Self-Regulatory Organizations; NYSE Chicago, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending the Fee Schedule of NYSE Chicago, Inc. in Connection With the Exchange's Transition to Trading to the Pillar Trading Platform, 64160-64164 [2019-25107]

Download as PDF 64160 Federal Register / Vol. 84, No. 224 / Wednesday, November 20, 2019 / Notices Board will take any appropriate actions based on its review, including, if appropriate, the institution of procedures designed to assure that purchases of securities in Affiliated Underwritings are in the best interest of shareholders of the Fund. 17. Each Fund will maintain and preserve permanently in an easily accessible place a written copy of the procedures described in the preceding condition, and any modifications to such procedures, and will maintain and preserve for a period of not less than six years from the end of the fiscal year in which any purchase in an Affiliated Underwriting occurred, the first two years in an easily accessible place, a written record of each purchase of securities in Affiliated Underwritings once an investment by an Investing Fund in the securities of the Fund exceeds the limit of section 12(d)(1)(A)(i) of the Act, setting forth from whom the securities were acquired, the identity of the underwriting syndicate’s members, the terms of the purchase, and the information or materials upon which the Board’s determinations were made. 18. Before investing in a Fund in excess of the limits in section 12(d)(1)(A), an Investing Fund will execute a FOF Participation Agreement with the Fund stating that their respective boards of directors or trustees and their investment advisers, or Trustee and Sponsor, as applicable, understand the terms and conditions of the order, and agree to fulfill their responsibilities under the order. At the time of its investment in Shares of a Fund in excess of the limit in section 12(d)(1)(A)(i), an Investing Fund will notify the Fund of the investment. At such time, the Investing Fund will also transmit to the Fund a list of the names of each Investing Fund Affiliate and Underwriting Affiliate. The Investing Fund will notify the Fund of any changes to the list as soon as reasonably practicable after a change occurs. The Fund and the Investing Fund will maintain and preserve a copy of the order, the FOF Participation Agreement, and the list with any updated information for the duration of the investment and for a period of not less than six years thereafter, the first two years in an easily accessible place. 19. Before approving any advisory contract under section 15 of the Act, the board of directors or trustees of each Investing Management Company, including a majority of the independent directors or trustees, will find that the advisory fees charged under such contract are based on services provided that will be in addition to, rather than VerDate Sep<11>2014 17:21 Nov 19, 2019 Jkt 250001 duplicative of, the services provided under the advisory contract(s) of any Fund in which the Investing Management Company may invest. These findings and their basis will be recorded fully in the minute books of the appropriate Investing Management Company. 20. Any sales charges and/or service fees charged with respect to shares of an Investing Fund will not exceed the limits applicable to a fund of funds as set forth in FINRA Rule 2341. 21. No Fund will acquire securities of any investment company or company relying on section 3(c)(1) or 3(c)(7) of the Act in excess of the limits contained in section 12(d)(1)(A) of the Act, except to the extent permitted by exemptive relief from the Commission permitting the Fund to purchase shares of other investment companies for short-term cash management purposes. By the Commission, Jill M. Peterson, Assistant Secretary. [FR Doc. 2019–25071 Filed 11–19–19; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–87541; File No. SR– NYSECHX–2019–20] Self-Regulatory Organizations; NYSE Chicago, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending the Fee Schedule of NYSE Chicago, Inc. in Connection With the Exchange’s Transition to Trading to the Pillar Trading Platform November 14, 2019. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on November 12, 2019 the NYSE Chicago, Inc. (‘‘NYSE Chicago’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). U.S.C. 78a. 3 17 CFR 240.19b–4. 2 15 PO 00000 Frm 00123 Fmt 4703 Sfmt 4703 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend the Fee Schedule of NYSE Chicago, Inc. (the ‘‘Fee Schedule’’) in connection with the Exchange’s transition to trading to the Pillar trading platform. The Exchange proposes to implement the fee change effective November 12, 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 On November 4, 2019, the Exchange transitioned to trading on Pillar.4 Pillar is an integrated trading technology platform designed to use a single specification for connecting to the equities and options markets operated by the Exchange and its affiliates, NYSE Arca, Inc. (‘‘NYSE Arca’’), NYSE American, LLC (‘‘NYSE American’’), NYSE National, Inc. (‘‘NYSE National’’), and New York Stock Exchange LLC (‘‘NYSE’’). With Pillar, the Exchange transitioned its cash equities trading platform to a fully automated price-time priority allocation model that trades all Regulation National Market System (‘‘NMS’’) Stocks. In connection with this transition, the Exchange proposes to amend the Fee Schedule for trading on the Pillar platform, and to eliminate certain other fees that would no longer be applicable. The Exchange proposes to implement 4 See Trader Update, available at https:// www.nyse.com/publicdocs/nyse/notifications/ trader-update/NYSEChicago_Migration_update_ 9.4.pdf. See also Securities Exchange Act Release No. 87264 (October 9, 2019), 84 FR 55345 (October 16, 2019) (SR–NYSECHX–2019–08). E:\FR\FM\20NON1.SGM 20NON1 Federal Register / Vol. 84, No. 224 / Wednesday, November 20, 2019 / Notices the fee changes effective November 12, 2019.5 Background The Exchange operates in a highly competitive environment. The Commission has repeatedly expressed its preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. In Regulation NMS, the Commission highlighted the importance of market forces in determining prices and SRO revenues and, also, recognized that current regulation of the market system ‘‘has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.’’ 6 As the Commission itself recognized, the market for trading services in NMS stocks has become ‘‘more fragmented and competitive.’’ 7 Indeed, equity trading is currently dispersed across 13 exchanges,8 31 alternative trading systems,9 and numerous broker-dealer internalizers and wholesalers, all competing for order flow. Based on publicly-available information for August 2019, no single exchange has more than 19% market share (whether including or excluding auction volume).10 Therefore, no exchange possesses significant pricing power in the execution of equity order flow. More specifically, in September 2019, the Exchange had 0.47% market share of executed volume of non-auction equity trading.11 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. While it is not possible to know a firm’s reason for shifting order 5 The Exchange originally filed to amend the Fee Schedule on November 4, 2019 (SR–NYSECHX– 2019–18). SR–NYSECHX–2019–18 was subsequently withdrawn and replaced by this filing. 6 See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005). 7 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). 8 See Cboe U.S Equities Market Volume Summary at https://markets.cboe.com/us/equities/market_ share. See generally https://www.sec.gov/fastanswers/divisionsmarketregmr exchangesshtml.html. 9 See FINRA ATS Transparency Data, available at https://otctransparency.finra.org/otctransparency/ AtsIssueData. A list of alternative trading systems registered with the Commission is available at https://www.sec.gov/foia/docs/atslist.htm. 10 See Cboe Global Markets U.S. Equities Market Volume Summary, available at https:// markets.cboe.com/us/equities/market_share/. 11 See id. VerDate Sep<11>2014 17:21 Nov 19, 2019 Jkt 250001 flow, the Exchange believes that one such reason is because of fee changes at any of the registered exchanges or nonexchange venues to which a firm routes order flow. Proposed Rule Change Pursuant to Section E.1 of the Fee Schedule, the Exchange currently charges a fee for removing liquidity and provides a credit for adding liquidity for orders in Tape A, B and C securities. For each of Tape A, B and C securities with a share price equal to or greater than $1.00, the Exchange charges a fee of $0.0030 per share for orders that remove liquidity and provides a credit of $0.0020 per share for orders that provide liquidity. For each of Tape A, B and C securities with a share price less than $1.00, the Exchange charges a fee that is equal to 0.10% of trade value 12 for orders that remove liquidity and provides a credit of $0.0009 per share for orders that provide liquidity. The Exchange proposes the following transaction fees for trading on its Pillar trading platform. For each of Tape A, B and C securities with a share price equal to or greater than $1.00, the Exchange proposes a fee of $0.0010 per share for orders that remove liquidity and for orders that add liquidity. For each of Tape A, B and C securities with a share price less than $1.00, the Exchange proposes a fee that is equal to 0.10% of trade value for orders that remove liquidity and for orders that add liquidity. Section E.1 currently provides that the fees under this section are for Matching System executions resulting from single-sided orders submitted as at least a Round Lot. The Exchange proposes to remove ‘‘submitted as at least a Round Lot’’ from the text of the Fee Schedule as the proposed fees would apply to all orders, including round lot and odd lot orders. Further, as described below, the Exchange is proposing to delete pricing applicable to odd lot orders from the Fee Schedule, and as such, the proposed fees under Section E.1 would apply to odd lot orders also. Additionally, with this proposed rule change, the Exchange would no longer provide credits for orders that add liquidity. Accordingly, the Exchange proposes to delete paragraphs (b) and (c) under Section E.1 as each of those paragraphs refer to credits that would no longer be payable by the Exchange. The Exchange also proposes to remove the reference to ‘‘credits attributed’’ 12 ‘‘Trade value’’ means a dollar amount equal to the price per share multiplied by the number of shares executed. See Fee Schedule. PO 00000 Frm 00124 Fmt 4703 Sfmt 4703 64161 found in Section E.1 and the reference to ‘‘attributed credits pursuant to Section E.1(b) and (c)’’ found in Section E.3(a)(2). The Exchange also proposes to amend the text of paragraph (a) under Section E.1 to make clear that the both the liquidity removing fee and the liquidity providing fee shall not be charged to any Institutional Brokers, as Institutional Brokers are and would continue to be subject to fees under Section E.3. Finally, the Exchange proposes to delete the conditional requirement found in Sections E.1 and E.3 of the Fee Schedule. Specifically, the Exchange proposes to delete the term ‘‘Subject to Section E.9 below’’ from Sections E.1 and E.3 because the Fee Schedule no longer has a Section E.9. Section E.9 previously provided fees for certain executions that resulted from a functionality that has since been decommissioned. The Exchange inadvertently failed to previously delete reference to Section E.9 found in Sections E.1 and E.3 from the Fee Schedule and proposes to do so now.13 Section E.4 currently provides that a fee of $0.0040 per share applies for the execution of orders submitted as odd lots during all trading sessions.14 With this proposed rule change, the Exchange would no longer distinguish between executions of round lot orders and odd lot orders and would charge the same fee for all orders pursuant to the proposed fees under Section E.1. Accordingly, the Exchange proposes to remove the text within Section E.4 of the Fee Schedule in its entirety, replacing it with ‘‘Reserved.’’ Section E.8 currently provides a formula-based order cancellation fee which assesses a daily cancellation fee per trading account symbol, if the order cancellation ratio exceeds a designated threshold.15 Historically, the 13 See Securities Exchange Act Release No. 85248 (March 5, 2019), 84 FR 8773 (March 11, 2019) (SR– NYSECHX–2019–01). See also Exchange Act Release No. 84852 (December 19, 2018), 83 FR 66808 (December 27, 2018) (SR–CHX–2018–09). 14 See Securities Exchange Act Release No. 54657 (October 26, 2006), 71 FR 64590 (November 2, 2006) (SR–CHX–2006–29). See also Securities Exchange Act Release Nos. 64953 (July 25, 2011), 76 FR 45626 (July 29, 2011) (SR–CHX–2011–19); 73814 (December 11, 2014), 79 FR 75203 (December 17, 2014) (SR–CHX–2014–19); and 77785 (May 9, 2016), 81 FR 29936 (May 13, 2016) (SR–CHX–2016– 06). 15 See Securities Exchange Act Release No. 61392 (January 21, 2010), 75 FR 4436 (January 27, 2010) (SR–CHX–2010–02). See also Securities Exchange Act Release Nos. 62642 (August 4, 2010), 75 FR 48404 (August 10, 2010) (SR–CHX–2010–19); 68219 (November 13, 2012), 77 FR 69673 (November 20, 2012) (SR–CHX–2012–15); 69701 (June 5, 2013), 78 FR 35082 (June 11, 2013) (SR–CHX–2013–11); 69903 (July 1, 2013), 78 FR 40788 (July 8, 2013) (SR–CHX–2013–12; and 71404 (January 27, 2014), 79 FR 5476 (January 31, 2014) (SR–CHX–2014–01). E:\FR\FM\20NON1.SGM 20NON1 64162 Federal Register / Vol. 84, No. 224 / Wednesday, November 20, 2019 / Notices 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.’’ 20 As the Commission itself recognized, the market for trading services in NMS stocks has become ‘‘more fragmented and competitive.’’ 21 Indeed, equity trading is currently dispersed across 13 exchanges,22 31 alternative trading systems,23 and numerous broker-dealer internalizers and wholesalers, all competing for order flow. Based on publicly-available information, no single exchange has more than 19% market share (whether including or excluding auction volume).24 Therefore, no exchange possesses significant pricing power in the execution of equity order flow. More specifically, as noted earlier, the Exchange averaged less than 1% market share of executed volume of equity trades (excluding auction volume) 25 for September 2019. The Exchange believes that the evershifting market share among the exchanges from month to month demonstrates that market participants 2. Statutory Basis can shift order flow, or discontinue to The Exchange believes that the reduce use of certain categories of proposed rule change is consistent with products, in response to fee changes. Section 6(b) of the Act,18 in general, and With respect to non-marketable orders which provide liquidity on an furthers the objectives of Sections 6(b)(4) and (5) of the Act,19 in particular, Exchange, Participants can choose from any one of the 13 currently operating because it provides for the equitable registered exchanges to route such order allocation of reasonable dues, fees, and flow. Accordingly, competitive forces other charges among its members, reasonably constrain exchange issuers and other persons using its transaction fees that relate to orders that facilities and does not unfairly would provide displayed liquidity on an discriminate between customers, exchange. Stated otherwise, changes to issuers, brokers or dealers. exchange transaction fees can have a The Proposed Rule Change Is direct effect on the ability of an Reasonable exchange to compete for order flow. The Exchange believes that charging As discussed above, the Exchange $0.0010 per share for securities priced at operates in a highly fragmented and or above $1.00 and 0.10% of the total competitive market. The Commission dollar value of the transaction for has repeatedly expressed its preference securities priced below $1.00 for for competition over regulatory executions on the Exchange of singleintervention in determining prices, sided orders that add liquidity and that products, and services in the securities markets. Specifically, in Regulation 20 See Securities Exchange Act Release No. 51808 NMS, the Commission highlighted the (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005). importance of market forces in 21 See Securities Exchange Act Release No. 51808, determining prices and SRO revenues 84 FR 5202, 5253 (February 20, 2019) (File No. S7– cancellation fee was adopted so the Exchange could recoup some of the costs associated with administering and processing large numbers of cancelled orders and to incent Participants to post marketable orders, and thereby, promote liquidity and single-sided executions on the Exchange. With this proposed rule change, the Exchange would no longer assess the cancellation fee and proposes to remove the fee from the Fee Schedule. Section I of the Fee Schedule currently provides listing fees charged by the Exchange.16 More specifically, Section I.1 provides fees for original listings; Section I.2 provides the fees for annual maintenance; Section I.3 provides the fees for supplemental listings; and Section I.4 provides miscellaneous fees related to listings on the Exchange. On Pillar, the Exchange would no longer be a primary listing venue and would no longer charge the listing fees found in Section I of the Fee Schedule.17 Accordingly, the Exchange proposes to remove the text within Section I of the Fee Schedule in its entirety, replacing it with ‘‘Reserved.’’ 16 See Securities Exchange Act Release Nos. 54657 (October 26, 2006), 71 FR 64590 (November 2, 2006) (SR–CHX–2006–29); and 68620 (January 10, 2013), 78 FR 3485 (January 16, 2013) (SR–CHX– 2012–20). 17 See Trader Update, available at https:// www.nyse.com/publicdocs/nyse/notifications/ trader-update/NYSEChicago_Migration_update_ 9.4.pdf. See also Securities Exchange Act Release No. 87264 (October 9, 2019), 84 FR 55345 (October 16, 2019) (SR–NYSECHX–2019–08). 18 15 U.S.C. 78f(b). 19 15 U.S.C. 78f(b)(4) and (5). VerDate Sep<11>2014 17:21 Nov 19, 2019 Jkt 250001 05–18) (Final Rule). 22 See Cboe Global Markets, U.S Equities Market Volume Summary, available at https:// markets.cboe.com/us/equities/market_share. 23 See FINRA ATS Transparency Data, available at https://otctransparency.finra.org/ otctransparency/AtsIssueData. A list of alternative trading systems registered with the Commission is available at https://www.sec.gov/foia/docs/ atslist.htm. 24 See Cboe Global Markets U.S. Equities Market Volume Summary, available at https:// markets.cboe.com/us/equities/market_share/. 25 See note 11, supra. PO 00000 Frm 00125 Fmt 4703 Sfmt 4703 remove liquidity to the Exchange is reasonable because the proposed rate would be comparable to the fee charged by other exchanges.26 With this proposed rule change, the Exchange proposes to standardize the fee for adding and removing liquidity for all orders executed by Participants on the Exchange. The Exchange believes it is reasonable to amend the rule text in Section E.1(a) to clarify that, with this proposed rule change, all liquidity providing orders and all liquidity removing orders executed by Participants on the Exchange would be charged the same fee and that the liquidity removing fee and the liquidity providing fee shall not be charged to any Institutional Brokers, as Institutional Brokers are and would continue to be subject to fees under Section E.3. The Exchange believes it is reasonable to charge odd lot orders the same fee that is charged for round lot orders, and to delete the part of the Fee Schedule that provided fees specifically for odd lot orders. The Exchange believes the proposed rule change, which would result in lower fees for the execution of odd lot orders on the Exchange, would provide an incentive to Participants to direct their odd lot order flow to the Exchange. This in turn would provide the Exchange with potential order flow as it transitions to the Pillar trading platform. The Exchange believes that it is reasonable to eliminate the cancellation fee, and to delete the part of the Fee Schedule that provided the cancellation fee. The cancellation fee was originally introduced in response to capacity concerns stemming from Participants generating significant order traffic that did not result in executed trades due to orders being cancelled at high rates. In the time since the cancellation fee was adopted, the fee has become less important as the Exchange over time has generally improved its technology and the Exchange believes that maintaining the fee is no longer necessary. The Exchange believes that this fee may inadvertently discourage Participants to enter additional orders on the Exchange. The Exchange believes it is reasonable to eliminate the listing fees from the Fee Schedule, and to delete the part of the Fee Schedule that provided the listing fees, because once the Exchange 26 IEX, for instance, charges a fee of $0.0009 per share for providing non-displayed liquidity for securities priced at or above $1.00 and 0.30% of TDV (i.e., the total dollar value of the transaction calculated as the execution price) for securities priced below $1.00. See Investors Exchange Fee Schedule, available at https://iextrading.com/ trading/fees/. E:\FR\FM\20NON1.SGM 20NON1 Federal Register / Vol. 84, No. 224 / Wednesday, November 20, 2019 / Notices transitions to Pillar, the Exchange would no longer be a primary listing market and therefore, removal of the listing fees from the Fee Schedule would increase transparency to the fees that would be applicable on the Exchange and would reduce investor confusion. The Exchange believes that the proposal to delete obsolete text under Sections E.1 and E.3 of the Fee Schedule would remove impediments to, and perfect the mechanisms of, a free and open market and a national market system and, in general, protect investors and the public interest because the proposed fee change would remove text from the Fee Schedule related to fees that no longer exist and therefore reduce any potential ambiguity and provide clarification with respect to fees that are applicable on the Exchange. The Proposed Rule Change Is an Equitable Allocation of Fees and Credits The Exchange believes its proposal equitably allocates its fees among its market participants. First, the Exchange is proposing to adopt a standardized rate for orders that add liquidity and orders that remove liquidity. The Exchange believes the proposed revised fee structure would simplify the fees charged by the Exchange to Participants that transact on the Exchange as all liquidity providing orders and all liquidity removing orders executed by Participants on the Exchange would be charged the same fee. As a result, the proposal should encourage Participants to direct orders that add liquidity and remove liquidity, as the case may be, thereby contributing to robust levels of trading, which would benefit all market participants. The proposed change will encourage the submission of a greater number of orders to a national securities exchange, thus promoting price discovery and transparency and enhancing order execution opportunities for Participants on the Exchange. However, without having a view of Participant’s activity on other markets and off-exchange venues, the Exchange has no way of knowing whether this proposed rule change would result in a change in trading behavior by Participants. However, the Exchange believes that standardizing the adding and removing fees by adopting a single fee would result in a simpler fee structure which may provide an incentive for Participants to continue to submit orders to the Exchange, and thereby promote price discovery and increased execution opportunities for all Participants. The Exchange believes the proposed rule VerDate Sep<11>2014 17:21 Nov 19, 2019 Jkt 250001 change would improve market quality for all market participants on the Exchange and, as a consequence, attract more liquidity to the Exchange, thereby improving market-wide quality and price discovery. The Exchange believes the proposed rule change would improve market quality for all market participants on the Exchange and, as a consequence, attract more liquidity to the Exchange thereby improving market-wide quality. The proposal neither targets nor will it have a disparate impact on any particular category of market participant. The Exchange believes that recalibrating the fees for orders that add and that remove liquidity would continue to attract order flow and liquidity to the Exchange for the benefit of investors generally. The Exchange further believes the proposed rule change to remove sections related to fees for odd lot orders, cancellation fee and listing fees from the Fee Schedule and the deletion of obsolete fees is equitable because such fees are no longer applicable or would no longer be applicable once the Exchange has transitioned to the Pillar trading platform. The Exchange believes this will more clearly identify currently applicable fees, which the Exchange believes removes impediments to and perfects the mechanism of a free and open market. The Exchange believes the proposed rule change will eliminate confusion regarding which fees apply to current trading, which ultimately protects investors and the public interest. The Proposed Rule Change Is Not Unfairly Discriminatory The Exchange believes that the proposal is not unfairly discriminatory. In the prevailing competitive environment, Participants are free to disfavor the Exchange’s pricing if they believe that alternatives offer them better value. The proposal to adopt standardized fees for orders that add liquidity and for orders that remove liquidity neither targets nor will it have a disparate impact on any particular category of market participant. The proposal does not permit unfair discrimination because the proposed standardized fees would be applied to all similarly Participants, who would all be eligible for the same fee on an equal basis. Accordingly, no Participant already operating on the Exchange would be disadvantaged by this allocation of fees. The Exchange believes the proposed rule change to charge odd lot orders the same fee that is charged to round lot orders, and to delete the part of the Fee Schedule that provided fees specifically PO 00000 Frm 00126 Fmt 4703 Sfmt 4703 64163 for odd lot orders, is not unfairly discriminatory as the proposed fees for odd lot orders would apply on an equal basis to all Participants that send odd lot orders to the Exchange. The Exchange believes the proposed rule change to eliminate the cancellation fee, and to delete the part of the Fee Schedule that provided the cancellation fee, is not unfairly discriminatory as the proposed elimination of the fee would apply equally to all Participants, who will no longer be subject to any cancellation fees, resulting in lower fees for Participants. The Exchange believes the proposed rule change to eliminate the listing fees, and to delete the part of the Fee Schedule that provided the listing fees, is not unfairly discriminatory as the proposed elimination of the fee would apply equally to all Participants, who will no longer be subject to any listing fees. The Exchange believes the proposed rule change to delete references to Section E.9 from the Fee Schedule, which no longer exists, is not unfairly discriminatory because the proposed deletion would alleviate confusion and maintain clarity in the Fee Schedule, and would apply to all Participants on an equal basis. Finally, the submission of orders to the Exchange is optional for Participants in that they could choose whether to submit orders to the Exchange and, if they do, the extent of its activity in this regard. 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,27 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 orders to a public exchange, thereby promoting market depth, price discovery and transparency and enhancing order execution opportunities for Participants. As a result, the Exchange believes that the proposed change furthers the Commission’s goal in adopting Regulation NMS of fostering integrated competition among orders, which 27 15 E:\FR\FM\20NON1.SGM U.S.C. 78f(b)(8). 20NON1 64164 Federal Register / Vol. 84, No. 224 / Wednesday, November 20, 2019 / Notices promotes ‘‘more efficient pricing of individual stocks for all types of orders, large and small.’’ 28 Intramarket Competition The proposed rule change is designed to attract order flow to the Exchange, and thereby, increased liquidity. Greater liquidity benefits all market participants on the Exchange by providing more trading opportunities and encourages Participants, to send orders, thereby contributing to robust levels of liquidity, which benefit all market participants. The Exchange does not believe that the proposed rule change will impair the ability of Participants to compete in the financial markets. There are 13 exchanges, 31 alternative trading systems, and numerous broker-dealer internalizers and wholesalers, all competing for order flow from which Participants may choose to send their quotes and trades. The Exchange also does not believe the proposed rule change would impact intramarket competition as the proposed rule change would apply to all Participants equally that transact on the Exchange, and therefore 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 and rebate levels at those other venues to be more favorable. As noted earlier, the Exchange’s market share of intraday trading (i.e., excluding auctions) was 0.47% in September 2019. 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 the proposed change can impose any burden on intermarket competition. The Exchange believes that the proposed rule 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. 28 See Securities Exchange Act Release No. 51808, 70 FR 37495, 37498–99 (June 29, 2005) (S7–10–04) (Final Rule). VerDate Sep<11>2014 17:21 Nov 19, 2019 Jkt 250001 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) 29 of the Act and subparagraph (f)(2) of Rule 19b–4 30 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) 31 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– NYSECHX–2019–20 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–NYSECHX–2019–20. 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/ U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(2). 31 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 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–NYSECHX–2019–20 and should be submitted on or before December 11, 2019. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.32 Jill M. Peterson, Assistant Secretary. [FR Doc. 2019–25107 Filed 11–19–19; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–87543; File No. SR– CboeBYX–2019–021] Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Fee Schedule Applicable to the BYX Equities Trading Platform as it Relates to Pricing for Orders Routed to Cboe EDGA Exchange, Inc. Using the ALLB, TRIM, or SLIM Routing Strategy November 14, 2019. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on November 13, 2019, Cboe BYX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘BYX’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule 29 15 32 17 30 17 1 15 PO 00000 Frm 00127 Fmt 4703 Sfmt 4703 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. E:\FR\FM\20NON1.SGM 20NON1

Agencies

[Federal Register Volume 84, Number 224 (Wednesday, November 20, 2019)]
[Notices]
[Pages 64160-64164]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-25107]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87541; File No. SR-NYSECHX-2019-20]


Self-Regulatory Organizations; NYSE Chicago, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Amending the 
Fee Schedule of NYSE Chicago, Inc. in Connection With the Exchange's 
Transition to Trading to the Pillar Trading Platform

November 14, 2019.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on November 12, 2019 the NYSE Chicago, Inc. (``NYSE 
Chicago'' or the ``Exchange'') filed with the Securities and Exchange 
Commission (the ``Commission'') the proposed rule change as described 
in Items I, II, and III below, which Items have been prepared by the 
self-regulatory organization. The Commission is publishing this notice 
to solicit comments on the proposed rule change from interested 
persons.
---------------------------------------------------------------------------

    \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 the Fee Schedule of NYSE Chicago, 
Inc. (the ``Fee Schedule'') in connection with the Exchange's 
transition to trading to the Pillar trading platform. The Exchange 
proposes to implement the fee change effective November 12, 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
    On November 4, 2019, the Exchange transitioned to trading on 
Pillar.\4\ Pillar is an integrated trading technology platform designed 
to use a single specification for connecting to the equities and 
options markets operated by the Exchange and its affiliates, NYSE Arca, 
Inc. (``NYSE Arca''), NYSE American, LLC (``NYSE American''), NYSE 
National, Inc. (``NYSE National''), and New York Stock Exchange LLC 
(``NYSE''). With Pillar, the Exchange transitioned its cash equities 
trading platform to a fully automated price-time priority allocation 
model that trades all Regulation National Market System (``NMS'') 
Stocks.
---------------------------------------------------------------------------

    \4\ See Trader Update, available at https://www.nyse.com/publicdocs/nyse/notifications/trader-update/NYSEChicago_Migration_update_9.4.pdf. See also Securities Exchange 
Act Release No. 87264 (October 9, 2019), 84 FR 55345 (October 16, 
2019) (SR-NYSECHX-2019-08).
---------------------------------------------------------------------------

    In connection with this transition, the Exchange proposes to amend 
the Fee Schedule for trading on the Pillar platform, and to eliminate 
certain other fees that would no longer be applicable. The Exchange 
proposes to implement

[[Page 64161]]

the fee changes effective November 12, 2019.\5\
---------------------------------------------------------------------------

    \5\ The Exchange originally filed to amend the Fee Schedule on 
November 4, 2019 (SR-NYSECHX-2019-18). SR-NYSECHX-2019-18 was 
subsequently withdrawn and replaced by this filing.
---------------------------------------------------------------------------

Background
    The Exchange operates in a highly competitive environment. The 
Commission has repeatedly expressed its preference for competition over 
regulatory intervention in determining prices, products, and services 
in the securities markets. In Regulation NMS, the Commission 
highlighted the importance of market forces in determining prices and 
SRO revenues and, also, recognized that current regulation of the 
market system ``has been remarkably successful in promoting market 
competition in its broader forms that are most important to investors 
and listed companies.'' \6\
---------------------------------------------------------------------------

    \6\ 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.'' 
\7\ Indeed, equity trading is currently dispersed across 13 
exchanges,\8\ 31 alternative trading systems,\9\ and numerous broker-
dealer internalizers and wholesalers, all competing for order flow. 
Based on publicly-available information for August 2019, no single 
exchange has more than 19% market share (whether including or excluding 
auction volume).\10\ Therefore, no exchange possesses significant 
pricing power in the execution of equity order flow. More specifically, 
in September 2019, the Exchange had 0.47% market share of executed 
volume of non-auction equity trading.\11\
---------------------------------------------------------------------------

    \7\ 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).
    \8\ See Cboe U.S Equities Market Volume Summary at https://markets.cboe.com/us/equities/market_share. See generally https://www.sec.gov/fast-answers/divisionsmarketregmrexchangesshtml.html.
    \9\ See FINRA ATS Transparency Data, available at https://otctransparency.finra.org/otctransparency/AtsIssueData. A list of 
alternative trading systems registered with the Commission is 
available at https://www.sec.gov/foia/docs/atslist.htm.
    \10\ See Cboe Global Markets U.S. Equities Market Volume 
Summary, available at https://markets.cboe.com/us/equities/market_share/.
    \11\ 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. While it is not possible to know a firm's reason for shifting 
order flow, the Exchange believes that one such reason is because of 
fee changes at any of the registered exchanges or non-exchange venues 
to which a firm routes order flow.
Proposed Rule Change
    Pursuant to Section E.1 of the Fee Schedule, the Exchange currently 
charges a fee for removing liquidity and provides a credit for adding 
liquidity for orders in Tape A, B and C securities. For each of Tape A, 
B and C securities with a share price equal to or greater than $1.00, 
the Exchange charges a fee of $0.0030 per share for orders that remove 
liquidity and provides a credit of $0.0020 per share for orders that 
provide liquidity. For each of Tape A, B and C securities with a share 
price less than $1.00, the Exchange charges a fee that is equal to 
0.10% of trade value \12\ for orders that remove liquidity and provides 
a credit of $0.0009 per share for orders that provide liquidity.
---------------------------------------------------------------------------

    \12\ ``Trade value'' means a dollar amount equal to the price 
per share multiplied by the number of shares executed. See Fee 
Schedule.
---------------------------------------------------------------------------

    The Exchange proposes the following transaction fees for trading on 
its Pillar trading platform. For each of Tape A, B and C securities 
with a share price equal to or greater than $1.00, the Exchange 
proposes a fee of $0.0010 per share for orders that remove liquidity 
and for orders that add liquidity. For each of Tape A, B and C 
securities with a share price less than $1.00, the Exchange proposes a 
fee that is equal to 0.10% of trade value for orders that remove 
liquidity and for orders that add liquidity.
    Section E.1 currently provides that the fees under this section are 
for Matching System executions resulting from single-sided orders 
submitted as at least a Round Lot. The Exchange proposes to remove 
``submitted as at least a Round Lot'' from the text of the Fee Schedule 
as the proposed fees would apply to all orders, including round lot and 
odd lot orders. Further, as described below, the Exchange is proposing 
to delete pricing applicable to odd lot orders from the Fee Schedule, 
and as such, the proposed fees under Section E.1 would apply to odd lot 
orders also.
    Additionally, with this proposed rule change, the Exchange would no 
longer provide credits for orders that add liquidity. Accordingly, the 
Exchange proposes to delete paragraphs (b) and (c) under Section E.1 as 
each of those paragraphs refer to credits that would no longer be 
payable by the Exchange. The Exchange also proposes to remove the 
reference to ``credits attributed'' found in Section E.1 and the 
reference to ``attributed credits pursuant to Section E.1(b) and (c)'' 
found in Section E.3(a)(2). The Exchange also proposes to amend the 
text of paragraph (a) under Section E.1 to make clear that the both the 
liquidity removing fee and the liquidity providing fee shall not be 
charged to any Institutional Brokers, as Institutional Brokers are and 
would continue to be subject to fees under Section E.3. Finally, the 
Exchange proposes to delete the conditional requirement found in 
Sections E.1 and E.3 of the Fee Schedule. Specifically, the Exchange 
proposes to delete the term ``Subject to Section E.9 below'' from 
Sections E.1 and E.3 because the Fee Schedule no longer has a Section 
E.9. Section E.9 previously provided fees for certain executions that 
resulted from a functionality that has since been decommissioned. The 
Exchange inadvertently failed to previously delete reference to Section 
E.9 found in Sections E.1 and E.3 from the Fee Schedule and proposes to 
do so now.\13\
---------------------------------------------------------------------------

    \13\ See Securities Exchange Act Release No. 85248 (March 5, 
2019), 84 FR 8773 (March 11, 2019) (SR-NYSECHX-2019-01). See also 
Exchange Act Release No. 84852 (December 19, 2018), 83 FR 66808 
(December 27, 2018) (SR-CHX-2018-09).
---------------------------------------------------------------------------

    Section E.4 currently provides that a fee of $0.0040 per share 
applies for the execution of orders submitted as odd lots during all 
trading sessions.\14\ With this proposed rule change, the Exchange 
would no longer distinguish between executions of round lot orders and 
odd lot orders and would charge the same fee for all orders pursuant to 
the proposed fees under Section E.1. Accordingly, the Exchange proposes 
to remove the text within Section E.4 of the Fee Schedule in its 
entirety, replacing it with ``Reserved.''
---------------------------------------------------------------------------

    \14\ See Securities Exchange Act Release No. 54657 (October 26, 
2006), 71 FR 64590 (November 2, 2006) (SR-CHX-2006-29). See also 
Securities Exchange Act Release Nos. 64953 (July 25, 2011), 76 FR 
45626 (July 29, 2011) (SR-CHX-2011-19); 73814 (December 11, 2014), 
79 FR 75203 (December 17, 2014) (SR-CHX-2014-19); and 77785 (May 9, 
2016), 81 FR 29936 (May 13, 2016) (SR-CHX-2016-06).
---------------------------------------------------------------------------

    Section E.8 currently provides a formula-based order cancellation 
fee which assesses a daily cancellation fee per trading account symbol, 
if the order cancellation ratio exceeds a designated threshold.\15\ 
Historically, the

[[Page 64162]]

cancellation fee was adopted so the Exchange could recoup some of the 
costs associated with administering and processing large numbers of 
cancelled orders and to incent Participants to post marketable orders, 
and thereby, promote liquidity and single-sided executions on the 
Exchange. With this proposed rule change, the Exchange would no longer 
assess the cancellation fee and proposes to remove the fee from the Fee 
Schedule.
---------------------------------------------------------------------------

    \15\ See Securities Exchange Act Release No. 61392 (January 21, 
2010), 75 FR 4436 (January 27, 2010) (SR-CHX-2010-02). See also 
Securities Exchange Act Release Nos. 62642 (August 4, 2010), 75 FR 
48404 (August 10, 2010) (SR-CHX-2010-19); 68219 (November 13, 2012), 
77 FR 69673 (November 20, 2012) (SR-CHX-2012-15); 69701 (June 5, 
2013), 78 FR 35082 (June 11, 2013) (SR-CHX-2013-11); 69903 (July 1, 
2013), 78 FR 40788 (July 8, 2013) (SR-CHX-2013-12; and 71404 
(January 27, 2014), 79 FR 5476 (January 31, 2014) (SR-CHX-2014-01).
---------------------------------------------------------------------------

    Section I of the Fee Schedule currently provides listing fees 
charged by the Exchange.\16\ More specifically, Section I.1 provides 
fees for original listings; Section I.2 provides the fees for annual 
maintenance; Section I.3 provides the fees for supplemental listings; 
and Section I.4 provides miscellaneous fees related to listings on the 
Exchange. On Pillar, the Exchange would no longer be a primary listing 
venue and would no longer charge the listing fees found in Section I of 
the Fee Schedule.\17\ Accordingly, the Exchange proposes to remove the 
text within Section I of the Fee Schedule in its entirety, replacing it 
with ``Reserved.''
---------------------------------------------------------------------------

    \16\ See Securities Exchange Act Release Nos. 54657 (October 26, 
2006), 71 FR 64590 (November 2, 2006) (SR-CHX-2006-29); and 68620 
(January 10, 2013), 78 FR 3485 (January 16, 2013) (SR-CHX-2012-20).
    \17\ See Trader Update, available at https://www.nyse.com/publicdocs/nyse/notifications/trader-update/NYSEChicago_Migration_update_9.4.pdf. See also Securities Exchange 
Act Release No. 87264 (October 9, 2019), 84 FR 55345 (October 16, 
2019) (SR-NYSECHX-2019-08).
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\18\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\19\ 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.
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78f(b).
    \19\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

The Proposed Rule Change Is Reasonable
    As discussed above, the Exchange operates in a highly fragmented 
and competitive market. The Commission has repeatedly expressed its 
preference for competition over regulatory intervention in determining 
prices, products, and services in the securities markets. Specifically, 
in Regulation NMS, the Commission highlighted the importance of market 
forces in determining prices and SRO revenues and, also, recognized 
that current regulation of the market system ``has been remarkably 
successful in promoting market competition in its broader forms that 
are most important to investors and listed companies.'' \20\
---------------------------------------------------------------------------

    \20\ 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.'' 
\21\ Indeed, equity trading is currently dispersed across 13 
exchanges,\22\ 31 alternative trading systems,\23\ and numerous broker-
dealer internalizers and wholesalers, all competing for order flow. 
Based on publicly-available information, no single exchange has more 
than 19% market share (whether including or excluding auction 
volume).\24\ Therefore, no exchange possesses significant pricing power 
in the execution of equity order flow. More specifically, as noted 
earlier, the Exchange averaged less than 1% market share of executed 
volume of equity trades (excluding auction volume) \25\ for September 
2019.
---------------------------------------------------------------------------

    \21\ See Securities Exchange Act Release No. 51808, 84 FR 5202, 
5253 (February 20, 2019) (File No. S7-05-18) (Final Rule).
    \22\ See Cboe Global Markets, U.S Equities Market Volume 
Summary, available at https://markets.cboe.com/us/equities/market_share.
    \23\ See FINRA ATS Transparency Data, available at https://otctransparency.finra.org/otctransparency/AtsIssueData. A list of 
alternative trading systems registered with the Commission is 
available at https://www.sec.gov/foia/docs/atslist.htm.
    \24\ See Cboe Global Markets U.S. Equities Market Volume 
Summary, available at https://markets.cboe.com/us/equities/market_share/.
    \25\ See note 11, supra.
---------------------------------------------------------------------------

    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. With respect to non-marketable 
orders which provide liquidity on an Exchange, Participants can choose 
from any one of the 13 currently operating registered exchanges to 
route such order flow. Accordingly, competitive forces reasonably 
constrain exchange transaction fees that relate to orders that would 
provide displayed liquidity on an exchange. Stated otherwise, changes 
to exchange transaction fees can have a direct effect on the ability of 
an exchange to compete for order flow.
    The Exchange believes that charging $0.0010 per share for 
securities priced at or above $1.00 and 0.10% of the total dollar value 
of the transaction for securities priced below $1.00 for executions on 
the Exchange of single-sided orders that add liquidity and that remove 
liquidity to the Exchange is reasonable because the proposed rate would 
be comparable to the fee charged by other exchanges.\26\ With this 
proposed rule change, the Exchange proposes to standardize the fee for 
adding and removing liquidity for all orders executed by Participants 
on the Exchange. The Exchange believes it is reasonable to amend the 
rule text in Section E.1(a) to clarify that, with this proposed rule 
change, all liquidity providing orders and all liquidity removing 
orders executed by Participants on the Exchange would be charged the 
same fee and that the liquidity removing fee and the liquidity 
providing fee shall not be charged to any Institutional Brokers, as 
Institutional Brokers are and would continue to be subject to fees 
under Section E.3.
---------------------------------------------------------------------------

    \26\ IEX, for instance, charges a fee of $0.0009 per share for 
providing non-displayed liquidity for securities priced at or above 
$1.00 and 0.30% of TDV (i.e., the total dollar value of the 
transaction calculated as the execution price) for securities priced 
below $1.00. See Investors Exchange Fee Schedule, available at 
https://iextrading.com/trading/fees/.
---------------------------------------------------------------------------

    The Exchange believes it is reasonable to charge odd lot orders the 
same fee that is charged for round lot orders, and to delete the part 
of the Fee Schedule that provided fees specifically for odd lot orders. 
The Exchange believes the proposed rule change, which would result in 
lower fees for the execution of odd lot orders on the Exchange, would 
provide an incentive to Participants to direct their odd lot order flow 
to the Exchange. This in turn would provide the Exchange with potential 
order flow as it transitions to the Pillar trading platform.
    The Exchange believes that it is reasonable to eliminate the 
cancellation fee, and to delete the part of the Fee Schedule that 
provided the cancellation fee. The cancellation fee was originally 
introduced in response to capacity concerns stemming from Participants 
generating significant order traffic that did not result in executed 
trades due to orders being cancelled at high rates. In the time since 
the cancellation fee was adopted, the fee has become less important as 
the Exchange over time has generally improved its technology and the 
Exchange believes that maintaining the fee is no longer necessary. The 
Exchange believes that this fee may inadvertently discourage 
Participants to enter additional orders on the Exchange.
    The Exchange believes it is reasonable to eliminate the listing 
fees from the Fee Schedule, and to delete the part of the Fee Schedule 
that provided the listing fees, because once the Exchange

[[Page 64163]]

transitions to Pillar, the Exchange would no longer be a primary 
listing market and therefore, removal of the listing fees from the Fee 
Schedule would increase transparency to the fees that would be 
applicable on the Exchange and would reduce investor confusion.
    The Exchange believes that the proposal to delete obsolete text 
under Sections E.1 and E.3 of the Fee Schedule would remove impediments 
to, and perfect the mechanisms of, a free and open market and a 
national market system and, in general, protect investors and the 
public interest because the proposed fee change would remove text from 
the Fee Schedule related to fees that no longer exist and therefore 
reduce any potential ambiguity and provide clarification with respect 
to fees that are applicable on the Exchange.
The Proposed Rule Change Is an Equitable Allocation of Fees and Credits
    The Exchange believes its proposal equitably allocates its fees 
among its market participants.
    First, the Exchange is proposing to adopt a standardized rate for 
orders that add liquidity and orders that remove liquidity. The 
Exchange believes the proposed revised fee structure would simplify the 
fees charged by the Exchange to Participants that transact on the 
Exchange as all liquidity providing orders and all liquidity removing 
orders executed by Participants on the Exchange would be charged the 
same fee. As a result, the proposal should encourage Participants to 
direct orders that add liquidity and remove liquidity, as the case may 
be, thereby contributing to robust levels of trading, which would 
benefit all market participants. The proposed change will encourage the 
submission of a greater number of orders to a national securities 
exchange, thus promoting price discovery and transparency and enhancing 
order execution opportunities for Participants on the Exchange. 
However, without having a view of Participant's activity on other 
markets and off-exchange venues, the Exchange has no way of knowing 
whether this proposed rule change would result in a change in trading 
behavior by Participants. However, the Exchange believes that 
standardizing the adding and removing fees by adopting a single fee 
would result in a simpler fee structure which may provide an incentive 
for Participants to continue to submit orders to the Exchange, and 
thereby promote price discovery and increased execution opportunities 
for all Participants. The Exchange believes the proposed rule change 
would improve market quality for all market participants on the 
Exchange and, as a consequence, attract more liquidity to the Exchange, 
thereby improving market-wide quality and price discovery.
    The Exchange believes the proposed rule change would improve market 
quality for all market participants on the Exchange and, as a 
consequence, attract more liquidity to the Exchange thereby improving 
market-wide quality. The proposal neither targets nor will it have a 
disparate impact on any particular category of market participant. The 
Exchange believes that recalibrating the fees for orders that add and 
that remove liquidity would continue to attract order flow and 
liquidity to the Exchange for the benefit of investors generally.
    The Exchange further believes the proposed rule change to remove 
sections related to fees for odd lot orders, cancellation fee and 
listing fees from the Fee Schedule and the deletion of obsolete fees is 
equitable because such fees are no longer applicable or would no longer 
be applicable once the Exchange has transitioned to the Pillar trading 
platform. The Exchange believes this will more clearly identify 
currently applicable fees, which the Exchange believes removes 
impediments to and perfects the mechanism of a free and open market. 
The Exchange believes the proposed rule change will eliminate confusion 
regarding which fees apply to current trading, which ultimately 
protects investors and the public interest.
The Proposed Rule Change Is Not Unfairly Discriminatory
    The Exchange believes that the proposal is not unfairly 
discriminatory. In the prevailing competitive environment, Participants 
are free to disfavor the Exchange's pricing if they believe that 
alternatives offer them better value.
    The proposal to adopt standardized fees for orders that add 
liquidity and for orders that remove liquidity neither targets nor will 
it have a disparate impact on any particular category of market 
participant. The proposal does not permit unfair discrimination because 
the proposed standardized fees would be applied to all similarly 
Participants, who would all be eligible for the same fee on an equal 
basis. Accordingly, no Participant already operating on the Exchange 
would be disadvantaged by this allocation of fees.
    The Exchange believes the proposed rule change to charge odd lot 
orders the same fee that is charged to round lot orders, and to delete 
the part of the Fee Schedule that provided fees specifically for odd 
lot orders, is not unfairly discriminatory as the proposed fees for odd 
lot orders would apply on an equal basis to all Participants that send 
odd lot orders to the Exchange.
    The Exchange believes the proposed rule change to eliminate the 
cancellation fee, and to delete the part of the Fee Schedule that 
provided the cancellation fee, is not unfairly discriminatory as the 
proposed elimination of the fee would apply equally to all 
Participants, who will no longer be subject to any cancellation fees, 
resulting in lower fees for Participants.
    The Exchange believes the proposed rule change to eliminate the 
listing fees, and to delete the part of the Fee Schedule that provided 
the listing fees, is not unfairly discriminatory as the proposed 
elimination of the fee would apply equally to all Participants, who 
will no longer be subject to any listing fees.
    The Exchange believes the proposed rule change to delete references 
to Section E.9 from the Fee Schedule, which no longer exists, is not 
unfairly discriminatory because the proposed deletion would alleviate 
confusion and maintain clarity in the Fee Schedule, and would apply to 
all Participants on an equal basis.
    Finally, the submission of orders to the Exchange is optional for 
Participants in that they could choose whether to submit orders to the 
Exchange and, if they do, the extent of its activity in this regard. 
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,\27\ 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 orders to a 
public exchange, thereby promoting market depth, price discovery and 
transparency and enhancing order execution opportunities for 
Participants. As a result, the Exchange believes that the proposed 
change furthers the Commission's goal in adopting Regulation NMS of 
fostering integrated competition among orders, which

[[Page 64164]]

promotes ``more efficient pricing of individual stocks for all types of 
orders, large and small.'' \28\
---------------------------------------------------------------------------

    \27\ 15 U.S.C. 78f(b)(8).
    \28\ See Securities Exchange Act Release No. 51808, 70 FR 37495, 
37498-99 (June 29, 2005) (S7-10-04) (Final Rule).
---------------------------------------------------------------------------

Intramarket Competition
    The proposed rule change is designed to attract order flow to the 
Exchange, and thereby, increased liquidity. Greater liquidity benefits 
all market participants on the Exchange by providing more trading 
opportunities and encourages Participants, to send orders, thereby 
contributing to robust levels of liquidity, which benefit all market 
participants. The Exchange does not believe that the proposed rule 
change will impair the ability of Participants to compete in the 
financial markets. There are 13 exchanges, 31 alternative trading 
systems, and numerous broker-dealer internalizers and wholesalers, all 
competing for order flow from which Participants may choose to send 
their quotes and trades. The Exchange also does not believe the 
proposed rule change would impact intramarket competition as the 
proposed rule change would apply to all Participants equally that 
transact on the Exchange, and therefore 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 and rebate levels at 
those other venues to be more favorable. As noted earlier, the 
Exchange's market share of intraday trading (i.e., excluding auctions) 
was 0.47% in September 2019. 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 the proposed change can impose any burden 
on intermarket competition.
    The Exchange believes that the proposed rule 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) \29\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \30\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \29\ 15 U.S.C. 78s(b)(3)(A).
    \30\ 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) \31\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \31\ 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-NYSECHX-2019-20 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-NYSECHX-2019-20. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. 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-NYSECHX-2019-20 and should be submitted 
on or before December 11, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\32\
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    \32\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-25107 Filed 11-19-19; 8:45 am]
 BILLING CODE 8011-01-P
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