Self-Regulatory Organizations; NYSE Chicago, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Fee Schedule of NYSE Chicago, Inc., 76225-76228 [2022-26949]

Download as PDF Federal Register / Vol. 87, No. 238 / Tuesday, December 13, 2022 / Notices • Send an email to rule-comments@ sec.gov. Please include File Number SR– IEX–2022–12 on the subject line. SECURITIES AND EXCHANGE COMMISSION Paper Comments [Release No. 34–96461; File No. SR– NYSECHX–2022–28] • 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–IEX–2022–12. This file number should be included in 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 will also be available for inspection and copying at the principal office of IEX and on its internet website at www.iextrading.com. 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–IEX–2022–12 and should be submitted on or before January 3,2023. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.22 Sherry R. Haywood, Assistant Secretary. lotter on DSK11XQN23PROD with NOTICES1 [FR Doc. 2022–26950 Filed 12–12–22; 8:45 am] BILLING CODE 8011–01–P Self-Regulatory Organizations; NYSE Chicago, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Fee Schedule of NYSE Chicago, Inc. December 7, 2022. Effectiveness of Proposed Rule Change to amend the Fee Schedule of NYSE Chicago, Inc. 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 November 28, 2022, NYSE Chicago, Inc. (‘‘NYSE Chicago’’ 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 selfregulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend the Fee Schedule of NYSE Chicago, Inc. (the ‘‘Fee Schedule’’) to adopt a new credit and increase an existing credit applicable to certain Exchange members. The Exchange proposes to implement the fee changes effective November 28, 2022. The proposed rule change is available on the Exchange’s website at www.nyse.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. 1 15 U.S.C. 78s(b)(1). U.S.C. 78a. 3 17 CFR 240.19b–4. 2 15 22 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 16:56 Dec 12, 2022 Jkt 259001 PO 00000 Frm 00052 Fmt 4703 Sfmt 4703 76225 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 the Fee Schedule to adopt a new credit and increase an existing credit applicable to certain Exchange members. Specifically, the Exchange proposes new Section F.1 to adopt a Participant 4 credit applicable to Clearing Participants and amend Section F.2 to increase the Transaction Fee Credit and Clearing Submission Fee Credit applicable to Clearing Brokers. The Exchange proposes to implement the fee changes effective November 28, 2022.5 Background 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 National Market System (‘‘NMS’’), the Commission highlighted the importance of market forces in determining prices and SelfRegulatory Organizations (‘‘SRO’’) revenues and, also, recognized that current regulation of the market system ‘‘has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.’’ 6 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.’’ 7 Indeed, equity trading is 4 A ‘‘Participant’’ is, except as otherwise described in the Rules of the Exchange, ‘‘any Participant Firm that holds a valid Trading Permit and any person associated with a Participant Firm who is registered with the Exchange under Articles 16 and 17 as a Market Maker Authorized Trader or Institutional Broker Representative, respectively.’’ See Article 1, Rule 1(s). 5 The Exchange originally filed to amend the Fee Schedule on November 1, 2022 (SR–NYSECHX– 2022–25). SR–NYSECHX–2022–25 was subsequently withdrawn and replaced by SR– NYSECHX–2022–26. SR–NYSECHX–2022–26 was subsequently withdrawn and replaced by this filing. 6 See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005) (File No. S7–10–04) (Final Rule) (‘‘Regulation NMS’’). 7 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). E:\FR\FM\13DEN1.SGM 13DEN1 76226 Federal Register / Vol. 87, No. 238 / Tuesday, December 13, 2022 / Notices currently dispersed across 16 exchanges,8 numerous alternative trading systems,9 and broker-dealer internalizers and wholesalers, all competing for order flow. Based on publicly available information, no single exchange currently has more than 17% market share.10 Therefore, no exchange possesses significant pricing power in the execution of equity order flow. More specifically, the Exchange currently has less than 1% market share of executed volume of equities trading.11 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. While it is not possible to know a firm’s reason for shifting order flow, the Exchange believes that one such reason is because of fee changes at any of the registered exchanges or nonexchange venues to which a firm routes order flow. lotter on DSK11XQN23PROD with NOTICES1 Proposed Rule Change Current Section E.3(a) assesses a fee of $0.0030 per share, capped at $75 per Clearing Side,12 for an execution within the Exchange in a security priced at $1.00 per share or more that results from an agency order submitted by an Institutional Broker.13 Current Section E.7 assesses a similar fee of $0.0030 per share, capped at $75 per Clearing Side, for an away execution in a security priced at $1.00 per share or more that is cleared through the Exchange’s systems by an Institutional Broker and submitted to a Qualified Clearing Agency pursuant to Article 21, Rule 6(a).14 8 See Cboe U.S Equities Market Volume Summary, available at https://markets.cboe.com/us/ equities/market_share. 9 See FINRA ATS Transparency Data, available at https://otctransparency.finra.org/otctransparency/ AtsIssueData. A list of alternative trading systems registered with the Commission is available at https://www.sec.gov/foia/docs/atslist.htm. 10 See Cboe Global Markets U.S. Equities Market Volume Summary, available at https:// markets.cboe.com/us/equities/market_share/. 11 See id. 12 Section E.3(a)(3) of the Fee Schedule defines ‘‘Clearing Side,’’ in pertinent part, as the buy or sell side of a clearing submission that is related to a Section E.3(a) or Section E.7 execution. The Clearing Side is paid by the Clearing Participant or an Institutional Broker. 13 The term ‘‘Institutional Broker’’ is defined in Article 1, Rule 1(n) to mean a member of the Exchange who is registered as an Institutional Broker pursuant to the provisions of Article 17 and has satisfied all Exchange requirements to operate as an Institutional Broker on the Exchange; see also generally NYSE Chicago Article 17. 14 Section E.3(a) and E.7 fees are virtually identical as both apply to executions effected through Institutional Brokers that are cleared through the Exchange’s clearing systems, except VerDate Sep<11>2014 16:56 Dec 12, 2022 Jkt 259001 The Exchange proposes to adopt new Section F.1 titled ‘‘Participant credits’’ pursuant to which the total monthly fees owed by a Clearing Participant to the Exchange under Section E.3(a) and Section E.7 would be reduced by the application of a credit equal to 5% of such fees. The Exchange believes that reducing Section E.3(a) and Section E.7 fees would increase trading on the Exchange. Additionally, current Section F.2 provides for a Transaction Fee Credit and a Clearing Submission Fee Credit and generally states that the total monthly fees owed by an Exchangeregistered Institutional Broker to the Exchange will be reduced (and Institutional Brokers will be paid for any unused credits) by the application of a Transaction Fee Credit and a Clearing Submission Fee Credit. Specifically, a Clearing Broker 15 receives a ‘‘Transaction Fee Credit’’ equal to 5% of the transaction fees received by the Exchange each month for agency trades executed through the Institutional Broker (i.e., Section E.3(a) fees) for the portion(s) of the transaction handled by the Clearing Broker. Similarly, a Clearing Broker receives a ‘‘Clearing Submission Fee Credit’’ equal to 5% of the Clearing Submission Fees received by the Exchange pursuant to Section E.7 of the Fee Schedule for the portion(s) of the transaction handled by the Clearing Broker. Also, only Institutional Brokers which are members of the Financial Industry Regulatory Authority, Inc. are eligible for the Clearing Submission Fee Credit. Both the Transaction Fee Credit and the Clearing Submission Fee Credit are provided by the Exchange to the Clearing Broker, who then passes on these credits to the Institutional Broker associated with the transaction. The Exchange proposes to amend current Section F.2 by increasing both the Transaction Fee Credit and the Clearing Submission Fee Credit from 5% to 8% each. As with the Participant credit proposed herein, the Exchange believes that increasing the Transaction Fee Credit and the Clearing Submission Fee Credit, which would result in that Section E.3(a) applies to executions within the Exchange, whereas Section E.7 applies to qualified away executions pursuant to CHX Article 21, Rule 6(a). 15 Section F.2 of the Fee Schedule defines ‘‘Clearing Broker’’ as the Exchange-registered Institutional Broker that did not execute the trade, but acted as the broker for the ultimate Clearing Participant. ‘‘Clearing Participant’’ means a Participant which has been admitted to membership in a Qualified Clearing Agency pursuant to the provisions of the Rules of the Qualified Clearing Agency. See Article 1, Rule 1(ee). PO 00000 Frm 00053 Fmt 4703 Sfmt 4703 reduced fees, would increase trading and post-trade activity on the Exchange. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,16 in general, and furthers the objectives of Sections 6(b)(4) of the Act,17 in particular, because it provides for the equitable allocation of reasonable dues, fees, and other charges among its members, issuers and other persons using its facilities and does not unfairly discriminate between customers, issuers, brokers or dealers. The Proposed Fee Change is Reasonable As discussed above, the Exchange operates in a highly fragmented and competitive market. The Commission has repeatedly expressed its preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. Specifically, in Regulation NMS, the Commission highlighted the importance of market forces in determining prices and SRO revenues and, also, recognized that current regulation of the market system ‘‘has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.’’ 18 The Exchange believes that the evershifting market share among the exchanges from month to month demonstrates that market participants can shift order flow, or discontinue or reduce use of certain categories of products, in response to fee changes. With respect to non-marketable orders that provide liquidity on an Exchange, Participants can choose from any one of the 16 currently operating registered exchanges to route such order flow. Accordingly, competitive forces reasonably constrain exchange transaction fees that relate to orders that would provide displayed liquidity on an exchange. Stated otherwise, changes to exchange transaction fees can have a direct effect on the ability of an exchange to compete for order flow. The Exchange believes that the proposed new Participant credit is reasonable because it is designed to encourage increased trading activity on the Exchange. The Exchange believes the proposed rule change to introduce the Participant credit, which would result in lower fees paid by Clearing Participants for the execution of single16 15 U.S.C. 78f(b). U.S.C. 78f(b)(4). 18 See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005). 17 15 E:\FR\FM\13DEN1.SGM 13DEN1 Federal Register / Vol. 87, No. 238 / Tuesday, December 13, 2022 / Notices lotter on DSK11XQN23PROD with NOTICES1 sided or cross orders, would incentivize more trading on the Exchange. Further, the Exchange believes that increasing the Transaction Fee Credit, which applies to executions effected on the Exchange, and the Clearing Submission Fee Credit, which applies to offexchange executions cleared on the Exchange, from 5% to 8% is reasonable because these credits are designed to incent trading, in the case of the Transaction Fee Credit, and clearing activity, in the case of the Clearing Submission Fee Credit, by Institutional Brokers. The Exchange believes increasing these credits, which would result in lower fees, is a reasonable means to further incentivize Institutional Brokers to conduct more of their trading and clearing activity on the Exchange. The Exchange believes that the proposal represents a reasonable effort to promote enhanced order execution opportunities as well as promote posttrade clearing submissions by Exchange members. The Exchange notes that market participants are free to shift their order flow to competing venues if they believe other markets offer more favorable fees and credits. On the backdrop of the competitive environment in which the Exchange currently operates, the proposed rule change is a reasonable attempt to attract additional order flow and increase liquidity on the Exchange and improve the Exchange’s market share relative to its competitors. The Proposed Fee Change is an Equitable Allocation of Fees and Credits The Exchange believes that the proposed new Participant credit and the proposed increase to the Transaction Fee Credit and the Clearing Submission Fee Credit equitably allocates its fees and credits among its market participants. The Exchange believes the proposed new Participant credit is equitable because it is open to all similarly situated Clearing Participants on an equal basis and provides a per share credit that is reasonably related to the value of an exchange’s market quality associated with higher volumes. The Exchange believes it is equitable to provide Clearing Participants with the proposed credit and provide Clearing Brokers with increased credits, both of which would result in lower fees, because the credits would serve to incentivize each such member to conduct more of its trading and clearing activity on the Exchange. The Exchange believes that the proposed new Participant credit could encourage the submission of a greater number of orders to the Exchange, thus VerDate Sep<11>2014 16:56 Dec 12, 2022 Jkt 259001 enhancing order execution opportunities for all market participants trading on the Exchange. All market participants would benefit from the greater amounts of liquidity that would be present on the Exchange, which would provide greater execution opportunities. The Exchange also believes that the proposed increase to the Transaction Fee Credit and the Clearing Submission Fee Credit could encourage Institutional Brokers to conduct more of their trading and posttrade activity on the Exchange. The Proposed Fee Change is Not Unfairly Discriminatory The Exchange believes that the proposed new Participant credit and increasing the level of the Transaction Fee Credit and the Clearing Submission Fee Credit is not unfairly discriminatory. The Exchange believes that the proposal does not permit unfair discrimination because the proposed new credit would be applied to all similarly situated Clearing Participants while the existing Transaction Fee Credit and the Clearing Submission Fee Credit would be similarly applied to all Clearing Brokers on an equal basis. Accordingly, no Exchange member already operating on the Exchange would be disadvantaged by the proposed allocation of fees and credits under the proposal. The Exchange further believes that the proposed fee change would not permit unfair discrimination among Clearing Participants or among Clearing Brokers because the credits would be available equally to them. As described above, in today’s competitive marketplace, market participants have a choice of where to direct their order flow or which market to transact on. The Exchange believes this proposal would benefit a number of members by lowering their current fees, regardless of whether or not they increase their trading and clearing activity on the Exchange. In the prevailing competitive environment, Exchange members are free to disfavor the Exchange’s pricing if they believe that alternatives offer them better value. Accordingly, no Exchange member already operating on the Exchange would be disadvantaged by the proposed allocation of the Exchange’s fees and credits. Finally, the submission of orders to the Exchange is optional for Exchange members in that they could choose whether to submit orders to the Exchange and, if they do, the extent of its activity in this regard. The Exchange believes that it is subject to significant competitive forces, as described below PO 00000 Frm 00054 Fmt 4703 Sfmt 4703 76227 in the Exchange’s statement regarding the burden on competition. For the foregoing reasons, the Exchange believes that the proposal is consistent with the Act. B. Self-Regulatory Organization’s Statement on Burden on Competition In accordance with Section 6(b)(8) of the Act,19 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 all market participants on the Exchange. 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.’’ 20 Intramarket Competition. The Exchange believes the proposed new Participant credit and the proposed increase to the Transaction Fee Credit and the Clearing Submission Fee Credit would not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange does not believe that the proposed change represents a significant departure from previous pricing offered by the Exchange. The proposed changes are designed to attract additional trading and post-trade activity to the Exchange. The Exchange believes that the proposed adoption of the Participant credit and increasing the level of the Transaction Fee Credit and the Clearing Submission Fee Credit would incentivize market participants to direct more of their trading and post-trading activity to the Exchange, bringing with it additional execution opportunities for market participants and improved price transparency. Greater overall order flow, trading opportunities, and pricing transparency benefits all market participants on the Exchange by enhancing market quality. Additionally, the proposed changes would apply equally to all similarly situated Clearing Participants and Clearing Brokers, in that they would all be equally eligible 19 15 U.S.C. 78f(b)(8). Securities Exchange Act Release No. 51808, 70 FR 37495, 37498–99 (June 29, 2005) (S7–10–04) (Final Rule). 20 See E:\FR\FM\13DEN1.SGM 13DEN1 76228 Federal Register / Vol. 87, No. 238 / Tuesday, December 13, 2022 / Notices for the credits available under Sections F.1 and F.2, respectively, of the Fee Schedule. Intermarket Competition. The Exchange operates in a highly competitive market in which market participants can readily choose to send their orders to other exchange and offexchange venues if they deem fee levels at those other venues to be more favorable. As noted above, the Exchange’s market share of intraday trading (i.e., excluding auctions) is currently less than 1%. In such an environment, the Exchange must continually adjust its fees and rebates to remain competitive with other exchanges and with off-exchange venues. Because competitors are free to modify their own fees and credits in response, and because market participants may readily adjust their order routing practices, the Exchange does not believe its proposed fee change can impose any burden on intermarket competition. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective upon filing pursuant to Section 19(b)(3)(A) 21 of the Act and paragraph (f) thereunder. At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. lotter on DSK11XQN23PROD with NOTICES1 IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NYSECHX–2022–28 on the subject line. 21 15 U.S.C. 78s(b)(3)(A). VerDate Sep<11>2014 16:56 Dec 12, 2022 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–NYSECHX–2022–28. 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–NYSECHX–2022–28 and should be submitted on or before January 3, 2023. This meeting will be closed to the public. MATTERS TO BE CONSIDERED: Commissioners, Counsel to the Commissioners, the Secretary to the Commission, and recording secretaries will attend the closed meeting. Certain staff members who have an interest in the matters also may be present. In the event that the time, date, or location of this meeting changes, an announcement of the change, along with the new time, date, and/or place of the meeting will be posted on the Commission’s website at https:// www.sec.gov. The General Counsel of the Commission, or his designee, has certified that, in his opinion, one or more of the exemptions set forth in 5 U.S.C. 552b(c)(3), (5), (6), (7), (8), 9(B) and (10) and 17 CFR 200.402(a)(3), (a)(5), (a)(6), (a)(7), (a)(8), (a)(9)(ii) and (a)(10), permit consideration of the scheduled matters at the closed meeting. The subject matter of the closed meeting will consist of the following topics: Institution and settlement of injunctive actions; Institution and settlement of administrative proceedings; Resolution of litigation claims; and Other matters relating to examinations and enforcement proceedings. At times, changes in Commission priorities require alterations in the scheduling of meeting agenda items that may consist of adjudicatory, examination, litigation, or regulatory matters. CONTACT PERSON FOR MORE INFORMATION: For further information; please contact Vanessa A. Countryman from the Office of the Secretary at (202) 551–5400. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.22 Sherry R. Haywood, Assistant Secretary. Dated: December 9, 2022. Vanessa A. Countryman, Secretary. [FR Doc. 2022–26949 Filed 12–12–22; 8:45 am] Authority: 5 U.S.C. 552b. [FR Doc. 2022–27154 Filed 12–9–22; 4:15 pm] BILLING CODE 8011–01–P BILLING CODE 8011–01–P DEPARTMENT OF STATE SECURITIES AND EXCHANGE COMMISSION [Public Notice: 11936] Sunshine Act Meetings 30-Day Notice of Proposed Information Collection: Department of State Acquisition Regulation (DOSAR) 4:00 p.m. on Friday, December 9, 2022. PLACE: The meeting will be held via remote means and/or at the Commission’s headquarters, 100 F Street NE, Washington, DC 20549. TIME AND DATE: 22 17 Jkt 259001 STATUS: PO 00000 CFR 200.30–3(a)(12). Frm 00055 Fmt 4703 Sfmt 4703 Notice of request for public comment and submission to OMB of proposed collection of information. ACTION: The Department of State has submitted the information collection described below to the Office of SUMMARY: E:\FR\FM\13DEN1.SGM 13DEN1

Agencies

[Federal Register Volume 87, Number 238 (Tuesday, December 13, 2022)]
[Notices]
[Pages 76225-76228]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-26949]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96461; File No. SR-NYSECHX-2022-28]


Self-Regulatory Organizations; NYSE Chicago, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend the 
Fee Schedule of NYSE Chicago, Inc.

December 7, 2022.
    Effectiveness of Proposed Rule Change to amend the Fee Schedule of 
NYSE Chicago, Inc.
    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 November 28, 2022, NYSE Chicago, Inc. (``NYSE Chicago'' 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the Fee Schedule of NYSE Chicago, 
Inc. (the ``Fee Schedule'') to adopt a new credit and increase an 
existing credit applicable to certain Exchange members. The Exchange 
proposes to implement the fee changes effective November 28, 2022. The 
proposed rule change is available on the Exchange's website at 
www.nyse.com, at the principal office of the Exchange, and at the 
Commission's Public Reference Room.

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

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

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

1. Purpose
    The Exchange proposes to amend the Fee Schedule to adopt a new 
credit and increase an existing credit applicable to certain Exchange 
members. Specifically, the Exchange proposes new Section F.1 to adopt a 
Participant \4\ credit applicable to Clearing Participants and amend 
Section F.2 to increase the Transaction Fee Credit and Clearing 
Submission Fee Credit applicable to Clearing Brokers. The Exchange 
proposes to implement the fee changes effective November 28, 2022.\5\
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    \4\ A ``Participant'' is, except as otherwise described in the 
Rules of the Exchange, ``any Participant Firm that holds a valid 
Trading Permit and any person associated with a Participant Firm who 
is registered with the Exchange under Articles 16 and 17 as a Market 
Maker Authorized Trader or Institutional Broker Representative, 
respectively.'' See Article 1, Rule 1(s).
    \5\ The Exchange originally filed to amend the Fee Schedule on 
November 1, 2022 (SR-NYSECHX-2022-25). SR-NYSECHX-2022-25 was 
subsequently withdrawn and replaced by SR-NYSECHX-2022-26. SR-
NYSECHX-2022-26 was subsequently withdrawn and replaced by this 
filing.
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Background
    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 National Market System 
(``NMS''), the Commission highlighted the importance of market forces 
in determining prices and Self-Regulatory Organizations (``SRO'') 
revenues and, also, recognized that current regulation of the market 
system ``has been remarkably successful in promoting market competition 
in its broader forms that are most important to investors and listed 
companies.'' \6\
---------------------------------------------------------------------------

    \6\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005) (File No. S7-10-04) (Final 
Rule) (``Regulation NMS'').
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    While Regulation NMS has enhanced competition, it has also fostered 
a ``fragmented'' market structure where trading in a single stock can 
occur across multiple trading centers. When multiple trading centers 
compete for order flow in the same stock, the Commission has recognized 
that ``such competition can lead to the fragmentation of order flow in 
that stock.'' \7\ Indeed, equity trading is

[[Page 76226]]

currently dispersed across 16 exchanges,\8\ numerous alternative 
trading systems,\9\ and broker-dealer internalizers and wholesalers, 
all competing for order flow. Based on publicly available information, 
no single exchange currently has more than 17% market share.\10\ 
Therefore, no exchange possesses significant pricing power in the 
execution of equity order flow. More specifically, the Exchange 
currently has less than 1% market share of executed volume of equities 
trading.\11\
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    \7\ 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).
    \8\ See Cboe U.S Equities Market Volume Summary, available at 
https://markets.cboe.com/us/equities/market_share.
    \9\ See FINRA ATS Transparency Data, available at https://otctransparency.finra.org/otctransparency/AtsIssueData. A list of 
alternative trading systems registered with the Commission is 
available at https://www.sec.gov/foia/docs/atslist.htm.
    \10\ See Cboe Global Markets U.S. Equities Market Volume 
Summary, available at https://markets.cboe.com/us/equities/market_share/.
    \11\ See id.
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    The Exchange believes that the ever-shifting market share among the 
exchanges from month to month demonstrates that market participants can 
move order flow, or discontinue or reduce use of certain categories of 
products. While it is not possible to know a firm's reason for shifting 
order flow, the Exchange believes that one such reason is because of 
fee changes at any of the registered exchanges or non-exchange venues 
to which a firm routes order flow.
Proposed Rule Change
    Current Section E.3(a) assesses a fee of $0.0030 per share, capped 
at $75 per Clearing Side,\12\ for an execution within the Exchange in a 
security priced at $1.00 per share or more that results from an agency 
order submitted by an Institutional Broker.\13\
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    \12\ Section E.3(a)(3) of the Fee Schedule defines ``Clearing 
Side,'' in pertinent part, as the buy or sell side of a clearing 
submission that is related to a Section E.3(a) or Section E.7 
execution. The Clearing Side is paid by the Clearing Participant or 
an Institutional Broker.
    \13\ The term ``Institutional Broker'' is defined in Article 1, 
Rule 1(n) to mean a member of the Exchange who is registered as an 
Institutional Broker pursuant to the provisions of Article 17 and 
has satisfied all Exchange requirements to operate as an 
Institutional Broker on the Exchange; see also generally NYSE 
Chicago Article 17.
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    Current Section E.7 assesses a similar fee of $0.0030 per share, 
capped at $75 per Clearing Side, for an away execution in a security 
priced at $1.00 per share or more that is cleared through the 
Exchange's systems by an Institutional Broker and submitted to a 
Qualified Clearing Agency pursuant to Article 21, Rule 6(a).\14\
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    \14\ Section E.3(a) and E.7 fees are virtually identical as both 
apply to executions effected through Institutional Brokers that are 
cleared through the Exchange's clearing systems, except that Section 
E.3(a) applies to executions within the Exchange, whereas Section 
E.7 applies to qualified away executions pursuant to CHX Article 21, 
Rule 6(a).
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    The Exchange proposes to adopt new Section F.1 titled ``Participant 
credits'' pursuant to which the total monthly fees owed by a Clearing 
Participant to the Exchange under Section E.3(a) and Section E.7 would 
be reduced by the application of a credit equal to 5% of such fees. The 
Exchange believes that reducing Section E.3(a) and Section E.7 fees 
would increase trading on the Exchange.
    Additionally, current Section F.2 provides for a Transaction Fee 
Credit and a Clearing Submission Fee Credit and generally states that 
the total monthly fees owed by an Exchange-registered Institutional 
Broker to the Exchange will be reduced (and Institutional Brokers will 
be paid for any unused credits) by the application of a Transaction Fee 
Credit and a Clearing Submission Fee Credit. Specifically, a Clearing 
Broker \15\ receives a ``Transaction Fee Credit'' equal to 5% of the 
transaction fees received by the Exchange each month for agency trades 
executed through the Institutional Broker (i.e., Section E.3(a) fees) 
for the portion(s) of the transaction handled by the Clearing Broker. 
Similarly, a Clearing Broker receives a ``Clearing Submission Fee 
Credit'' equal to 5% of the Clearing Submission Fees received by the 
Exchange pursuant to Section E.7 of the Fee Schedule for the portion(s) 
of the transaction handled by the Clearing Broker. Also, only 
Institutional Brokers which are members of the Financial Industry 
Regulatory Authority, Inc. are eligible for the Clearing Submission Fee 
Credit. Both the Transaction Fee Credit and the Clearing Submission Fee 
Credit are provided by the Exchange to the Clearing Broker, who then 
passes on these credits to the Institutional Broker associated with the 
transaction.
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    \15\ Section F.2 of the Fee Schedule defines ``Clearing Broker'' 
as the Exchange-registered Institutional Broker that did not execute 
the trade, but acted as the broker for the ultimate Clearing 
Participant. ``Clearing Participant'' means a Participant which has 
been admitted to membership in a Qualified Clearing Agency pursuant 
to the provisions of the Rules of the Qualified Clearing Agency. See 
Article 1, Rule 1(ee).
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    The Exchange proposes to amend current Section F.2 by increasing 
both the Transaction Fee Credit and the Clearing Submission Fee Credit 
from 5% to 8% each. As with the Participant credit proposed herein, the 
Exchange believes that increasing the Transaction Fee Credit and the 
Clearing Submission Fee Credit, which would result in reduced fees, 
would increase trading and post-trade activity on the Exchange.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\16\ in general, and furthers the 
objectives of Sections 6(b)(4) of the Act,\17\ in particular, because 
it provides for the equitable allocation of reasonable dues, fees, and 
other charges among its members, issuers and other persons using its 
facilities and does not unfairly discriminate between customers, 
issuers, brokers or dealers.
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    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(4).
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The Proposed Fee Change is Reasonable
    As discussed above, the Exchange operates in a highly fragmented 
and competitive market. The Commission has repeatedly expressed its 
preference for competition over regulatory intervention in determining 
prices, products, and services in the securities markets. Specifically, 
in Regulation NMS, the Commission highlighted the importance of market 
forces in determining prices and SRO revenues and, also, recognized 
that current regulation of the market system ``has been remarkably 
successful in promoting market competition in its broader forms that 
are most important to investors and listed companies.'' \18\
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    \18\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
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    The Exchange believes that the ever-shifting market share among the 
exchanges from month to month demonstrates that market participants can 
shift order flow, or discontinue or reduce use of certain categories of 
products, in response to fee changes. With respect to non-marketable 
orders that provide liquidity on an Exchange, Participants can choose 
from any one of the 16 currently operating registered exchanges to 
route such order flow. Accordingly, competitive forces reasonably 
constrain exchange transaction fees that relate to orders that would 
provide displayed liquidity on an exchange. Stated otherwise, changes 
to exchange transaction fees can have a direct effect on the ability of 
an exchange to compete for order flow.
    The Exchange believes that the proposed new Participant credit is 
reasonable because it is designed to encourage increased trading 
activity on the Exchange. The Exchange believes the proposed rule 
change to introduce the Participant credit, which would result in lower 
fees paid by Clearing Participants for the execution of single-

[[Page 76227]]

sided or cross orders, would incentivize more trading on the Exchange. 
Further, the Exchange believes that increasing the Transaction Fee 
Credit, which applies to executions effected on the Exchange, and the 
Clearing Submission Fee Credit, which applies to off-exchange 
executions cleared on the Exchange, from 5% to 8% is reasonable because 
these credits are designed to incent trading, in the case of the 
Transaction Fee Credit, and clearing activity, in the case of the 
Clearing Submission Fee Credit, by Institutional Brokers. The Exchange 
believes increasing these credits, which would result in lower fees, is 
a reasonable means to further incentivize Institutional Brokers to 
conduct more of their trading and clearing activity on the Exchange.
    The Exchange believes that the proposal represents a reasonable 
effort to promote enhanced order execution opportunities as well as 
promote post-trade clearing submissions by Exchange members. The 
Exchange notes that market participants are free to shift their order 
flow to competing venues if they believe other markets offer more 
favorable fees and credits.
    On the backdrop of the competitive environment in which the 
Exchange currently operates, the proposed rule change is a reasonable 
attempt to attract additional order flow and increase liquidity on the 
Exchange and improve the Exchange's market share relative to its 
competitors.
The Proposed Fee Change is an Equitable Allocation of Fees and Credits
    The Exchange believes that the proposed new Participant credit and 
the proposed increase to the Transaction Fee Credit and the Clearing 
Submission Fee Credit equitably allocates its fees and credits among 
its market participants. The Exchange believes the proposed new 
Participant credit is equitable because it is open to all similarly 
situated Clearing Participants on an equal basis and provides a per 
share credit that is reasonably related to the value of an exchange's 
market quality associated with higher volumes. The Exchange believes it 
is equitable to provide Clearing Participants with the proposed credit 
and provide Clearing Brokers with increased credits, both of which 
would result in lower fees, because the credits would serve to 
incentivize each such member to conduct more of its trading and 
clearing activity on the Exchange.
    The Exchange believes that the proposed new Participant credit 
could encourage the submission of a greater number of orders to the 
Exchange, thus enhancing order execution opportunities for all market 
participants trading on the Exchange. All market participants would 
benefit from the greater amounts of liquidity that would be present on 
the Exchange, which would provide greater execution opportunities. The 
Exchange also believes that the proposed increase to the Transaction 
Fee Credit and the Clearing Submission Fee Credit could encourage 
Institutional Brokers to conduct more of their trading and post-trade 
activity on the Exchange.
The Proposed Fee Change is Not Unfairly Discriminatory
    The Exchange believes that the proposed new Participant credit and 
increasing the level of the Transaction Fee Credit and the Clearing 
Submission Fee Credit is not unfairly discriminatory. The Exchange 
believes that the proposal does not permit unfair discrimination 
because the proposed new credit would be applied to all similarly 
situated Clearing Participants while the existing Transaction Fee 
Credit and the Clearing Submission Fee Credit would be similarly 
applied to all Clearing Brokers on an equal basis. Accordingly, no 
Exchange member already operating on the Exchange would be 
disadvantaged by the proposed allocation of fees and credits under the 
proposal. The Exchange further believes that the proposed fee change 
would not permit unfair discrimination among Clearing Participants or 
among Clearing Brokers because the credits would be available equally 
to them. As described above, in today's competitive marketplace, market 
participants have a choice of where to direct their order flow or which 
market to transact on. The Exchange believes this proposal would 
benefit a number of members by lowering their current fees, regardless 
of whether or not they increase their trading and clearing activity on 
the Exchange.
    In the prevailing competitive environment, Exchange members are 
free to disfavor the Exchange's pricing if they believe that 
alternatives offer them better value. Accordingly, no Exchange member 
already operating on the Exchange would be disadvantaged by the 
proposed allocation of the Exchange's fees and credits.
    Finally, the submission of orders to the Exchange is optional for 
Exchange members in that they could choose whether to submit orders to 
the Exchange and, if they do, the extent of its activity in this 
regard. The Exchange believes that it is subject to significant 
competitive forces, as described below in the Exchange's statement 
regarding the burden on competition.
    For the foregoing reasons, the Exchange believes that the proposal 
is consistent with the Act.

B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act,\19\ 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 all market participants on the Exchange. 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.'' \20\
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    \19\ 15 U.S.C. 78f(b)(8).
    \20\ See Securities Exchange Act Release No. 51808, 70 FR 37495, 
37498-99 (June 29, 2005) (S7-10-04) (Final Rule).
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    Intramarket Competition. The Exchange believes the proposed new 
Participant credit and the proposed increase to the Transaction Fee 
Credit and the Clearing Submission Fee Credit would not impose any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange does not believe 
that the proposed change represents a significant departure from 
previous pricing offered by the Exchange. The proposed changes are 
designed to attract additional trading and post-trade activity to the 
Exchange. The Exchange believes that the proposed adoption of the 
Participant credit and increasing the level of the Transaction Fee 
Credit and the Clearing Submission Fee Credit would incentivize market 
participants to direct more of their trading and post-trading activity 
to the Exchange, bringing with it additional execution opportunities 
for market participants and improved price transparency. Greater 
overall order flow, trading opportunities, and pricing transparency 
benefits all market participants on the Exchange by enhancing market 
quality. Additionally, the proposed changes would apply equally to all 
similarly situated Clearing Participants and Clearing Brokers, in that 
they would all be equally eligible

[[Page 76228]]

for the credits available under Sections F.1 and F.2, respectively, of 
the Fee Schedule.
    Intermarket Competition. The Exchange operates in a highly 
competitive market in which market participants can readily choose to 
send their orders to other exchange and off-exchange venues if they 
deem fee levels at those other venues to be more favorable. As noted 
above, the Exchange's market share of intraday trading (i.e., excluding 
auctions) is currently less than 1%. In such an environment, the 
Exchange must continually adjust its fees and rebates to remain 
competitive with other exchanges and with off-exchange venues. Because 
competitors are free to modify their own fees and credits in response, 
and because market participants may readily adjust their order routing 
practices, the Exchange does not believe its proposed fee change can 
impose any burden on intermarket competition.

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

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

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

    The foregoing rule change has become effective upon filing pursuant 
to Section 19(b)(3)(A) \21\ of the Act and paragraph (f) thereunder. At 
any time within 60 days of the filing of the proposed rule change, the 
Commission summarily may temporarily suspend such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act.
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    \21\ 15 U.S.C. 78s(b)(3)(A).
---------------------------------------------------------------------------

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-NYSECHX-2022-28 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-NYSECHX-2022-28. 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-NYSECHX-2022-28 and should be submitted 
on or before January 3, 2023.
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    \22\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022-26949 Filed 12-12-22; 8:45 am]
BILLING CODE 8011-01-P
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