Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of Proposed Change To Amend Its Price List, 10482-10487 [2020-03546]

Download as PDF 10482 Federal Register / Vol. 85, No. 36 / Monday, February 24, 2020 / Notices incurs co-location fees for a particular co-location service pursuant to the Fee Schedules will not be subject to colocation fees for the same co-location services charged by any of the Exchange’s affiliates, including NYSE Chicago. In addition, the Exchange believes that the proposed non-substantive changes to General Note 4 would not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act because it would have no impact on pricing or existing services. Rather, the changes would clarify Exchange rules, making the Fee Schedules easier to understand and alleviating any possible market participant confusion caused by the current text of the note. 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 Exchange has filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 13 and Rule 19b–4(f)(6) thereunder.14 Because the proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative prior to 30 days from the date on which it was filed, or such shorter time as the Commission may designate, if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b–4(f)(6)(iii) thereunder.15 A proposed rule change filed under Rule 19b–4(f)(6) 16 normally does not become operative prior to 30 days after the date of the filing. However, pursuant to Rule 19b–4(f)(6)(iii),17 the Commission may designate a shorter time if such action is consistent with the 13 15 U.S.C. 78s(b)(3)(A)(iii). CFR 240.19b–4(f)(6). 15 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6) requires the Exchange to give the Commission written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. 16 17 CFR 240.19b–4(f)(6). 17 17 CFR 240.19b–4(f)(6)(iii). lotter on DSKBCFDHB2PROD with NOTICES 14 17 VerDate Sep<11>2014 18:30 Feb 21, 2020 Jkt 250001 protection of investors and the public interest. The Exchange requests that the Commission waive the 30-day operative delay so that the proposal may become operative immediately upon filing. The Exchange believes that waiver of the operative delay is consistent with the protection of investors and the public interest because NYSE Chicago offers co-location services, and the waiver of the operative delay would alleviate the possibility of confusion among members, the public, and the Commission that could be caused by inconsistencies between the Exchange’s Fee Schedules and the NYSE Chicago Fee Schedule. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest. Accordingly, the Commission waives the 30-day operative delay and designates the proposed rule change operative upon filing.18 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) 19 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: All submissions should refer to File Number SR–NYSEAMER–2020–08. 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–NYSEAMER–2020–08 and should be submitted on or before March 16, 2020. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.20 Jill M. Peterson, Assistant Secretary. [FR Doc. 2020–03534 Filed 2–21–20; 8:45 am] BILLING CODE 8011–01–P 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– NYSEAMER–2020–08 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. 18 For purposes only of waiving the 30-day operative delay, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 19 15 U.S.C. 78s(b)(2)(B). PO 00000 Frm 00085 Fmt 4703 Sfmt 4703 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–88233; File No. SR– NYSEAMER–2020–07] Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of Proposed Change To Amend Its Price List February 18, 2020. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 20 17 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 E:\FR\FM\24FEN1.SGM 24FEN1 Federal Register / Vol. 85, No. 36 / Monday, February 24, 2020 / Notices notice is hereby given that, on February 3, 2020, NYSE American LLC (‘‘NYSE American’’ 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 selfregulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend its Price List to (1) offer new credits for displayed orders, and revise the credits for non-displayed orders, that add liquidity to the Exchange; (2) revise the fees for non-displayed orders that remove liquidity from the Exchange; and (3) offer a one-time credit for quoting in UTP Securities. The proposed 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. lotter on DSKBCFDHB2PROD with NOTICES A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend its Price List to (1) offer new credits for displayed orders, and revise the credits for non-displayed orders, that add liquidity to the Exchange; (2) revise the fees for non-displayed orders that remove liquidity from the Exchange; and (3) offer a one-time credit for quoting in UTP Securities.4 The proposed change responds to the current competitive environment where order flow providers have a choice of where to direct orders by offering further incentives for Equity Trading 4 See Rule 1.1E(ii) (definition of UTP Security). VerDate Sep<11>2014 18:30 Feb 21, 2020 Jkt 250001 Permit (‘‘ETP’’) Holders 5 to send additional displayed liquidity to the Exchange. The Exchange proposes to implement the rule change on February 3, 2020. 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, no single exchange has more than 20% 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, the Exchange’s market share of trading in Tapes A, B and C securities combined is less than 1%. 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 liquidity on an Exchange, ETP Holders can choose from 5 See id. at (m) (definition of ETP) & (n) (definition of ETP Holder). 6 See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37495, 37499 (June 29, 2005) (S7–10–04) (Final Rule) (‘‘Regulation NMS’’). 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) (‘‘Transaction Fee Pilot’’). 8 See Cboe Global Markets, U.S. Equities Market Volume Summary, available 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/. PO 00000 Frm 00086 Fmt 4703 Sfmt 4703 10483 any one of the 13 currently operating registered exchanges to route such order flow. Accordingly, competitive forces constrain exchange transaction fees that relate to orders that would provide liquidity on an exchange. In response to this competitive environment, the Exchange proposes to introduce incentives for its ETP Holders who submit orders that provide liquidity on the Exchange in displayed and non-displayed securities and for ETP Holders that remove liquidity from the Exchange. In addition, the Exchange proposes a credit for each ETP Holder’s Market Participant Identifier (‘‘MPID’’) that meets certain quoting requirements in UTP Securities, up to a maximum amount, designed to encourage ETP Holders to quote on the Exchange in UTP Securities. In short, the proposed fee change is designed to attract additional order flow to the Exchange and to encourage quoting and trading on the Exchange. Proposed Rule Change Liquidity Adding Displayed Order Fees For transactions in securities priced at or above $1.00, other than transactions by Electronic Designated Market Makers (‘‘eDMM’’) in assigned securities, the Exchange currently does not charge a fee for executions on the Exchange of displayed orders that add liquidity to the Exchange. The Exchange proposes to offer the following credits for displayed orders that add liquidity to the Exchange: • For displayed orders and Mid-Point Liquidity Orders (‘‘MPL Order’’) 11 with an average daily volume (‘‘ADV’’) of at least 750,000 shares that add liquidity to the Exchange (‘‘Adding ADV’’),12 the Exchange proposes a $0.0025 credit per displayed and MPL share. • For displayed orders and MPL Orders that add liquidity to the Exchange that do not have an Adding ADV of at least 750,000 shares, the Exchange proposes a $0.0024 credit per displayed and MPL share. • For orders that add displayed liquidity to the Exchange and that set a new best bid or offer (‘‘BBO’’) on NYSE American, 13 the Exchange proposes a $0.0026 per share credit. The purpose of this proposed change is to incentivize ETP Holders to increase 11 See Rule 7.31E(d)(3) (description of MPL Order). 12 The Exchange proposes to add a fourth bullet under the first heading in the Price List titled ‘‘Pillar Trading Platform’’ that would provide that capitalized terms have the same meaning as in Rules 1.1E and 7E and that ‘‘Adding ADV’’ means an ETP Holder’s average daily volume of shares executed on the Exchange that provided liquidity. 13 See Rule 1.1E(h) (definition of BBO). E:\FR\FM\24FEN1.SGM 24FEN1 10484 Federal Register / Vol. 85, No. 36 / Monday, February 24, 2020 / Notices the liquidity-providing orders they send to the Exchange, which would support the quality of price discovery on the Exchange and provide additional liquidity for incoming orders. As noted above, the Exchange operates in a competitive environment, particularly as it relates to attracting non-marketable orders, which add liquidity to the Exchange. The Exchange believes that the proposed credits for orders the meeting the Adding ADV requirement, for orders that don’t meet the Adding ADV requirements and for orders that set a new Exchange BBO would provide incentives for ETP Holders to send additional liquidity and improve quoting on the Exchange in order to qualify for a credit. The Exchange does not know how much order flow ETP Holders choose to route to other exchanges or to offexchange venues. The Exchange did not previously offer credits for displayed orders that add liquidity to the Exchange, but 5 ETP Holders currently qualify for the tiered credits, and all ETP Holders could qualify for the proposed $0.0026 credit for setting a new BBO if they so choose. However, without having a view of ETP Holder’s activity on other exchanges and offexchange venues, the Exchange has no way of knowing whether this proposed rule change would result in any ETP Holder directing orders to the Exchange in order to qualify for the new credits. lotter on DSKBCFDHB2PROD with NOTICES Liquidity Adding Non-Displayed Order Fees For securities priced at or above $1.00, other than transactions by eDMMs in assigned securities, the Exchange currently charges $0.0002 per share for executions on the Exchange of non-displayed orders that add liquidity to the Exchange. The Exchange proposes a credit for executions on the Exchange of non-displayed orders that add liquidity to the Exchange of $0.0020 per share. For securities priced at or above $1.00 on transactions by eDMMs in assigned securities, the Exchange currently does not offer a credit for executions of nondisplayed orders that add liquidity to the Exchange. The Exchange proposes to offer a $0.0020 per share credit to eDMMs for executions of non-displayed orders that add liquidity to the Exchange.14 The purpose of this proposed change is to incentivize ETP Holders to increase the liquidity-providing orders they send 14 The Exchange proposes to delete the stray comma following ‘‘(displayed)’’ in the first entry under ‘‘Adding Liquidity’’ in Section II, A of the Price List. VerDate Sep<11>2014 18:30 Feb 21, 2020 Jkt 250001 to the Exchange, which would support the quality of price discovery on the Exchange and provide additional liquidity for incoming orders. As noted above, the Exchange operates in a competitive environment, particularly as it relates to attracting non-marketable orders, which add liquidity to the Exchange. The Exchange believes that the proposed credits would provide incentives for ETP Holders to send additional liquidity to the Exchange. The Exchange does not know how much order flow ETP Holders choose to route to other exchanges or to offexchange venues. The Exchange believes all ETP Holders and eDMMs could qualify for the credits if they so choose. However, without having a view of ETP Holder’s and eDMM’s activity on other exchanges and off-exchange venues, the Exchange has no way of knowing whether this proposed rule change would result in any ETP Holder or eDMM directing orders to the Exchange in order to qualify for the new credits. Liquidity Removing Order Fees For securities priced at or above $1.00, other than transactions by eDMMs in assigned securities, the Exchange currently charges $0.0002 per share for all executions that remove liquidity from the Exchange. The Exchange proposes to revise the current fee for removing liquidity to $0.0026 per share where an ETP Holder has an Adding ADV of at least 10,000 shares. Where an ETP Holder does not have an Adding ADV of at least 10,000 shares, the Exchange proposes to charge $0.0030 per share for all executions that remove liquidity from the Exchange. For priced at or above $1.00 in transactions applicable to eDMMs in assigned securities that remove liquidity from the Exchange, the Exchange currently charges $0.0002 per share for all executions that remove liquidity from the Exchange. The Exchange proposes to revise this fee for removing liquidity in transactions applicable to eDMMs in assigned securities to $0.0026 per share. The Exchange does not know how much order flow ETP Holders choose to route to other exchanges or to offexchange venues. There are currently 25 ETP Holders that qualify for the current fees for removing liquidity based on their current trading profile on the Exchange. However, without having a view of ETP Holder’s activity on other exchanges and off-exchange venues, the Exchange has no way of knowing whether this proposed rule change would result in any ETP Holder PO 00000 Frm 00087 Fmt 4703 Sfmt 4703 directing orders to the Exchange in order to qualify for the lower fees. Monthly Quoting Credit The Exchange proposes to offer a credit in addition to the transaction fees and credits specified in Section I.B of the Price List to encourage quoting on the Exchange in UTP Securities. Specifically, the Exchange proposes that each ETP Holder’s MPID quoting at the national best bid or offer (‘‘NBBO’’) 15 an average of at least 10% of the time in 750 securities or more UTP Securities in the billing month would be eligible for a credit of $10,000 per qualifying MPID in the first month that an MPID qualifies for the credit for the first time, up to a maximum of $50,000 per ETP Holder for all of the ETP Holder’s MPIDs. For example, assume that ETP Holder A has 6 MPIDs and that ETP Holder A’s first MPID quotes at least 10% at the NBBO in 800 UTP Securities in the first month while the remaining 5 MPIDs quote at least 10% in less than 750 UTP Securities each. The first MPID would qualify for the $10,000 credit in the first month. Assume that in the second month all of ETP Holder A’s MPIDs quote at least 10% in at least 750 UTP Securities each. In the second month, ETP Holder A’s first MPID would not qualify for the credit since it already received the $10,000 credit in the first month. ETP Holder A would accordingly receive a credit for $40,000 in the second month because the five of the remaining MPIDs met the quoting requirements but the combined credit is capped at $50,000 per ETP Holder. Because ETP Holder A would have received a combined credit of $50,000 over the first two months, ETP Holder A would not be eligible for any additional monthly quoting credits. As noted, the purpose of this proposed change is to provide ETP Holders with an incentive to increase quoting on the Exchange in UTP Securities, which would support the quality of price discovery on the Exchange and provide additional liquidity for incoming orders. As noted, the Exchange operates in a competitive environment, particularly as it relates to attracting non-marketable orders, which add liquidity to the Exchange. The Exchange believes that incentivizing ETP Holders to quote at the NBBO in UTP Securities more frequently could attract additional orders to the Exchange and contribute to price discovery, especially in less liquid securities that may quote but not trade. In addition, 15 See Rule 1.1E(dd) (definition of NBBO, Best Protected Bid, Best Protected Offer, Protected Best Bid and Offer (PBBO)). E:\FR\FM\24FEN1.SGM 24FEN1 Federal Register / Vol. 85, No. 36 / Monday, February 24, 2020 / Notices Given this competitive environment, the proposal represents a reasonable attempt to attract additional order flow to, and to increase quoting on, the Exchange. As noted, the Exchange’s market share of trading in Tapes A, B and C securities combined is under 1%. Specifically, the Exchange believes that offering new credits for displayed orders, and revising the credits for nondisplayed orders, that add liquidity to the Exchange would provide incentives 2. Statutory Basis for ETP Holders to send additional liquidity providing orders to the The Exchange believes that the proposed rule change is consistent with Exchange. As noted above, the Exchange Section 6(b) of the Act,16 in general, and operates in a highly competitive environment, particularly for attracting furthers the objectives of Sections 6(b)(4) and (5) of the Act,17 in particular, non-marketable order flow that provides liquidity on an exchange. because it provides for the equitable Since the credits for displayed orders allocation of reasonable dues, fees, and that add liquidity to the Exchange other charges among its members, would be new, no ETP Holder currently issuers and other persons using its qualifies for the proposed credits. As facilities and does not unfairly previously noted, there are a number of discriminate between customers, ETP Holders that could qualify for the issuers, brokers or dealers. proposed credits for displayed and nondisplayed orders that add liquidity to The Proposal is Reasonable the Exchange but without a view of ETP As discussed above, the Exchange Holder activity on other exchanges and operates in a highly fragmented and off-exchange venues, the Exchange has competitive market. The Commission no way of knowing whether the has repeatedly expressed its preference proposed rule change would result in for competition over regulatory any ETP Holder qualifying for the intervention in determining prices, proposed credits. The Exchange believes products, and services in the securities the proposed credits are reasonable as markets. Specifically, in Regulation they would provide an incentive for NMS, the Commission highlighted the ETP Holders to direct order flow to the importance of market forces in Exchange and provide meaningful determining prices and SRO revenues added levels of liquidity in order to and, also, recognized that current qualify for the credits, thereby regulation of the market system ‘‘has contributing to depth and market been remarkably successful in quality on the Exchange. The Exchange promoting market competition in its notes that the proposed credits remain broader forms that are most important to in line with credits currently offered on investors and listed companies.’’ 18 other markets to attract displayed and The Exchange believes that the evernon-displayed liquidity. For example, shifting market share among the Cboe BZX and Nasdaq offer non-tier exchanges from month to month credits for adding liquidity of $0.0020.19 demonstrates that market participants The Exchange further believes that the can move order flow, or discontinue or proposed revised fees for orders that reduce use of certain categories of remove liquidity from the Exchange are products, in response to fee changes. reasonable because they would With respect to non-marketable order incentivize ETP Holders to remove flow that would provide liquidity on an additional liquidity from the Exchange, Exchange, ETP Holders can choose from thereby increasing the number of orders any one of the 13 currently operating adding liquidity executed on the registered exchanges to route such order Exchange and improving overall flow. Accordingly, competitive forces liquidity on a public exchange, resulting constrain exchange transaction fees that in lower costs for ETP Holders that relate to orders that would provide qualify for the rates. The Exchange notes liquidity on an exchange. Stated that the proposed fees, although higher otherwise, changes to exchange than current levels, are significantly less transaction fees can have a direct effect 19 See Cboe BZX U.S. Equities Exchange Fee on the ability of an exchange to compete Schedule, Fee Codes and Associated Fees, available for order flow. lotter on DSKBCFDHB2PROD with NOTICES additional liquidity-providing quotes benefit all market participants because they provide greater execution opportunities on the Exchange and improve the public quotation. 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. 16 15 U.S.C. 78f(b). U.S.C. 78f(b)(4) & (5). 18 See Regulation NMS, 70 FR at 37499. 17 15 VerDate Sep<11>2014 18:30 Feb 21, 2020 Jkt 250001 at https://markets.cboe.com/us/equities/ membership/fee_schedule/bzx/; Nasdaq Price List, Rebate to Add Displayed Designated Retail Liquidity, available at https://nasdaqtrader.com/ Trader.aspx?id=PriceListTrading2. PO 00000 Frm 00088 Fmt 4703 Sfmt 4703 10485 than comparable fees offered on other markets. For example, Cboe BZX and Nasdaq both offer a non-tier fee for removing liquidity of $0.0030.20 Without having a view of an ETP Holder’s activity on other markets and off-exchange venues, the Exchange believes that the proposed higher fees to remove liquidity would provide an incentive for ETP Holders to remove additional liquidity from the Exchange. As previously noted, a number of ETP Holders qualify for the proposed fees and additional ETP Holders could qualify for the fees if they choose to direct order flow to, and increase quoting on, the Exchange. The Exchange believes that the proposed credit for quoting on the Exchange in UTP Securities is reasonable. The proposed credit would provide ETP Holders with an additional incentive to increase quoting on the Exchange in UTP Securities, and particularly in less active securities, which would support the quality of price discovery on the Exchange and provide additional liquidity for incoming orders. The Exchange believes that incentivizing ETP Holders on the Exchange to quote at the NBBO more frequently could attract additional orders to the Exchange and contribute to price discovery. In addition, additional liquidity-providing quotes benefit all market participants because they provide greater execution opportunities on the Exchange and improve the public quotation. Finally, the Exchange also believes the proposed non-substantive changes are reasonable and would not be inconsistent with the public interest and the protection of investors because investors will not be harmed and in fact would benefit from increased clarity and transparency on the Price List, thereby reducing potential confusion. Given the competitive environment in which the Exchange currently operates, the proposed rule change accordingly constitutes a reasonable attempt to increase liquidity on the Exchange and improve the Exchange’s market share relative to its competitors. The Proposal Is an Equitable Allocation of Fees The Exchange believes the proposal equitably allocates its fees among its market participants by fostering liquidity provision and stability in the marketplace. Moreover, the proposal is 20 See Cboe BZX Fee Schedule, Fee Codes and Associated Fees, available at https:// markets.cboe.com/us/equities/membership/fee_ schedule/bzx/; Nasdaq Price List, Fees to Remove Liquidity, available at https://nasdaqtrader.com/ Trader.aspx?id=PriceListTrading2. E:\FR\FM\24FEN1.SGM 24FEN1 lotter on DSKBCFDHB2PROD with NOTICES 10486 Federal Register / Vol. 85, No. 36 / Monday, February 24, 2020 / Notices an equitable allocation of fees because it would reward ETP Holders for increasing their quoting on the Exchange in UTP Securities. As such, it is equitable to offer ETP Holders an additional credit for quoting in UTP Securities up to a maximum amount. The Exchange believes that the new credits for displayed orders, and revising the credits for non-displayed orders, that add liquidity to the Exchange are equitable because the proposed credits are not unreasonably high in comparison to the credits paid by other exchanges for displayed and non-displayed orders that provide liquidity.21 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. Currently, 5 ETP Holders qualify for the proposed credits for displayed orders that add liquidity to the Exchange. As previously noted, there are a number of other ETP Holders that could qualify for the proposed credits for displayed and non-displayed orders that add liquidity to the Exchange but without a view of ETP Holder activity on other exchanges and off-exchange venues, the Exchange has no way of knowing whether the proposed rule change would result in any ETP Holder qualifying for the proposed credits. The Exchange believes the proposed credits are reasonable as they would provide an incentive for ETP Holders to direct order flow to the Exchange and provide meaningful added levels of liquidity in order to qualify for the credits, thereby contributing to depth and market quality on the Exchange. The proposal neither targets nor will it have a disparate impact on any particular category of market participant. All ETP Holders would be eligible to qualify for the proposed credits by directing displayed and nondisplayed order flow to the Exchange. Similarly, all ETP Holders would be eligible to qualify for the one-time credit for quoting on the Exchange in UTP Securities. ETP Holders must have an assigned MPID to quote and trade on the Exchange, and are thus all ETP Holders would be equally eligible to receive the same proposed credit. As noted above, the Exchange operates in a competitive environment, particularly as it relates to attracting non-marketable orders, which add liquidity to the Exchange. The Exchange believes that offering credits for liquidity-providing displayed and non-displayed orders would provide 21 See note 19, supra. VerDate Sep<11>2014 18:30 Feb 21, 2020 Jkt 250001 incentives for ETP Holders to send additional liquidity to the Exchange, thereby providing additional price improvement opportunities on the Exchange and benefiting investors generally. Similarly, the Exchange believes that offering a one-time credit for quoting on the Exchange in UTP Securities would provide an added incentive to increase quoting on the Exchange in UTP Securities, and particularly in less active securities, which would support the quality of price discovery on the Exchange and provide additional liquidity for incoming orders. The Exchange believes that, for the reasons discussed above, the proposed changes to the liquidity-removing order fees would incentivize ETP Holders to add additional liquidity from the Exchange to qualify for the lower removing fee of $0.0026, thereby increasing the number of orders adding liquidity that are executed on the Exchange and improving overall liquidity on a public exchange. As previously noted, a number of ETPs are qualifying for the current fees for removing liquidity based on their current trading profile on the Exchange. Based on the profile of liquidityremoving firms generally, the Exchange believes additional ETP Holders could qualify for the new rates if they choose to direct order flow to, and increase quoting on, the Exchange, given the low level of 10,000 shares ADV. The Proposal Is Not Unfairly Discriminatory The Exchange believes that the proposal is not unfairly discriminatory. In the prevailing competitive environment, ETP Holders are free to disfavor the Exchange’s pricing if they believe that alternatives offer them better value. The Exchange believes it is not unfairly discriminatory to provide higher credits for displayed orders and non-displayed orders as well as a onetime credit based on enhanced quoting at the NBBO in UTP Securities insofar as the proposed credits would be provided on an equal basis to all similarly situated ETP Holders that add liquidity to the Exchange, who would all be eligible for the same credits if they meet the quoting and other requirements on an equal basis. Moreover, the proposed cap per ETP Holder of $50,000 for the one-time credit for enhanced quoting at the NBBO in UTP Securities would also be provided on equal basis to all ETP Holders. ETP Holders must have an assigned MPID to quote and trade on the Exchange, and are thus all ETP Holders PO 00000 Frm 00089 Fmt 4703 Sfmt 4703 would be equally eligible to receive the same proposed credit. The revised fees for orders that remove liquidity from the Exchange are also not unfairly discriminatory because the ADV requirement to qualify for the fee would be applied to all similarly situated ETP Holders who would all be eligible for the same fee on an equal basis. Accordingly, no ETP Holder already operating on the Exchange would be disadvantaged by this allocation of fees. Further, the Exchange believes the proposal would provide an incentive for ETP Holders to remove additional liquidity from the Exchange, to the benefit of all market participants. The proposal does not permit unfair discrimination to provide a lower fee for removing liquidity and higher credits for adding displayed and non-displayed liquidity as the proposed fee and credits would be provided on an equal basis to all similarly situated ETP Holders who would all be eligible for the same credit on an equal basis. Accordingly, no ETP Holder already operating on the Exchange would be disadvantaged by this allocation of fees. The Exchange also believes that the proposed change is not unfairly discriminatory because it is reasonably related to the value to the Exchange’s market quality associated with higher volume. The Exchange believes the proposed credits would incentivize ETP Holders to send more orders to the Exchange and to increase quoting on the Exchange in order to qualify for the proposed credits, which would support the quality of price discovery on the Exchange and provide additional liquidity for incoming orders. Further, the submission of orders to the Exchange is optional for member organizations in that they could choose whether to submit orders to the Exchange and, if they do, the extent of its activity in this regard. 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 22 15 E:\FR\FM\24FEN1.SGM U.S.C. 78f(b)(8). 24FEN1 Federal Register / Vol. 85, No. 36 / Monday, February 24, 2020 / Notices lotter on DSKBCFDHB2PROD with NOTICES that the proposed changes would encourage the submission of additional liquidity to a public exchange, thereby promoting market depth, price discovery and transparency and enhancing order execution opportunities for ETP Holders. As a result, the Exchange believes that the proposed change furthers the Commission’s goal in adopting Regulation NMS of fostering integrated competition among orders, which promotes ‘‘more efficient pricing of individual stocks for all types of orders, large and small.’’ 23 Intramarket Competition. The proposed changes are designed to attract additional order flow to the Exchange. The Exchange believes that the proposed changes would continue to incentivize market participants to direct order flow to the Exchange. Greater liquidity benefits all market participants on the Exchange by providing more trading opportunities and encourages member organizations to send orders, thereby contributing to robust levels of liquidity, which benefits all market participants on the Exchange. The proposed credits would be available to all similarly-situated market participants, and, as such, the proposed change would not impose a disparate burden on competition among market participants on the Exchange. 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. As noted, the Exchange’s market share of trading in Tapes A, B and C securities combined is less than 1%. In such an environment, the Exchange must continually adjust its fees and rebates to remain competitive with other exchanges and with offexchange 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. 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. 23 Regulation VerDate Sep<11>2014 NMS, 70 FR at 37498–99. 18:30 Feb 21, 2020 Jkt 250001 10487 III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change is effective upon filing pursuant to Section 19(b)(3)(A) 24 of the Act and subparagraph (f)(2) of Rule 19b–4 25 thereunder, because it establishes a due, fee, or other charge imposed by the Exchange. At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings under Section 19(b)(2)(B) 26 of the Act to determine whether the proposed rule change should be approved or disapproved. 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–NYSEAMER–2020–07 and should be submitted on or before March 16, 2020. 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: For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.27 Jill M. Peterson, Assistant Secretary. 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– NYSEAMER–2020–07 on the subject line. SECURITIES AND EXCHANGE COMMISSION 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–NYSEAMER–2020–07. 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 [FR Doc. 2020–03546 Filed 2–21–20; 8:45 am] BILLING CODE 8011–01–P [Release No. 34–88225; File No. SR–MSRB– 2019–13] Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Order Granting Approval of a Proposed Rule Change To Amend the Information Facility of the MSRB’s Electronic Municipal Market Access (EMMA) System February 18, 2020. I. Introduction On November 19, 2019, the Municipal Securities Rulemaking Board (the ‘‘MSRB’’ or ‘‘Board’’) filed with the Securities and Exchange Commission (the ‘‘SEC’’ or ‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to amend the information facility of the MSRB’s Electronic Municipal Market Access (‘‘EMMA’’) 3 system (the ‘‘EMMA IF’’) to provide for (1) the automated calculation and static display of the number of days between 27 17 24 15 U.S.C. 78s(b)(3)(A). 25 17 CFR 240.19b–4(f)(2). 26 15 U.S.C. 78s(b)(2)(B). PO 00000 Frm 00090 Fmt 4703 Sfmt 4703 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 EMMA is a registered trademark of the MSRB. 1 15 E:\FR\FM\24FEN1.SGM 24FEN1

Agencies

[Federal Register Volume 85, Number 36 (Monday, February 24, 2020)]
[Notices]
[Pages 10482-10487]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-03546]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88233; File No. SR-NYSEAMER-2020-07]


Self-Regulatory Organizations; NYSE American LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Change To Amend Its 
Price List

February 18, 2020.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\

[[Page 10483]]

notice is hereby given that, on February 3, 2020, NYSE American LLC 
(``NYSE American'' 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 its Price List to (1) offer new 
credits for displayed orders, and revise the credits for non-displayed 
orders, that add liquidity to the Exchange; (2) revise the fees for 
non-displayed orders that remove liquidity from the Exchange; and (3) 
offer a one-time credit for quoting in UTP Securities. The proposed 
change is available on the Exchange's website at www.nyse.com, at the 
principal office of the Exchange, and at the Commission's Public 
Reference Room.

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

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

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

1. Purpose
    The Exchange proposes to amend its Price List to (1) offer new 
credits for displayed orders, and revise the credits for non-displayed 
orders, that add liquidity to the Exchange; (2) revise the fees for 
non-displayed orders that remove liquidity from the Exchange; and (3) 
offer a one-time credit for quoting in UTP Securities.\4\
---------------------------------------------------------------------------

    \4\ See Rule 1.1E(ii) (definition of UTP Security).
---------------------------------------------------------------------------

    The proposed change responds to the current competitive environment 
where order flow providers have a choice of where to direct orders by 
offering further incentives for Equity Trading Permit (``ETP'') Holders 
\5\ to send additional displayed liquidity to the Exchange.
---------------------------------------------------------------------------

    \5\ See id. at (m) (definition of ETP) & (n) (definition of ETP 
Holder).
---------------------------------------------------------------------------

    The Exchange proposes to implement the rule change on February 3, 
2020.
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 37495, 37499 (June 29, 2005) (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.'' 
\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, no single exchange has more 
than 20% 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, the 
Exchange's market share of trading in Tapes A, B and C securities 
combined is less than 1%.
---------------------------------------------------------------------------

    \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) (``Transaction Fee Pilot'').
    \8\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, available 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/.
---------------------------------------------------------------------------

    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 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 
liquidity on an exchange.
    In response to this competitive environment, the Exchange proposes 
to introduce incentives for its ETP Holders who submit orders that 
provide liquidity on the Exchange in displayed and non-displayed 
securities and for ETP Holders that remove liquidity from the Exchange. 
In addition, the Exchange proposes a credit for each ETP Holder's 
Market Participant Identifier (``MPID'') that meets certain quoting 
requirements in UTP Securities, up to a maximum amount, designed to 
encourage ETP Holders to quote on the Exchange in UTP Securities. In 
short, the proposed fee change is designed to attract additional order 
flow to the Exchange and to encourage quoting and trading on the 
Exchange.
Proposed Rule Change
Liquidity Adding Displayed Order Fees
    For transactions in securities priced at or above $1.00, other than 
transactions by Electronic Designated Market Makers (``eDMM'') in 
assigned securities, the Exchange currently does not charge a fee for 
executions on the Exchange of displayed orders that add liquidity to 
the Exchange.
    The Exchange proposes to offer the following credits for displayed 
orders that add liquidity to the Exchange:
     For displayed orders and Mid-Point Liquidity Orders (``MPL 
Order'') \11\ with an average daily volume (``ADV'') of at least 
750,000 shares that add liquidity to the Exchange (``Adding ADV''),\12\ 
the Exchange proposes a $0.0025 credit per displayed and MPL share.
---------------------------------------------------------------------------

    \11\ See Rule 7.31E(d)(3) (description of MPL Order).
    \12\ The Exchange proposes to add a fourth bullet under the 
first heading in the Price List titled ``Pillar Trading Platform'' 
that would provide that capitalized terms have the same meaning as 
in Rules 1.1E and 7E and that ``Adding ADV'' means an ETP Holder's 
average daily volume of shares executed on the Exchange that 
provided liquidity.
---------------------------------------------------------------------------

     For displayed orders and MPL Orders that add liquidity to 
the Exchange that do not have an Adding ADV of at least 750,000 shares, 
the Exchange proposes a $0.0024 credit per displayed and MPL share.
     For orders that add displayed liquidity to the Exchange 
and that set a new best bid or offer (``BBO'') on NYSE American, \13\ 
the Exchange proposes a $0.0026 per share credit.
---------------------------------------------------------------------------

    \13\ See Rule 1.1E(h) (definition of BBO).
---------------------------------------------------------------------------

    The purpose of this proposed change is to incentivize ETP Holders 
to increase

[[Page 10484]]

the liquidity-providing orders they send to the Exchange, which would 
support the quality of price discovery on the Exchange and provide 
additional liquidity for incoming orders. As noted above, the Exchange 
operates in a competitive environment, particularly as it relates to 
attracting non-marketable orders, which add liquidity to the Exchange. 
The Exchange believes that the proposed credits for orders the meeting 
the Adding ADV requirement, for orders that don't meet the Adding ADV 
requirements and for orders that set a new Exchange BBO would provide 
incentives for ETP Holders to send additional liquidity and improve 
quoting on the Exchange in order to qualify for a credit.
    The Exchange does not know how much order flow ETP Holders choose 
to route to other exchanges or to off-exchange venues. The Exchange did 
not previously offer credits for displayed orders that add liquidity to 
the Exchange, but 5 ETP Holders currently qualify for the tiered 
credits, and all ETP Holders could qualify for the proposed $0.0026 
credit for setting a new BBO if they so choose. However, without having 
a view of ETP Holder's activity on other exchanges and off-exchange 
venues, the Exchange has no way of knowing whether this proposed rule 
change would result in any ETP Holder directing orders to the Exchange 
in order to qualify for the new credits.
Liquidity Adding Non-Displayed Order Fees
    For securities priced at or above $1.00, other than transactions by 
eDMMs in assigned securities, the Exchange currently charges $0.0002 
per share for executions on the Exchange of non-displayed orders that 
add liquidity to the Exchange. The Exchange proposes a credit for 
executions on the Exchange of non-displayed orders that add liquidity 
to the Exchange of $0.0020 per share.
    For securities priced at or above $1.00 on transactions by eDMMs in 
assigned securities, the Exchange currently does not offer a credit for 
executions of non-displayed orders that add liquidity to the Exchange. 
The Exchange proposes to offer a $0.0020 per share credit to eDMMs for 
executions of non-displayed orders that add liquidity to the 
Exchange.\14\
---------------------------------------------------------------------------

    \14\ The Exchange proposes to delete the stray comma following 
``(displayed)'' in the first entry under ``Adding Liquidity'' in 
Section II, A of the Price List.
---------------------------------------------------------------------------

    The purpose of this proposed change is to incentivize ETP Holders 
to increase the liquidity-providing orders they send to the Exchange, 
which would support the quality of price discovery on the Exchange and 
provide additional liquidity for incoming orders. As noted above, the 
Exchange operates in a competitive environment, particularly as it 
relates to attracting non-marketable orders, which add liquidity to the 
Exchange. The Exchange believes that the proposed credits would provide 
incentives for ETP Holders to send additional liquidity to the 
Exchange.
    The Exchange does not know how much order flow ETP Holders choose 
to route to other exchanges or to off-exchange venues. The Exchange 
believes all ETP Holders and eDMMs could qualify for the credits if 
they so choose. However, without having a view of ETP Holder's and 
eDMM's activity on other exchanges and off-exchange venues, the 
Exchange has no way of knowing whether this proposed rule change would 
result in any ETP Holder or eDMM directing orders to the Exchange in 
order to qualify for the new credits.
Liquidity Removing Order Fees
    For securities priced at or above $1.00, other than transactions by 
eDMMs in assigned securities, the Exchange currently charges $0.0002 
per share for all executions that remove liquidity from the Exchange.
    The Exchange proposes to revise the current fee for removing 
liquidity to $0.0026 per share where an ETP Holder has an Adding ADV of 
at least 10,000 shares. Where an ETP Holder does not have an Adding ADV 
of at least 10,000 shares, the Exchange proposes to charge $0.0030 per 
share for all executions that remove liquidity from the Exchange.
    For priced at or above $1.00 in transactions applicable to eDMMs in 
assigned securities that remove liquidity from the Exchange, the 
Exchange currently charges $0.0002 per share for all executions that 
remove liquidity from the Exchange. The Exchange proposes to revise 
this fee for removing liquidity in transactions applicable to eDMMs in 
assigned securities to $0.0026 per share.
    The Exchange does not know how much order flow ETP Holders choose 
to route to other exchanges or to off-exchange venues. There are 
currently 25 ETP Holders that qualify for the current fees for removing 
liquidity based on their current trading profile on the Exchange. 
However, without having a view of ETP Holder's activity on other 
exchanges and off-exchange venues, the Exchange has no way of knowing 
whether this proposed rule change would result in any ETP Holder 
directing orders to the Exchange in order to qualify for the lower 
fees.
Monthly Quoting Credit
    The Exchange proposes to offer a credit in addition to the 
transaction fees and credits specified in Section I.B of the Price List 
to encourage quoting on the Exchange in UTP Securities. Specifically, 
the Exchange proposes that each ETP Holder's MPID quoting at the 
national best bid or offer (``NBBO'') \15\ an average of at least 10% 
of the time in 750 securities or more UTP Securities in the billing 
month would be eligible for a credit of $10,000 per qualifying MPID in 
the first month that an MPID qualifies for the credit for the first 
time, up to a maximum of $50,000 per ETP Holder for all of the ETP 
Holder's MPIDs.
---------------------------------------------------------------------------

    \15\ See Rule 1.1E(dd) (definition of NBBO, Best Protected Bid, 
Best Protected Offer, Protected Best Bid and Offer (PBBO)).
---------------------------------------------------------------------------

    For example, assume that ETP Holder A has 6 MPIDs and that ETP 
Holder A's first MPID quotes at least 10% at the NBBO in 800 UTP 
Securities in the first month while the remaining 5 MPIDs quote at 
least 10% in less than 750 UTP Securities each. The first MPID would 
qualify for the $10,000 credit in the first month. Assume that in the 
second month all of ETP Holder A's MPIDs quote at least 10% in at least 
750 UTP Securities each. In the second month, ETP Holder A's first MPID 
would not qualify for the credit since it already received the $10,000 
credit in the first month. ETP Holder A would accordingly receive a 
credit for $40,000 in the second month because the five of the 
remaining MPIDs met the quoting requirements but the combined credit is 
capped at $50,000 per ETP Holder. Because ETP Holder A would have 
received a combined credit of $50,000 over the first two months, ETP 
Holder A would not be eligible for any additional monthly quoting 
credits.
    As noted, the purpose of this proposed change is to provide ETP 
Holders with an incentive to increase quoting on the Exchange in UTP 
Securities, which would support the quality of price discovery on the 
Exchange and provide additional liquidity for incoming orders. As 
noted, the Exchange operates in a competitive environment, particularly 
as it relates to attracting non-marketable orders, which add liquidity 
to the Exchange. The Exchange believes that incentivizing ETP Holders 
to quote at the NBBO in UTP Securities more frequently could attract 
additional orders to the Exchange and contribute to price discovery, 
especially in less liquid securities that may quote but not trade. In 
addition,

[[Page 10485]]

additional liquidity-providing quotes benefit all market participants 
because they provide greater execution opportunities on the Exchange 
and improve the public quotation.
    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,\16\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\17\ 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.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(4) & (5).
---------------------------------------------------------------------------

The Proposal 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.'' \18\
---------------------------------------------------------------------------

    \18\ See Regulation NMS, 70 FR at 37499.
---------------------------------------------------------------------------

    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 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 
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.
    Given this competitive environment, the proposal represents a 
reasonable attempt to attract additional order flow to, and to increase 
quoting on, the Exchange. As noted, the Exchange's market share of 
trading in Tapes A, B and C securities combined is under 1%.
    Specifically, the Exchange believes that offering new credits for 
displayed orders, and revising the credits for non-displayed orders, 
that add liquidity to the Exchange would provide incentives for ETP 
Holders to send additional liquidity providing orders to the Exchange. 
As noted above, the Exchange operates in a highly competitive 
environment, particularly for attracting non-marketable order flow that 
provides liquidity on an exchange.
    Since the credits for displayed orders that add liquidity to the 
Exchange would be new, no ETP Holder currently qualifies for the 
proposed credits. As previously noted, there are a number of ETP 
Holders that could qualify for the proposed credits for displayed and 
non-displayed orders that add liquidity to the Exchange but without a 
view of ETP Holder activity on other exchanges and off-exchange venues, 
the Exchange has no way of knowing whether the proposed rule change 
would result in any ETP Holder qualifying for the proposed credits. The 
Exchange believes the proposed credits are reasonable as they would 
provide an incentive for ETP Holders to direct order flow to the 
Exchange and provide meaningful added levels of liquidity in order to 
qualify for the credits, thereby contributing to depth and market 
quality on the Exchange. The Exchange notes that the proposed credits 
remain in line with credits currently offered on other markets to 
attract displayed and non-displayed liquidity. For example, Cboe BZX 
and Nasdaq offer non-tier credits for adding liquidity of $0.0020.\19\
---------------------------------------------------------------------------

    \19\ See Cboe BZX U.S. Equities Exchange Fee Schedule, Fee Codes 
and Associated Fees, available at https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/; Nasdaq Price List, Rebate to 
Add Displayed Designated Retail Liquidity, available at https://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2.
---------------------------------------------------------------------------

    The Exchange further believes that the proposed revised fees for 
orders that remove liquidity from the Exchange are reasonable because 
they would incentivize ETP Holders to remove additional liquidity from 
the Exchange, thereby increasing the number of orders adding liquidity 
executed on the Exchange and improving overall liquidity on a public 
exchange, resulting in lower costs for ETP Holders that qualify for the 
rates. The Exchange notes that the proposed fees, although higher than 
current levels, are significantly less than comparable fees offered on 
other markets. For example, Cboe BZX and Nasdaq both offer a non-tier 
fee for removing liquidity of $0.0030.\20\
---------------------------------------------------------------------------

    \20\ See Cboe BZX Fee Schedule, Fee Codes and Associated Fees, 
available at https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/; Nasdaq Price List, Fees to Remove Liquidity, 
available at https://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2.
---------------------------------------------------------------------------

    Without having a view of an ETP Holder's activity on other markets 
and off-exchange venues, the Exchange believes that the proposed higher 
fees to remove liquidity would provide an incentive for ETP Holders to 
remove additional liquidity from the Exchange. As previously noted, a 
number of ETP Holders qualify for the proposed fees and additional ETP 
Holders could qualify for the fees if they choose to direct order flow 
to, and increase quoting on, the Exchange.
    The Exchange believes that the proposed credit for quoting on the 
Exchange in UTP Securities is reasonable. The proposed credit would 
provide ETP Holders with an additional incentive to increase quoting on 
the Exchange in UTP Securities, and particularly in less active 
securities, which would support the quality of price discovery on the 
Exchange and provide additional liquidity for incoming orders. The 
Exchange believes that incentivizing ETP Holders on the Exchange to 
quote at the NBBO more frequently could attract additional orders to 
the Exchange and contribute to price discovery. In addition, additional 
liquidity-providing quotes benefit all market participants because they 
provide greater execution opportunities on the Exchange and improve the 
public quotation.
    Finally, the Exchange also believes the proposed non-substantive 
changes are reasonable and would not be inconsistent with the public 
interest and the protection of investors because investors will not be 
harmed and in fact would benefit from increased clarity and 
transparency on the Price List, thereby reducing potential confusion.
    Given the competitive environment in which the Exchange currently 
operates, the proposed rule change accordingly constitutes a reasonable 
attempt to increase liquidity on the Exchange and improve the 
Exchange's market share relative to its competitors.
The Proposal Is an Equitable Allocation of Fees
    The Exchange believes the proposal equitably allocates its fees 
among its market participants by fostering liquidity provision and 
stability in the marketplace. Moreover, the proposal is

[[Page 10486]]

an equitable allocation of fees because it would reward ETP Holders for 
increasing their quoting on the Exchange in UTP Securities. As such, it 
is equitable to offer ETP Holders an additional credit for quoting in 
UTP Securities up to a maximum amount.
    The Exchange believes that the new credits for displayed orders, 
and revising the credits for non-displayed orders, that add liquidity 
to the Exchange are equitable because the proposed credits are not 
unreasonably high in comparison to the credits paid by other exchanges 
for displayed and non-displayed orders that provide liquidity.\21\ 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.
---------------------------------------------------------------------------

    \21\ See note 19, supra.
---------------------------------------------------------------------------

    Currently, 5 ETP Holders qualify for the proposed credits for 
displayed orders that add liquidity to the Exchange. As previously 
noted, there are a number of other ETP Holders that could qualify for 
the proposed credits for displayed and non-displayed orders that add 
liquidity to the Exchange but without a view of ETP Holder activity on 
other exchanges and off-exchange venues, the Exchange has no way of 
knowing whether the proposed rule change would result in any ETP Holder 
qualifying for the proposed credits. The Exchange believes the proposed 
credits are reasonable as they would provide an incentive for ETP 
Holders to direct order flow to the Exchange and provide meaningful 
added levels of liquidity in order to qualify for the credits, thereby 
contributing to depth and market quality on the Exchange.
    The proposal neither targets nor will it have a disparate impact on 
any particular category of market participant. All ETP Holders would be 
eligible to qualify for the proposed credits by directing displayed and 
non-displayed order flow to the Exchange. Similarly, all ETP Holders 
would be eligible to qualify for the one-time credit for quoting on the 
Exchange in UTP Securities. ETP Holders must have an assigned MPID to 
quote and trade on the Exchange, and are thus all ETP Holders would be 
equally eligible to receive the same proposed credit. As noted above, 
the Exchange operates in a competitive environment, particularly as it 
relates to attracting non-marketable orders, which add liquidity to the 
Exchange. The Exchange believes that offering credits for liquidity-
providing displayed and non-displayed orders would provide incentives 
for ETP Holders to send additional liquidity to the Exchange, thereby 
providing additional price improvement opportunities on the Exchange 
and benefiting investors generally. Similarly, the Exchange believes 
that offering a one-time credit for quoting on the Exchange in UTP 
Securities would provide an added incentive to increase quoting on the 
Exchange in UTP Securities, and particularly in less active securities, 
which would support the quality of price discovery on the Exchange and 
provide additional liquidity for incoming orders.
    The Exchange believes that, for the reasons discussed above, the 
proposed changes to the liquidity-removing order fees would incentivize 
ETP Holders to add additional liquidity from the Exchange to qualify 
for the lower removing fee of $0.0026, thereby increasing the number of 
orders adding liquidity that are executed on the Exchange and improving 
overall liquidity on a public exchange. As previously noted, a number 
of ETPs are qualifying for the current fees for removing liquidity 
based on their current trading profile on the Exchange. Based on the 
profile of liquidity-removing firms generally, the Exchange believes 
additional ETP Holders could qualify for the new rates if they choose 
to direct order flow to, and increase quoting on, the Exchange, given 
the low level of 10,000 shares ADV.
The Proposal Is Not Unfairly Discriminatory
    The Exchange believes that the proposal is not unfairly 
discriminatory. In the prevailing competitive environment, ETP Holders 
are free to disfavor the Exchange's pricing if they believe that 
alternatives offer them better value.
    The Exchange believes it is not unfairly discriminatory to provide 
higher credits for displayed orders and non-displayed orders as well as 
a one-time credit based on enhanced quoting at the NBBO in UTP 
Securities insofar as the proposed credits would be provided on an 
equal basis to all similarly situated ETP Holders that add liquidity to 
the Exchange, who would all be eligible for the same credits if they 
meet the quoting and other requirements on an equal basis. Moreover, 
the proposed cap per ETP Holder of $50,000 for the one-time credit for 
enhanced quoting at the NBBO in UTP Securities would also be provided 
on equal basis to all ETP Holders. ETP Holders must have an assigned 
MPID to quote and trade on the Exchange, and are thus all ETP Holders 
would be equally eligible to receive the same proposed credit.
    The revised fees for orders that remove liquidity from the Exchange 
are also not unfairly discriminatory because the ADV requirement to 
qualify for the fee would be applied to all similarly situated ETP 
Holders who would all be eligible for the same fee on an equal basis. 
Accordingly, no ETP Holder already operating on the Exchange would be 
disadvantaged by this allocation of fees. Further, the Exchange 
believes the proposal would provide an incentive for ETP Holders to 
remove additional liquidity from the Exchange, to the benefit of all 
market participants.
    The proposal does not permit unfair discrimination to provide a 
lower fee for removing liquidity and higher credits for adding 
displayed and non-displayed liquidity as the proposed fee and credits 
would be provided on an equal basis to all similarly situated ETP 
Holders who would all be eligible for the same credit on an equal 
basis. Accordingly, no ETP Holder already operating on the Exchange 
would be disadvantaged by this allocation of fees.
    The Exchange also believes that the proposed change is not unfairly 
discriminatory because it is reasonably related to the value to the 
Exchange's market quality associated with higher volume. The Exchange 
believes the proposed credits would incentivize ETP Holders to send 
more orders to the Exchange and to increase quoting on the Exchange in 
order to qualify for the proposed credits, which would support the 
quality of price discovery on the Exchange and provide additional 
liquidity for incoming orders. Further, the submission of orders to the 
Exchange is optional for member organizations in that they could choose 
whether to submit orders to the Exchange and, if they do, the extent of 
its activity in this regard.
    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

[[Page 10487]]

that the proposed changes would encourage the submission of additional 
liquidity to a public exchange, thereby promoting market depth, price 
discovery and transparency and enhancing order execution opportunities 
for ETP Holders. As a result, the Exchange believes that the proposed 
change furthers the Commission's goal in adopting Regulation NMS of 
fostering integrated competition among orders, which promotes ``more 
efficient pricing of individual stocks for all types of orders, large 
and small.'' \23\
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    \22\ 15 U.S.C. 78f(b)(8).
    \23\ Regulation NMS, 70 FR at 37498-99.
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    Intramarket Competition. The proposed changes are designed to 
attract additional order flow to the Exchange. The Exchange believes 
that the proposed changes would continue to incentivize market 
participants to direct order flow to the Exchange. Greater liquidity 
benefits all market participants on the Exchange by providing more 
trading opportunities and encourages member organizations to send 
orders, thereby contributing to robust levels of liquidity, which 
benefits all market participants on the Exchange. The proposed credits 
would be available to all similarly-situated market participants, and, 
as such, the proposed change would not impose a disparate burden on 
competition among market participants on the Exchange.
    Intermarket Competition. The Exchange operates in a highly 
competitive market in which market participants can readily choose to 
send their orders to other exchange and off-exchange venues if they 
deem fee levels at those other venues to be more favorable. As noted, 
the Exchange's market share of trading in Tapes A, B and C securities 
combined is less than 1%. 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.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change is effective upon filing pursuant to 
Section 19(b)(3)(A) \24\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \25\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
---------------------------------------------------------------------------

    \24\ 15 U.S.C. 78s(b)(3)(A).
    \25\ 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) \26\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \26\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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-NYSEAMER-2020-07 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-NYSEAMER-2020-07. 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-NYSEAMER-2020-07 and should be submitted 
on or before March 16, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\27\
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    \27\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2020-03546 Filed 2-21-20; 8:45 am]
BILLING CODE 8011-01-P
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