Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Its Price List, 82532-82536 [2020-27842]

Download as PDF 82532 Federal Register / Vol. 85, No. 244 / Friday, December 18, 2020 / Notices (Authority: 39 CFR 211.2) 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. Joshua J. Hofer, Attorney, Federal Compliance. [FR Doc. 2020–27886 Filed 12–17–20; 8:45 am] BILLING CODE 7710–12–P SECURITIES AND EXCHANGE COMMISSION (Release No. 34–90661; File No. SR–NYSE– 2020–99) Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Its Price List December 14, 2020. Pursuant to the provisions of Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on December 1, 2020, New York Stock Exchange LLC (‘‘NYSE’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) a proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 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 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. khammond on DSKJM1Z7X2PROD with NOTICES 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 1 15 2 17 U.S.C. 78s(b)(1). CFR 240.19b–4. VerDate Sep<11>2014 22:22 Dec 17, 2020 Jkt 253001 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, 2020.3 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.4 Effective August 1, 2020, the Exchange (1) extended the end of the Transition Period from August 2020 to 3 See Securities Exchange Act Release No. 86360 (July 11, 2019), 84 FR 34210 (July 17, 2019) (SR– NYSE–2019–39). 4 See Securities Exchange Act Release No. 88373 (March 12, 2020), 85 FR 15533 (March 18, 2020) (SR–NYSE–2020–14). PO 00000 Frm 00107 Fmt 4703 Sfmt 4703 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, 2020.5 Effective October 1, 2020, the Exchange (1) extended the end of the Transition Period from October 2020 to December 2020; (2) extended 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 (3) extended 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, 2021.6 The Exchange proposes to: • Extend the end of the Transition Period from December 2020 to February 2021; • extend the beginning of the Decommission Period from January 2021 to March 2021 and the end of the Decommission Period from April 2021 to June 2021; and • extend the effective date that the Exchange would prorate the monthly fee for ports activated on or after July 1, 2019 from January 1, 2021 to March 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 December 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, 5 See Securities Exchange Act Release No. 89591 (August 18, 2020), 85 FR 52159 (August 24, 2020) (SR–NYSE–2020–14). 6 See Securities Exchange Act Release No. 90180 (October 14, 2020), 85 FR 66612 (October 20, 2020) (SR–NYSE–2020–82). E:\FR\FM\18DEN1.SGM 18DEN1 Federal Register / Vol. 85, No. 244 / Friday, December 18, 2020 / Notices khammond on DSKJM1Z7X2PROD with NOTICES 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 While Regulation NMS has enhanced competition, it has also fostered a ‘‘fragmented’’ market structure where trading in a single stock can occur across multiple trading centers. When multiple trading centers compete for order flow in the same stock, the Commission has recognized that ‘‘such competition can lead to the fragmentation of order flow in that stock.’’ 8 Indeed, equity trading is currently dispersed across 16 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 16% 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 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. 61358, 75 FR 3594, 3597 (January 21, 2010) (File No. S7– 02–10) (Concept Release on Equity Market Structure). 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/. VerDate Sep<11>2014 22:22 Dec 17, 2020 Jkt 253001 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 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 January 1, 2021, 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 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. PO 00000 Frm 00108 Fmt 4703 Sfmt 4703 82533 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 March 1, 2021 to coincide with the end of the proposed extended Transition Period in February 2021, discussed below. Extension of the Transition Period Currently, during the billing months of July 2019 through December 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., December 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 February 2020 [sic]. 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 November 2020, only 67% of Phase I ports have been cancelled, a 1% increase over the 66% that had transitioned as of September 2020. 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. E:\FR\FM\18DEN1.SGM 18DEN1 82534 Federal Register / Vol. 85, No. 244 / Friday, December 18, 2020 / Notices 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 January 2021 through April 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 May 1, 2021. The Exchange proposes that the Decommission Period would begin in March 2021, after the end of the proposed longer Transition Period, and end four months later. As proposed, the Decommission Period would commence in March 2021 and end in June 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 July 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 July 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. khammond on DSKJM1Z7X2PROD with NOTICES 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, 14 15 15 15 U.S.C. 78f(b). U.S.C. 78f(b)(4) & (5). VerDate Sep<11>2014 22:22 Dec 17, 2020 Jkt 253001 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 While Regulation NMS has enhanced competition, it has also fostered a ‘‘fragmented’’ market structure where trading in a single stock can occur across multiple trading centers. When multiple trading centers compete for order flow in the same stock, the Commission has recognized that ‘‘such competition can lead to the fragmentation of order flow in that stock.’’ 17 Indeed, equity trading is currently dispersed across 16 exchanges,18 31 alternative trading systems,19 and numerous broker-dealer internalizers and wholesalers. Based on publicly-available information, no single exchange has more than 16% 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 16 See Regulation NMS, 70 FR at 37499. Securities Exchange Act Release No. 61358, 75 FR 3594, 3597 (January 21, 2010) (File No. S7– 02–10) (Concept Release on Equity Market Structure). 18 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. 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/. 17 See PO 00000 Frm 00109 Fmt 4703 Sfmt 4703 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 November 2020, 33% of legacy ports have not been cancelled. If a member organization is unable to complete this transition within the additional time 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 March 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 March 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 March 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 E:\FR\FM\18DEN1.SGM 18DEN1 Federal Register / Vol. 85, No. 244 / Friday, December 18, 2020 / Notices khammond on DSKJM1Z7X2PROD with NOTICES use of Phase I ports is no longer available beginning July 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 VerDate Sep<11>2014 22:22 Dec 17, 2020 Jkt 253001 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 February 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 March 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 July 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. 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 21 15 PO 00000 U.S.C. 78f(b)(8). Frm 00110 Fmt 4703 Sfmt 4703 82535 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 February 2021 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 February 2021 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 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 16% 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 22 See Cboe Global Markets U.S. Equities Market Volume Summary, available at https:// markets.cboe.com/us/equities/market_share/. E:\FR\FM\18DEN1.SGM 18DEN1 82536 Federal Register / Vol. 85, No. 244 / Friday, December 18, 2020 / Notices 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. 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. khammond on DSKJM1Z7X2PROD with NOTICES IV. Solicitation of Comments • Send an email to rule-comments@ sec.gov. Please include File Number SR– NYSE–2020–99 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–2020–99. 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–2020–99, and should be submitted on or before January 8, 2021. Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.26 J. Matthew DeLesDernier, Assistant Secretary. Electronic Comments BILLING CODE 8011–01–P [FR Doc. 2020–27842 Filed 12–17–20; 8:45 am] • 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 VerDate Sep<11>2014 22:22 Dec 17, 2020 26 17 Jkt 253001 PO 00000 CFR 200.30–3(a)(12). Frm 00111 Fmt 4703 Sfmt 4703 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–90659; File No. SRCboeBZX–2020–070] Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Order Instituting Proceedings to Determine Whether to Approve or Disapprove a Proposed Rule Change to List and Trade Shares of the –1x Short VIX Futures ETF, a Series of VS Trust, Under Rule 14.11(f)(4) (‘‘Trust Issued Receipts’’) December 14, 2020. I. Introduction On September 4, 2020, Cboe BZX Exchange, Inc. (‘‘Exchange’’ or ‘‘BZX’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to list and trade shares (‘‘Shares’’) of the –1x Short VIX Futures ETF (‘‘Fund’’), a series of VS Trust (‘‘Trust’’), under BZX Rule 14.11(f)(4) (Trust Issued Receipts). The proposed rule change was published for comment in the Federal Register on September 23, 2020.3 On October 30, 2020, pursuant to Section 19(b)(2) of the Act,4 the Commission designated a longer period within which to approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether to disapprove the proposed rule change.5 The Commission has received no comments on the proposed rule change. The Commission is publishing this order to solicit comments on the proposed rule change from interested persons and to institute proceedings pursuant to Section 19(b)(2)(B) of the Act 6 to determine whether to approve or disapprove the proposed rule change. II. Description of the Proposed Rule Change The Exchange proposes to list and trade Shares of the Fund 7 under BZX 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Securities Exchange Act Release No. 89901 (Sept. 17, 2020), 85 FR 59836 (‘‘Notice’’). 4 15 U.S.C. 78s(b)(2). 5 See Securities Exchange Act Release No. 90292, 85 FR 70678 (Nov. 5, 2020). The Commission designated December 22, 2020, as the date by which the Commission shall approve or disapprove, or institute proceedings to determine whether to disapprove, the proposed rule change. 6 15 U.S.C. 78s(b)(2)(B). 7 The Trust has filed a registration statement on Form S–1 under the Securities Act of 1933, dated August 26, 2020 (File No.333–248430) (‘‘Registration Statement’’). The Fund will not trade on the Exchange until the Registration Statement is effective. 2 17 E:\FR\FM\18DEN1.SGM 18DEN1

Agencies

[Federal Register Volume 85, Number 244 (Friday, December 18, 2020)]
[Notices]
[Pages 82532-82536]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-27842]


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SECURITIES AND EXCHANGE COMMISSION

(Release No. 34-90661; File No. SR-NYSE-2020-99)


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

December 14, 2020.
    Pursuant to the provisions of Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on December 1, 2020, New York Stock Exchange LLC 
(``NYSE'' or the ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission'') a proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by the 
Exchange. The Commission is publishing this notice to solicit comments 
on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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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) 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 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 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.\3\
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    \3\ See Securities Exchange Act Release No. 86360 (July 11, 
2019), 84 FR 34210 (July 17, 2019) (SR-NYSE-2019-39).
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    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.\4\
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    \4\ See Securities Exchange Act Release No. 88373 (March 12, 
2020), 85 FR 15533 (March 18, 2020) (SR-NYSE-2020-14).
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    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.\5\
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    \5\ See Securities Exchange Act Release No. 89591 (August 18, 
2020), 85 FR 52159 (August 24, 2020) (SR-NYSE-2020-14).
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    Effective October 1, 2020, the Exchange (1) extended the end of the 
Transition Period from October 2020 to December 2020; (2) extended 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 (3) extended 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.\6\
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    \6\ See Securities Exchange Act Release No. 90180 (October 14, 
2020), 85 FR 66612 (October 20, 2020) (SR-NYSE-2020-82).
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    The Exchange proposes to:
     Extend the end of the Transition Period from December 2020 
to February 2021;
     extend the beginning of the Decommission Period from 
January 2021 to March 2021 and the end of the Decommission Period from 
April 2021 to June 2021; and
     extend the effective date that the Exchange would prorate 
the monthly fee for ports activated on or after July 1, 2019 from 
January 1, 2021 to March 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 December 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,

[[Page 82533]]

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\
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    \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'').
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    While Regulation NMS has enhanced competition, it has also fostered 
a ``fragmented'' market structure where trading in a single stock can 
occur across multiple trading centers. When multiple trading centers 
compete for order flow in the same stock, the Commission has recognized 
that ``such competition can lead to the fragmentation of order flow in 
that stock.'' \8\ Indeed, equity trading is currently dispersed across 
16 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 16% 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.
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    \8\ See Securities Exchange Act Release No. 61358, 75 FR 3594, 
3597 (January 21, 2010) (File No. S7-02-10) (Concept Release on 
Equity Market Structure).
    \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/.
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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 
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 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.
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    \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.
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    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 January 1, 2021, 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 March 1, 2021 to 
coincide with the end of the proposed extended Transition Period in 
February 2021, discussed below.
Extension of the Transition Period
    Currently, during the billing months of July 2019 through December 
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., December 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 February 2020 [sic]. 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 November 2020, only 
67% of Phase I ports have been cancelled, a 1% increase over the 66% 
that had transitioned as of September 2020. 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.

[[Page 82534]]

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 January 2021 through April 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 May 1, 2021.
    The Exchange proposes that the Decommission Period would begin in 
March 2021, after the end of the proposed longer Transition Period, and 
end four months later. As proposed, the Decommission Period would 
commence in March 2021 and end in June 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 July 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 July 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.
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    \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.
---------------------------------------------------------------------------

    While Regulation NMS has enhanced competition, it has also fostered 
a ``fragmented'' market structure where trading in a single stock can 
occur across multiple trading centers. When multiple trading centers 
compete for order flow in the same stock, the Commission has recognized 
that ``such competition can lead to the fragmentation of order flow in 
that stock.'' \17\ Indeed, equity trading is currently dispersed across 
16 exchanges,\18\ 31 alternative trading systems,\19\ and numerous 
broker-dealer internalizers and wholesalers. Based on publicly-
available information, no single exchange has more than 16% 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 Securities Exchange Act Release No. 61358, 75 FR 3594, 
3597 (January 21, 2010) (File No. S7-02-10) (Concept Release on 
Equity Market Structure).
    \18\ 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.
    \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 November 2020, 33% of legacy 
ports have not been cancelled. If a member organization is unable to 
complete this transition within the additional time 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 March 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 
March 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 March 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

[[Page 82535]]

use of Phase I ports is no longer available beginning July 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 February 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 March 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 July 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.
    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.
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    \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 February 2021 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 February 2021 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 16% 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.
---------------------------------------------------------------------------

    \22\ 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

[[Page 82536]]

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).
---------------------------------------------------------------------------

    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).
---------------------------------------------------------------------------

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-2020-99 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-2020-99. 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-2020-99, and should be submitted on 
or before January 8, 2021.

    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. 2020-27842 Filed 12-17-20; 8:45 am]
BILLING CODE 8011-01-P
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