Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Its Price List, 36637-36644 [2020-12989]
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Federal Register / Vol. 85, No. 117 / Wednesday, June 17, 2020 / Notices
competitive standing in the financial
markets.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act,21 and Rule
19b–4(f)(2) 22 thereunder. At any time
within 60 days of the filing of the
proposed rule change, the Commission
summarily may temporarily suspend
such rule change if it appears to the
Commission that such action is: (i)
Necessary or appropriate in the public
interest; (ii) for the protection of
investors; or (iii) otherwise in
furtherance of the purposes of the Act.
If the Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
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:
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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–
MRX–2020–11 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–MRX–2020–11. 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–MRX–2020–11 and should
be submitted on or before July 8, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.23
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–12985 Filed 6–16–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–89050; File No. SR–NYSE–
2020–49]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend Its
Price List
June 11, 2020.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on June 1,
2020, New York Stock Exchange LLC
(‘‘NYSE’’ or the ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I, 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.
23 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
21 15
22 17
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
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I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend its
Price List to (1) adopt a step up tier for
member organizations adding liquidity
in Non-Displayed Limit Orders in Tapes
A, B and C securities; (2) revise the
credits for member organizations
qualifying for Step Up Tier 2 Adding
Credit; and (3) extend through June
2020 the waiver of equipment and
related service charges and trading
license fees for NYSE Trading Floorbased member organizations
implemented for April and May 2020.
The Exchange proposes to implement
the fee changes effective June 1, 2020.
The proposed rule change is available
on the Exchange’s website at
www.nyse.com, at the principal office of
the Exchange, and at the Commission’s
Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend its
Price List to (1) adopt a step up tier for
member organizations adding liquidity
in Non-Displayed Limit Orders in Tapes
A, B and C securities; (2) revise the
credits for member organizations
qualifying for Step Up Tier 2 Adding
Credit; and (3) extend through June
2020 the waiver of equipment and
related service charges and trading
license fees for NYSE Trading Floorbased member organizations
implemented for April and May 2020.
The proposed changes respond to the
current competitive environment where
order flow providers have a choice of
where to direct liquidity-providing
orders by offering further incentives for
member organizations to send
additional displayed liquidity to the
Exchange. The proposed changes also
respond to the current volatile market
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environment that has resulted in
unprecedented average daily volumes
and the temporary closure of the
Trading Floor, which are both related to
the ongoing spread of the novel
coronavirus (‘‘COVID–19’’).
The Exchange proposes to implement
the fee changes effective June 1, 2020.
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Current Market and Competitive
Environment
The Exchange operates in a highly
competitive market. The Commission
has repeatedly expressed its preference
for competition over regulatory
intervention in determining prices,
products, and services in the securities
markets. In Regulation NMS, the
Commission highlighted the importance
of market forces in determining prices
and SRO revenues and, also, recognized
that current regulation of the market
system ‘‘has been remarkably successful
in promoting market competition in its
broader forms that are most important to
investors and listed companies.’’ 4
As the Commission itself recognized,
the market for trading services in NMS
stocks has become ‘‘more fragmented
and competitive.’’ 5 Indeed, equity
trading is currently dispersed across 13
exchanges,6 31 alternative trading
systems,7 and numerous broker-dealer
internalizers and wholesalers, all
competing for order flow. Based on
publicly-available information, no
single exchange has more than 20%
market share (whether including or
excluding auction volume).8 Therefore,
no exchange possesses significant
pricing power in the execution of equity
order flow. More specifically, the
Exchange’s market share of trading in
Tape A, B and C securities combined is
less than 13%.
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
4 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37495, 37499 (June 29, 2005)
(S7–10–04) (Final Rule) (‘‘Regulation NMS’’).
5 See Securities Exchange Act Release No. 51808,
84 FR 5202, 5253 (February 20, 2019) (File No. S7–
05–18) (Transaction Fee Pilot for NMS Stocks Final
Rule) (‘‘Transaction Fee Pilot’’).
6 See Cboe Global Markets, U.S. Equities Market
Volume Summary, available at https://
markets.cboe.com/us/equities/market_share/. See
generally https://www.sec.gov/fast-answers/
divisionsmarketregmrexchangesshtml.html.
7 See FINRA ATS Transparency Data, available at
https://otctransparency.finra.org/otctransparency/
AtsIssueData. A list of alternative trading systems
registered with the Commission is available at
https://www.sec.gov/foia/docs/atslist.htm.
8 See Cboe Global Markets U.S. Equities Market
Volume Summary, available at https://
markets.cboe.com/us/equities/market_share/.
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products, in response to fee changes.
With respect to non-marketable order
flow that would provide displayed
liquidity on an Exchange, member
organizations can choose from any one
of the 13 currently operating registered
exchanges to route such order flow.
Accordingly, competitive forces
constrain exchange transaction fees that
relate to orders that would provide
liquidity on an exchange.
In response to the competitive
environment described above, the
Exchange has established incentives for
its member organizations who submit
orders that provide liquidity on the
Exchange. The proposed fee change is
designed to attract additional order flow
to the Exchange by offering a new
pricing tier to incentivize member
organizations to step up their liquidityproviding Non-Displayed Limit Orders
and Mid-Point Liquidity (‘‘MPL’’)
Orders on the Exchange and revising the
credits for member organizations adding
liquidity by qualifying for Step Up Tier
2 Adding Credit.
Moreover, beginning on March 16,
2020, in order to slow the spread of
COVID–19 through social distancing
measures, significant limitations were
placed on large gatherings throughout
the country. As a result, on March 18,
2020, the Exchange determined that
beginning March 23, 2020, the physical
Trading Floor facilities located at 11
Wall Street in New York City would
close and that the Exchange would
move, on a temporary basis, to fully
electronic trading.9 On May 14, 2020,
the Exchange announced that on May
26, 2020 trading operations on the
Trading Floor would resume on a
limited basis to a subset of Floor
brokers, subject to safety measures
designed to prevent the spread of
COVID–19.10 The proposed rule change
responds to these unprecedented events
by extending the waiver of equipment
and related service charges and trading
license fees for NYSE Trading Floorbased member organizations for June
2020.
Proposed Rule Change
Step Up Tier for Adding Liquidity in
Non-Displayed Limit Orders
The Exchange proposes to adopt a
step up tier that would offer credits to
member organizations providing nondisplayed liquidity to the Exchange in
Tape A, B, and C securities.
9 See Press Release, dated March 18, 2020,
available here: https://ir.theice.com/press/pressreleases/allcategories/2020/03-18-2020-204202110
[sic].
10 See Trader Update, dated May 14, 2020,
available here: https://www.nyse.com/traderupdate/
history#110000251588 [sic].
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As proposed, a member organization
that
• sends orders that add liquidity to
the Exchange in Non-Displayed Limit
Orders, and
• that has adding average daily
volume (‘‘ADV’’) in Non-Displayed
Limit Orders and MPL Orders in Tapes
A, B, and C consolidated ADV
(‘‘CADV’’) 11 combined, excluding any
liquidity added by a Designated Market
Makers (‘‘DMM’’), that is at least 0.02%
of NYSE CADV over that member
organization’s May 2020 adding
liquidity in Non-Displayed Limit Orders
and MPL Orders as a percentage of
NYSE CADV (the ‘‘Baseline Tape A
Share’’)
would receive a credit of $0.0005 for
adding liquidity if the increase in
Adding ADV over the Baseline Tape A
Share is at least 0.02% and less than
0.04%. If the increase in Adding ADV
over the Baseline Tape A Share is at
least 0.04% and less than 0.08%, a
member organization meeting the above
requirements would receive a credit of
$0.0010. If the increase in Adding ADV
over the Baseline Tape A Share is at
least 0.08% or more, a member
organization meeting the above
requirements would receive a credit of
$0.0015.
For example, Member Organization A
had an adding ADV in Non-Displayed
Limit Orders and MPL Orders in Tape
A, Tape B and Tape C securities
combined of 6 million shares in the
baseline month of May 2020 when Tape
A, Tape B and Tape C CADV combined
(‘‘US CADV’’) was 10.0 billion shares or
0.06% of US CADV. Further assume that
in the billing month, Member
Organization A had an adding ADV in
Non-Displayed Limit Orders and MPL
Orders combined of 10 million shares
when US CADV was again 10 billion
shares, or 0.10% of US CADV. In this
scenario, Member Organization A would
have a step up percentage of US CADV
of 0.04% (0.10% minus 0.06%), which
would qualify Member Organization A
for a credit of $0.0010 per share for NonDisplayed Limit Orders.
If Member Organization A had an
adding ADV of 18 million shares, or
0.18%, for a step up ADV of 0.12%,
Member Organization A would instead
qualify for a credit of $0.0015 because
Member Organization A’s increase in
Adding ADV over the Baseline Tape A
Share is at least 0.08%.
If in the same billing month Member
Organization A’s adding ADV of 18
million shares was solely in NonDisplayed Limit Orders (i.e., the share
11 The terms ‘‘ADV’’ and ‘‘CADV’’ are defined in
footnote * [sic] of the Price List.
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number did not include MPL Orders) for
an Adding ADV in Non-Displayed Limit
Orders of 0.18%, Member Organization
A would also qualify for the existing
Non-Displayed Limit Order credit of
$0.0018 by meeting the existing adding
ADV requirement of 0.15%. In this
scenario, Member Organization A would
achieve the higher of the two credits, or
$0.0018.
The purpose of this proposed change
is to incentivize member organizations
to increase the liquidity-providing
orders in Non-Displayed Limit Orders
and MPL 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. Because the proposed tier
requires a member organization to
increase the volume of its trades in
orders that add liquidity over that
member organization’s May 2020
baseline, the Exchange believes that the
proposed credit would provide an
incentive for all member organizations
to send additional liquidity to the
Exchange in order to qualify for it.
The Exchange does not know how
much order flow member organizations
choose to route to other exchanges or to
off-exchange venues. Since the tier’s
requirements utilize an increase in
volume from the most recent month, the
Exchange does not know how many
member organizations could qualify for
the proposed tiered credits based on
their current trading profile on the
Exchange, but the Exchange notes that,
since the lowest step up is only an
Adding ADV of 0.02% of US CADV in
Non-Display Limit Orders and MPL
Orders combined, the Exchange believes
that many member organizations could
qualify if they so choose. However,
without having a view of member
organization’s activity on other
exchanges and off-exchange venues, the
Exchange has no way of knowing
whether this proposed rule change
would result in any member
organization directing orders to the
Exchange in order to qualify for the new
tier.
Revised Credits for the Step Up Tier 2
Adding Credit
Under the current Step Up Tier 2
Adding Credit, a member organization
that sends orders, except Mid-Point
Liquidity Orders (‘‘MPL’’) and NonDisplayed Limit Orders, that add
liquidity (‘‘Adding ADV’’) in Tape A
securities receive a credit of $0.0029 if:
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• The member organization quotes at
least 15% of the National Best Bid or
Offer (‘‘NBBO’’) 12 in 300 or more Tape
A securities on a monthly basis, and
• the member organization’s Adding
ADV in Tapes A, B and C securities as
a percentage of Tapes A, B and C CADV,
excluding any orders by a DMM, that
Æ is at least two times more than the
Member Organization’s Adding ADV in
Tapes A, B and C securities in July 2019
as a percentage of Tapes A, B and C
CADV, and
Æ adds liquidity as an Supplemental
Liquidity Provider in Tape A securities
of at least 0.10% of NYSE CADV, and
Æ exceeds the Member Organization’s
Adding ADV, excluding any liquidity
added by a DMM, in Tapes A, B and C
securities in July 2019 as a percentage
of Tapes A, B and C CADV by at least
0.20% of Tapes A, B and C CADV.
In addition, a member organization
that meets these requirements, and thus
qualifies for the $0.0029 credit, would
be eligible to receive an additional
$0.00005 per share if trades in Tapes B
and C securities against the member
organization’s orders that add liquidity,
excluding orders as a Supplemental
Liquidity Provider (‘‘SLP’’), equal to at
least 0.20% of Tape B and Tape C CADV
combined.
The Exchange proposes two higher
credits for member organizations that
meet the current Step Up Tier 2 Adding
Credit requirements and increase their
Adding ADV, excluding any liquidity
added by a DMM, in Tapes A, B and C
securities in July 2019 as a percentage
of Tapes A, B and C CADV (‘‘July 2019
Adding ADV’’).
Specifically, member organizations
whose Adding ADV as a percentage of
US CADV represents an increase of at
least 0.20% and less than 0.35% over
their July 2019 Adding ADV as a
percentage of US CADV would receive
the current $0.0029 credit. Member
organizations whose Adding ADV as a
percentage of US CADV represents an
increase of at least 0.35% and less than
0.45% over their July 2019 Adding ADV
as a percentage of US CADV would
receive a $0.0030 credit. Finally,
member organizations whose Adding
ADV as a percentage of US CADV
represents an increase of at least 0.45%
or more over their July 2019 Adding
ADV as a percentage of US CADV would
receive a $0.0031 credit.
The Exchange does not propose to
change any of the other requirements to
qualify for the Step Up Tier 2 Adding
Credit.
12 See Rule 1.1(q) (defining ‘‘NBBO’’ to mean the
national best bid or offer).
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36639
The purpose of this proposed change
is to incentivize member organizations
to increase the liquidity-providing
orders in Tape A securities they send to
the Exchange, which would support the
quality of price discovery on the
Exchange and provide additional price
improvement opportunities for
incoming orders. The Exchange believes
that by correlating the amount of the
credit to the level of orders sent by a
member organization that add liquidity,
the Exchange’s fee structure would
incentivize member organizations to
submit more orders that add liquidity to
the Exchange, thereby increasing the
potential for price improvement to
incoming marketable orders submitted
to the Exchange. The Exchange proposes
higher credits under this tier to provide
an incentive for member organizations
to send more orders because they would
then qualify for the credits. 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. Because, as proposed, the tier
requires a member organization to
increase the volume of its trades against
orders that add liquidity, the Exchange
believes that the proposed higher credits
based on a commensurate increase in
Adding ADV would provide an
incentive for member organizations to
route additional liquidity to the
Exchange in order to qualify for the
higher credits.
The Exchange does not know how
much order flow member organizations
choose to route to other exchanges or to
off-exchange venues. No firms currently
qualify for the proposed higher Step Up
Tier 2 Adding Credits based on their
current trading profile on the Exchange,
but the Exchange believes that at least
five member organizations could qualify
for the tier if they so choose. The
Exchange notes that, given the lower
requirement for Adding ADV of 0.20%
as a percentage of US CADV
requirement when compared to other
Exchange Adding Tiers (for example,
Tier 1 Adding Credit and Tier 2 Adding
Credit), a number of firms would be
eligible to qualify if they so choose.
However, without having a view of
member organization’s activity on other
exchanges and off-exchange venues, the
Exchange has no way of knowing
whether this proposed rule change
would result in any member
organization directing orders to the
Exchange in order to qualify for the new
tier.
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Fee Waivers for Trading Floor-Based
Member Organizations
As noted above, on March 18, 2020,
the Exchange announced that it would
temporarily close the Trading Floor,
effective March 23, 2020, as a
precautionary measure to prevent the
potential spread of COVID–19.
Following the temporary closure of the
Trading Floor, the Exchange waived
certain equipment fees for the booth
telephone system on the Trading Floor
and associated service charges for the
months of April and May.13 On May 26,
2020, the Trading Floor reopened on a
limited basis to a reduced number of
Floor brokers to accommodate healthfocused considerations. DMMs continue
to operate remotely.14
For the months of April and May, the
Exchange waived the Annual Telephone
Line Charge of $400 per phone number
and the $129 fee for a single line phone,
jack, and data jack. The Exchange also
waived related service charges, as
follows: $161.25 to install single jack
(voice or data); $107.50 to relocate a
jack; $53.75 to remove a jack; $107.50 to
install voice or data line; $53.75 to
disconnect data line; $53.75 to change a
phone line subscriber; and
miscellaneous telephone charges billed
at $106 per hour in 15 minute
increments.15 These fees were waived
for (1) member organizations with at
least one trading license, a physical
Trading Floor presence, and Floor
broker executions accounting for 40% or
more of the member organization’s
combined adding, taking, and auction
volumes during March 1 to March 20,
2020, and (2) member organizations
with at least one trading license that are
Designated Market Makers with 30 or
fewer assigned securities for the billing
month of March 2020.
Because the Trading Floor will
continue to operate with reduced
capacity, the Exchange proposes to
extend the waiver of these Trading
Floor-based fees through June 2020. To
effectuate this change, the Exchange
proposes to add ‘‘and June’’ between
13 See Securities Exchange Act Release No. 88602
(April 8, 2020), 85 FR 20730 (April 14, 2020) (SR–
NYSE–2020–27); Securities Exchange Act Release
No. 88874 (May 14, 2020), 85 FR 30743 (May 20,
2020) (SR–NYSE–2020–29). See footnote 11 of the
Price List.
14 DMMs will be provided access to the Trading
Floor on trading days when an IPO Auction or Core
Open Auction for a post-IPO public offering is
scheduled. DMMs will continue to otherwise be
absent from the Trading Floor and, thus, all intraday trading and other Auctions will be conducted
remotely by DMMs.
15 The Service Charges also include an internet
Equipment Monthly Hosting Fee that the Exchange
did not waive for April and May 2020 and that the
Exchange does not propose to waive for June 2020.
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‘‘May’’ and ‘‘2020’’ in footnote 11 to the
Price List.
In order to further reduce costs for
member organizations with a Trading
Floor presence, the Exchange also
waived the April and May 2020
monthly portion of all applicable annual
fees for (1) member organizations with
at least one trading license, a physical
Trading Floor presence and Floor broker
executions accounting for 40% or more
of the member organization’s combined
adding, taking, and auction volumes
during March 1 to March 20, 2020, and
(2) member organizations with at least
one trading license that are DMMs with
30 or fewer assigned securities for the
billing month of March 2020.16
The Exchange proposes to also waive
the June 2020 monthly portion of all
applicable annual fees for member
organizations with at least one trading
license, a physical Trading Floor
presence and Floor broker executions
accounting for 40% or more of the
member organization’s combined
adding, taking, and auction volumes
during March 1 to March 20, 2020. The
indicated annual trading license fees
would also be waived for June 2020 for
member organizations with at least one
trading license that are DMMs with 30
or fewer assigned securities for the
billing month of March 2020. To
effectuate this change, the Exchange
proposes to add ‘‘and June’’ between
‘‘May’’ and ‘‘2020’’ in footnote 15.
This proposed extension of the fee
waivers would reduce monthly costs for
member organizations with a Trading
Floor presence whose operations were
disrupted by the Floor closure, which
lasted approximately two months, and
remains partially closed. The Exchange
believes that extension of the fee waiver
would ease the financial burden
associated with the ongoing partial
Trading Floor closure. The Exchange
believes that all member organization
that conduct business on the Trading
Floor would benefit from this proposed
fee change.
The proposed changes are not
otherwise intended to address other
issues, and the Exchange is not aware of
any significant problems that market
participants would have in complying
with the proposed changes.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act,17 in general, and
furthers the objectives of Sections
16 See
The Proposed Change is Reasonable
As discussed above, the Exchange
operates in a highly fragmented and
competitive market. The Commission
has repeatedly expressed its preference
for competition over regulatory
intervention in determining prices,
products, and services in the securities
markets. Specifically, in Regulation
NMS, the Commission highlighted the
importance of market forces in
determining prices and SRO revenues
and, also, recognized that current
regulation of the market system ‘‘has
been remarkably successful in
promoting market competition in its
broader forms that are most important to
investors and listed companies.’’ 19
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 orders
which provide liquidity on an
Exchange, member organizations can
choose from any one of the 13 currently
operating registered exchanges to route
such order flow. Accordingly,
competitive forces constrain exchange
transaction fees that relate to orders that
would provide displayed liquidity on an
exchange. Stated otherwise, changes to
exchange transaction fees can have a
direct effect on the ability of an
exchange to compete for order flow.
Step Up Tier for Adding Liquidity in
Non-Displayed Limit Orders
Given the competitive environment,
the proposed Step Up Tier for Adding
Liquidity in Non-Displayed Limit
Orders would provide an incentive for
member organizations to route
additional liquidity providing orders to
the Exchange in Tape A securities.
As noted above, the Exchange
operates in a highly competitive
environment, particularly for attracting
non-marketable order flow that provides
liquidity on an exchange. The Exchange
believes it is reasonable to provide a
higher credit for orders that provide
additional liquidity. The Exchange
believes that requiring member
note 13, supra. See footnotes 15 of the Price
18 15
List.
17 15
PO 00000
6(b)(4) and (5) of the Act,18 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.
U.S.C. 78f(b).
Frm 00114
Fmt 4703
U.S.C. 78f(b)(4) & (5).
Regulation NMS, 70 FR at 37499.
19 See
Sfmt 4703
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khammond on DSKJM1Z7X2PROD with NOTICES
organizations to have an Adding ADV in
Non-Displayed Limit Orders and MPL
Orders in Tapes A, B and C CADV
combined, excluding any liquidity
added by a DMM, that is at least 0.02%
of NYSE CADV over that member
organization’s May 2020 adding
liquidity in Non-Displayed Limit Orders
and MPL Orders taken as a percentage
of NYSE CADV in order to qualify for
the proposed Step Up Tier is reasonable
because it would encourage additional
non-displayed and mid-point liquidity
on the Exchange and because market
participants benefit from the greater
amounts of liquidity and price
improvement present on the Exchange.
Similarly, the Exchange believes that
it is reasonable to provide an
incremental credit to member
organizations that meet the
requirements of the Step Up Tier that
add additional liquidity in NonDisplayed Limit Orders and MPL
Orders. Since the proposed Step Up Tier
would be new with a requirement for
increased Adding ADV over the baseline
month, no member organization
currently qualifies for the proposed
pricing tier. As previously noted, there
are a number of member organizations
that could qualify for the proposed
higher credit but without a view of
member organization activity on other
exchanges and off exchange venues, the
Exchange has no way of knowing
whether the proposed rule change
would result in any member
organization qualifying for the tier. The
Exchange believes the proposed higher
credit is reasonable as it would provide
an additional incentive for member
organizations to direct their order flow
to the Exchange and provide meaningful
added levels of liquidity in order to
qualify for the higher credit, thereby
contributing to depth and market
quality on the Exchange.
Step Up Tier 2 Adding Credit
The Exchange believes that higher
credits for meeting the Step Up Tier 2
Adding Credit requirements is
reasonable. Specifically, the Exchange
believes that offering higher credits for
increased Adding ADV of a minimum
and maximum percentage over a
baseline would provide an incentive for
member organizations to route
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.
The Exchange believes it is reasonable
to provide incrementally higher credits
for orders that provide additional
liquidity because it would encourage
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additional displayed liquidity on the
Exchange and because market
participants benefit from the greater
amounts of displayed liquidity present
on the Exchange. Because, as proposed,
the tier requires a member organization
to increase the volume of its trades
against orders that add liquidity, the
Exchange believes that the proposed
higher credits based on a commensurate
increase in Adding ADV would provide
an incentive for member organizations
to route additional liquidity to the
Exchange in order to qualify for the
higher credits.
The Exchange does not know how
much order flow member organizations
choose to route to other exchanges or to
off-exchange venues. As previously
noted, there are currently a number of
firms that could qualify for the proposed
higher Step Up Tier 2 Adding Credits
based on their current trading profile on
the Exchange if they so choose, but
without a view of member organization
activity on other exchanges and off
exchange venues, the Exchange has no
way of knowing whether the proposed
rule change would result in any member
organization qualifying for the tier. The
Exchange believes the proposed higher
credit is reasonable as it would provide
an additional incentive for member
organizations to direct their order flow
to the Exchange and provide meaningful
added levels of liquidity in order to
qualify for the higher credit, thereby
contributing to depth and market
quality on the Exchange.
Fee Waivers for Trading Floor-Based
Member Organizations
The proposed extension of the waiver
of equipment and related service fees
and the applicable monthly trading
license fee for Trading Floor-based
member organizations is reasonable in
light of the partial continued closure of
the NYSE Trading Floor. Beginning
March 2020, markets worldwide have
experienced unprecedented declines
and volatility because of the ongoing
spread of COVID–19 also resulted in the
temporary closure of the NYSE Trading
Floor. As noted, the Trading Floor was
recently partially reopened on a limited
basis to a subset of Floor brokers,
subject to safety measures designed to
prevent the spread of COVID–19. The
proposed change is designed to reduce
costs for Floor participants for the
month of June 2020 and therefore ease
the financial burden faced by member
organizations that conduct business on
the Trading Floor while it continues to
operate with reduced capacity.
PO 00000
Frm 00115
Fmt 4703
Sfmt 4703
36641
The Proposal is an Equitable Allocation
of Fees
The Exchange believes the proposal
equitably allocates its fees among its
market participants by fostering
liquidity provision and stability in the
marketplace.
Step Up Tier for Adding Liquidity in
Non-Displayed Limit Orders
The Exchange believes that the
proposed Step Up Tier is equitable
because the magnitude of the additional
credit is not unreasonably high relative
to the current tiered credits for NonDisplayed Limit orders that add
liquidity of $0.0010 and $0.0018. 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 that requiring
member organizations to having an
Adding ADV in Non-Displayed Limit
Orders and MPL Orders in Tapes A, B
and C CADV combined, excluding any
liquidity added by a DMM, that is at
least 0.02% of NYSE CADV over that
member organization’s May 2020 adding
liquidity in Non-Displayed Limit Orders
and MPL Orders combined taken as a
percentage of NYSE CADV in order to
qualify for the proposed credits would
also encourage additional displayed
liquidity on the Exchange. Since the
proposed Step Up Tier would be new,
no member organization currently
qualifies for it. As noted, there are
currently no member organizations that
could qualify for the proposed higher
credit, but without a view of member
organization activity on other exchanges
and off-exchange venues, the Exchange
has no way of knowing whether this
proposed rule change would result in
any member organization qualifying for
the tier.
The Exchange believes the proposed
higher credit is reasonable as it would
provide an additional incentive for
member organizations to direct their
order flow to the Exchange and provide
meaningful added levels of liquidity in
order to qualify for the higher credit,
thereby contributing to depth and
market quality and increased price
improvement on the Exchange. The
proposal neither targets nor will it have
a disparate impact on any particular
category of market participant. All
member organizations would be eligible
to qualify for the higher credit proposed
in Step Up Tier if they increase their
Adding ADV in Non-Displayed Limit
orders and MPL Orders combined over
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their own baseline of order flow. The
Exchange believes that offering a higher
step up credits for providing liquidity if
the step up requirements for Tape A,
Tape B and Tape C securities are met,
will continue to attract order flow and
liquidity to the Exchange, thereby
providing additional price improvement
opportunities on the Exchange and
benefiting investors generally. As to
those market participants that do not
presently qualify for the adding
liquidity credits, the proposal will not
adversely impact their existing pricing
or their ability to qualify for other
credits provided by the Exchange.
khammond on DSKJM1Z7X2PROD with NOTICES
Step Up Tier 2 Adding Credit
The Exchange is not proposing to
adjust the current requirements to
qualify for the Step Up Tier 2 Adding
Credit, which will remain the same for
all market participants. Rather, the
proposal would provide incrementally
higher credits for member organizations
that increase Adding ADV over the
current baseline. The Exchange believes
that the proposed higher credits are
equitable because the magnitude of the
additional credits is not unreasonably
high compared to the current credit for
Step Up Tier 2 and also relative to the
other adding tier credits, which noted
above range from $0.0015 to $0.0022, in
comparison to the credits paid by other
exchanges for orders that provide
additional step up liquidity.20 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 that requiring
member organizations to having an
Adding ADV in Non-Displayed Limit
Orders and MPL Orders in Tapes A, B
and C CADV combined, excluding any
liquidity added by a DMM, that is at
least 0.02% of NYSE CADV over that
member organization’s May 2020 adding
liquidity in Non-Displayed Limit Orders
and MPL Orders taken as a percentage
of NYSE CADV in order to qualify for
the proposed credits would also
encourage additional displayed
liquidity on the Exchange. Since the
proposed Step Up Tier would be new,
no member organization currently
qualifies for it. As noted, there are
currently no member organizations that
currently qualify for the proposed
higher credit, but without a view of
20 See Cboe BZX Fee Schedule, which has adding
credits ranging from $0.0025 to $0.0032, at https://
markets.cboe.com/us/equities/membership/fee_
schedule/bzx/.
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member organization activity on other
exchanges and off-exchange venues, the
Exchange has no way of knowing
whether this proposed rule change
would result in any member
organization qualifying for the tier. The
Exchange believes the proposed higher
credits are reasonable as it would
provide an additional incentive for
member organizations to direct their
order flow to the Exchange and provide
meaningful added levels of liquidity in
order to qualify for the higher credit,
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
member organizations would be eligible
to qualify for the higher credits
proposed in Step Up Tier 2 if they
increase their Adding ADV over their
own baseline of order flow accordingly.
The Exchange believes that offering
higher step up credits for providing
liquidity if the step up requirements for
Tape A securities are met, will continue
to attract order flow and liquidity to the
Exchange, thereby providing additional
price improvement opportunities on the
Exchange and benefiting investors
generally. As to those market
participants that do not presently
qualify for the adding liquidity credits,
the proposal will not adversely impact
their existing pricing or their ability to
qualify for other credits provided by the
Exchange.
Fee Waivers for Trading Floor-Based
Member Organizations
Finally, the proposed extension of the
waiver of equipment and related service
fees and the applicable monthly trading
license fee for Trading Floor-based
member organizations to June 2020 are
also an equitable allocation of fees. The
proposed waivers apply to all Trading
Floor-based firms meeting specific
requirements during the period that the
Trading Floor is partially open. The
proposed change is equitable as it
merely continues the fee waiver granted
in April and May 2020, and is designed
to reduce monthly costs for Trading
Floor-based member organizations that
are unable to fully conduct Floor
operations.
The Proposal is Not Unfairly
Discriminatory
The Exchange believes that the
proposal is not unfairly discriminatory.
In the prevailing competitive
environment, member organizations are
free to disfavor the Exchange’s pricing if
they believe that alternatives offer them
better value.
PO 00000
Frm 00116
Fmt 4703
Sfmt 4703
The proposal is not unfairly
discriminatory because it neither targets
nor will it have a disparate impact on
any particular category of market
participant.
Step Up Tier for Adding Liquidity in
Non-Displayed Limit Orders
The Exchange believes it is not
unfairly discriminatory to provide
additional per share step up credits for
adding liquidity in Non-Displayed Limit
Orders, as the proposed credits would
be provided on an equal basis to all
member organizations that add liquidity
by meeting the new proposed Step Up
Tier’s requirements. For the same
reason, the Exchange believes it is not
unfairly discriminatory to provide
additional incrementally higher credits
for increased adding ADV over the
member organization’s May 2020 adding
liquidity in Non-Displayed Limit Orders
and MPL Orders combined taken as a
percentage of NYSE CADV because the
proposed higher credits would equally
encourage all member organizations to
provide additional liquidity on the
Exchange in Non-Displayed Limit
Orders and MPL Orders. As noted, the
Exchange believes that the proposed
credit would provide an incentive for
member organizations to send
additional liquidity to the Exchange in
order to qualify for the additional
credits. The Exchange also believes that
the proposed change is not unfairly
discriminatory because it is reasonably
related to the value to the Exchange’s
market quality associated with higher
volume. Finally, the submission of
orders to the Exchange is optional for
member organizations in that they could
choose whether to submit orders to the
Exchange and, if they do, the extent of
its activity in this regard.
Step Up Tier 2 Adding Credit
The Exchange believes it is not
unfairly discriminatory to provide
higher per share step up credits, as the
proposed credit would be provided on
an equal basis to all member
organizations that add liquidity by
meeting the new proposed Step Up Tier
2 requirements. For the same reason, the
Exchange believes it is not unfairly
discriminatory to provide additional
incremental credits to member
organizations that satisfy the Step Up
Tier 2 requirements and add liquidity in
Tape A, B and C securities. Further, the
Exchange believes the proposed Step Up
Tier 2 credits would incentivize
member organizations that meet the
current tiered requirements to send
more orders to the Exchange to qualify
for higher credits. The Exchange also
believes that the proposed change is not
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unfairly discriminatory because it is
reasonably related to the value to the
Exchange’s market quality associated
with higher volume. Finally, the
submission of orders to the Exchange is
optional for member organizations in
that they could choose whether to
submit orders to the Exchange and, if
they do, the extent of its activity in this
regard.
khammond on DSKJM1Z7X2PROD with NOTICES
Fee Waivers for Trading Floor-Based
Member Organizations
The proposed continuation of the
waiver of equipment and related service
fees and the applicable monthly trading
license fee for Trading Floor-based
member organizations during June 2020
is not unfairly discriminatory because
the proposed waivers would benefit all
similarly-situated market participants
on an equal and non-discriminatory
basis. The Exchange is not proposing to
waive the Floor-related fixed
indefinitely, but rather during the
period that the Trading Floor is not fully
open. The proposed fee change is
designed to ease the financial burden on
Trading Floor-based member
organizations that cannot fully conduct
Floor operations.
Finally, the Exchange believes that it
is subject to significant competitive
forces, as described below in the
Exchange’s statement regarding the
burden on competition.
For the foregoing reasons, the
Exchange believes that the proposal is
consistent with the Act.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
In accordance with Section 6(b)(8) of
the Act,21 the Exchange believes that the
proposed rule change would not impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. Instead, as
discussed above, the Exchange believes
that the proposed changes would
encourage the submission of additional
liquidity to a public exchange, thereby
promoting market depth, price
discovery and transparency and
enhancing order execution
opportunities for member organizations.
As further discussed above, the
Exchange believes that the proposed
changes would encourage the continued
participation of member organizations
on the Exchange by providing certainty
and fee relief during the unprecedented
volatility and market declines caused by
the continued spread of COVID–19. As
a result, the Exchange believes that the
proposed change furthers the
Commission’s goal in adopting
Regulation NMS of fostering integrated
competition among orders, which
promotes ‘‘more efficient pricing of
individual stocks for all types of orders,
large and small.’’ 22
Intramarket Competition. The
proposed changes are designed to
respond to the current competitive
environment and to attract additional
order flow to the Exchange. The
Exchange believes that the proposed
changes would continue to incentivize
market participants to direct displayed
order flow to the Exchange. Greater
liquidity benefits all market participants
on the Exchange by providing more
trading opportunities and encourages
member organizations to send orders,
thereby contributing to robust levels of
liquidity, which benefits all market
participants on the Exchange. The
current and proposed credits would be
available to all similarly-situated market
participants, and, as such, the proposed
change would not impose a disparate
burden on competition among market
participants on the Exchange. Further,
the proposed continued waiver of
equipment and related service fees and
the applicable monthly trading license
fee for Trading Floor-based member
organizations during June 2020 provide
a degree of certainty and ease the
financial burden on Trading Floor-based
member organizations impacted by the
temporary closing and partial reopening
of the Trading Floor. As noted, the
proposal would apply to all similarly
situated member organizations on the
same and equal terms, who would
benefit from the changes on the same
basis. Accordingly, the proposed change
would not impose a disparate burden on
competition among market participants
on the Exchange.
Intermarket Competition. The
Exchange operates in a highly
competitive market in which market
participants can readily choose to send
their orders to other exchange and offexchange venues if they deem fee levels
at those other venues to be more
favorable. As previously noted, the
Exchange’s market share of trading in
Tape A, B and C securities combined is
less than 13%. In such an environment,
the Exchange must continually adjust its
fees and rebates to remain competitive
with other exchanges and with 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. The Exchange believes that
the proposed rule change reflects this
competitive environment because it
modifies the Exchange’s fees in a
manner designed to provide a degree of
certainty and ease the financial burdens
of the current unsettled market
environment, and permit affected
member organizations to continue to
conduct market-making operations on
the Exchange and avoid unintended
costs of doing business on the Exchange
while the Trading Floor is not fully
open, which could make the Exchange
a less competitive venue on which to
trade as compared to other options
exchanges.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change is effective
upon filing pursuant to Section
19(b)(3)(A) 23 of the Act and
subparagraph (f)(2) of Rule 19b–4 24
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) 25 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
23 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(2).
25 15 U.S.C. 78s(b)(2)(B).
24 17
21 15
U.S.C. 78f(b)(8).
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22 Regulation
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Frm 00117
NMS, 70 FR at 37498–99.
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Federal Register / Vol. 85, No. 117 / Wednesday, June 17, 2020 / Notices
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSE–2020–49 on the subject line.
SECURITIES AND EXCHANGE
COMMISSION
Paper Comments
[Release No. 34–89045; File No. SR–
NYSEAMER–2020–45]
• Send paper comments in triplicate
to: Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSE–2020–49. 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–NYSE–2020–49 and should
be submitted on or before July 8, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.26
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–12989 Filed 6–16–20; 8:45 am]
khammond on DSKJM1Z7X2PROD with NOTICES
BILLING CODE 8011–01–P
Self-Regulatory Organizations; NYSE
American LLC; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change Amending the NYSE
American Options Fee Schedule To
Adopt a New Incentive Program for
Floor Brokers
June 11, 2020.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on June 5,
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 the
NYSE American Options Fee Schedule
(‘‘Fee Schedule’’) to adopt a new
incentive program for Floor Brokers.
The Exchange proposes to implement
the fee change effective June 5, 2020.4
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.
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
4 The Exchange originally filed to amend the Fee
Schedule on June 1, 2020 (SR–NYSEAMER–2020–
43) and withdrew such filing on June 5, 2020.
2 15
26 17
CFR 200.30–3(a)(12).
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of this filing is to modify
the Fee Schedule to introduce a new
incentive program for Floor Broker
organizations (each a ‘‘Floor Broker’’) to
encourage Floor Brokers to increase
their billable volume on the Exchange.
Specifically, the Exchange proposes to
offer a rebate of $35,000 to Floor broker
organizations for each month that a
Floor Broker achieves a certain
minimum level of average daily volume
(‘‘ADV’’) of billable contracts, as
specified below.
The Exchange proposes to implement
the rule changes on June 5, 2020.
Background
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.’’ 5
There are currently 16 registered
options exchanges competing for order
flow. Based on publicly-available
information, and excluding index-based
options, no single exchange has more
than 16% of the market share of
executed volume of multiply-listed
equity and ETF options trades.6
Therefore, currently no exchange
possesses significant pricing power in
the execution of multiply-listed equity &
ETF options order flow. More
specifically, in January 2020, the
Exchange had less than 10% market
share of executed volume of multiplylisted equity & ETF options trades.7
The Exchange believes that the evershifting market share among the
exchanges from month to month
demonstrates that market participants
can shift order flow, or discontinue or
reduce use of certain categories of
5 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(S7–10–04) (‘‘Reg NMS Adopting Release’’).
6 The OCC publishes options and futures volume
in a variety of formats, including daily and monthly
volume by exchange, available here: https://
www.theocc.com/market-data/volume/default.jsp.
7 Based on OCC data, see id., the Exchange’s
market share in equity-based options declined from
9.82% for the month of January 2019 to 8.08% for
the month of January 2020.
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]]>Agencies
[Federal Register Volume 85, Number 117 (Wednesday, June 17, 2020)]
[Notices]
[Pages 36637-36644]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-12989]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-89050; File No. SR-NYSE-2020-49]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Its Price List
June 11, 2020.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on June 1, 2020, New York Stock Exchange LLC (``NYSE'' or
the ``Exchange'') filed with the Securities and Exchange Commission
(the ``Commission'') the proposed rule change as described in Items I,
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) adopt a step
up tier for member organizations adding liquidity in Non-Displayed
Limit Orders in Tapes A, B and C securities; (2) revise the credits for
member organizations qualifying for Step Up Tier 2 Adding Credit; and
(3) extend through June 2020 the waiver of equipment and related
service charges and trading license fees for NYSE Trading Floor-based
member organizations implemented for April and May 2020. The Exchange
proposes to implement the fee changes effective June 1, 2020. The
proposed rule change is available on the Exchange's website at
www.nyse.com, at the principal office of the Exchange, and at the
Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend its Price List to (1) adopt a step
up tier for member organizations adding liquidity in Non-Displayed
Limit Orders in Tapes A, B and C securities; (2) revise the credits for
member organizations qualifying for Step Up Tier 2 Adding Credit; and
(3) extend through June 2020 the waiver of equipment and related
service charges and trading license fees for NYSE Trading Floor-based
member organizations implemented for April and May 2020.
The proposed changes respond to the current competitive environment
where order flow providers have a choice of where to direct liquidity-
providing orders by offering further incentives for member
organizations to send additional displayed liquidity to the Exchange.
The proposed changes also respond to the current volatile market
[[Page 36638]]
environment that has resulted in unprecedented average daily volumes
and the temporary closure of the Trading Floor, which are both related
to the ongoing spread of the novel coronavirus (``COVID-19'').
The Exchange proposes to implement the fee changes effective June
1, 2020.
Current Market and Competitive Environment
The Exchange operates in a highly competitive market. The
Commission has repeatedly expressed its preference for competition over
regulatory intervention in determining prices, products, and services
in the securities markets. In Regulation NMS, the Commission
highlighted the importance of market forces in determining prices and
SRO revenues and, also, recognized that current regulation of the
market system ``has been remarkably successful in promoting market
competition in its broader forms that are most important to investors
and listed companies.'' \4\
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\4\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37495, 37499 (June 29, 2005) (S7-10-04) (Final Rule)
(``Regulation NMS'').
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As the Commission itself recognized, the market for trading
services in NMS stocks has become ``more fragmented and competitive.''
\5\ Indeed, equity trading is currently dispersed across 13
exchanges,\6\ 31 alternative trading systems,\7\ and numerous broker-
dealer internalizers and wholesalers, all competing for order flow.
Based on publicly-available information, no single exchange has more
than 20% market share (whether including or excluding auction
volume).\8\ Therefore, no exchange possesses significant pricing power
in the execution of equity order flow. More specifically, the
Exchange's market share of trading in Tape A, B and C securities
combined is less than 13%.
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\5\ See Securities Exchange Act Release No. 51808, 84 FR 5202,
5253 (February 20, 2019) (File No. S7-05-18) (Transaction Fee Pilot
for NMS Stocks Final Rule) (``Transaction Fee Pilot'').
\6\ See Cboe Global Markets, U.S. Equities Market Volume
Summary, available at https://markets.cboe.com/us/equities/market_share/. See generally https://www.sec.gov/fast-answers/divisionsmarketregmrexchangesshtml.html.
\7\ See FINRA ATS Transparency Data, available at https://otctransparency.finra.org/otctransparency/AtsIssueData. A list of
alternative trading systems registered with the Commission is
available at https://www.sec.gov/foia/docs/atslist.htm.
\8\ See Cboe Global Markets U.S. Equities Market Volume Summary,
available at https://markets.cboe.com/us/equities/market_share/.
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The Exchange believes that the ever-shifting market share among the
exchanges from month to month demonstrates that market participants can
move order flow, or discontinue or reduce use of certain categories of
products, in response to fee changes. With respect to non-marketable
order flow that would provide displayed liquidity on an Exchange,
member organizations can choose from any one of the 13 currently
operating registered exchanges to route such order flow. Accordingly,
competitive forces constrain exchange transaction fees that relate to
orders that would provide liquidity on an exchange.
In response to the competitive environment described above, the
Exchange has established incentives for its member organizations who
submit orders that provide liquidity on the Exchange. The proposed fee
change is designed to attract additional order flow to the Exchange by
offering a new pricing tier to incentivize member organizations to step
up their liquidity-providing Non-Displayed Limit Orders and Mid-Point
Liquidity (``MPL'') Orders on the Exchange and revising the credits for
member organizations adding liquidity by qualifying for Step Up Tier 2
Adding Credit.
Moreover, beginning on March 16, 2020, in order to slow the spread
of COVID-19 through social distancing measures, significant limitations
were placed on large gatherings throughout the country. As a result, on
March 18, 2020, the Exchange determined that beginning March 23, 2020,
the physical Trading Floor facilities located at 11 Wall Street in New
York City would close and that the Exchange would move, on a temporary
basis, to fully electronic trading.\9\ On May 14, 2020, the Exchange
announced that on May 26, 2020 trading operations on the Trading Floor
would resume on a limited basis to a subset of Floor brokers, subject
to safety measures designed to prevent the spread of COVID-19.\10\ The
proposed rule change responds to these unprecedented events by
extending the waiver of equipment and related service charges and
trading license fees for NYSE Trading Floor-based member organizations
for June 2020.
---------------------------------------------------------------------------
\9\ See Press Release, dated March 18, 2020, available here:
https://ir.theice.com/press/press-releases/allcategories/2020/03-18-2020-204202110 [sic].
\10\ See Trader Update, dated May 14, 2020, available here:
https://www.nyse.com/traderupdate/history#110000251588 [sic].
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Proposed Rule Change
Step Up Tier for Adding Liquidity in Non-Displayed Limit Orders
The Exchange proposes to adopt a step up tier that would offer
credits to member organizations providing non-displayed liquidity to
the Exchange in Tape A, B, and C securities.
As proposed, a member organization that
sends orders that add liquidity to the Exchange in Non-
Displayed Limit Orders, and
that has adding average daily volume (``ADV'') in Non-
Displayed Limit Orders and MPL Orders in Tapes A, B, and C consolidated
ADV (``CADV'') \11\ combined, excluding any liquidity added by a
Designated Market Makers (``DMM''), that is at least 0.02% of NYSE CADV
over that member organization's May 2020 adding liquidity in Non-
Displayed Limit Orders and MPL Orders as a percentage of NYSE CADV (the
``Baseline Tape A Share'')
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\11\ The terms ``ADV'' and ``CADV'' are defined in footnote *
[sic] of the Price List.
would receive a credit of $0.0005 for adding liquidity if the increase
in Adding ADV over the Baseline Tape A Share is at least 0.02% and less
than 0.04%. If the increase in Adding ADV over the Baseline Tape A
Share is at least 0.04% and less than 0.08%, a member organization
meeting the above requirements would receive a credit of $0.0010. If
the increase in Adding ADV over the Baseline Tape A Share is at least
0.08% or more, a member organization meeting the above requirements
would receive a credit of $0.0015.
For example, Member Organization A had an adding ADV in Non-
Displayed Limit Orders and MPL Orders in Tape A, Tape B and Tape C
securities combined of 6 million shares in the baseline month of May
2020 when Tape A, Tape B and Tape C CADV combined (``US CADV'') was
10.0 billion shares or 0.06% of US CADV. Further assume that in the
billing month, Member Organization A had an adding ADV in Non-Displayed
Limit Orders and MPL Orders combined of 10 million shares when US CADV
was again 10 billion shares, or 0.10% of US CADV. In this scenario,
Member Organization A would have a step up percentage of US CADV of
0.04% (0.10% minus 0.06%), which would qualify Member Organization A
for a credit of $0.0010 per share for Non-Displayed Limit Orders.
If Member Organization A had an adding ADV of 18 million shares, or
0.18%, for a step up ADV of 0.12%, Member Organization A would instead
qualify for a credit of $0.0015 because Member Organization A's
increase in Adding ADV over the Baseline Tape A Share is at least
0.08%.
If in the same billing month Member Organization A's adding ADV of
18 million shares was solely in Non-Displayed Limit Orders (i.e., the
share
[[Page 36639]]
number did not include MPL Orders) for an Adding ADV in Non-Displayed
Limit Orders of 0.18%, Member Organization A would also qualify for the
existing Non-Displayed Limit Order credit of $0.0018 by meeting the
existing adding ADV requirement of 0.15%. In this scenario, Member
Organization A would achieve the higher of the two credits, or $0.0018.
The purpose of this proposed change is to incentivize member
organizations to increase the liquidity-providing orders in Non-
Displayed Limit Orders and MPL 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. Because the proposed tier requires a member organization to
increase the volume of its trades in orders that add liquidity over
that member organization's May 2020 baseline, the Exchange believes
that the proposed credit would provide an incentive for all member
organizations to send additional liquidity to the Exchange in order to
qualify for it.
The Exchange does not know how much order flow member organizations
choose to route to other exchanges or to off-exchange venues. Since the
tier's requirements utilize an increase in volume from the most recent
month, the Exchange does not know how many member organizations could
qualify for the proposed tiered credits based on their current trading
profile on the Exchange, but the Exchange notes that, since the lowest
step up is only an Adding ADV of 0.02% of US CADV in Non-Display Limit
Orders and MPL Orders combined, the Exchange believes that many member
organizations could qualify if they so choose. However, without having
a view of member organization's activity on other exchanges and off-
exchange venues, the Exchange has no way of knowing whether this
proposed rule change would result in any member organization directing
orders to the Exchange in order to qualify for the new tier.
Revised Credits for the Step Up Tier 2 Adding Credit
Under the current Step Up Tier 2 Adding Credit, a member
organization that sends orders, except Mid-Point Liquidity Orders
(``MPL'') and Non-Displayed Limit Orders, that add liquidity (``Adding
ADV'') in Tape A securities receive a credit of $0.0029 if:
The member organization quotes at least 15% of the
National Best Bid or Offer (``NBBO'') \12\ in 300 or more Tape A
securities on a monthly basis, and
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\12\ See Rule 1.1(q) (defining ``NBBO'' to mean the national
best bid or offer).
---------------------------------------------------------------------------
the member organization's Adding ADV in Tapes A, B and C
securities as a percentage of Tapes A, B and C CADV, excluding any
orders by a DMM, that
[cir] is at least two times more than the Member Organization's
Adding ADV in Tapes A, B and C securities in July 2019 as a percentage
of Tapes A, B and C CADV, and
[cir] adds liquidity as an Supplemental Liquidity Provider in Tape
A securities of at least 0.10% of NYSE CADV, and
[cir] exceeds the Member Organization's Adding ADV, excluding any
liquidity added by a DMM, in Tapes A, B and C securities in July 2019
as a percentage of Tapes A, B and C CADV by at least 0.20% of Tapes A,
B and C CADV.
In addition, a member organization that meets these requirements,
and thus qualifies for the $0.0029 credit, would be eligible to receive
an additional $0.00005 per share if trades in Tapes B and C securities
against the member organization's orders that add liquidity, excluding
orders as a Supplemental Liquidity Provider (``SLP''), equal to at
least 0.20% of Tape B and Tape C CADV combined.
The Exchange proposes two higher credits for member organizations
that meet the current Step Up Tier 2 Adding Credit requirements and
increase their Adding ADV, excluding any liquidity added by a DMM, in
Tapes A, B and C securities in July 2019 as a percentage of Tapes A, B
and C CADV (``July 2019 Adding ADV'').
Specifically, member organizations whose Adding ADV as a percentage
of US CADV represents an increase of at least 0.20% and less than 0.35%
over their July 2019 Adding ADV as a percentage of US CADV would
receive the current $0.0029 credit. Member organizations whose Adding
ADV as a percentage of US CADV represents an increase of at least 0.35%
and less than 0.45% over their July 2019 Adding ADV as a percentage of
US CADV would receive a $0.0030 credit. Finally, member organizations
whose Adding ADV as a percentage of US CADV represents an increase of
at least 0.45% or more over their July 2019 Adding ADV as a percentage
of US CADV would receive a $0.0031 credit.
The Exchange does not propose to change any of the other
requirements to qualify for the Step Up Tier 2 Adding Credit.
The purpose of this proposed change is to incentivize member
organizations to increase the liquidity-providing orders in Tape A
securities they send to the Exchange, which would support the quality
of price discovery on the Exchange and provide additional price
improvement opportunities for incoming orders. The Exchange believes
that by correlating the amount of the credit to the level of orders
sent by a member organization that add liquidity, the Exchange's fee
structure would incentivize member organizations to submit more orders
that add liquidity to the Exchange, thereby increasing the potential
for price improvement to incoming marketable orders submitted to the
Exchange. The Exchange proposes higher credits under this tier to
provide an incentive for member organizations to send more orders
because they would then qualify for the credits. 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. Because, as proposed, the tier requires a member organization
to increase the volume of its trades against orders that add liquidity,
the Exchange believes that the proposed higher credits based on a
commensurate increase in Adding ADV would provide an incentive for
member organizations to route additional liquidity to the Exchange in
order to qualify for the higher credits.
The Exchange does not know how much order flow member organizations
choose to route to other exchanges or to off-exchange venues. No firms
currently qualify for the proposed higher Step Up Tier 2 Adding Credits
based on their current trading profile on the Exchange, but the
Exchange believes that at least five member organizations could qualify
for the tier if they so choose. The Exchange notes that, given the
lower requirement for Adding ADV of 0.20% as a percentage of US CADV
requirement when compared to other Exchange Adding Tiers (for example,
Tier 1 Adding Credit and Tier 2 Adding Credit), a number of firms would
be eligible to qualify if they so choose. However, without having a
view of member organization's activity on other exchanges and off-
exchange venues, the Exchange has no way of knowing whether this
proposed rule change would result in any member organization directing
orders to the Exchange in order to qualify for the new tier.
[[Page 36640]]
Fee Waivers for Trading Floor-Based Member Organizations
As noted above, on March 18, 2020, the Exchange announced that it
would temporarily close the Trading Floor, effective March 23, 2020, as
a precautionary measure to prevent the potential spread of COVID-19.
Following the temporary closure of the Trading Floor, the Exchange
waived certain equipment fees for the booth telephone system on the
Trading Floor and associated service charges for the months of April
and May.\13\ On May 26, 2020, the Trading Floor reopened on a limited
basis to a reduced number of Floor brokers to accommodate health-
focused considerations. DMMs continue to operate remotely.\14\
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\13\ See Securities Exchange Act Release No. 88602 (April 8,
2020), 85 FR 20730 (April 14, 2020) (SR-NYSE-2020-27); Securities
Exchange Act Release No. 88874 (May 14, 2020), 85 FR 30743 (May 20,
2020) (SR-NYSE-2020-29). See footnote 11 of the Price List.
\14\ DMMs will be provided access to the Trading Floor on
trading days when an IPO Auction or Core Open Auction for a post-IPO
public offering is scheduled. DMMs will continue to otherwise be
absent from the Trading Floor and, thus, all intra-day trading and
other Auctions will be conducted remotely by DMMs.
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For the months of April and May, the Exchange waived the Annual
Telephone Line Charge of $400 per phone number and the $129 fee for a
single line phone, jack, and data jack. The Exchange also waived
related service charges, as follows: $161.25 to install single jack
(voice or data); $107.50 to relocate a jack; $53.75 to remove a jack;
$107.50 to install voice or data line; $53.75 to disconnect data line;
$53.75 to change a phone line subscriber; and miscellaneous telephone
charges billed at $106 per hour in 15 minute increments.\15\ These fees
were waived for (1) member organizations with at least one trading
license, a physical Trading Floor presence, and Floor broker executions
accounting for 40% or more of the member organization's combined
adding, taking, and auction volumes during March 1 to March 20, 2020,
and (2) member organizations with at least one trading license that are
Designated Market Makers with 30 or fewer assigned securities for the
billing month of March 2020.
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\15\ The Service Charges also include an internet Equipment
Monthly Hosting Fee that the Exchange did not waive for April and
May 2020 and that the Exchange does not propose to waive for June
2020.
---------------------------------------------------------------------------
Because the Trading Floor will continue to operate with reduced
capacity, the Exchange proposes to extend the waiver of these Trading
Floor-based fees through June 2020. To effectuate this change, the
Exchange proposes to add ``and June'' between ``May'' and ``2020'' in
footnote 11 to the Price List.
In order to further reduce costs for member organizations with a
Trading Floor presence, the Exchange also waived the April and May 2020
monthly portion of all applicable annual fees for (1) member
organizations with at least one trading license, a physical Trading
Floor presence and Floor broker executions accounting for 40% or more
of the member organization's combined adding, taking, and auction
volumes during March 1 to March 20, 2020, and (2) member organizations
with at least one trading license that are DMMs with 30 or fewer
assigned securities for the billing month of March 2020.\16\
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\16\ See note 13, supra. See footnotes 15 of the Price List.
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The Exchange proposes to also waive the June 2020 monthly portion
of all applicable annual fees for member organizations with at least
one trading license, a physical Trading Floor presence and Floor broker
executions accounting for 40% or more of the member organization's
combined adding, taking, and auction volumes during March 1 to March
20, 2020. The indicated annual trading license fees would also be
waived for June 2020 for member organizations with at least one trading
license that are DMMs with 30 or fewer assigned securities for the
billing month of March 2020. To effectuate this change, the Exchange
proposes to add ``and June'' between ``May'' and ``2020'' in footnote
15.
This proposed extension of the fee waivers would reduce monthly
costs for member organizations with a Trading Floor presence whose
operations were disrupted by the Floor closure, which lasted
approximately two months, and remains partially closed. The Exchange
believes that extension of the fee waiver would ease the financial
burden associated with the ongoing partial Trading Floor closure. The
Exchange believes that all member organization that conduct business on
the Trading Floor would benefit from this proposed fee change.
The proposed changes are not otherwise intended to address other
issues, and the Exchange is not aware of any significant problems that
market participants would have in complying with the proposed changes.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\17\ in general, and furthers the
objectives of Sections 6(b)(4) and (5) of the Act,\18\ in particular,
because it provides for the equitable allocation of reasonable dues,
fees, and other charges among its members, issuers and other persons
using its facilities and does not unfairly discriminate between
customers, issuers, brokers or dealers.
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\17\ 15 U.S.C. 78f(b).
\18\ 15 U.S.C. 78f(b)(4) & (5).
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The Proposed Change is Reasonable
As discussed above, the Exchange operates in a highly fragmented
and competitive market. The Commission has repeatedly expressed its
preference for competition over regulatory intervention in determining
prices, products, and services in the securities markets. Specifically,
in Regulation NMS, the Commission highlighted the importance of market
forces in determining prices and SRO revenues and, also, recognized
that current regulation of the market system ``has been remarkably
successful in promoting market competition in its broader forms that
are most important to investors and listed companies.'' \19\
---------------------------------------------------------------------------
\19\ 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
orders which provide liquidity on an Exchange, member organizations can
choose from any one of the 13 currently operating registered exchanges
to route such order flow. Accordingly, competitive forces constrain
exchange transaction fees that relate to orders that would provide
displayed liquidity on an exchange. Stated otherwise, changes to
exchange transaction fees can have a direct effect on the ability of an
exchange to compete for order flow.
Step Up Tier for Adding Liquidity in Non-Displayed Limit Orders
Given the competitive environment, the proposed Step Up Tier for
Adding Liquidity in Non-Displayed Limit Orders would provide an
incentive for member organizations to route additional liquidity
providing orders to the Exchange in Tape A securities.
As noted above, the Exchange operates in a highly competitive
environment, particularly for attracting non-marketable order flow that
provides liquidity on an exchange. The Exchange believes it is
reasonable to provide a higher credit for orders that provide
additional liquidity. The Exchange believes that requiring member
[[Page 36641]]
organizations to have an Adding ADV in Non-Displayed Limit Orders and
MPL Orders in Tapes A, B and C CADV combined, excluding any liquidity
added by a DMM, that is at least 0.02% of NYSE CADV over that member
organization's May 2020 adding liquidity in Non-Displayed Limit Orders
and MPL Orders taken as a percentage of NYSE CADV in order to qualify
for the proposed Step Up Tier is reasonable because it would encourage
additional non-displayed and mid-point liquidity on the Exchange and
because market participants benefit from the greater amounts of
liquidity and price improvement present on the Exchange.
Similarly, the Exchange believes that it is reasonable to provide
an incremental credit to member organizations that meet the
requirements of the Step Up Tier that add additional liquidity in Non-
Displayed Limit Orders and MPL Orders. Since the proposed Step Up Tier
would be new with a requirement for increased Adding ADV over the
baseline month, no member organization currently qualifies for the
proposed pricing tier. As previously noted, there are a number of
member organizations that could qualify for the proposed higher credit
but without a view of member organization activity on other exchanges
and off exchange venues, the Exchange has no way of knowing whether the
proposed rule change would result in any member organization qualifying
for the tier. The Exchange believes the proposed higher credit is
reasonable as it would provide an additional incentive for member
organizations to direct their order flow to the Exchange and provide
meaningful added levels of liquidity in order to qualify for the higher
credit, thereby contributing to depth and market quality on the
Exchange.
Step Up Tier 2 Adding Credit
The Exchange believes that higher credits for meeting the Step Up
Tier 2 Adding Credit requirements is reasonable. Specifically, the
Exchange believes that offering higher credits for increased Adding ADV
of a minimum and maximum percentage over a baseline would provide an
incentive for member organizations to route 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. The
Exchange believes it is reasonable to provide incrementally higher
credits for orders that provide additional liquidity because it would
encourage additional displayed liquidity on the Exchange and because
market participants benefit from the greater amounts of displayed
liquidity present on the Exchange. Because, as proposed, the tier
requires a member organization to increase the volume of its trades
against orders that add liquidity, the Exchange believes that the
proposed higher credits based on a commensurate increase in Adding ADV
would provide an incentive for member organizations to route additional
liquidity to the Exchange in order to qualify for the higher credits.
The Exchange does not know how much order flow member organizations
choose to route to other exchanges or to off-exchange venues. As
previously noted, there are currently a number of firms that could
qualify for the proposed higher Step Up Tier 2 Adding Credits based on
their current trading profile on the Exchange if they so choose, but
without a view of member organization activity on other exchanges and
off exchange venues, the Exchange has no way of knowing whether the
proposed rule change would result in any member organization qualifying
for the tier. The Exchange believes the proposed higher credit is
reasonable as it would provide an additional incentive for member
organizations to direct their order flow to the Exchange and provide
meaningful added levels of liquidity in order to qualify for the higher
credit, thereby contributing to depth and market quality on the
Exchange.
Fee Waivers for Trading Floor-Based Member Organizations
The proposed extension of the waiver of equipment and related
service fees and the applicable monthly trading license fee for Trading
Floor-based member organizations is reasonable in light of the partial
continued closure of the NYSE Trading Floor. Beginning March 2020,
markets worldwide have experienced unprecedented declines and
volatility because of the ongoing spread of COVID-19 also resulted in
the temporary closure of the NYSE Trading Floor. As noted, the Trading
Floor was recently partially reopened on a limited basis to a subset of
Floor brokers, subject to safety measures designed to prevent the
spread of COVID-19. The proposed change is designed to reduce costs for
Floor participants for the month of June 2020 and therefore ease the
financial burden faced by member organizations that conduct business on
the Trading Floor while it continues to operate with reduced capacity.
The Proposal is an Equitable Allocation of Fees
The Exchange believes the proposal equitably allocates its fees
among its market participants by fostering liquidity provision and
stability in the marketplace.
Step Up Tier for Adding Liquidity in Non-Displayed Limit Orders
The Exchange believes that the proposed Step Up Tier is equitable
because the magnitude of the additional credit is not unreasonably high
relative to the current tiered credits for Non-Displayed Limit orders
that add liquidity of $0.0010 and $0.0018. 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 that requiring member organizations to having
an Adding ADV in Non-Displayed Limit Orders and MPL Orders in Tapes A,
B and C CADV combined, excluding any liquidity added by a DMM, that is
at least 0.02% of NYSE CADV over that member organization's May 2020
adding liquidity in Non-Displayed Limit Orders and MPL Orders combined
taken as a percentage of NYSE CADV in order to qualify for the proposed
credits would also encourage additional displayed liquidity on the
Exchange. Since the proposed Step Up Tier would be new, no member
organization currently qualifies for it. As noted, there are currently
no member organizations that could qualify for the proposed higher
credit, but without a view of member organization activity on other
exchanges and off-exchange venues, the Exchange has no way of knowing
whether this proposed rule change would result in any member
organization qualifying for the tier.
The Exchange believes the proposed higher credit is reasonable as
it would provide an additional incentive for member organizations to
direct their order flow to the Exchange and provide meaningful added
levels of liquidity in order to qualify for the higher credit, thereby
contributing to depth and market quality and increased price
improvement on the Exchange. The proposal neither targets nor will it
have a disparate impact on any particular category of market
participant. All member organizations would be eligible to qualify for
the higher credit proposed in Step Up Tier if they increase their
Adding ADV in Non-Displayed Limit orders and MPL Orders combined over
[[Page 36642]]
their own baseline of order flow. The Exchange believes that offering a
higher step up credits for providing liquidity if the step up
requirements for Tape A, Tape B and Tape C securities are met, will
continue to attract order flow and liquidity to the Exchange, thereby
providing additional price improvement opportunities on the Exchange
and benefiting investors generally. As to those market participants
that do not presently qualify for the adding liquidity credits, the
proposal will not adversely impact their existing pricing or their
ability to qualify for other credits provided by the Exchange.
Step Up Tier 2 Adding Credit
The Exchange is not proposing to adjust the current requirements to
qualify for the Step Up Tier 2 Adding Credit, which will remain the
same for all market participants. Rather, the proposal would provide
incrementally higher credits for member organizations that increase
Adding ADV over the current baseline. The Exchange believes that the
proposed higher credits are equitable because the magnitude of the
additional credits is not unreasonably high compared to the current
credit for Step Up Tier 2 and also relative to the other adding tier
credits, which noted above range from $0.0015 to $0.0022, in comparison
to the credits paid by other exchanges for orders that provide
additional step up liquidity.\20\ 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.
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\20\ See Cboe BZX Fee Schedule, which has adding credits ranging
from $0.0025 to $0.0032, at https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/.
---------------------------------------------------------------------------
The Exchange believes that requiring member organizations to having
an Adding ADV in Non-Displayed Limit Orders and MPL Orders in Tapes A,
B and C CADV combined, excluding any liquidity added by a DMM, that is
at least 0.02% of NYSE CADV over that member organization's May 2020
adding liquidity in Non-Displayed Limit Orders and MPL Orders taken as
a percentage of NYSE CADV in order to qualify for the proposed credits
would also encourage additional displayed liquidity on the Exchange.
Since the proposed Step Up Tier would be new, no member organization
currently qualifies for it. As noted, there are currently no member
organizations that currently qualify for the proposed higher credit,
but without a view of member organization activity on other exchanges
and off-exchange venues, the Exchange has no way of knowing whether
this proposed rule change would result in any member organization
qualifying for the tier. The Exchange believes the proposed higher
credits are reasonable as it would provide an additional incentive for
member organizations to direct their order flow to the Exchange and
provide meaningful added levels of liquidity in order to qualify for
the higher credit, 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 member
organizations would be eligible to qualify for the higher credits
proposed in Step Up Tier 2 if they increase their Adding ADV over their
own baseline of order flow accordingly. The Exchange believes that
offering higher step up credits for providing liquidity if the step up
requirements for Tape A securities are met, will continue to attract
order flow and liquidity to the Exchange, thereby providing additional
price improvement opportunities on the Exchange and benefiting
investors generally. As to those market participants that do not
presently qualify for the adding liquidity credits, the proposal will
not adversely impact their existing pricing or their ability to qualify
for other credits provided by the Exchange.
Fee Waivers for Trading Floor-Based Member Organizations
Finally, the proposed extension of the waiver of equipment and
related service fees and the applicable monthly trading license fee for
Trading Floor-based member organizations to June 2020 are also an
equitable allocation of fees. The proposed waivers apply to all Trading
Floor-based firms meeting specific requirements during the period that
the Trading Floor is partially open. The proposed change is equitable
as it merely continues the fee waiver granted in April and May 2020,
and is designed to reduce monthly costs for Trading Floor-based member
organizations that are unable to fully conduct Floor operations.
The Proposal is Not Unfairly Discriminatory
The Exchange believes that the proposal is not unfairly
discriminatory. In the prevailing competitive environment, member
organizations are free to disfavor the Exchange's pricing if they
believe that alternatives offer them better value.
The proposal is not unfairly discriminatory because it neither
targets nor will it have a disparate impact on any particular category
of market participant.
Step Up Tier for Adding Liquidity in Non-Displayed Limit Orders
The Exchange believes it is not unfairly discriminatory to provide
additional per share step up credits for adding liquidity in Non-
Displayed Limit Orders, as the proposed credits would be provided on an
equal basis to all member organizations that add liquidity by meeting
the new proposed Step Up Tier's requirements. For the same reason, the
Exchange believes it is not unfairly discriminatory to provide
additional incrementally higher credits for increased adding ADV over
the member organization's May 2020 adding liquidity in Non-Displayed
Limit Orders and MPL Orders combined taken as a percentage of NYSE CADV
because the proposed higher credits would equally encourage all member
organizations to provide additional liquidity on the Exchange in Non-
Displayed Limit Orders and MPL Orders. As noted, the Exchange believes
that the proposed credit would provide an incentive for member
organizations to send additional liquidity to the Exchange in order to
qualify for the additional credits. The Exchange also believes that the
proposed change is not unfairly discriminatory because it is reasonably
related to the value to the Exchange's market quality associated with
higher volume. Finally, the submission of orders to the Exchange is
optional for member organizations in that they could choose whether to
submit orders to the Exchange and, if they do, the extent of its
activity in this regard.
Step Up Tier 2 Adding Credit
The Exchange believes it is not unfairly discriminatory to provide
higher per share step up credits, as the proposed credit would be
provided on an equal basis to all member organizations that add
liquidity by meeting the new proposed Step Up Tier 2 requirements. For
the same reason, the Exchange believes it is not unfairly
discriminatory to provide additional incremental credits to member
organizations that satisfy the Step Up Tier 2 requirements and add
liquidity in Tape A, B and C securities. Further, the Exchange believes
the proposed Step Up Tier 2 credits would incentivize member
organizations that meet the current tiered requirements to send more
orders to the Exchange to qualify for higher credits. The Exchange also
believes that the proposed change is not
[[Page 36643]]
unfairly discriminatory because it is reasonably related to the value
to the Exchange's market quality associated with higher volume.
Finally, the submission of orders to the Exchange is optional for
member organizations in that they could choose whether to submit orders
to the Exchange and, if they do, the extent of its activity in this
regard.
Fee Waivers for Trading Floor-Based Member Organizations
The proposed continuation of the waiver of equipment and related
service fees and the applicable monthly trading license fee for Trading
Floor-based member organizations during June 2020 is not unfairly
discriminatory because the proposed waivers would benefit all
similarly-situated market participants on an equal and non-
discriminatory basis. The Exchange is not proposing to waive the Floor-
related fixed indefinitely, but rather during the period that the
Trading Floor is not fully open. The proposed fee change is designed to
ease the financial burden on Trading Floor-based member organizations
that cannot fully conduct Floor operations.
Finally, the Exchange believes that it is subject to significant
competitive forces, as described below in the Exchange's statement
regarding the burden on competition.
For the foregoing reasons, the Exchange believes that the proposal
is consistent with the Act.
B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with Section 6(b)(8) of the Act,\21\ the Exchange
believes that the proposed rule change would not impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act. Instead, as discussed above, the Exchange believes
that the proposed changes would encourage the submission of additional
liquidity to a public exchange, thereby promoting market depth, price
discovery and transparency and enhancing order execution opportunities
for member organizations. As further discussed above, the Exchange
believes that the proposed changes would encourage the continued
participation of member organizations on the Exchange by providing
certainty and fee relief during the unprecedented volatility and market
declines caused by the continued spread of COVID-19. As a result, the
Exchange believes that the proposed change furthers the Commission's
goal in adopting Regulation NMS of fostering integrated competition
among orders, which promotes ``more efficient pricing of individual
stocks for all types of orders, large and small.'' \22\
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\21\ 15 U.S.C. 78f(b)(8).
\22\ Regulation NMS, 70 FR at 37498-99.
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Intramarket Competition. The proposed changes are designed to
respond to the current competitive environment and to attract
additional order flow to the Exchange. The Exchange believes that the
proposed changes would continue to incentivize market participants to
direct displayed order flow to the Exchange. Greater liquidity benefits
all market participants on the Exchange by providing more trading
opportunities and encourages member organizations to send orders,
thereby contributing to robust levels of liquidity, which benefits all
market participants on the Exchange. The current and proposed credits
would be available to all similarly-situated market participants, and,
as such, the proposed change would not impose a disparate burden on
competition among market participants on the Exchange. Further, the
proposed continued waiver of equipment and related service fees and the
applicable monthly trading license fee for Trading Floor-based member
organizations during June 2020 provide a degree of certainty and ease
the financial burden on Trading Floor-based member organizations
impacted by the temporary closing and partial reopening of the Trading
Floor. As noted, the proposal would apply to all similarly situated
member organizations on the same and equal terms, who would benefit
from the changes on the same basis. Accordingly, the proposed change
would not impose a disparate burden on competition among market
participants on the Exchange.
Intermarket Competition. The Exchange operates in a highly
competitive market in which market participants can readily choose to
send their orders to other exchange and off-exchange venues if they
deem fee levels at those other venues to be more favorable. As
previously noted, the Exchange's market share of trading in Tape A, B
and C securities combined is less than 13%. In such an environment, the
Exchange must continually adjust its fees and rebates to remain
competitive with other exchanges and with off-exchange venues. Because
competitors are free to modify their own fees and credits in response,
and because market participants may readily adjust their order routing
practices, the Exchange does not believe its proposed fee change can
impose any burden on intermarket competition. The Exchange believes
that the proposed rule change reflects this competitive environment
because it modifies the Exchange's fees in a manner designed to provide
a degree of certainty and ease the financial burdens of the current
unsettled market environment, and permit affected member organizations
to continue to conduct market-making operations on the Exchange and
avoid unintended costs of doing business on the Exchange while the
Trading Floor is not fully open, which could make the Exchange a less
competitive venue on which to trade as compared to other options
exchanges.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change is effective upon filing pursuant to
Section 19(b)(3)(A) \23\ of the Act and subparagraph (f)(2) of Rule
19b-4 \24\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\23\ 15 U.S.C. 78s(b)(3)(A).
\24\ 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) \25\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\25\ 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
[[Page 36644]]
Send an email to [email protected]. Please include
File Number SR-NYSE-2020-49 on the subject line.
Paper Comments
Send paper comments in triplicate to: Secretary,
Securities and Exchange Commission, 100 F Street NE, Washington, DC
20549-1090.
All submissions should refer to File Number SR-NYSE-2020-49. 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-NYSE-2020-49 and should be submitted on
or before July 8, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\26\
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\26\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-12989 Filed 6-16-20; 8:45 am]
BILLING CODE 8011-01-P
