Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Its Price List, 66612-66617 [2020-23144]

Download as PDF 66612 Federal Register / Vol. 85, No. 203 / Tuesday, October 20, 2020 / Notices certification fees do not place an undue burden on competition on other SROs that is not necessary or appropriate. The Exchange operates in a highly competitive market in which market participants can readily favor one of the 16 competing options venues if they deem fee levels at a particular venue to be excessive.35 Based on publiclyavailable information, and excluding index-based options, no single exchange has more than 16% market share. Therefore, no exchange possesses significant pricing power in the execution of multiply-listed equity and ETF options order flow. For the month of August 2020, the Exchange had a market share of approximately 3.24% of executed multiply-listed equity options 36 and the Exchange believes that the ever-shifting market share among exchanges from month to month demonstrates that market participants can discontinue or reduce use of certain categories of products, or shift order flow, in response to fee changes. In such an environment, the Exchange must continually adjust its fees and fee waivers to remain competitive with other exchanges and to attract order flow to the Exchange. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were neither solicited nor 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,37 and Rule 19b–4(f)(2) 38 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 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 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, 35 See including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– EMERALD–2020–09 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–EMERALD–2020–09. 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–EMERALD–2020–09 and should be submitted on or before November 10, 2020. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.39 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2020–23142 Filed 10–19–20; 8:45 am] supra note 22. BILLING CODE 8011–01–P 36 Id. U.S.C. 78s(b)(3)(A)(ii). 38 17 CFR 240.19b–4(f)(2). 18:08 Oct 19, 2020 [Release No. 34–90180; File No. SR–NYSE– 2020–82] Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Its Price List October 14, 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 September 30, 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. 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) extend the Transition Period for member organizations to transition to the utilization of ports that connect to the Exchange using Pillar technology; (2) extend the Decommission Period that begins once the Transition Period ends; and (3) extend the effective date that the Exchange would prorate the monthly fee for ports activated on or after July 1, 2019. The Exchange proposes to implement these changes to its Price List effective October 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, 1 15 37 15 VerDate Sep<11>2014 SECURITIES AND EXCHANGE COMMISSION U.S.C. 78s(b)(1). U.S.C. 78a. 3 17 CFR 240.19b–4. 2 15 39 17 Jkt 253001 PO 00000 CFR 200.30–3(a)(12). Frm 00080 Fmt 4703 Sfmt 4703 E:\FR\FM\20OCN1.SGM 20OCN1 Federal Register / Vol. 85, No. 203 / Tuesday, October 20, 2020 / Notices 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 purpose of this filing is to provide additional time for member organizations to transition from older to newer and more efficient Pillar technology. The Exchange is not proposing to adjust the amount of the port fees or the fees charged to offset the Exchange’s continuing costs of supporting legacy ports, which will remain at the current level for all market participants. Effective July 3, 2019, the Exchange introduced transition pricing designed to provide member organizations an extended transition period to connect to the Exchange using Pillar technology with no fee increase. Specifically, the Exchange (1) adopted a cap on monthly fees for the use of certain ports connecting to the Exchange for the billing months July 2019 through March 2020 (the ‘‘Transition Period’’); (2) adopted a Decommission Extension Fee applicable for the billing months April 2020 through September 2020 (the ‘‘Decommission Period’’) for legacy port connections; and (3) prorated the monthly fee for certain ports activated after July 1, 2019, effective April 1, 2020.4 Effective March 2, 2020, the Exchange (1) extended the end of the Transition Period from March 2020 to August 2020 for member organizations to transition to the utilization of ports that connect to the Exchange using Pillar technology; (2) shortened the Decommission Period from six months (April 2020–September 2020) to four months (September– December 2020); (3) extended the effective date that the Exchange would prorate the monthly fee for certain ports activated on or after July 1, 2019 from April 1, 2020 to September 1, 2020; and (4) revised the fees charged for legacy port connections during the Decommission Period.5 Effective August 1, 2020, the Exchange (1) extended the end of the Transition Period from August 2020 to October 2020; (2) extended the beginning of the Decommission Period from September 2020 to November 2020 4 See Securities Exchange Act Release No. 86360 (July 11, 2019), 84 FR 34210 (July 17, 2019) (SR– NYSE–2019–39). 5 See Securities Exchange Act Release No. 88373 (March 12, 2020), 85 FR 15533 (March 18, 2020) (SR–NYSE–2020–14). VerDate Sep<11>2014 18:08 Oct 19, 2020 Jkt 253001 66613 and the end of the Decommission Period from December 2020 to February 2021; and (3) extended the effective date that the Exchange would prorate the monthly fee for ports activated on or after July 1, 2019 from September 1, 2020 to November 1, 2020.6 The Exchange proposes to: • Extend the end of the Transition Period from October 2020 to December 2020; • extend the beginning of the Decommission Period from November 2020 to January 2021 and the end of the Decommission Period from February 2021 to April 2021; and • extend the effective date that the Exchange would prorate the monthly fee for ports activated on or after July 1, 2019 from November 1, 2020 to January 1, 2021. The Exchange would continue to provide a cap on how much member organizations would be charged for ports during the proposed extra two months of the Transition Period so that they would not incur additional charges during the transition to Pillar communication protocols. Moreover, the Exchange would retain a four month period during which the few firms that do not transition during the proposed longer Transition Period would be charged fees to offset the Exchange’s continuing costs of supporting legacy ports but proposes to extend the beginning and end dates for this period. The Exchange proposes to implement these changes to its Price List effective October 1, 2020. trading is currently dispersed across 15 exchanges,9 31 alternative trading systems,10 and numerous broker-dealer internalizers and wholesalers. Based on publicly-available information, no single exchange has more than 20% of the market share of executed volume of equity trades (whether excluding or including auction volume).11 The Exchange believes that the ever-shifting market share among the exchanges from month to month demonstrates that market participants can shift order flow, or discontinue or reduce use of certain categories of products, including ports, in response to fee changes. Accordingly, the Exchange’s fees, including port fees, are reasonably constrained by competitive alternatives and market participants can readily trade on competing venues if they deem pricing levels at those other venues to be more favorable. The Exchange is proposing these changes in the context of a competitive environment in which market participants can and do shift order flow, or discontinue or reduce use of certain categories of products, in response to fee changes. Because ports are used by member organizations to trade electronically on the Exchange, fees associated with ports are subject to these same competitive forces. The Exchange believes that the proposal represents a reasonable attempt to provide member organizations with additional time to effect an orderly transition to upgraded technology without incurring additional costs. 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.’’ 7 As the Commission itself recognized, the market for trading services in NMS stocks has become ‘‘more fragmented and competitive.’’ 8 Indeed, equity Proposed Rule Change Member organizations enter orders and order instructions, and receive information from the Exchange, by establishing a connection to a gateway that uses communication protocols that map to the order types and modifiers described in Exchange rules. These gateway connections, also known as logical port connections, are referred to as ‘‘ports’’ on the Exchange’s Price List. Legacy ports connect with the Exchange via a Common Customer Gateway (known as ‘‘CCG’’) that accesses its 6 See Securities Exchange Act Release No. 89591 (August 18, 2020), 85 FR 52159 (August 24, 2020) (SR–NYSE–2020–14) [sic]. 7 See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37495, 37499 (June 29, 2005) (S7–10–04) (Final Rule) (‘‘Regulation NMS’’). 8 See Securities Exchange Act Release No. 51808, 84 FR 5202, 5253 (February 20, 2019) (File No. S7– PO 00000 Frm 00081 Fmt 4703 Sfmt 4703 05–18) (Transaction Fee Pilot for NMS Stocks Final Rule) (‘‘Transaction Fee Pilot’’). 9 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. 10 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. 11 See Cboe Global Markets U.S. Equities Market Volume Summary, available at https:// markets.cboe.com/us/equities/market_share/. E:\FR\FM\20OCN1.SGM 20OCN1 66614 Federal Register / Vol. 85, No. 203 / Tuesday, October 20, 2020 / Notices equity trading systems (‘‘Phase I ports’’). Beginning July 1, 2019, the Exchange began making available ports using Pillar gateways to its member organizations (‘‘Phase II ports’’). Extension of the Date To Prorate Ports The Exchange currently makes available ports that provide connectivity to the Exchange’s trading systems (i.e., ports for entry of orders and/or quotes (‘‘order/quote entry ports’’)) and charges $550 per port per month. Designated Market Makers (‘‘DMMs’’) are not charged for the first 12 ports per month that connect to the Exchange.12 The Exchange also currently makes ports available for drop copies and charges $550 per port per month,13 except that DMMs are not charged for drop copy ports that connect to the Exchange. During the ongoing first phase of the Exchange’s transition pricing, the fees charged for both order/quote entry and drop copy ports are, with certain exceptions, capped at—and thus not charged for more than—the total number of both order/quote entry and drop copy ports that the member organization has activated as of its June 2019 invoice. Effective November 1, 2020, the Exchange will prorate fees for order/ quote entry and drop copy ports activated after July 1, 2019, to the number of trading days that a port is eligible for production trading with the Exchange, including any scheduled early closing days. The Exchange proposes to extend the effective date for the prorating of order/ quote entry and drop copy ports to January 1, 2021 to coincide with the end of the proposed extended Transition Period in December 2020, discussed below. Extension of the Transition Period Currently, during the billing months of July 2019 through October 2020 (the ‘‘Transition Period’’), the total number of ports charged per member organization is capped at the total number of ports that the member organization activated as of the June 2019 invoice, which was the last full month prior to the introduction of the new gateways (the ‘‘Transition Cap’’). Transition Cap pricing is available until the earlier of (1) the end of the Transition Period, i.e., October 2020, or (2) the billing month during which a member organization fully transitions to using only ports that communicate 12 DMMs completed the transition to Phase II ports last year. 13 Only one fee per drop copy port applies, even if receiving drop copies from multiple order/quote entry ports. VerDate Sep<11>2014 18:08 Oct 19, 2020 Jkt 253001 using Pillar phase II protocols. If during the Transition Period, a member organization increases the number of Phase I ports above the Transition Cap, those ports would be charged at the current rates for order/quote entry ports and drop copy ports. Finally, if during the Transition Period a member organization has a total number of ports below the Transition Cap, the Exchange would charge a member organization for their actual number of ports. The Exchange proposes to extend the Transition Period by two months to December 2020. As proposed, the charge per port (order/quote entry and drop copy) would remain at $550 per port per month. DMMs would continue not to be charged for drop copy ports and for their first 12 order/quote entry ports per month that connect to the Exchange, and then charged $550 per order/quote entry port that connects to the Exchange per month thereafter. The purpose of Transition Period pricing is to cap port fees to allow member organizations additional time to implement technology changes necessary to connect to the Exchange using the Phase II ports without incurring additional Exchange fees. As of September 2020, only 66% of Phase I ports have been cancelled. Based on the Exchange’s experience to date, the Exchange believes that an additional two months will be necessary to provide sufficient time for all member organizations, regardless of size, to be able to complete the necessary changes and transition fully to the Phase II ports. Extension of the Decommission Period Currently, member organizations that have not transitioned to Phase II ports and are still utilizing Phase I ports during the billing months of November 2020 through February 2021 (i.e., the Decommission Period), would, in addition to the current port fees, be charged a Decommission Extension Fee of $1,000 per port per month, increasing by $1,000 per port for each month for any ports that communicate using Pillar phase I protocols. As per the Price List, ports using Pillar phase I protocols would no longer be available beginning March 1, 2021. The Exchange proposes that the Decommission Period would begin in January 2021, after the end of the proposed longer Transition Period, and end four months later. As proposed, the Decommission Period would commence in January 2021 and end in April 2021. As a result, the Price List would also be amended to provide that ports using Pillar phase I protocols would no longer be available beginning May 1, 2021. PO 00000 Frm 00082 Fmt 4703 Sfmt 4703 As noted above, the Exchange believes that extending the Transition Period would provide sufficient time for member organizations to fully transition to Phase II ports and eliminate their use of Phase I ports. To the extent that member organizations do not complete the transition during the Transition Period, the Exchange will offer member organizations the ability to choose to continue using Phase I ports until May 2021. The proposed changes are not otherwise intended to address any other issues, and the Exchange is not aware of any problems that member organizations would have in complying with the proposed change. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,14 in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act,15 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. The Proposed Changes Are Reasonable The Exchange operates in a highly competitive market. The Commission has repeatedly expressed its preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. Specifically, in Regulation NMS, the Commission highlighted the importance of market forces in determining prices and SRO revenues and, also, recognized that current regulation of the market system ‘‘has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.’’ 16 As the Commission itself recognized, the market for trading services in NMS stocks has become ‘‘more fragmented and competitive.’’ 17 Indeed, equity trading is currently dispersed across 15 exchanges,18 31 alternative trading systems,19 and numerous broker-dealer 14 15 U.S.C. 78f(b). U.S.C. 78f(b)(4) & (5). 16 See Regulation NMS, 70 FR at 37499. 17 See Transaction Fee Pilot, 84 FR at 5253. 18 See Cboe Global Markets, U.S. Equities Market Volume, available at https://markets.cboe.com/us/ equities/market_share/. See generally https:// www.sec.gov/fast-answers/ divisionsmarketregmrexchangesshtml.html. 19 See FINRA ATS Transparency Data, available at https://otctransparency.finra.org/ otctransparency/AtsIssueData. A list of alternative trading systems registered with the Commission is 15 15 E:\FR\FM\20OCN1.SGM 20OCN1 Federal Register / Vol. 85, No. 203 / Tuesday, October 20, 2020 / Notices internalizers and wholesalers. Based on publicly-available information, no single exchange has more than 20% of the market share of executed volume of equity trades (whether excluding or including auction volume).20 The Exchange believes that the ever-shifting market share among the exchanges from month to month demonstrates that market participants can shift order flow, or discontinue or reduce use of certain categories of products, including ports, in response to fee changes. Accordingly, the Exchange’s fees, including port fees, are reasonably constrained by competitive alternatives and market participants can readily trade on competing venues if they deem pricing levels at those other venues to be more favorable. If a particular exchange charges excessive fees for connectivity, impacted members and non-members may opt to terminate their connectivity arrangements with that exchange, and adopt a possible range of alternative strategies, including routing to the applicable exchange through another participant or market center or taking that exchange’s data indirectly. Accordingly, if the Exchange charges excessive fees, it would stand to lose not only connectivity revenues but also revenues associated with the execution of orders routed to it, and, to the extent applicable, market data revenues. The Exchange believes that this competitive dynamic imposes powerful restraints on the ability of any exchange to charge unreasonable fees for connectivity. Given this competitive environment, the proposal represents a fair and reasonable attempt to provide member organizations with additional time to make an orderly transition to upgraded technology without increasing their costs. As noted, as of September 2020, 34% of legacy ports have not been cancelled. If a member organization is unable to complete this transition within the additional two months of the extended Transition Period, the pricing is designed so that only those few member organizations that may not transition within that time period would pay for the Exchange to continue to support their Phase I ports. The Proposal Is an Equitable Allocation of Fees The Exchange believes its proposal equitably allocates its fees among its market participants. The Exchange is not proposing to adjust the amount of available at https://www.sec.gov/foia/docs/ atslist.htm. 20 See Cboe Global Markets U.S. Equities Market Volume Summary, available at https:// markets.cboe.com/us/equities/market_share/. VerDate Sep<11>2014 18:08 Oct 19, 2020 Jkt 253001 the port fees or the fees charged fees to offset the Exchange’s continuing costs of supporting legacy ports, which will remain at the current level for all market participants. Rather, the proposal would provide additional time for member organizations to transition from older to newer and more efficient Pillar technology and would charge the same fee for those few member organizations that choose not to transition to Phase II ports during the extended Transition Period. The Exchange believes that the proposal to pro-rate port fees beginning January 1, 2021, is also an equitable allocation of fees since it would apply equally to all member organizations that connect to the Exchange, who would equally receive the benefit of being charged only for the connectivity utilized during any trading month beginning in January 2021. As noted above, to the extent a member organization continues to use ports activated before July 1, 2019 to connect to the Exchange during the new January 1, 2021 date and any subsequent months, the Exchange believes it is fair and equitable to continue to charge flat fees for such ports until such time that connection to the Exchange through the use of Phase I ports is no longer available beginning May 1, 2021. The proposal constitutes an equitable allocation of fees because all similarly situated member organizations and other market participants that choose to connect to the Exchange through the use of Phase I ports during the Decommission Period would continue to be charged the same, unchanged Decommission Extension Fee. Moreover, as noted above, the Exchange proposes a longer transition period which the Exchange expects should be more than sufficient for all member organizations, regardless of size, to transition to Phase II ports before the Decommission Fee goes into effect. 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, and are free to discontinue to connect to the Exchange through its ports. As noted, the Exchange is offering upgraded connections in an effort to keep pace with changes in the industry and evolving customer needs as new technologies emerge and products continue to develop and change. The proposal neither targets nor will it have a disparate impact on any PO 00000 Frm 00083 Fmt 4703 Sfmt 4703 66615 particular category of market participant. The Exchange believes that the proposal does not permit unfair discrimination because the proposal would be applied to all similarly situated member organizations and other market participants would be charged the same rates, which will remain unchanged. The Exchange believes that the proposal does not permit unfair discrimination because the Exchange will be making available both the Phase I and Phase II ports available to all member organizations during the extended Transition Period on an equal basis. Accordingly, no member organization already operating on the Exchange would be disadvantaged by this allocation of fees. For the same reasons, the Exchange believes that the proposal would not permit unfair discrimination between member organizations. Similarly, the Decommission Extension Fee would apply equally to all member organizations that choose to connect to the Exchange through the use of such ports during the proposed Decommission Period. If a member organizations becomes subject to the Decommission Fee, it would only be because such firm chose not to complete its transition to the Phase II ports by the end of the proposed Transition Period. While the Exchange cannot predict with certainty whether any firms would be subject to the Decommission Fee, and if so, which ones, the Exchange anticipates that it would be a limited set of member organizations that would incur such fees. The Exchange believes that the proposal to pro-rate port fees does not permit unfair discrimination because it would apply equally to all member organizations that connect to the Exchange, who would equally receive the benefit of being charged only for the connectivity utilized during any trading month beginning January 1, 2021. As noted, to the extent a member organization continues to use ports activated before July 1, 2019 to connect to the Exchange during January 2021 and any subsequent months, the Exchange believes it is fair, equitable and not unfairly discriminatory to continue to charge flat fees for such ports until such time that connection to the Exchange through the use of old ports is no longer available beginning May 1, 2021. 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. E:\FR\FM\20OCN1.SGM 20OCN1 66616 Federal Register / Vol. 85, No. 203 / Tuesday, October 20, 2020 / Notices 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 provide additional time for member organizations to transition from older to newer and more efficient Pillar technology with no fee increase and offset the Exchange’s continuing costs of supporting the Phase I ports for the few firms that do not transition to the new ports during the longer transition period without any change to the fees currently charged by the Exchange for the use of ports to connect to the Exchange’s trading systems. Intramarket Competition. The Exchange does not believe the proposed rule change would impose any burden on intramarket competition that is not necessary or appropriate because it would apply to all member organizations equally that connect to the Exchange. All member organizations, regardless of size, will be eligible for the transition pricing through the extended Transition Period ending December 2020 and will be eligible to connect via either Phase I or Phase II ports during this period. In addition, all member organizations will be subject to the Decommission Fee on an equal basis if they do complete the transition to Phase II ports by the end of the new December 2020 date. As noted, the Exchange anticipates that a low percentage of member organizations would be subject to the proposed Decommission Fee, and the firms likely to be subject to such fee would be larger firms that could more easily absorb the cost of that fee. The Exchange further believes that by extending the Transition Period, all member organizations have an equal opportunity to timely transition to Phase II ports before the Decommission Fee would take effect. Intermarket Competition. The Exchange does not believe the proposed rule change would impose any burden on intermarket competition that is not necessary or appropriate because 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 21 15 U.S.C. 78f(b)(8). VerDate Sep<11>2014 18:08 Oct 19, 2020 Jkt 253001 at those other venues to be more favorable. The Exchange believes that fees for connectivity are constrained by the robust competition for order flow among exchanges and non-exchange markets. As noted, the no single exchange has more than 20% of the market share of executed volume of equity trades (whether excluding or including auction volume).22 The Exchange believes that the ever-shifting market share among the exchanges from month to month demonstrates that market participants can shift order flow, or discontinue or reduce use of certain categories of products, including ports, in response to fee changes. Accordingly, the Exchange’s fees, including port fees, are reasonably constrained by competitive alternatives and market participants can readily trade on competing venues if they deem pricing levels at those other venues to be more favorable. The Exchange is proposing these changes in the context of a competitive environment in which market participants can and do shift order flow, or discontinue or reduce use of certain categories of products, in response to fee changes. Because ports are used by member organizations to trade electronically on the Exchange, fees associated with ports are subject to these same competitive forces. The Exchange therefore believes that the proposal would not impose an undue burden on intermarket competition because the purpose of this filing is not to change the rates charged for ports or to offset the Exchange’s continuing costs of supporting legacy ports but rather to provide member organizations with more time to effect an orderly transition to upgraded technology without needing to incur any additional costs. 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, 22 See Cboe Global Markets U.S. Equities Market Volume Summary, available at https:// markets.cboe.com/us/equities/market_share/. 23 15 U.S.C. 78s(b)(3)(A). 24 17 CFR 240.19b–4(f)(2). PO 00000 Frm 00084 Fmt 4703 Sfmt 4703 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 • Send an email to rule-comments@ sec.gov. Please include File Number SR– NYSE–2020–82 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–2020–82. 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 25 15 E:\FR\FM\20OCN1.SGM U.S.C. 78s(b)(2)(B). 20OCN1 Federal Register / Vol. 85, No. 203 / Tuesday, October 20, 2020 / Notices 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–2020–82 and should be submitted on or before November 10, 2020. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.26 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2020–23144 Filed 10–19–20; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–90174; File No. SR–CBOE– 2020–092] Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 5.24 October 14, 2020. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on October 1, 2020, Cboe Exchange, Inc. (the ‘‘Exchange’’ or ‘‘Cboe Options’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Exchange filed the proposal as a ‘‘noncontroversial’’ proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 3 and Rule 19b–4(f)(6) thereunder.4 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 Cboe Exchange, Inc. (the ‘‘Exchange’’ or ‘‘Cboe Options’’) proposes to amend Rule 5.24. The text of the proposed rule change is provided below. 26 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(iii). 4 17 CFR 240.19b–4(f)(6). 1 15 VerDate Sep<11>2014 18:08 Oct 19, 2020 (additions are italicized; deletions are [bracketed]) * * * * * Rules of Cboe Exchange, Inc. * * * * * Rule 5.24. Disaster Recovery (a)–(d) No change. (e) Loss of Trading Floor. If the Exchange trading floor becomes inoperable, the Exchange will continue to operate in a screen-based only environment using a floorless configuration of the System that is operational while the trading floor facility is inoperable. The Exchange will operate using this configuration only until the Exchange’s trading floor facility is operational. Open outcry trading will not be available in the event the trading floor becomes inoperable, except in accordance with paragraph (2) below and pursuant to Rule 5.26, as applicable. (1) Applicable Rules. In the event that the trading floor becomes inoperable, trading will be conducted pursuant to all applicable System Rules, except that open outcry Rules will not be in force, including but not limited to the Rules (or applicable portions of the Rules) in Chapter 5, Section G, and as follows (subparagraphs (A) through ([E]D) will be effective until [September 30]December 31, 2020): * * * * * The text of the proposed rule change is also available on the Exchange’s website (https://www.cboe.com/ AboutCBOE/ CBOELegalRegulatoryHome.aspx), at the Exchange’s Office of the Secretary, 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 Exchange 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 these 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 aspects of such statements. 66617 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 Rule 5.24 regarding the Exchange’s business continuity and disaster recovery plans. Rule 5.24 describes which Trading Permit Holders (‘‘TPHs’’) are required to connect to the Exchange’s backup systems as well as certain actions the Exchange may take as part of its business continuity plans so that it may maintain fair and orderly markets if unusual circumstances occurred that could impact the Exchange’s ability to conduct business. This includes what actions the Exchange would take if its trading floor became inoperable. Specifically, Rule 5.24(e) states if the Exchange trading floor becomes inoperable, the Exchange will continue to operate in a screenbased only environment using a floorless configuration of the System that is operational while the trading floor facility is inoperable. The Exchange would operate using that configuration only until the Exchange’s trading floor facility became operational. Open outcry trading would not be available in the event the trading floor becomes inoperable.5 Rule 5.24(e)(1) currently states in the event that the trading floor becomes inoperable, trading will be conducted pursuant to all applicable System Rules, except that open outcry Rules would not be in force, including but not limited to the Rules (or applicable portions) in Chapter 5, Section G,6 and that all nontrading rules of the Exchange would continue to apply. The Exchange recently adopted several rule changes that would apply during a time in which the trading floor in inoperable, which are effective until September 30, 2020.7 The Exchange believes these 5 Pursuant to Rule 5.26, the Exchange may enter into a back-up trading arrangement with another exchange, which could allow the Exchange to use the facilities of a back-up exchange to conduct trading of certain of its products. The Exchange currently has no back-up trading arrangement in place with another exchange. 6 Chapter 5, Section G of the Exchange’s rulebook sets forth the rules and procedures for manual order handling and open outcry trading on the Exchange. 7 See Securities Exchange Act Release Nos. 88386 (March 13, 2020), 85 FR 15823 (March 19, 2020) (SR–CBOE–2020–019); 88447 (March 20, 2020), 85 FR 17129 (March 26, 2020) (SR–CBOE–2020–023); 88490 (March 26, 2020), 85 FR 18318 (April 1, 2020) (SR–CBOE–2020–026); 88530 (March 31, 2020), 85 FR 19182 (April 6, 2020) (SR–CBOE– 2020–031); 88886 (May 15, 2020), 85 FR 31008 (May 21, 2020) (SR–CBOE–2020–047); 89307 (July 14, 2020), 85 FR 43938 (July 20, 2020) (SR–CBOE– 2020–066); and 89789 (September 8, 2020), 85 FR Continued Jkt 253001 PO 00000 Frm 00085 Fmt 4703 Sfmt 4703 E:\FR\FM\20OCN1.SGM 20OCN1

Agencies

[Federal Register Volume 85, Number 203 (Tuesday, October 20, 2020)]
[Notices]
[Pages 66612-66617]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-23144]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90180; File No. SR-NYSE-2020-82]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Its Price List

October 14, 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 September 30, 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) extend the 
Transition Period for member organizations to transition to the 
utilization of ports that connect to the Exchange using Pillar 
technology; (2) extend the Decommission Period that begins once the 
Transition Period ends; and (3) extend the effective date that the 
Exchange would prorate the monthly fee for ports activated on or after 
July 1, 2019. The Exchange proposes to implement these changes to its 
Price List effective October 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,

[[Page 66613]]

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 purpose of this filing is to provide additional time for member 
organizations to transition from older to newer and more efficient 
Pillar technology. The Exchange is not proposing to adjust the amount 
of the port fees or the fees charged to offset the Exchange's 
continuing costs of supporting legacy ports, which will remain at the 
current level for all market participants.
    Effective July 3, 2019, the Exchange introduced transition pricing 
designed to provide member organizations an extended transition period 
to connect to the Exchange using Pillar technology with no fee 
increase. Specifically, the Exchange (1) adopted a cap on monthly fees 
for the use of certain ports connecting to the Exchange for the billing 
months July 2019 through March 2020 (the ``Transition Period''); (2) 
adopted a Decommission Extension Fee applicable for the billing months 
April 2020 through September 2020 (the ``Decommission Period'') for 
legacy port connections; and (3) prorated the monthly fee for certain 
ports activated after July 1, 2019, effective April 1, 2020.\4\
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Release No. 86360 (July 11, 
2019), 84 FR 34210 (July 17, 2019) (SR-NYSE-2019-39).
---------------------------------------------------------------------------

    Effective March 2, 2020, the Exchange (1) extended the end of the 
Transition Period from March 2020 to August 2020 for member 
organizations to transition to the utilization of ports that connect to 
the Exchange using Pillar technology; (2) shortened the Decommission 
Period from six months (April 2020-September 2020) to four months 
(September-December 2020); (3) extended the effective date that the 
Exchange would prorate the monthly fee for certain ports activated on 
or after July 1, 2019 from April 1, 2020 to September 1, 2020; and (4) 
revised the fees charged for legacy port connections during the 
Decommission Period.\5\
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 88373 (March 12, 
2020), 85 FR 15533 (March 18, 2020) (SR-NYSE-2020-14).
---------------------------------------------------------------------------

    Effective August 1, 2020, the Exchange (1) extended the end of the 
Transition Period from August 2020 to October 2020; (2) extended the 
beginning of the Decommission Period from September 2020 to November 
2020 and the end of the Decommission Period from December 2020 to 
February 2021; and (3) extended the effective date that the Exchange 
would prorate the monthly fee for ports activated on or after July 1, 
2019 from September 1, 2020 to November 1, 2020.\6\
---------------------------------------------------------------------------

    \6\ See Securities Exchange Act Release No. 89591 (August 18, 
2020), 85 FR 52159 (August 24, 2020) (SR-NYSE-2020-14) [sic].
---------------------------------------------------------------------------

    The Exchange proposes to:
     Extend the end of the Transition Period from October 2020 
to December 2020;
     extend the beginning of the Decommission Period from 
November 2020 to January 2021 and the end of the Decommission Period 
from February 2021 to April 2021; and
     extend the effective date that the Exchange would prorate 
the monthly fee for ports activated on or after July 1, 2019 from 
November 1, 2020 to January 1, 2021.
    The Exchange would continue to provide a cap on how much member 
organizations would be charged for ports during the proposed extra two 
months of the Transition Period so that they would not incur additional 
charges during the transition to Pillar communication protocols. 
Moreover, the Exchange would retain a four month period during which 
the few firms that do not transition during the proposed longer 
Transition Period would be charged fees to offset the Exchange's 
continuing costs of supporting legacy ports but proposes to extend the 
beginning and end dates for this period.
    The Exchange proposes to implement these changes to its Price List 
effective October 1, 2020.
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.'' \7\
---------------------------------------------------------------------------

    \7\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37495, 37499 (June 29, 2005) (S7-10-04) (Final Rule) 
(``Regulation NMS'').
---------------------------------------------------------------------------

    As the Commission itself recognized, the market for trading 
services in NMS stocks has become ``more fragmented and competitive.'' 
\8\ Indeed, equity trading is currently dispersed across 15 
exchanges,\9\ 31 alternative trading systems,\10\ and numerous broker-
dealer internalizers and wholesalers. Based on publicly-available 
information, no single exchange has more than 20% of the market share 
of executed volume of equity trades (whether excluding or including 
auction volume).\11\ The Exchange believes that the ever-shifting 
market share among the exchanges from month to month demonstrates that 
market participants can shift order flow, or discontinue or reduce use 
of certain categories of products, including ports, in response to fee 
changes. Accordingly, the Exchange's fees, including port fees, are 
reasonably constrained by competitive alternatives and market 
participants can readily trade on competing venues if they deem pricing 
levels at those other venues to be more favorable.
---------------------------------------------------------------------------

    \8\ 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'').
    \9\ 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.
    \10\ 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.
    \11\ See Cboe Global Markets U.S. Equities Market Volume 
Summary, available at https://markets.cboe.com/us/equities/market_share/.
---------------------------------------------------------------------------

    The Exchange is proposing these changes in the context of a 
competitive environment in which market participants can and do shift 
order flow, or discontinue or reduce use of certain categories of 
products, in response to fee changes. Because ports are used by member 
organizations to trade electronically on the Exchange, fees associated 
with ports are subject to these same competitive forces. The Exchange 
believes that the proposal represents a reasonable attempt to provide 
member organizations with additional time to effect an orderly 
transition to upgraded technology without incurring additional costs.
Proposed Rule Change
    Member organizations enter orders and order instructions, and 
receive information from the Exchange, by establishing a connection to 
a gateway that uses communication protocols that map to the order types 
and modifiers described in Exchange rules. These gateway connections, 
also known as logical port connections, are referred to as ``ports'' on 
the Exchange's Price List. Legacy ports connect with the Exchange via a 
Common Customer Gateway (known as ``CCG'') that accesses its

[[Page 66614]]

equity trading systems (``Phase I ports''). Beginning July 1, 2019, the 
Exchange began making available ports using Pillar gateways to its 
member organizations (``Phase II ports'').
Extension of the Date To Prorate Ports
    The Exchange currently makes available ports that provide 
connectivity to the Exchange's trading systems (i.e., ports for entry 
of orders and/or quotes (``order/quote entry ports'')) and charges $550 
per port per month. Designated Market Makers (``DMMs'') are not charged 
for the first 12 ports per month that connect to the Exchange.\12\ The 
Exchange also currently makes ports available for drop copies and 
charges $550 per port per month,\13\ except that DMMs are not charged 
for drop copy ports that connect to the Exchange.
---------------------------------------------------------------------------

    \12\ DMMs completed the transition to Phase II ports last year.
    \13\ Only one fee per drop copy port applies, even if receiving 
drop copies from multiple order/quote entry ports.
---------------------------------------------------------------------------

    During the ongoing first phase of the Exchange's transition 
pricing, the fees charged for both order/quote entry and drop copy 
ports are, with certain exceptions, capped at--and thus not charged for 
more than--the total number of both order/quote entry and drop copy 
ports that the member organization has activated as of its June 2019 
invoice.
    Effective November 1, 2020, the Exchange will prorate fees for 
order/quote entry and drop copy ports activated after July 1, 2019, to 
the number of trading days that a port is eligible for production 
trading with the Exchange, including any scheduled early closing days.
    The Exchange proposes to extend the effective date for the 
prorating of order/quote entry and drop copy ports to January 1, 2021 
to coincide with the end of the proposed extended Transition Period in 
December 2020, discussed below.
Extension of the Transition Period
    Currently, during the billing months of July 2019 through October 
2020 (the ``Transition Period''), the total number of ports charged per 
member organization is capped at the total number of ports that the 
member organization activated as of the June 2019 invoice, which was 
the last full month prior to the introduction of the new gateways (the 
``Transition Cap''). Transition Cap pricing is available until the 
earlier of (1) the end of the Transition Period, i.e., October 2020, or 
(2) the billing month during which a member organization fully 
transitions to using only ports that communicate using Pillar phase II 
protocols. If during the Transition Period, a member organization 
increases the number of Phase I ports above the Transition Cap, those 
ports would be charged at the current rates for order/quote entry ports 
and drop copy ports. Finally, if during the Transition Period a member 
organization has a total number of ports below the Transition Cap, the 
Exchange would charge a member organization for their actual number of 
ports.
    The Exchange proposes to extend the Transition Period by two months 
to December 2020. As proposed, the charge per port (order/quote entry 
and drop copy) would remain at $550 per port per month. DMMs would 
continue not to be charged for drop copy ports and for their first 12 
order/quote entry ports per month that connect to the Exchange, and 
then charged $550 per order/quote entry port that connects to the 
Exchange per month thereafter.
    The purpose of Transition Period pricing is to cap port fees to 
allow member organizations additional time to implement technology 
changes necessary to connect to the Exchange using the Phase II ports 
without incurring additional Exchange fees. As of September 2020, only 
66% of Phase I ports have been cancelled. Based on the Exchange's 
experience to date, the Exchange believes that an additional two months 
will be necessary to provide sufficient time for all member 
organizations, regardless of size, to be able to complete the necessary 
changes and transition fully to the Phase II ports.
Extension of the Decommission Period
    Currently, member organizations that have not transitioned to Phase 
II ports and are still utilizing Phase I ports during the billing 
months of November 2020 through February 2021 (i.e., the Decommission 
Period), would, in addition to the current port fees, be charged a 
Decommission Extension Fee of $1,000 per port per month, increasing by 
$1,000 per port for each month for any ports that communicate using 
Pillar phase I protocols. As per the Price List, ports using Pillar 
phase I protocols would no longer be available beginning March 1, 2021.
    The Exchange proposes that the Decommission Period would begin in 
January 2021, after the end of the proposed longer Transition Period, 
and end four months later. As proposed, the Decommission Period would 
commence in January 2021 and end in April 2021. As a result, the Price 
List would also be amended to provide that ports using Pillar phase I 
protocols would no longer be available beginning May 1, 2021.
    As noted above, the Exchange believes that extending the Transition 
Period would provide sufficient time for member organizations to fully 
transition to Phase II ports and eliminate their use of Phase I ports. 
To the extent that member organizations do not complete the transition 
during the Transition Period, the Exchange will offer member 
organizations the ability to choose to continue using Phase I ports 
until May 2021.
    The proposed changes are not otherwise intended to address any 
other issues, and the Exchange is not aware of any problems that member 
organizations would have in complying with the proposed change.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\14\ in general, and furthers the 
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\15\ 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.
---------------------------------------------------------------------------

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

The Proposed Changes Are Reasonable
    The Exchange operates in a highly competitive market. The 
Commission has repeatedly expressed its preference for competition over 
regulatory intervention in determining prices, products, and services 
in the securities markets. Specifically, in Regulation NMS, the 
Commission highlighted the importance of market forces in determining 
prices and SRO revenues and, also, recognized that current regulation 
of the market system ``has been remarkably successful in promoting 
market competition in its broader forms that are most important to 
investors and listed companies.'' \16\
---------------------------------------------------------------------------

    \16\ See Regulation NMS, 70 FR at 37499.
---------------------------------------------------------------------------

    As the Commission itself recognized, the market for trading 
services in NMS stocks has become ``more fragmented and competitive.'' 
\17\ Indeed, equity trading is currently dispersed across 15 
exchanges,\18\ 31 alternative trading systems,\19\ and numerous broker-
dealer

[[Page 66615]]

internalizers and wholesalers. Based on publicly-available information, 
no single exchange has more than 20% of the market share of executed 
volume of equity trades (whether excluding or including auction 
volume).\20\ The Exchange believes that the ever-shifting market share 
among the exchanges from month to month demonstrates that market 
participants can shift order flow, or discontinue or reduce use of 
certain categories of products, including ports, in response to fee 
changes. Accordingly, the Exchange's fees, including port fees, are 
reasonably constrained by competitive alternatives and market 
participants can readily trade on competing venues if they deem pricing 
levels at those other venues to be more favorable.
---------------------------------------------------------------------------

    \17\ See Transaction Fee Pilot, 84 FR at 5253.
    \18\ See Cboe Global Markets, U.S. Equities Market Volume, 
available at https://markets.cboe.com/us/equities/market_share/. See 
generally https://www.sec.gov/fast-answers/divisionsmarketregmrexchangesshtml.html.
    \19\ 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.
    \20\ See Cboe Global Markets U.S. Equities Market Volume 
Summary, available at https://markets.cboe.com/us/equities/market_share/.
---------------------------------------------------------------------------

    If a particular exchange charges excessive fees for connectivity, 
impacted members and non-members may opt to terminate their 
connectivity arrangements with that exchange, and adopt a possible 
range of alternative strategies, including routing to the applicable 
exchange through another participant or market center or taking that 
exchange's data indirectly. Accordingly, if the Exchange charges 
excessive fees, it would stand to lose not only connectivity revenues 
but also revenues associated with the execution of orders routed to it, 
and, to the extent applicable, market data revenues. The Exchange 
believes that this competitive dynamic imposes powerful restraints on 
the ability of any exchange to charge unreasonable fees for 
connectivity.
    Given this competitive environment, the proposal represents a fair 
and reasonable attempt to provide member organizations with additional 
time to make an orderly transition to upgraded technology without 
increasing their costs. As noted, as of September 2020, 34% of legacy 
ports have not been cancelled. If a member organization is unable to 
complete this transition within the additional two months of the 
extended Transition Period, the pricing is designed so that only those 
few member organizations that may not transition within that time 
period would pay for the Exchange to continue to support their Phase I 
ports.
The Proposal Is an Equitable Allocation of Fees
    The Exchange believes its proposal equitably allocates its fees 
among its market participants. The Exchange is not proposing to adjust 
the amount of the port fees or the fees charged fees to offset the 
Exchange's continuing costs of supporting legacy ports, which will 
remain at the current level for all market participants. Rather, the 
proposal would provide additional time for member organizations to 
transition from older to newer and more efficient Pillar technology and 
would charge the same fee for those few member organizations that 
choose not to transition to Phase II ports during the extended 
Transition Period.
    The Exchange believes that the proposal to pro-rate port fees 
beginning January 1, 2021, is also an equitable allocation of fees 
since it would apply equally to all member organizations that connect 
to the Exchange, who would equally receive the benefit of being charged 
only for the connectivity utilized during any trading month beginning 
in January 2021. As noted above, to the extent a member organization 
continues to use ports activated before July 1, 2019 to connect to the 
Exchange during the new January 1, 2021 date and any subsequent months, 
the Exchange believes it is fair and equitable to continue to charge 
flat fees for such ports until such time that connection to the 
Exchange through the use of Phase I ports is no longer available 
beginning May 1, 2021.
    The proposal constitutes an equitable allocation of fees because 
all similarly situated member organizations and other market 
participants that choose to connect to the Exchange through the use of 
Phase I ports during the Decommission Period would continue to be 
charged the same, unchanged Decommission Extension Fee. Moreover, as 
noted above, the Exchange proposes a longer transition period which the 
Exchange expects should be more than sufficient for all member 
organizations, regardless of size, to transition to Phase II ports 
before the Decommission Fee goes into effect.
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, and are free to 
discontinue to connect to the Exchange through its ports. As noted, the 
Exchange is offering upgraded connections in an effort to keep pace 
with changes in the industry and evolving customer needs as new 
technologies emerge and products continue to develop and change.
    The proposal neither targets nor will it have a disparate impact on 
any particular category of market participant. The Exchange believes 
that the proposal does not permit unfair discrimination because the 
proposal would be applied to all similarly situated member 
organizations and other market participants would be charged the same 
rates, which will remain unchanged.
    The Exchange believes that the proposal does not permit unfair 
discrimination because the Exchange will be making available both the 
Phase I and Phase II ports available to all member organizations during 
the extended Transition Period on an equal basis. Accordingly, no 
member organization already operating on the Exchange would be 
disadvantaged by this allocation of fees. For the same reasons, the 
Exchange believes that the proposal would not permit unfair 
discrimination between member organizations.
    Similarly, the Decommission Extension Fee would apply equally to 
all member organizations that choose to connect to the Exchange through 
the use of such ports during the proposed Decommission Period. If a 
member organizations becomes subject to the Decommission Fee, it would 
only be because such firm chose not to complete its transition to the 
Phase II ports by the end of the proposed Transition Period. While the 
Exchange cannot predict with certainty whether any firms would be 
subject to the Decommission Fee, and if so, which ones, the Exchange 
anticipates that it would be a limited set of member organizations that 
would incur such fees.
    The Exchange believes that the proposal to pro-rate port fees does 
not permit unfair discrimination because it would apply equally to all 
member organizations that connect to the Exchange, who would equally 
receive the benefit of being charged only for the connectivity utilized 
during any trading month beginning January 1, 2021. As noted, to the 
extent a member organization continues to use ports activated before 
July 1, 2019 to connect to the Exchange during January 2021 and any 
subsequent months, the Exchange believes it is fair, equitable and not 
unfairly discriminatory to continue to charge flat fees for such ports 
until such time that connection to the Exchange through the use of old 
ports is no longer available beginning May 1, 2021.
    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.

[[Page 66616]]

    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 provide additional time for member 
organizations to transition from older to newer and more efficient 
Pillar technology with no fee increase and offset the Exchange's 
continuing costs of supporting the Phase I ports for the few firms that 
do not transition to the new ports during the longer transition period 
without any change to the fees currently charged by the Exchange for 
the use of ports to connect to the Exchange's trading systems.
---------------------------------------------------------------------------

    \21\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    Intramarket Competition. The Exchange does not believe the proposed 
rule change would impose any burden on intramarket competition that is 
not necessary or appropriate because it would apply to all member 
organizations equally that connect to the Exchange. All member 
organizations, regardless of size, will be eligible for the transition 
pricing through the extended Transition Period ending December 2020 and 
will be eligible to connect via either Phase I or Phase II ports during 
this period. In addition, all member organizations will be subject to 
the Decommission Fee on an equal basis if they do complete the 
transition to Phase II ports by the end of the new December 2020 date. 
As noted, the Exchange anticipates that a low percentage of member 
organizations would be subject to the proposed Decommission Fee, and 
the firms likely to be subject to such fee would be larger firms that 
could more easily absorb the cost of that fee. The Exchange further 
believes that by extending the Transition Period, all member 
organizations have an equal opportunity to timely transition to Phase 
II ports before the Decommission Fee would take effect.
    Intermarket Competition. The Exchange does not believe the proposed 
rule change would impose any burden on intermarket competition that is 
not necessary or appropriate because the Exchange operates in a highly 
competitive market in which market participants can readily choose to 
send their orders to other exchange and off-exchange venues if they 
deem fee levels at those other venues to be more favorable. The 
Exchange believes that fees for connectivity are constrained by the 
robust competition for order flow among exchanges and non-exchange 
markets.
    As noted, the no single exchange has more than 20% of the market 
share of executed volume of equity trades (whether excluding or 
including auction volume).\22\ The Exchange believes that the ever-
shifting market share among the exchanges from month to month 
demonstrates that market participants can shift order flow, or 
discontinue or reduce use of certain categories of products, including 
ports, in response to fee changes. Accordingly, the Exchange's fees, 
including port fees, are reasonably constrained by competitive 
alternatives and market participants can readily trade on competing 
venues if they deem pricing levels at those other venues to be more 
favorable.
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    \22\ 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 is proposing these changes in the context of a 
competitive environment in which market participants can and do shift 
order flow, or discontinue or reduce use of certain categories of 
products, in response to fee changes. Because ports are used by member 
organizations to trade electronically on the Exchange, fees associated 
with ports are subject to these same competitive forces. The Exchange 
therefore believes that the proposal would not impose an undue burden 
on intermarket competition because the purpose of this filing is not to 
change the rates charged for ports or to offset the Exchange's 
continuing costs of supporting legacy ports but rather to provide 
member organizations with more time to effect an orderly transition to 
upgraded technology without needing to incur any additional costs.

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
     Send an email to [email protected]. Please include 
File Number SR-NYSE-2020-82 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-2020-82. 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

[[Page 66617]]

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-2020-82 and should be submitted on or before November 10, 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. 2020-23144 Filed 10-19-20; 8:45 am]
BILLING CODE 8011-01-P
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