Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Its Price List, 28399-28405 [2021-11082]
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Federal Register / Vol. 86, No. 100 / Wednesday, May 26, 2021 / Notices
United States Postal Service
Office of the Board of Governors
Certification of Governors’ Vote on
Governors’ Decision No. 21–4
Consistent with 39 U.S.C. 3632(a), I
hereby certify that, on May 6, 2021, the
Governors voted on adopting Governors’
Decision No. 21–4, and that a majority
of the Governors then holding office
voted in favor of that Decision.
effective May 17, 2021.4 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
Date: May 6, 2021
self-regulatory organization included
statements concerning the purpose of,
/s/
and basis for, the proposed rule change
lllllllllllllllllllll
and discussed any comments it received
Michael J. Elston,
on the proposed rule change. The text
Secretary of the Board of Governors.
of those statements may be examined at
[FR Doc. 2021–11104 Filed 5–25–21; 8:45 am]
the places specified in Item IV below.
BILLING CODE 7710–12–P
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
SECURITIES AND EXCHANGE
statements.
COMMISSION
A. Self-Regulatory Organization’s
[Release No. 34–91948; File No. SR–NYSE–
Statement of the Purpose of, and the
2021–33]
Statutory Basis for, the Proposed Rule
Change
Self-Regulatory Organizations; New
1. Purpose
York Stock Exchange LLC; Notice of
Filing and Immediate Effectiveness of
The Exchange proposes to amend its
Proposed Rule Change Amending Its
Price List to (1) introduce a new fee for
Price List
orders designated with a Retail Modifier
at the open and the close; (2) revise
May 20, 2021.
certain requirements for executions at
1
Pursuant to Section 19(b)(1) of the
the open and the close; (3) introduce an
Securities Exchange Act of 1934
additional credit under the Step Up Tier
2
3
(‘‘Act’’) and Rule 19b–4 thereunder,
2 Adding Credit; and (4) revise certain
notice is hereby given that, on May 17,
requirements for RPI orders in the Retail
2021, New York Stock Exchange LLC
Liquidity Program.
(‘‘NYSE’’ or ‘‘Exchange’’) filed with the
The proposed changes respond to the
Securities and Exchange Commission
current competitive environment where
(‘‘Commission’’) the proposed rule
order flow providers have a choice of
change as described in Items I, II, and
where to direct liquidity-providing
III below, which Items have been
orders by offering further incentives for
prepared by the self-regulatory
member organizations to send
organization. The Commission is
additional liquidity to the Exchange,
publishing this notice to solicit
including retail order flow.
comments on the proposed rule change
The Exchange proposes to implement
from interested persons.
the fee changes effective May 17, 2021.
I. Self-Regulatory Organization’s
Background
Statement of the Terms of Substance of
Current Market and Competitive
the Proposed Rule Change
Environment
The Exchange proposes to amend its
The Exchange operates in a highly
Price List to (1) introduce a new fee for
competitive market. The Commission
orders designated with a Retail Modifier
has repeatedly expressed its preference
at the open and the close; (2) revise
for competition over regulatory
certain requirements for executions at
intervention in determining prices,
the open and the close; (3) introduce an
products, and services in the securities
additional credit under the Step Up Tier
markets. In Regulation NMS, the
2 Adding Credit; and (4) revise certain
Commission highlighted the importance
requirements for Retail Price
of market forces in determining prices
Improvement (‘‘RPI’’) orders in the
and SRO revenues and, also, recognized
Retail Liquidity Program. The Exchange
that current regulation of the market
proposes to implement the fee changes
4 The Exchange originally filed to amend the
Price List on May 3, 2021 (SR–NYSE–2021–30). SR–
NYSE–2021–30 was subsequently withdrawn and
replaced by this filing.
1 15
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
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28399
system ‘‘has been remarkably successful
in promoting market competition in its
broader forms that are most important to
investors and listed companies.’’ 5
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.’’ 6 Indeed, equity trading is
currently dispersed across 16
exchanges,7 31 alternative trading
systems,8 and numerous broker-dealer
internalizers and wholesalers, all
competing for order flow. Based on
publicly available information, no single
exchange has more than 20% market
share.9 Therefore, no exchange
possesses significant pricing power in
the execution of equity order flow. More
specifically, the Exchange’s market
share of trading in Tape A, B and C
securities combined is less than 12%.
The Exchange believes that the evershifting market share among the
exchanges from month to month
demonstrates that market participants
can move order flow, or discontinue or
reduce use of certain categories of
products, in response to fee changes.
With respect to non-marketable order
flow that would provide displayed
liquidity on an Exchange, member
organizations can choose from any one
of the numerous currently operating
registered exchanges to route such order
flow. Accordingly, competitive forces
constrain exchange transaction fees that
relate to orders that would provide
liquidity on an exchange.
In response to this competitive
environment, the Exchange has
established incentives for its member
organizations who submit orders that
provide liquidity on the Exchange. The
proposed fee change is designed to
5 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37495, 37499 (June 29, 2005)
(S7–10–04) (Final Rule) (‘‘Regulation NMS’’).
6 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).
7 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.
8 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.
9 See Cboe Global Markets U.S. Equities Market
Volume Summary, available at https://
markets.cboe.com/us/equities/market_share/.
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Executions at the Close
attract additional order flow to the
Exchange by incentivizing member
organizations to submit additional
displayed liquidity to the Exchange,
including retail order flow.
Proposed Rule Change
Executions at the Open
For securities priced $1.00 or more,
the Exchange currently charges a fee of
$0.0010 per share for executions at the
open and a fee of $0.0003 per share for
executions at the open by Floor brokers,
subject to a monthly fee cap of $30,000
per member organization provided the
member organization executes an
average daily volume (‘‘ADV’’) that adds
liquidity to the Exchange during the
billing month (‘‘Adding ADV’’),10
excluding liquidity added by a
Designated Market Maker (‘‘DMM’’), of
at least five million shares.
The Exchange proposes to introduce a
fee of $0.0005 for executions at the open
designated with a Retail Modifier as
defined in Rule 13.11 In addition, the
Exchange proposes to increase the per
member organization monthly fee cap
for all member organization executions
at the open to $35,000. As proposed, the
fee for executions at the open with a
Retail Modifier as well as the current
fees for executions at the open would be
subject to a $35,000 per member
organization monthly fee cap.12 DMMs
currently are not charged for executions
at the opening and would continue to
not be charged.
The Exchange believes that the
proposed fee for executions at the open
designated with a Retail Modifier would
encourage additional retail liquidity on
the Exchange’s opening auction by
reducing the fee to execute at the open
for those orders. The Exchange also
believes a higher cap will encourage
member organizations to increase their
activity in order to qualify for the
existing fees and the proposed fee for
executions at the open.
10 The
terms ‘‘ADV’’ and ‘‘CADV’’ are defined in
footnote * of the Price List.
11 The Exchange proposes the non-substantive,
conforming change of replacing ‘‘designated with a
Retail Modifier as defined in Rule 13’’ and
‘‘designated as ‘retail’ (i.e., orders that satisfy the
Retail Modifier requirements of Rule 13’’ with the
defined term ‘‘Retail Modifier’’ where the phrases
appear in the Price List. In one place, ‘‘are not
designated with a Retail Modifier as defined in Rule
13’’ would be replaced with ‘‘no Retail Modifier.’’
As Rule 13 makes clear, orders with a ‘‘retail’’
modifier are separate and distinct from a ‘‘Retail
Order’’ under Rule 107C (now Rule 7.44, see note
17, infra).
12 The Exchange has not previously amended the
$30,000 cap. In 2020, the Exchange eliminated an
alternative cap and corresponding requirements.
See Securities Exchange Act Release Nos. 87957
(January 14, 2020), 85 FR 3440 (January 21, 2020)
(SR–NYSE–2020–02).
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Currently, for all market at-the-close
(‘‘MOC’’) and limit at-the-close (‘‘LOC’’)
orders from any member organization in
the prior three billing months that do
not meet the MOC/LOC Tier 1, Tier 2,
or Tier 3 requirements, the Exchange
currently charges member organizations
$0.0010 per share for MOC orders,
$0.0005 for MOC orders executed by a
Floor broker unless a lower tiered fee
applies, and $0.0011 for LOC Orders.
The Exchange proposes to charge
$0.0008 per share for MOC and LOC
Orders with a Retail Modifier, unless a
lower tiered fee applies.
Similarly, the Exchange does not
currently charge member organizations
for the first 750,000 ADV of the
aggregate of executions at the close for
D Orders,13 Floor broker executions
swept into the close, excluding verbal
interest, and executions at the close,
excluding market at-the-close (‘‘MOC’’)
Orders, limit at-the-close (‘‘LOC’’)
Orders and Closing Offset (‘‘CO’’)
Orders. After the first 750,000 ADV of
the aggregate of executions at the close
by a member organization, D Orders are
charged fees differentiated by time of
entry (or last modification). With
respect to D Orders last modified in the
last 3 minutes before the scheduled
close of trading, the Exchange charges
member organizations in MOC/LOC
Tiers 1 and 2 a fee of $0.0008 per share.
The Exchange proposes to charge this
fee to member organizations in MOC/
LOC Tiers 1 and 2, both with an Adding
ADV of at least 0.50% of Tape A CADV.
The purpose of this change is to
encourage additional adding liquidity
on the Exchange by providing an
incentive for member organizations to
submit greater adding liquidity to
achieve a lower fee for D Orders at the
close.
Step Up Tier 2 Adding Credit
Under the current Step Up Tier 2
Adding Credit, a member organization
that sends orders, except Mid-Point
Liquidity Orders (‘‘MPL’’) and NonDisplayed Limit Orders, that add
liquidity in Tape A securities receives
the credit specified below if:
• The member organization quotes at
least 15% of the National Best Bid or
Offer (‘‘NBBO’’) 14 in 300 or more Tape
A securities on a monthly basis, and
13 ‘‘d-Quotes’’ are now called ‘‘D Orders.’’ See
Rule 7.31(Orders and Modifiers). The Exchange
proposes the non-substantive change of replacing
references to ‘‘d-Quote’’ and ‘‘d-Quotes’’ with ‘‘D
Order’’ and ‘‘D Orders,’’ respectively, in the Price
List.
14 See Rule 1.1(q) (defining ‘‘NBBO’’ to mean the
national best bid or offer).
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• The member organization’s Adding
ADV in Tapes A, B and C securities as
a percentage of Tapes A, B and C CADV,
excluding any orders by a DMM, that
Æ is at least two times more than the
Member Organization’s Adding ADV in
Tapes A, B and C securities in July 2019
as a percentage of Tapes A, B and C
CADV, and
Æ adds liquidity as an Supplemental
Liquidity Provider (‘‘SLP’’) in Tape A
securities of at least 0.10% of NYSE
CADV, and
Æ exceeds the Member Organization’s
Adding ADV, excluding any liquidity
added by a DMM, in Tapes A, B and C
securities in July 2019 as a percentage
of Tapes A, B and C CADV by at least
0.20% of Tapes A, B and C CADV.
Currently, member organizations
whose Adding ADV as a percentage of
US CADV represents an increase of at
least 0.20% and less than 0.35% over
their July 2019 Adding ADV as a
percentage of US CADV receive a
$0.0029 credit. Member organizations
whose Adding ADV as a percentage of
US CADV represents an increase of at
least 0.35% and less than 0.45% over
their July 2019 Adding ADV as a
percentage of US CADV receive a
$0.0030 credit. Finally, member
organizations whose Adding ADV as a
percentage of US CADV represents an
increase of at least 0.45% or more over
their July 2019 Adding ADV as a
percentage of US CADV receive a
$0.0031 credit.
In addition, a member organization
that meets these requirements and adds
liquidity, excluding liquidity added as a
SLP, in Tapes B and C Securities of at
least 0.20% of Tape B and Tape C CADV
combined receives an additional
$0.00005 per share for adding liquidity
in Tape A securities.
The Exchange proposes to modify the
current requirements to qualify for the
Step Up Tier 2 Adding Credit, as
follows.
First, a member organization’s Adding
ADV in Tapes A, B and C securities as
a percentage of Tapes A, B and C CADV,
excluding any orders by a DMM, would
need to be at least 1.75 times more than
the Member Organization’s Adding ADV
in Tapes A, B and C securities in July
2019 as a percentage of Tapes A, B and
C CADV.
Second, a member organization would
need to add liquidity as an SLP in Tape
A securities of at least 0.05% of NYSE
CADV.
Third, a member organization’s
Adding ADV in Tapes A, B and C
securities as a percentage of Tapes A, B
and C CADV, excluding any orders by
a DMM, would need to exceed the
member organization’s Adding ADV,
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excluding any liquidity added by a
DMM, in Tapes A, B and C securities in
July 2019 as a percentage of Tapes A, B
and C CADV by at least 0.10% of Tapes
A, B and C CADV.
In addition, the Exchange proposes a
$0.0025 credit for member organizations
that meet the requirements for the Step
Up Tier 2 Adding Credit as modified
whose Adding ADV as a percentage of
US CADV represents an increase of at
least 0.10% and less than 0.20% over
their July 2019 Adding ADV as a
percentage of US CADV.
The requirements for the current
increase in Adding ADV as a percentage
of US CADV over the member
organization’s July 2019 Adding ADV as
a percentage of US CADV, of at least
0.20% and less than 0.35% for the
$0.0029 credit, of at least 0.35% and
less than 0.45% for the $0.0030 credit,
and of at least 0.45% for the $0.0031
credit, would all remain unchanged.
The purpose of the proposed change
is to incentivize member organizations
to increase the liquidity-providing
orders they send to the Exchange, which
would support the quality of price
discovery on the Exchange and provide
additional price improvement
opportunities for incoming orders. By
offering a lower credit with a lower
increase in Adding ADV requirement,
the Exchange believes the proposed
change would encourage more member
organizations to try to achieve the
offered step up credits by directing more
order flow that adds liquidity to the
Exchange. The Exchange believes that
by correlating the amount of the credit
to the level of orders sent by a member
organization that add liquidity, the
Exchange’s fee structure would
incentivize member organizations to
submit more orders that add liquidity to
the Exchange, thereby increasing the
potential for price improvement to
incoming marketable orders submitted
to the Exchange. As noted above, the
Exchange operates in a competitive
environment, particularly as it relates to
attracting non-marketable orders, which
add liquidity to the Exchange. Because,
as proposed, the tier requires a member
organization to increase the volume of
its trades against orders that add
liquidity, the Exchange believes that the
proposed higher credits based on a
commensurate increase in Adding ADV
would provide an incentive for member
organizations to route additional
liquidity to the Exchange in order to
qualify for the higher credits.
The Exchange does not know how
much order flow member organizations
choose to route to other exchanges or to
off-exchange venues. As described
above, member organizations with
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liquidity-providing orders have a choice
of where to send those orders. The
Exchange believes that offering an
alternate credit and modifying the
requirements for member organizations
to qualify for a tiered credit, more
member organizations will be able to
choose to route their liquidity-providing
orders to the Exchange to qualify for the
credit. However, without having a view
of member organization’s activity on
other exchanges and off-exchange
venues, the Exchange has no way of
knowing whether this proposed rule
change would result in any member
organization directing orders to the
Exchange in order to qualify for the new
credit.
RPI Orders
The Retail Liquidity Program is
designed to attract additional retail
order flow to the Exchange for NYSElisted securities while also providing
the potential for price improvement to
such order flow.15 Retail order flow is
submitted through the Retail Liquidity
Program as a distinct order type called
a ‘‘Retail Order,’’ which is an agency
order or a riskless principal order that
meets the criteria of Financial Industry
Regulatory Authority, Inc. Rule 5320.03
that originates from a natural person
and is submitted to the Exchange by a
Retail Member Organization (‘‘RMO’’),
provided that no change is made to the
terms of the order with respect to price
or side of market and the order does not
originate from a trading algorithm or
any other computerized methodology.16
In addition to RMOs, an additional class
of market participants known as Retail
Liquidity Providers (‘‘RLPs’’) are
required to provide potential price
improvement for Retail Orders in the
form of ‘‘RPIs,’’ which are nondisplayed interest that is better than the
best protected bid (‘‘PBB’’) or best
protected offer (‘‘PBO’’), as such terms
are defined in Regulation NMS Rule
600(b)(57) (together, ‘‘PBBO’’).17
A fee of $0.0003 per share currently
applies to non-RLP member
organization executions of RPIs against
15 See
Rule 7.44.
id. at (a)(3). An RMO is as a member
organization (or a division thereof) that has been
approved by the Exchange under Rule 7.44 to
submit Retail Orders. As noted above, under the
Exchange’s rules, a ‘‘Retail Order’’ is separate and
distinct from an order with Retail Modifier.
17 See 17 CFR 242.600(b)(57). RLP is defined in
Rule 7.44(a)(1) as a member organization that is
approved by the Exchange to act as such and that
is required to submit RPIs in accordance with Rule
7.44. RPI is defined in Rule 7.44(a)(4) and consists
of non-displayed interest in NYSE-listed securities
that would trade at prices better than the PBB or
PBO by at least $0.001 and that is identified as
such. Member organizations other than RLPs are
also permitted, but not required, to submit RPIs.
16 See
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28401
Retail Orders, unless the non-RLP
member organization executes an ADV
during the month of at least 500,000
shares of RPIs, in which case a credit of
$0.0003 per share applies. The
Exchange proposes to eliminate the
exception for non-RLP member
organizations that executes an ADV
during the month of at least 500,000
shares of RPIs. As proposed, non-RLP
member organizations will receive a
credit of $0.0003 per share for all RPI
orders.18
The proposed changes are not
otherwise intended to address other
issues, and the Exchange is not aware of
any significant problems that market
participants would have in complying
with the proposed changes.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act,19 in general, and
furthers the objectives of Sections
6(b)(4) and (5) of the Act,20 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.
As discussed above, 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.’’ 21
While Regulation NMS has enhanced
competition, it has also fostered a
‘‘fragmented’’ market structure where
18 The Exchange also proposes two nonsubstantive changes in this section of the Price List.
First, the Exchange proposes the conforming change
of deleting ‘‘a non-RLP member organization
(except DMMs), unless the rate immediately below
applies; and’’ which would be obsolete once the
exception is deleted. Second, the Exchange would
update the relevant rule reference from Rule 107C
to Rule 7.44. The Exchange relocated the substance
of Rule 107C to Rule 7.44 as part of the transition
of NYSE-listed securities to the Exchange’s Pillar
trading platform. See Securities Exchange Act
Release No. 85930 (May 23, 2019), 84 FR 25100
(May 30, 2010) (SR–NYSE–2020–26).
19 15 U.S.C. 78f(b).
20 15 U.S.C. 78f(b)(4) & (5).
21 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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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.’’ 22
Given this competitive environment,
the proposal represents a reasonable
attempt to attract additional order flow
to the Exchange.
The Proposed Change Is Reasonable
Executions at the Open
The Exchange believes that the
proposed fee for executions at the open
designated with a Retail Modifier as
defined in Rule 13 and the higher per
member organization monthly fee cap
for all member organization executions
at the open are reasonable. The
Exchange believes that the proposed fee
for executions at the open with a Retail
Modifier will encourage the submission
of additional liquidity to a national
securities exchange, thereby promoting
price discovery and transparency and
enhancing order execution
opportunities for member organizations
from the substantial amounts of
liquidity that are present on the
Exchange during the opening. The
Exchange also believes a higher cap will
encourage member organizations to
increase their activity in order to qualify
for the higher cap, which will result in
no fees for executions above the new
cap for those member organizations,
which will benefit all participants
through greater liquidity at the open.
Executions at the Close
The Exchange believes that the
proposed fee for MOC and LOC Orders
with a Retail Modifier, unless a lower
tiered fee applies, and the revised
requirements for the fee for D Orders
last modified in the last 3 minutes
before the scheduled close of trading,
are reasonable. The purpose of these
changes is to encourage additional
liquidity on the Exchange because
market participants benefit from the
greater amounts of displayed liquidity
present on a public exchange. The
Exchange’s Closing Auction is a
recognized industry reference point,23
and member organizations receive a
substantial benefit from the Exchange in
obtaining high levels of executions at
the Exchange’s closing price on a daily
22 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).
23 For example, the pricing and valuation of
certain indices, funds, and derivative products
require primary market prints.
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basis. Finally, the Exchange believes it’s
reasonable to require an Adding ADV of
0.50% for the $0.0008 per share fee for
D Orders last modified in the last 3
minutes before the scheduled close of
trading for member organizations in
MOC/LOC Tiers 1 and 2 as it would
encourage greater adding liquidity on
the Exchange, which benefits all market
participants.
Step Up Tier 2 Adding Credit
The Exchange believes that revising
the current requirements to qualify for
the Step Up Tier 2 Adding Credit and
introducing a $0.0025 credit for member
organizations that meet the
requirements for the Step Up Tier 2
Adding Credit as modified whose
Adding ADV as a percentage of US
CADV represents an increase of at least
0.10% and less than 0.20% over their
July 2019 Adding ADV as a percentage
of US CADV is reasonable.
Specifically, the Exchange believes
that offering credits for increased
Adding ADV of a minimum and
maximum percentage over a baseline
would provide an incentive for member
organizations to route additional
liquidity providing orders to the
Exchange. As noted above, the Exchange
operates in a highly competitive
environment, particularly for attracting
non-marketable order flow that provides
liquidity on an exchange. The Exchange
believes it is reasonable to provide
incrementally higher credits for orders
that provide additional liquidity
because it would encourage additional
displayed liquidity on the Exchange and
because market participants benefit
from the greater amounts of displayed
liquidity present on the Exchange.
Because the tier requires a member
organization to increase the volume of
its trades against orders that add
liquidity, the Exchange believes that the
proposed lower credit based on a
commensurate increase in Adding ADV
would provide an incentive for member
organizations to route additional
liquidity to the Exchange in order to
qualify for the higher credits. The
Exchange does not know how much
order flow member organizations choose
to route to other exchanges or to offexchange venues. As described above,
member organizations with liquidityproviding orders have a choice of where
to send those orders. The Exchange
believes that offering an alternate credit
and modifying the requirements for
member organizations to qualify for a
tiered credit, more member
organizations will be able to choose to
route their liquidity-providing orders to
the Exchange to qualify for the credit.
However, without having a view of
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member organization’s activity on other
exchanges and off-exchange venues, the
Exchange has no way of knowing
whether this proposed rule change
would result in any member
organization directing orders to the
Exchange in order to qualify for the new
credit.
RPI Orders
The Exchange believes that
eliminating the exception for non-RLP
member organizations that execute an
ADV during the month of at least
500,000 shares of RPIs so that non-RLP
member organizations would receive a
credit of $0.0003 per share for all RPI
orders is reasonable because it would
further incentivize submission of RPIs
for interaction with Retail Orders and
therefore could result in greater price
improvement for Retail Orders. The
proposed change is also reasonable
because, with the revision of the
requirements, non-RLP member
organizations, and indirectly their
customers, would continue to receive
significant benefits in the form of price
improvement by interacting with RPIs.
Non-Substantive Changes
Finally, the Exchange believes the
proposed non-substantive clarifying and
conforming changes are reasonable and
would not be inconsistent with the
public interest and the protection of
investors because investors will not be
harmed and in fact would benefit from
increased clarity and transparency on
the Price List, thereby reducing
potential confusion.
The Proposal Is an Equitable Allocation
of Fees
Executions at the Open
The Exchange believes the proposed
fee for executions at the open with a
Retail Modifier and to increase to the
monthly fee cap are equitable because
the proposal would contribute to robust
levels of liquidity at the open, which
benefits all market participants by
attracting more liquidity to the
Exchange, thereby improving market
wide quality and price discovery at the
open. The Exchange believes the
proposed fee and increase to the
monthly fee cap is reasonable as it
would encourage the submission of
additional retail liquidity to a national
securities exchange, thereby promoting
price discovery and transparency and
enhancing order execution
opportunities for member organizations
from the substantial amounts of
liquidity that are present on the
Exchange during the opening.
The proposal neither targets nor will
it have a disparate impact on any
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particular category of market
participant. All member organizations
that provide retail liquidity at the
Exchange open could be eligible to
qualify for the proposed fee. The
Exchange believes that offering credits
for providing liquidity will continue to
attract order flow and liquidity to the
Exchange, thereby providing additional
price improvement opportunities on the
Exchange and benefiting investors
generally. As to those market
participants that do not presently
qualify for fee for executions at the
open, the proposal will not adversely
impact their existing pricing or their
ability to qualify for other fees provided
by the Exchange. Moreover, the
proposed change represents an equitable
allocation of the Exchange’s fees
because it would apply equally to all
similarly situated member
organizations. Finally, the Exchange
notes that other markets have a similar
cap for executions at the opening.24
Executions at the Close
The Exchange believes that it is
equitable to modify the fees and
requirements for executions at the close
because the proposed changes would
incentivize member organizations to
send in more closing auction volume to
the primary market, thereby deepening
the Exchange’s liquidity pool and
supporting the quality of price
discovery. The Exchange believes that it
is equitable to charge fees to encourage
member organizations to send orders to
the Exchange for the closing auction
because member organizations would
continue to derive a substantial benefit
from the higher volume of closing
executions. The Exchange believes that
its proposal would equitably balance
these interests and continue to
encourage order flow from multiple
sources, which helps to maintain the
quality of the Exchange’s closing
auctions for the benefit of all market
participants.
Step Up Tier 2 Adding Credit
The Exchange believes that the
proposal to provide an additional
incremental credit and lower the
requirement for member organizations
to qualify for the Step Up Tier 2 Adding
Credit is equitable because it would
encourage additional displayed
liquidity on the Exchange and because
market participants benefit from the
24 For instance, on Nasdaq, each firm’s Opening
Cross charges for Market-On-Open (MOO) and
Limit-On-Open (LOO) orders are capped at $35,000
per month, provided that the firm adds one million
shares of liquidity, on average, during the month.
See Nasdaq Price List, at https://nasdaqtrader.com/
Trader.aspx?id=PriceListTrading2.
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Jkt 253001
greater amounts of displayed liquidity
present on the Exchange. The Exchange
believes that the magnitude of the
additional credit is not unreasonably
high compared to the current credits for
Step Up Tier 2 and also relative to the
other adding tier credits, which range
from $0.0015 to $0.0031, in comparison
to the credits paid by other exchanges
for orders that provide additional step
up liquidity.25
The Exchange believes the proposed
rule change would improve market
quality for all market participants on the
Exchange and, as a consequence, attract
more liquidity to the Exchange, thereby
improving market-wide quality and
price discovery. Since the proposed
credit would be new, no member
organization currently qualifies for it.
The Exchange does not know how much
order flow member organizations choose
to route to other exchanges or to offexchange venues. As described above,
member organizations with liquidityproviding orders have a choice of where
to send those orders. The Exchange
believes that offering an alternate credit
and modifying the requirements for
member organizations to qualify for a
tiered credit, more member
organizations will be able to choose to
route their liquidity-providing orders to
the Exchange to qualify for the credit.
However, without having a view of
member organization’s activity on other
exchanges and off-exchange venues, the
Exchange has no way of knowing
whether this proposed rule change
would result in any member
organization directing orders to the
Exchange in order to qualify for the new
credit.
The Exchange believes the proposed
credit is reasonable as it would provide
an additional incentive for member
organizations to direct their order flow
to the Exchange and provide meaningful
added levels of liquidity in order to
qualify for the higher credit, thereby
contributing to depth and market
quality on the Exchange. The proposal
neither targets nor will it have a
disparate impact on any particular
category of market participant. All
member organizations would be eligible
to qualify for the proposed credit if they
increase their Adding ADV over their
own baseline of order flow accordingly.
The Exchange believes that offering step
up credits for providing liquidity if the
step up requirements for Tape A
securities are met, will continue to
attract order flow and liquidity to the
25 See Cboe BZX Fee Schedule, which has adding
credits ranging from $0.0025 to $0.0032, at https://
markets.cboe.com/us/equities/membership/fee_
schedule/bzx/.
PO 00000
Frm 00075
Fmt 4703
Sfmt 4703
28403
Exchange, thereby providing additional
price improvement opportunities on the
Exchange and benefiting investors
generally. As to those market
participants that do not presently
qualify for the adding liquidity credits,
the proposal would provide a lower
entry point and revised requirements
that could allow those member
organizations to qualify for a credit. The
proposal will also not adversely impact
their ability to qualify for other credits
provided by the Exchange.
RPI Orders
The proposal to enable non-RLP
member organizations to receive a credit
of $0.0003 per share for all RPI orders
would contribute to robust amounts of
RPI liquidity submitted by non-RLPs
being available for interaction with the
Retail Orders. The Exchange believes
that, because Retail Orders are likely to
reflect long-term investment intentions,
they promote price discovery and
dampen volatility. The Exchange
believes that an increase in the amount
of RPI liquidity interacting with Retail
Orders would contribute to the quality
of the Exchange’s market and to the
Exchange’s status as a premier
destination for liquidity and order
execution. Accordingly, the Exchange
believes that an increase in the amount
of RPI liquidity on the Exchange has the
potential to benefit all market
participants. For these reasons, the
Exchange believes that the proposed
pricing is equitable and would continue
to encourage greater retail participation
on the Exchange.
The Proposal Is Not Unfairly
Discriminatory
Executions at the Open
The Exchange believes it is not
unfairly discriminatory to introduce a
fee for executions at the open
designated with a Retail Modifier and to
increase the monthly fee cap because
the proposed fee would be provided on
an equal basis to all member
organizations that add additional retail
liquidity on the Exchange’s opening
auction and the monthly cap would
apply to all member organizations
equally. As noted, the Exchange
believes that the proposed fee and
higher monthly cap would provide an
incentive for member organizations to
increase their activity and provide
additional liquidity at the open. The
proposal will encourage the submission
of additional retail liquidity to a
national securities exchange, thereby
promoting price discovery and
transparency and enhancing order
execution opportunities for member
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organizations from the substantial
amounts of liquidity that are present on
the Exchange during the opening.
Accordingly, the Exchange believes the
proposed change is not unfairly
discriminatory because it would
continue to encourage member
organizations to send orders to the
Exchange for execution at the open,
thereby contributing to robust levels of
liquidity on the Exchange, which
benefits all market participants. Finally,
the submission of orders to the
Exchange is optional for member
organizations in that they could choose
whether to submit orders to the
Exchange and, if they do, the extent of
its activity in this regard.
Executions at the Close
The Exchange believes that it is not
unfairly discriminatory to modify the
fees and requirements for executions at
the close because the proposed changes
would be provided on an equal basis to
all member organizations that add
liquidity to the Exchange’s closing
auction and would equally encourage
all member organizations to provide
additional liquidity on the Exchange.
The Exchange also believes that the
proposed change is not unfairly
discriminatory because it is reasonably
related to the value to the Exchange’s
market quality associated with higher
volume. The proposal does not permit
unfair discrimination because the
qualification criteria would be applied
to all similarly situated member
organizations, who would all be eligible
for the same fees on an equal basis. As
noted, the Exchange believes that the
proposed credits would provide an
incentive for member organizations to
send additional retail liquidity to the
Exchange, to the benefit of all market
participants. Finally, the submission of
orders to the Exchange is optional for
member organizations in that they could
choose whether to submit orders to the
Exchange and, if they do, the extent of
its activity in this regard.
Step Up Tier 2 Adding Credit
The Exchange believes it is not
unfairly discriminatory to provide an
additional incremental credit and lower
the requirement for member
organizations to qualify for the Step Up
Tier 2 Adding Credit as the proposed
credit would be provided on an equal
basis to all member organizations that
add liquidity by meeting the new
proposed Step Up Tier 2 requirements.
For the same reason, the Exchange
believes it is not unfairly discriminatory
to provide additional incremental
credits to member organizations that
satisfy the Step Up Tier 2 requirements
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20:00 May 25, 2021
Jkt 253001
and add liquidity in Tape A, B and C
securities. Further, the Exchange
believes the proposed Step Up Tier 2
credit would incentivize member
organizations that meet the new lower
tiered requirements to send more orders
to the Exchange. Since the proposed
$0.0025 credit would be new, no
member organization currently qualifies
for it. As noted, without a view of
member organization activity on other
exchanges and off-exchange venues, the
Exchange has no way of knowing
whether this proposed rule change
would result in any member
organization qualifying for the tier. The
Exchange believes the proposed credit is
reasonable as it would provide an
incentive for member organizations to
direct their order flow to the Exchange
and provide meaningful added levels of
liquidity in order to qualify for the
credits, thereby contributing to depth
and market quality on the Exchange.
The proposal neither targets nor will it
have a disparate impact on any
particular category of market
participant. All member organizations
that provide liquidity could be eligible
to qualify for the proposed credit if meet
the proposed adding liquidity
requirements. The Exchange believes
that offering credits for providing
liquidity will continue to attract order
flow and liquidity to the Exchange,
thereby providing additional price
improvement opportunities on the
Exchange and benefiting investors
generally. As to those market
participants that do not presently
qualify for the adding liquidity credits,
the proposal will not adversely impact
their existing pricing or their ability to
qualify for other credits provided by the
Exchange.
RPI Orders
The proposal to enable non-RLP
member organizations to receive a credit
for all RPI executions, like the Retail
Liquidity Program itself, is not designed
to permit unfair discrimination, but
instead to promote a competitive
process around retail executions such
that retail investors would receive better
prices than they currently do through
bilateral internalization arrangements.
The Exchange believes that the
transparency and competitiveness of
operating a program such as the Retail
Liquidity Program on an exchange
market, and the pricing related thereto,
would result in better prices for retail
investors. The proposed change is also
equitable and not unfairly
discriminatory because it would
contribute to investors’ confidence in
the fairness of their transactions and
because it would benefit all investors by
PO 00000
Frm 00076
Fmt 4703
Sfmt 4703
deepening the Exchange’s liquidity
pool, supporting the quality of price
discovery, promoting market
transparency and improving investor
protection. The proposal neither targets
nor will it have a disparate impact on
any particular category of market
participant. All member organizations
that are not RLPs and provide liquidity
could be eligible to qualify for the
proposed credit.
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,26 the Exchange believes that the
proposed rule change would not impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. Instead, as
discussed above, the Exchange believes
that the proposed changes would
encourage the submission of additional
liquidity to a public exchange, thereby
promoting market depth, price
discovery and transparency and
enhancing order execution
opportunities for member organizations.
As a result, the Exchange believes that
the proposed change furthers the
Commission’s goal in adopting
Regulation NMS of fostering integrated
competition among orders, which
promotes ‘‘more efficient pricing of
individual stocks for all types of orders,
large and small.’’ 27
Intramarket Competition. The
proposed changes are designed to attract
additional retail order flow to the
Exchange. The Exchange believes that
the proposed changes would continue to
incentivize market participants to direct
displayed and non-displayed order flow
to the Exchange. Greater liquidity
benefits all market participants on the
Exchange by providing more trading
opportunities and encourages member
organizations to send orders, thereby
contributing to robust levels of liquidity,
which benefits all market participants
on the Exchange. The current fees and
credits would be available to all
similarly situated market participants,
and, as such, the proposed change
would not impose a disparate burden on
competition among market participants
on the Exchange. As noted, the proposal
would apply to all similarly situated
member organizations on the same and
equal terms, who would benefit from
the changes on the same basis.
Accordingly, the proposed change
would not impose a disparate burden on
26 15
U.S.C. 78f(b)(8).
NMS, 70 FR at 37498–99.
27 Regulation
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Federal Register / Vol. 86, No. 100 / Wednesday, May 26, 2021 / Notices
competition among market participants
on the Exchange.
Intermarket Competition. The
Exchange operates in a highly
competitive market in which market
participants can readily choose to send
their orders to other exchange and offexchange venues if they deem fee levels
at those other venues to be more
favorable. In such an environment, the
Exchange must continually adjust its
fees and rebates to remain competitive
with other exchanges and with offexchange venues. Because competitors
are free to modify their own fees and
credits in response, and because market
participants may readily adjust their
order routing practices, the Exchange
does not believe its proposed fee change
can impose any burden on intermarket
competition.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
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) 28 of the Act and
subparagraph (f)(2) of Rule 19b–4 29
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) 30 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:
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(2).
30 15 U.S.C. 78s(b)(2)(B).
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–2021–33 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–2021–33. 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–2021–33 and should
be submitted on or before June 16, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.31
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–11082 Filed 5–25–21; 8:45 am]
BILLING CODE 8011–01–P
28 15
29 17
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31 17
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CFR 200.30–3(a)(12).
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–91959; File No. SR–FINRA–
2021–011]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing of a
Proposed Rule Change To Amend
FINRA Rule 1011(p) (‘‘Specified Risk
Event’’)
May 20, 2021.
Pursuant to 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 May 12,
2021, the Financial Industry Regulatory
Authority, Inc. (‘‘FINRA’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I, II,
and III below, which Items have been
prepared by FINRA. 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
FINRA is proposing to amend FINRA
Rule 1011(p) (‘‘specified risk event’’), to
correct an inadvertent drafting error and
clarify the ‘‘final regulatory actions’’
that are included in the ‘‘specified risk
event’’ definition for purposes of the
Rule 1000 Series (Member Application
and Associated Person Registration).
Rule 1011(p) was among the rules
approved in File No. SR–FINRA–2020–
011.3
Below is the text of the proposed rule
change. Proposed new language is in
italics; proposed deletions are in
brackets.
*
*
*
*
*
FINRA Rules
*
*
*
*
*
1000. MEMBER APPLICATION AND
ASSOCIATED PERSON
REGISTRATION
*
*
*
*
*
1011. Definitions
Unless otherwise provided, terms
used in the Rule 1000 Series shall have
the meaning as defined in Rule 0160.
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 90635
(December 10, 2020), 85 FR 81540 (December 16,
2020) (Order Approving File No. SR–FINRA–2020–
011) (‘‘SEC Order’’). FINRA announced the effective
dates of the rule change in Regulatory Notice 21–
09 (March 2021).
2 17
E:\FR\FM\26MYN1.SGM
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]]>Agencies
[Federal Register Volume 86, Number 100 (Wednesday, May 26, 2021)]
[Notices]
[Pages 28399-28405]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-11082]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-91948; File No. SR-NYSE-2021-33]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Amending Its Price List
May 20, 2021.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on May 17, 2021, New York Stock Exchange LLC (``NYSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``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) introduce a
new fee for orders designated with a Retail Modifier at the open and
the close; (2) revise certain requirements for executions at the open
and the close; (3) introduce an additional credit under the Step Up
Tier 2 Adding Credit; and (4) revise certain requirements for Retail
Price Improvement (``RPI'') orders in the Retail Liquidity Program. The
Exchange proposes to implement the fee changes effective May 17,
2021.\4\ 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.
---------------------------------------------------------------------------
\4\ The Exchange originally filed to amend the Price List on May
3, 2021 (SR-NYSE-2021-30). SR-NYSE-2021-30 was subsequently
withdrawn and replaced by this filing.
---------------------------------------------------------------------------
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend its Price List to (1) introduce a
new fee for orders designated with a Retail Modifier at the open and
the close; (2) revise certain requirements for executions at the open
and the close; (3) introduce an additional credit under the Step Up
Tier 2 Adding Credit; and (4) revise certain requirements for RPI
orders in the Retail Liquidity Program.
The proposed changes respond to the current competitive environment
where order flow providers have a choice of where to direct liquidity-
providing orders by offering further incentives for member
organizations to send additional liquidity to the Exchange, including
retail order flow.
The Exchange proposes to implement the fee changes effective May
17, 2021.
Background
Current Market and Competitive Environment
The Exchange operates in a highly competitive market. The
Commission has repeatedly expressed its preference for competition over
regulatory intervention in determining prices, products, and services
in the securities markets. In Regulation NMS, the Commission
highlighted the importance of market forces in determining prices and
SRO revenues and, also, recognized that current regulation of the
market system ``has been remarkably successful in promoting market
competition in its broader forms that are most important to investors
and listed companies.'' \5\
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37495, 37499 (June 29, 2005) (S7-10-04) (Final Rule)
(``Regulation NMS'').
---------------------------------------------------------------------------
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.'' \6\ Indeed, equity trading is currently dispersed across
16 exchanges,\7\ 31 alternative trading systems,\8\ and numerous
broker-dealer internalizers and wholesalers, all competing for order
flow. Based on publicly available information, no single exchange has
more than 20% market share.\9\ Therefore, no exchange possesses
significant pricing power in the execution of equity order flow. More
specifically, the Exchange's market share of trading in Tape A, B and C
securities combined is less than 12%.
---------------------------------------------------------------------------
\6\ 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).
\7\ 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.
\8\ 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.
\9\ See Cboe Global Markets U.S. Equities Market Volume Summary,
available at https://markets.cboe.com/us/equities/market_share/.
---------------------------------------------------------------------------
The Exchange believes that the ever-shifting market share among the
exchanges from month to month demonstrates that market participants can
move order flow, or discontinue or reduce use of certain categories of
products, in response to fee changes. With respect to non-marketable
order flow that would provide displayed liquidity on an Exchange,
member organizations can choose from any one of the numerous currently
operating registered exchanges to route such order flow. Accordingly,
competitive forces constrain exchange transaction fees that relate to
orders that would provide liquidity on an exchange.
In response to this competitive environment, the Exchange has
established incentives for its member organizations who submit orders
that provide liquidity on the Exchange. The proposed fee change is
designed to
[[Page 28400]]
attract additional order flow to the Exchange by incentivizing member
organizations to submit additional displayed liquidity to the Exchange,
including retail order flow.
Proposed Rule Change
Executions at the Open
For securities priced $1.00 or more, the Exchange currently charges
a fee of $0.0010 per share for executions at the open and a fee of
$0.0003 per share for executions at the open by Floor brokers, subject
to a monthly fee cap of $30,000 per member organization provided the
member organization executes an average daily volume (``ADV'') that
adds liquidity to the Exchange during the billing month (``Adding
ADV''),\10\ excluding liquidity added by a Designated Market Maker
(``DMM''), of at least five million shares.
---------------------------------------------------------------------------
\10\ The terms ``ADV'' and ``CADV'' are defined in footnote * of
the Price List.
---------------------------------------------------------------------------
The Exchange proposes to introduce a fee of $0.0005 for executions
at the open designated with a Retail Modifier as defined in Rule
13.\11\ In addition, the Exchange proposes to increase the per member
organization monthly fee cap for all member organization executions at
the open to $35,000. As proposed, the fee for executions at the open
with a Retail Modifier as well as the current fees for executions at
the open would be subject to a $35,000 per member organization monthly
fee cap.\12\ DMMs currently are not charged for executions at the
opening and would continue to not be charged.
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\11\ The Exchange proposes the non-substantive, conforming
change of replacing ``designated with a Retail Modifier as defined
in Rule 13'' and ``designated as `retail' (i.e., orders that satisfy
the Retail Modifier requirements of Rule 13'' with the defined term
``Retail Modifier'' where the phrases appear in the Price List. In
one place, ``are not designated with a Retail Modifier as defined in
Rule 13'' would be replaced with ``no Retail Modifier.'' As Rule 13
makes clear, orders with a ``retail'' modifier are separate and
distinct from a ``Retail Order'' under Rule 107C (now Rule 7.44, see
note 17, infra).
\12\ The Exchange has not previously amended the $30,000 cap. In
2020, the Exchange eliminated an alternative cap and corresponding
requirements. See Securities Exchange Act Release Nos. 87957
(January 14, 2020), 85 FR 3440 (January 21, 2020) (SR-NYSE-2020-02).
---------------------------------------------------------------------------
The Exchange believes that the proposed fee for executions at the
open designated with a Retail Modifier would encourage additional
retail liquidity on the Exchange's opening auction by reducing the fee
to execute at the open for those orders. The Exchange also believes a
higher cap will encourage member organizations to increase their
activity in order to qualify for the existing fees and the proposed fee
for executions at the open.
Executions at the Close
Currently, for all market at-the-close (``MOC'') and limit at-the-
close (``LOC'') orders from any member organization in the prior three
billing months that do not meet the MOC/LOC Tier 1, Tier 2, or Tier 3
requirements, the Exchange currently charges member organizations
$0.0010 per share for MOC orders, $0.0005 for MOC orders executed by a
Floor broker unless a lower tiered fee applies, and $0.0011 for LOC
Orders. The Exchange proposes to charge $0.0008 per share for MOC and
LOC Orders with a Retail Modifier, unless a lower tiered fee applies.
Similarly, the Exchange does not currently charge member
organizations for the first 750,000 ADV of the aggregate of executions
at the close for D Orders,\13\ Floor broker executions swept into the
close, excluding verbal interest, and executions at the close,
excluding market at-the-close (``MOC'') Orders, limit at-the-close
(``LOC'') Orders and Closing Offset (``CO'') Orders. After the first
750,000 ADV of the aggregate of executions at the close by a member
organization, D Orders are charged fees differentiated by time of entry
(or last modification). With respect to D Orders last modified in the
last 3 minutes before the scheduled close of trading, the Exchange
charges member organizations in MOC/LOC Tiers 1 and 2 a fee of $0.0008
per share. The Exchange proposes to charge this fee to member
organizations in MOC/LOC Tiers 1 and 2, both with an Adding ADV of at
least 0.50% of Tape A CADV. The purpose of this change is to encourage
additional adding liquidity on the Exchange by providing an incentive
for member organizations to submit greater adding liquidity to achieve
a lower fee for D Orders at the close.
---------------------------------------------------------------------------
\13\ ``d-Quotes'' are now called ``D Orders.'' See Rule
7.31(Orders and Modifiers). The Exchange proposes the non-
substantive change of replacing references to ``d-Quote'' and ``d-
Quotes'' with ``D Order'' and ``D Orders,'' respectively, in the
Price List.
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Step Up Tier 2 Adding Credit
Under the current Step Up Tier 2 Adding Credit, a member
organization that sends orders, except Mid-Point Liquidity Orders
(``MPL'') and Non-Displayed Limit Orders, that add liquidity in Tape A
securities receives the credit specified below if:
The member organization quotes at least 15% of the
National Best Bid or Offer (``NBBO'') \14\ in 300 or more Tape A
securities on a monthly basis, and
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\14\ See Rule 1.1(q) (defining ``NBBO'' to mean the national
best bid or offer).
---------------------------------------------------------------------------
The member organization's Adding ADV in Tapes A, B and C
securities as a percentage of Tapes A, B and C CADV, excluding any
orders by a DMM, that
[cir] is at least two times more than the Member Organization's
Adding ADV in Tapes A, B and C securities in July 2019 as a percentage
of Tapes A, B and C CADV, and
[cir] adds liquidity as an Supplemental Liquidity Provider
(``SLP'') in Tape A securities of at least 0.10% of NYSE CADV, and
[cir] exceeds the Member Organization's Adding ADV, excluding any
liquidity added by a DMM, in Tapes A, B and C securities in July 2019
as a percentage of Tapes A, B and C CADV by at least 0.20% of Tapes A,
B and C CADV.
Currently, member organizations whose Adding ADV as a percentage of
US CADV represents an increase of at least 0.20% and less than 0.35%
over their July 2019 Adding ADV as a percentage of US CADV receive a
$0.0029 credit. Member organizations whose Adding ADV as a percentage
of US CADV represents an increase of at least 0.35% and less than 0.45%
over their July 2019 Adding ADV as a percentage of US CADV receive a
$0.0030 credit. Finally, member organizations whose Adding ADV as a
percentage of US CADV represents an increase of at least 0.45% or more
over their July 2019 Adding ADV as a percentage of US CADV receive a
$0.0031 credit.
In addition, a member organization that meets these requirements
and adds liquidity, excluding liquidity added as a SLP, in Tapes B and
C Securities of at least 0.20% of Tape B and Tape C CADV combined
receives an additional $0.00005 per share for adding liquidity in Tape
A securities.
The Exchange proposes to modify the current requirements to qualify
for the Step Up Tier 2 Adding Credit, as follows.
First, a member organization's Adding ADV in Tapes A, B and C
securities as a percentage of Tapes A, B and C CADV, excluding any
orders by a DMM, would need to be at least 1.75 times more than the
Member Organization's Adding ADV in Tapes A, B and C securities in July
2019 as a percentage of Tapes A, B and C CADV.
Second, a member organization would need to add liquidity as an SLP
in Tape A securities of at least 0.05% of NYSE CADV.
Third, a member organization's Adding ADV in Tapes A, B and C
securities as a percentage of Tapes A, B and C CADV, excluding any
orders by a DMM, would need to exceed the member organization's Adding
ADV,
[[Page 28401]]
excluding any liquidity added by a DMM, in Tapes A, B and C securities
in July 2019 as a percentage of Tapes A, B and C CADV by at least 0.10%
of Tapes A, B and C CADV.
In addition, the Exchange proposes a $0.0025 credit for member
organizations that meet the requirements for the Step Up Tier 2 Adding
Credit as modified whose Adding ADV as a percentage of US CADV
represents an increase of at least 0.10% and less than 0.20% over their
July 2019 Adding ADV as a percentage of US CADV.
The requirements for the current increase in Adding ADV as a
percentage of US CADV over the member organization's July 2019 Adding
ADV as a percentage of US CADV, of at least 0.20% and less than 0.35%
for the $0.0029 credit, of at least 0.35% and less than 0.45% for the
$0.0030 credit, and of at least 0.45% for the $0.0031 credit, would all
remain unchanged.
The purpose of the proposed change is to incentivize member
organizations to increase the liquidity-providing orders they send to
the Exchange, which would support the quality of price discovery on the
Exchange and provide additional price improvement opportunities for
incoming orders. By offering a lower credit with a lower increase in
Adding ADV requirement, the Exchange believes the proposed change would
encourage more member organizations to try to achieve the offered step
up credits by directing more order flow that adds liquidity to the
Exchange. The Exchange believes that by correlating the amount of the
credit to the level of orders sent by a member organization that add
liquidity, the Exchange's fee structure would incentivize member
organizations to submit more orders that add liquidity to the Exchange,
thereby increasing the potential for price improvement to incoming
marketable orders submitted to the Exchange. As noted above, the
Exchange operates in a competitive environment, particularly as it
relates to attracting non-marketable orders, which add liquidity to the
Exchange. Because, as proposed, the tier requires a member organization
to increase the volume of its trades against orders that add liquidity,
the Exchange believes that the proposed higher credits based on a
commensurate increase in Adding ADV would provide an incentive for
member organizations to route additional liquidity to the Exchange in
order to qualify for the higher credits.
The Exchange does not know how much order flow member organizations
choose to route to other exchanges or to off-exchange venues. As
described above, member organizations with liquidity-providing orders
have a choice of where to send those orders. The Exchange believes that
offering an alternate credit and modifying the requirements for member
organizations to qualify for a tiered credit, more member organizations
will be able to choose to route their liquidity-providing orders to the
Exchange to qualify for the credit. However, without having a view of
member organization's activity on other exchanges and off-exchange
venues, the Exchange has no way of knowing whether this proposed rule
change would result in any member organization directing orders to the
Exchange in order to qualify for the new credit.
RPI Orders
The Retail Liquidity Program is designed to attract additional
retail order flow to the Exchange for NYSE-listed securities while also
providing the potential for price improvement to such order flow.\15\
Retail order flow is submitted through the Retail Liquidity Program as
a distinct order type called a ``Retail Order,'' which is an agency
order or a riskless principal order that meets the criteria of
Financial Industry Regulatory Authority, Inc. Rule 5320.03 that
originates from a natural person and is submitted to the Exchange by a
Retail Member Organization (``RMO''), provided that no change is made
to the terms of the order with respect to price or side of market and
the order does not originate from a trading algorithm or any other
computerized methodology.\16\ In addition to RMOs, an additional class
of market participants known as Retail Liquidity Providers (``RLPs'')
are required to provide potential price improvement for Retail Orders
in the form of ``RPIs,'' which are non-displayed interest that is
better than the best protected bid (``PBB'') or best protected offer
(``PBO''), as such terms are defined in Regulation NMS Rule 600(b)(57)
(together, ``PBBO'').\17\
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\15\ See Rule 7.44.
\16\ See id. at (a)(3). An RMO is as a member organization (or a
division thereof) that has been approved by the Exchange under Rule
7.44 to submit Retail Orders. As noted above, under the Exchange's
rules, a ``Retail Order'' is separate and distinct from an order
with Retail Modifier.
\17\ See 17 CFR 242.600(b)(57). RLP is defined in Rule
7.44(a)(1) as a member organization that is approved by the Exchange
to act as such and that is required to submit RPIs in accordance
with Rule 7.44. RPI is defined in Rule 7.44(a)(4) and consists of
non-displayed interest in NYSE-listed securities that would trade at
prices better than the PBB or PBO by at least $0.001 and that is
identified as such. Member organizations other than RLPs are also
permitted, but not required, to submit RPIs.
---------------------------------------------------------------------------
A fee of $0.0003 per share currently applies to non-RLP member
organization executions of RPIs against Retail Orders, unless the non-
RLP member organization executes an ADV during the month of at least
500,000 shares of RPIs, in which case a credit of $0.0003 per share
applies. The Exchange proposes to eliminate the exception for non-RLP
member organizations that executes an ADV during the month of at least
500,000 shares of RPIs. As proposed, non-RLP member organizations will
receive a credit of $0.0003 per share for all RPI orders.\18\
---------------------------------------------------------------------------
\18\ The Exchange also proposes two non-substantive changes in
this section of the Price List. First, the Exchange proposes the
conforming change of deleting ``a non-RLP member organization
(except DMMs), unless the rate immediately below applies; and''
which would be obsolete once the exception is deleted. Second, the
Exchange would update the relevant rule reference from Rule 107C to
Rule 7.44. The Exchange relocated the substance of Rule 107C to Rule
7.44 as part of the transition of NYSE-listed securities to the
Exchange's Pillar trading platform. See Securities Exchange Act
Release No. 85930 (May 23, 2019), 84 FR 25100 (May 30, 2010) (SR-
NYSE-2020-26).
---------------------------------------------------------------------------
The proposed changes are not otherwise intended to address other
issues, and the Exchange is not aware of any significant problems that
market participants would have in complying with the proposed changes.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\19\ in general, and furthers the
objectives of Sections 6(b)(4) and (5) of the Act,\20\ 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.
---------------------------------------------------------------------------
\19\ 15 U.S.C. 78f(b).
\20\ 15 U.S.C. 78f(b)(4) & (5).
---------------------------------------------------------------------------
As discussed above, 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.'' \21\ While Regulation
NMS has enhanced competition, it has also fostered a ``fragmented''
market structure where
[[Page 28402]]
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.'' \22\
---------------------------------------------------------------------------
\21\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37495, 37499 (June 29, 2005) (S7-10-04) (Final Rule)
(``Regulation NMS'').
\22\ 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).
---------------------------------------------------------------------------
Given this competitive environment, the proposal represents a
reasonable attempt to attract additional order flow to the Exchange.
The Proposed Change Is Reasonable
Executions at the Open
The Exchange believes that the proposed fee for executions at the
open designated with a Retail Modifier as defined in Rule 13 and the
higher per member organization monthly fee cap for all member
organization executions at the open are reasonable. The Exchange
believes that the proposed fee for executions at the open with a Retail
Modifier will encourage the submission of additional liquidity to a
national securities exchange, thereby promoting price discovery and
transparency and enhancing order execution opportunities for member
organizations from the substantial amounts of liquidity that are
present on the Exchange during the opening. The Exchange also believes
a higher cap will encourage member organizations to increase their
activity in order to qualify for the higher cap, which will result in
no fees for executions above the new cap for those member
organizations, which will benefit all participants through greater
liquidity at the open.
Executions at the Close
The Exchange believes that the proposed fee for MOC and LOC Orders
with a Retail Modifier, unless a lower tiered fee applies, and the
revised requirements for the fee for D Orders last modified in the last
3 minutes before the scheduled close of trading, are reasonable. The
purpose of these changes is to encourage additional liquidity on the
Exchange because market participants benefit from the greater amounts
of displayed liquidity present on a public exchange. The Exchange's
Closing Auction is a recognized industry reference point,\23\ and
member organizations receive a substantial benefit from the Exchange in
obtaining high levels of executions at the Exchange's closing price on
a daily basis. Finally, the Exchange believes it's reasonable to
require an Adding ADV of 0.50% for the $0.0008 per share fee for D
Orders last modified in the last 3 minutes before the scheduled close
of trading for member organizations in MOC/LOC Tiers 1 and 2 as it
would encourage greater adding liquidity on the Exchange, which
benefits all market participants.
---------------------------------------------------------------------------
\23\ For example, the pricing and valuation of certain indices,
funds, and derivative products require primary market prints.
---------------------------------------------------------------------------
Step Up Tier 2 Adding Credit
The Exchange believes that revising the current requirements to
qualify for the Step Up Tier 2 Adding Credit and introducing a $0.0025
credit for member organizations that meet the requirements for the Step
Up Tier 2 Adding Credit as modified whose Adding ADV as a percentage of
US CADV represents an increase of at least 0.10% and less than 0.20%
over their July 2019 Adding ADV as a percentage of US CADV is
reasonable.
Specifically, the Exchange believes that offering credits for
increased Adding ADV of a minimum and maximum percentage over a
baseline would provide an incentive for member organizations to route
additional liquidity providing orders to the Exchange. As noted above,
the Exchange operates in a highly competitive environment, particularly
for attracting non-marketable order flow that provides liquidity on an
exchange. The Exchange believes it is reasonable to provide
incrementally higher credits for orders that provide additional
liquidity because it would encourage additional displayed liquidity on
the Exchange and because market participants benefit from the greater
amounts of displayed liquidity present on the Exchange. Because the
tier requires a member organization to increase the volume of its
trades against orders that add liquidity, the Exchange believes that
the proposed lower credit based on a commensurate increase in Adding
ADV would provide an incentive for member organizations to route
additional liquidity to the Exchange in order to qualify for the higher
credits. The Exchange does not know how much order flow member
organizations choose to route to other exchanges or to off-exchange
venues. As described above, member organizations with liquidity-
providing orders have a choice of where to send those orders. The
Exchange believes that offering an alternate credit and modifying the
requirements for member organizations to qualify for a tiered credit,
more member organizations will be able to choose to route their
liquidity-providing orders to the Exchange to qualify for the credit.
However, without having a view of member organization's activity on
other exchanges and off-exchange venues, the Exchange has no way of
knowing whether this proposed rule change would result in any member
organization directing orders to the Exchange in order to qualify for
the new credit.
RPI Orders
The Exchange believes that eliminating the exception for non-RLP
member organizations that execute an ADV during the month of at least
500,000 shares of RPIs so that non-RLP member organizations would
receive a credit of $0.0003 per share for all RPI orders is reasonable
because it would further incentivize submission of RPIs for interaction
with Retail Orders and therefore could result in greater price
improvement for Retail Orders. The proposed change is also reasonable
because, with the revision of the requirements, non-RLP member
organizations, and indirectly their customers, would continue to
receive significant benefits in the form of price improvement by
interacting with RPIs.
Non-Substantive Changes
Finally, the Exchange believes the proposed non-substantive
clarifying and conforming changes are reasonable and would not be
inconsistent with the public interest and the protection of investors
because investors will not be harmed and in fact would benefit from
increased clarity and transparency on the Price List, thereby reducing
potential confusion.
The Proposal Is an Equitable Allocation of Fees
Executions at the Open
The Exchange believes the proposed fee for executions at the open
with a Retail Modifier and to increase to the monthly fee cap are
equitable because the proposal would contribute to robust levels of
liquidity at the open, which benefits all market participants by
attracting more liquidity to the Exchange, thereby improving market
wide quality and price discovery at the open. The Exchange believes the
proposed fee and increase to the monthly fee cap is reasonable as it
would encourage the submission of additional retail liquidity to a
national securities exchange, thereby promoting price discovery and
transparency and enhancing order execution opportunities for member
organizations from the substantial amounts of liquidity that are
present on the Exchange during the opening.
The proposal neither targets nor will it have a disparate impact on
any
[[Page 28403]]
particular category of market participant. All member organizations
that provide retail liquidity at the Exchange open could be eligible to
qualify for the proposed fee. The Exchange believes that offering
credits for providing liquidity will continue to attract order flow and
liquidity to the Exchange, thereby providing additional price
improvement opportunities on the Exchange and benefiting investors
generally. As to those market participants that do not presently
qualify for fee for executions at the open, the proposal will not
adversely impact their existing pricing or their ability to qualify for
other fees provided by the Exchange. Moreover, the proposed change
represents an equitable allocation of the Exchange's fees because it
would apply equally to all similarly situated member organizations.
Finally, the Exchange notes that other markets have a similar cap for
executions at the opening.\24\
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\24\ For instance, on Nasdaq, each firm's Opening Cross charges
for Market-On-Open (MOO) and Limit-On-Open (LOO) orders are capped
at $35,000 per month, provided that the firm adds one million shares
of liquidity, on average, during the month. See Nasdaq Price List,
at https://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2.
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Executions at the Close
The Exchange believes that it is equitable to modify the fees and
requirements for executions at the close because the proposed changes
would incentivize member organizations to send in more closing auction
volume to the primary market, thereby deepening the Exchange's
liquidity pool and supporting the quality of price discovery. The
Exchange believes that it is equitable to charge fees to encourage
member organizations to send orders to the Exchange for the closing
auction because member organizations would continue to derive a
substantial benefit from the higher volume of closing executions. The
Exchange believes that its proposal would equitably balance these
interests and continue to encourage order flow from multiple sources,
which helps to maintain the quality of the Exchange's closing auctions
for the benefit of all market participants.
Step Up Tier 2 Adding Credit
The Exchange believes that the proposal to provide an additional
incremental credit and lower the requirement for member organizations
to qualify for the Step Up Tier 2 Adding Credit is equitable because it
would encourage additional displayed liquidity on the Exchange and
because market participants benefit from the greater amounts of
displayed liquidity present on the Exchange. The Exchange believes that
the magnitude of the additional credit is not unreasonably high
compared to the current credits for Step Up Tier 2 and also relative to
the other adding tier credits, which range from $0.0015 to $0.0031, in
comparison to the credits paid by other exchanges for orders that
provide additional step up liquidity.\25\
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\25\ See Cboe BZX Fee Schedule, which has adding credits ranging
from $0.0025 to $0.0032, at https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/.
---------------------------------------------------------------------------
The Exchange believes the proposed rule change would improve market
quality for all market participants on the Exchange and, as a
consequence, attract more liquidity to the Exchange, thereby improving
market-wide quality and price discovery. Since the proposed credit
would be new, no member organization currently qualifies for it. The
Exchange does not know how much order flow member organizations choose
to route to other exchanges or to off-exchange venues. As described
above, member organizations with liquidity-providing orders have a
choice of where to send those orders. The Exchange believes that
offering an alternate credit and modifying the requirements for member
organizations to qualify for a tiered credit, more member organizations
will be able to choose to route their liquidity-providing orders to the
Exchange to qualify for the credit. However, without having a view of
member organization's activity on other exchanges and off-exchange
venues, the Exchange has no way of knowing whether this proposed rule
change would result in any member organization directing orders to the
Exchange in order to qualify for the new credit.
The Exchange believes the proposed credit is reasonable as it would
provide an additional incentive for member organizations to direct
their order flow to the Exchange and provide meaningful added levels of
liquidity in order to qualify for the higher credit, thereby
contributing to depth and market quality on the Exchange. The proposal
neither targets nor will it have a disparate impact on any particular
category of market participant. All member organizations would be
eligible to qualify for the proposed credit if they increase their
Adding ADV over their own baseline of order flow accordingly. The
Exchange believes that offering step up credits for providing liquidity
if the step up requirements for Tape A securities are met, will
continue to attract order flow and liquidity to the Exchange, thereby
providing additional price improvement opportunities on the Exchange
and benefiting investors generally. As to those market participants
that do not presently qualify for the adding liquidity credits, the
proposal would provide a lower entry point and revised requirements
that could allow those member organizations to qualify for a credit.
The proposal will also not adversely impact their ability to qualify
for other credits provided by the Exchange.
RPI Orders
The proposal to enable non-RLP member organizations to receive a
credit of $0.0003 per share for all RPI orders would contribute to
robust amounts of RPI liquidity submitted by non-RLPs being available
for interaction with the Retail Orders. The Exchange believes that,
because Retail Orders are likely to reflect long-term investment
intentions, they promote price discovery and dampen volatility. The
Exchange believes that an increase in the amount of RPI liquidity
interacting with Retail Orders would contribute to the quality of the
Exchange's market and to the Exchange's status as a premier destination
for liquidity and order execution. Accordingly, the Exchange believes
that an increase in the amount of RPI liquidity on the Exchange has the
potential to benefit all market participants. For these reasons, the
Exchange believes that the proposed pricing is equitable and would
continue to encourage greater retail participation on the Exchange.
The Proposal Is Not Unfairly Discriminatory
Executions at the Open
The Exchange believes it is not unfairly discriminatory to
introduce a fee for executions at the open designated with a Retail
Modifier and to increase the monthly fee cap because the proposed fee
would be provided on an equal basis to all member organizations that
add additional retail liquidity on the Exchange's opening auction and
the monthly cap would apply to all member organizations equally. As
noted, the Exchange believes that the proposed fee and higher monthly
cap would provide an incentive for member organizations to increase
their activity and provide additional liquidity at the open. The
proposal will encourage the submission of additional retail liquidity
to a national securities exchange, thereby promoting price discovery
and transparency and enhancing order execution opportunities for member
[[Page 28404]]
organizations from the substantial amounts of liquidity that are
present on the Exchange during the opening. Accordingly, the Exchange
believes the proposed change is not unfairly discriminatory because it
would continue to encourage member organizations to send orders to the
Exchange for execution at the open, thereby contributing to robust
levels of liquidity on the Exchange, which benefits all market
participants. Finally, the submission of orders to the Exchange is
optional for member organizations in that they could choose whether to
submit orders to the Exchange and, if they do, the extent of its
activity in this regard.
Executions at the Close
The Exchange believes that it is not unfairly discriminatory to
modify the fees and requirements for executions at the close because
the proposed changes would be provided on an equal basis to all member
organizations that add liquidity to the Exchange's closing auction and
would equally encourage all member organizations to provide additional
liquidity on the Exchange. The Exchange also believes that the proposed
change is not unfairly discriminatory because it is reasonably related
to the value to the Exchange's market quality associated with higher
volume. The proposal does not permit unfair discrimination because the
qualification criteria would be applied to all similarly situated
member organizations, who would all be eligible for the same fees on an
equal basis. As noted, the Exchange believes that the proposed credits
would provide an incentive for member organizations to send additional
retail liquidity to the Exchange, to the benefit of all market
participants. Finally, the submission of orders to the Exchange is
optional for member organizations in that they could choose whether to
submit orders to the Exchange and, if they do, the extent of its
activity in this regard.
Step Up Tier 2 Adding Credit
The Exchange believes it is not unfairly discriminatory to provide
an additional incremental credit and lower the requirement for member
organizations to qualify for the Step Up Tier 2 Adding Credit as the
proposed credit would be provided on an equal basis to all member
organizations that add liquidity by meeting the new proposed Step Up
Tier 2 requirements. For the same reason, the Exchange believes it is
not unfairly discriminatory to provide additional incremental credits
to member organizations that satisfy the Step Up Tier 2 requirements
and add liquidity in Tape A, B and C securities. Further, the Exchange
believes the proposed Step Up Tier 2 credit would incentivize member
organizations that meet the new lower tiered requirements to send more
orders to the Exchange. Since the proposed $0.0025 credit would be new,
no member organization currently qualifies for it. As noted, without a
view of member organization activity on other exchanges and off-
exchange venues, the Exchange has no way of knowing whether this
proposed rule change would result in any member organization qualifying
for the tier. The Exchange believes the proposed credit is reasonable
as it would provide an incentive for member organizations to direct
their order flow to the Exchange and provide meaningful added levels of
liquidity in order to qualify for the credits, thereby contributing to
depth and market quality on the Exchange. The proposal neither targets
nor will it have a disparate impact on any particular category of
market participant. All member organizations that provide liquidity
could be eligible to qualify for the proposed credit if meet the
proposed adding liquidity requirements. The Exchange believes that
offering credits for providing liquidity will continue to attract order
flow and liquidity to the Exchange, thereby providing additional price
improvement opportunities on the Exchange and benefiting investors
generally. As to those market participants that do not presently
qualify for the adding liquidity credits, the proposal will not
adversely impact their existing pricing or their ability to qualify for
other credits provided by the Exchange.
RPI Orders
The proposal to enable non-RLP member organizations to receive a
credit for all RPI executions, like the Retail Liquidity Program
itself, is not designed to permit unfair discrimination, but instead to
promote a competitive process around retail executions such that retail
investors would receive better prices than they currently do through
bilateral internalization arrangements. The Exchange believes that the
transparency and competitiveness of operating a program such as the
Retail Liquidity Program on an exchange market, and the pricing related
thereto, would result in better prices for retail investors. The
proposed change is also equitable and not unfairly discriminatory
because it would contribute to investors' confidence in the fairness of
their transactions and because it would benefit all investors by
deepening the Exchange's liquidity pool, supporting the quality of
price discovery, promoting market transparency and improving investor
protection. The proposal neither targets nor will it have a disparate
impact on any particular category of market participant. All member
organizations that are not RLPs and provide liquidity could be eligible
to qualify for the proposed credit.
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,\26\ the Exchange
believes that the proposed rule change would not impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act. Instead, as discussed above, the Exchange believes
that the proposed changes would encourage the submission of additional
liquidity to a public exchange, thereby promoting market depth, price
discovery and transparency and enhancing order execution opportunities
for member organizations. As a result, the Exchange believes that the
proposed change furthers the Commission's goal in adopting Regulation
NMS of fostering integrated competition among orders, which promotes
``more efficient pricing of individual stocks for all types of orders,
large and small.'' \27\
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\26\ 15 U.S.C. 78f(b)(8).
\27\ Regulation NMS, 70 FR at 37498-99.
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Intramarket Competition. The proposed changes are designed to
attract additional retail order flow to the Exchange. The Exchange
believes that the proposed changes would continue to incentivize market
participants to direct displayed and non-displayed order flow to the
Exchange. Greater liquidity benefits all market participants on the
Exchange by providing more trading opportunities and encourages member
organizations to send orders, thereby contributing to robust levels of
liquidity, which benefits all market participants on the Exchange. The
current fees and credits would be available to all similarly situated
market participants, and, as such, the proposed change would not impose
a disparate burden on competition among market participants on the
Exchange. As noted, the proposal would apply to all similarly situated
member organizations on the same and equal terms, who would benefit
from the changes on the same basis. Accordingly, the proposed change
would not impose a disparate burden on
[[Page 28405]]
competition among market participants on the Exchange.
Intermarket Competition. The Exchange operates in a highly
competitive market in which market participants can readily choose to
send their orders to other exchange and off-exchange venues if they
deem fee levels at those other venues to be more favorable. In such an
environment, the Exchange must continually adjust its fees and rebates
to remain competitive with other exchanges and with off-exchange
venues. Because competitors are free to modify their own fees and
credits in response, and because market participants may readily adjust
their order routing practices, the Exchange does not believe its
proposed fee change can impose any burden on intermarket competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change is effective upon filing pursuant to
Section 19(b)(3)(A) \28\ of the Act and subparagraph (f)(2) of Rule
19b-4 \29\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\28\ 15 U.S.C. 78s(b)(3)(A).
\29\ 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) \30\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\30\ 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-2021-33 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-2021-33. 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-2021-33 and should be submitted on
or before June 16, 2021.
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\31\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\31\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-11082 Filed 5-25-21; 8:45 am]
BILLING CODE 8011-01-P
