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. To Adopt a Fee for Directed Orders Routed Directly by the Exchange to an Alternative Trading System, 55798-55801 [2023-17605]
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55798
Federal Register / Vol. 88, No. 157 / Wednesday, August 16, 2023 / Notices
information and coordinates inquiries
and investigations with other exchanges
designed to address potential
intermarket manipulation and trading
abuses. Accordingly, there is a strong
nexus between the ORF and the
Exchange’s regulatory activities with
respect to its TPHs’ customer trading
activity.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. This
proposal does not create an unnecessary
or inappropriate intra-market burden on
competition because the ORF applies to
all customer activity, thereby raising
regulatory revenue to offset regulatory
expenses. It also supplements the
regulatory revenue derived from noncustomer activity. The Exchange notes,
however, the proposed change is not
designed to address any competitive
issues. Indeed, this proposal does not
create an unnecessary or inappropriate
inter-market burden on competition
because it is a regulatory fee that
supports regulation in furtherance of the
purposes of the Act. The Exchange is
obligated to ensure that the amount of
regulatory revenue collected from the
ORF, in combination with its other
regulatory fees and fines, does not
exceed regulatory costs.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
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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) 15 of the Act and
subparagraph (f)(2) of Rule 19b–4 16
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
SROs by cooperatively sharing regulatory
information pursuant to a written agreement
between the parties. The goal of the ISG’s
information sharing is to coordinate regulatory
efforts to address potential intermarket trading
abuses and manipulations.
15 15 U.S.C. 78s(b)(3)(A).
16 17 CFR 240.19b–4(f)(2).
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19:39 Aug 15, 2023
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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) 17 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec19b-4/
rules/sro.shtml); or
• Send an email to rule-comments@
sec19b–4. Please include file number
SR–CBOE–2023–038 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–CBOE–2023–038. 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.sec19b-4/
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
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
17 15
PO 00000
U.S.C. 78s(b)(2)(B).
Frm 00138
Fmt 4703
Sfmt 4703
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–CBOE–2023–038 and should be
submitted on or before September 6,
2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–17530 Filed 8–15–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–98114; File No. SR–
NYSECHX–2023–15]
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. To
Adopt a Fee for Directed Orders
Routed Directly by the Exchange to an
Alternative Trading System
August 11, 2023.
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 July 31,
2023, the NYSE Chicago, Inc. (‘‘NYSE
Chicago’’ or the ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the selfregulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
Fee Schedule of NYSE Chicago, Inc. (the
‘‘Fee Schedule’’) to adopt a fee for
Directed Orders routed directly by the
Exchange to an alternative trading
system (‘‘ATS’’). 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.
18 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
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Federal Register / Vol. 88, No. 157 / Wednesday, August 16, 2023 / Notices
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
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 fee for Directed
Orders routed directly by the Exchange
to an ATS. The Exchange proposes to
implement the fee change effective
August 1, 2023.
Background
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The Exchange operates in a highly
competitive market. The Securities and
Exchange Commission (‘‘Commission’’)
has repeatedly expressed its preference
for competition over regulatory
intervention in determining prices,
products, and services in the securities
markets. In Regulation NMS, the
Commission highlighted the importance
of market forces in determining prices
and SRO revenues and, also, recognized
that current regulation of the market
system ‘‘has been remarkably successful
in promoting market competition in its
broader forms that are most important to
investors and listed companies.’’ 4
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.’’ 5 Indeed, equity trading is
currently dispersed across 16
4 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’’).
5 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).
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exchanges,6 numerous alternative
trading systems,7 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.8 Therefore, no exchange
possesses significant pricing power in
the execution of equity order flow. More
specifically, the Exchange’s share of
executed volume of equity trades in
Tapes A, B and C securities is less than
1%.9
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. Accordingly, competitive
forces constrain exchange transaction
fees, and market participants can readily
trade on competing venues if they deem
pricing levels at those other venues to
be more favorable.
Proposed Rule Change
Pursuant to Commission approval, the
Exchange adopted an order type known
as Directed Orders.10 Under Exchange
rules, the ATS to which a Directed
Order is routed is responsible for
validating whether the order is eligible
to be accepted, and if such ATS
determines to reject the order, the order
would be cancelled. Directed Orders
that are the subject of this proposed rule
change are those that are routed to
OneChronos LLC (‘‘OneChronos’’).
The Exchange implemented the
routing functionality to OneChronos on
November 21, 2022,11 and introduced
the functionality at that time without
6 See Cboe U.S Equities Market Volume
Summary, available at https://markets.cboe.com/us/
equities/market_share.
7 See FINRA ATS Transparency Data, available at
https://otctransparency.finra.org/otctransparency/
AtsIssueData. A list of alternative trading systems
registered with the Commission is available at
https://www.sec.gov/foia/docs/atslist.htm.
8 See Cboe Global Markets U.S. Equities Market
Volume Summary, available at https://markets.
cboe.com/us/equities/market_share/.
9 See id.
10 A Directed Order is a Limit Order with
instructions to route on arrival at its limit price to
a specified ATS with which the Exchange
maintains an electronic linkage. See Rule 7.31(f)(4).
See also Securities Exchange Act Release No. 95425
(August 4, 2022), 87 FR 48735 (August 10, 2022)
(SR–NYSECHX–2022–06).
11 See https://www.nyse.com/publicdocs/nyse/
notifications/trader-update/110000486743/ALO_
MPL_One_Chronos_Chicago.pdf.
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Fmt 4703
Sfmt 4703
55799
charging a fee.12 The Exchange now
proposes to adopt a fee of $0.0015 per
share for Directed Orders routed to
OneChronos. To reflect the proposed
fee, the Exchange proposes to amend
footnote 1 under current Section E.
titled Transaction and Order Processing
Fees. As proposed, the first sentence
under footnote 1 would state ‘‘$0.0015
per share for Directed Orders routed to
OneChronos LLC.’’
Since its implementation, the
Directed Order functionality has
facilitated additional trading
opportunities by offering Participants 13
the ability to designate orders submitted
to the Exchange to be routed to
OneChronos for execution. The
functionality has also created
efficiencies for Participants that choose
to use the functionality by enabling
them to send orders that they wish to
route to OneChronos through the
Exchange by leveraging order entry
protocols already configured for their
interaction with the Exchange. Routing
functionality offered by the Exchange is
completely optional and Participants
can readily select between various
providers of routing services, including
other exchanges and non-exchange
venues. Participants that choose not to
utilize Directed Orders would continue
to be able to trade on the Exchange as
they currently do.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
section 6(b) of the Act,14 in general, and
furthers the objectives of sections 6(b)(4)
and (5) of the Act,15 in particular,
because it provides for the equitable
allocation of reasonable dues, fees, and
other charges among its members,
issuers and other persons using its
facilities and does not unfairly
discriminate between customers,
issuers, brokers or dealers.
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
12 See Securities Exchange Act Release No. 96433
(December 1, 2022), 87 FR 75113 (December 7,
2022) (SR–NYSECHX–2022–27).
13 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).
14 15 U.S.C. 78f(b).
15 15 U.S.C. 78f(b)(4) and (5).
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Federal Register / Vol. 88, No. 157 / Wednesday, August 16, 2023 / Notices
NMS, the Commission highlighted the
importance of market forces in
determining prices and SRO revenues
and, also, recognized that current
regulation of the market system ‘‘has
been remarkably successful in
promoting market competition in its
broader forms that are most important to
investors and listed companies.’’ 16
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.
Accordingly, changes to exchange
transaction fees can have a direct effect
on the ability of an exchange to compete
for order flow.
The routing of orders to OneChronos
is provided by the Exchange on a
voluntary basis and no rule or
regulation requires that the Exchange
offer it. Nor does any rule or regulation
require market participants to send
orders to an ATS generally, let alone to
OneChronos. The routing of orders to
OneChronos operates similarly to the
Primary Only Order already offered by
the Exchange, which is an order that is
routed directly to the primary listing
market on arrival, without interacting
with the interest on the Exchange
Book.17
The Exchange believes its proposal
equitably allocates its fees among
market participants. The Exchange
believes that the proposal represents an
equitable allocation of fees because it
would apply uniformly to all
Participants, in that all Participants will
have the ability to designate orders
submitted to the Exchange to be routed
to OneChronos, and each such
Participant would be charged the
proposed fee when utilizing the
functionality. Without having a view of
Participants’ activity on other exchanges
and off-exchange venues, the Exchange
has no way of knowing whether the
proposed fee would result in any
Participant from reducing or
discontinuing its use of the routing
functionality. While the Exchange has
no way of knowing whether this
proposed rule change would serve as a
disincentive to utilize the order type,
the Exchange believes that a number of
Participants will continue to utilize the
functionality because of the efficiencies
created for Participants that enables
them to send orders that they wish to
route to OneChronos through the
Exchange by leveraging order entry
16 See
17 See
supra note 4.
Rule 7.31(f)(1).
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19:39 Aug 15, 2023
protocols already configured for their
interactions with the Exchange.
The Exchange reiterates that the
routing functionality offered by the
Exchange is completely optional and
that the Exchange operates in a highly
competitive market in which market
participants can readily select between
various providers of routing services
with different product offerings and
different pricing. The Exchange believes
that the proposed flat fee structure for
orders routed to away venues is a fair
and equitable approach to pricing, as it
will provide certainty with respect to
execution fees.
The Exchange believes that the
proposal is not unfairly discriminatory.
The Exchange believes it is not unfairly
discriminatory as the proposal to charge
a fee would be assessed on an equal
basis to all Participants that use the
Directed Order functionality. Moreover,
this proposed rule change neither
targets nor will it have a disparate
impact on any particular category of
market participant. The Exchange
believes that this proposal does not
permit unfair discrimination because
the changes described in this proposal
would be applied to all similarly
situated Participants. Accordingly, no
Participant already operating on the
Exchange would be disadvantaged by
the proposed allocation of fees. The
Exchange further believes that the
proposed rule change would not permit
unfair discrimination among
Participants because the Directed Order
functionality would remain available to
all Participants on an equal basis and
each such Participant would be charged
the same fee for using the functionality.
Finally, the submission of orders to
the Exchange is optional for Participants
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,18 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. The
Exchange believes that the proposed
change furthers the Commission’s goal
18 15
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PO 00000
U.S.C. 78f(b)(8).
Frm 00140
Fmt 4703
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.’’ 19 The
Exchange does not believe that the
proposed fee change represents a
significant departure from previous
pricing offered by the Exchange or
pricing offered by the Exchange’s
competitors. Participants may opt to
disfavor the Exchange’s pricing if they
believe that alternatives offer them
better value. Accordingly, the Exchange
does not believe that the proposed
change will impair the ability of
Participants or competing venues to
maintain their competitive standing in
the financial markets.
Intramarket Competition. The
Exchange believes the proposed
amendment to its Fee Schedule would
not impose any burden on competition
that is not necessary or appropriate in
furtherance of the purposes of the Act.
The Directed Order functionality is
available to all Participants and all
Participants that use the functionality to
route their orders to OneChronos would
be charged the proposed fee. The
routing of orders to OneChronos is
provided by the Exchange on a
voluntary basis and no rule or
regulation requires that the Exchange
offer it. Participants have the choice
whether or not to use the Directed Order
functionality and those that choose not
to utilize it will not be impacted by the
proposed rule change. The Exchange
also does not believe the proposed rule
change would impact intramarket
competition as the proposed fee would
apply to all Participants equally that
choose to utilize the Directed Order
functionality, and therefore the
proposed change would not impose a
disparate burden on competition among
market participants on the Exchange.
Intermarket Competition. The
Exchange operates in a highly
competitive market in which market
participants can readily choose to send
their orders to other exchange and offexchange venues if they deem fee levels
at those other venues to be more
favorable. As noted above, the
Exchange’s market share of intraday
trading 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
19 See
Sfmt 4703
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supra note 4.
16AUN1
Federal Register / Vol. 88, No. 157 / Wednesday, August 16, 2023 / Notices
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) 20 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.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
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Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include file number SR–
NYSECHX–2023–15 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–2023–15. 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
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–NYSECHX–2023–15 and should be
submitted on or before September 6,
2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.21
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2023–17605 Filed 8–15–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–98109; File No. SR–
CboeBZX–2023–061]
Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Amend Its
Fee Schedule Related to the Options
Regulatory Fee
August 10, 2023.
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 August 8,
2023, Cboe BZX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BZX’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
21 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
20 15
U.S.C. 78s(b)(3)(A).
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19:39 Aug 15, 2023
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55801
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe BZX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BZX’’) proposes to
amend its Fee Schedule related to the
Options Regulatory Fee. The text of the
proposed rule change is provided in
Exhibit 5.
The text of the proposed rule change
is also available on the Exchange’s
website (https://markets.cboe.com/us/
equities/regulation/rule_filings/bzx/), at
the Exchange’s Office of the Secretary,
and at the Commission’s Public
Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend its
Options Fee Schedule, to harmonize the
language and processes relating to the
Options Regulatory Fee (‘‘ORF’’).3 By
way of background, the ORF is designed
to recover a material portion of the costs
to the Exchange of the supervision and
regulation of Member customer options
business, including performing routine
surveillances, investigations,
examinations, financial monitoring, as
well as policy, rulemaking, interpretive
and enforcement activities. The revenue
generated from the ORF, when
combined with all of the Exchange’s
other regulatory fees and fines, covers a
material portion, but not all, of the
Exchange’s regulatory costs.
The Exchange monitors the amount of
revenue collected from the ORF to
ensure that it, in combination with its
other regulatory fees and fines, does not
exceed the Exchange’s total regulatory
costs. The Exchange monitors its
regulatory costs and revenues at a
3 The Exchange initially filed the proposed rule
change on August 1, 2023 (SR–CboeBZX–2023–
057). On August 8, 2023, the Exchange withdrew
that filing and submitted this proposal.
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]]>Agencies
[Federal Register Volume 88, Number 157 (Wednesday, August 16, 2023)]
[Notices]
[Pages 55798-55801]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-17605]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-98114; File No. SR-NYSECHX-2023-15]
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. To Adopt a Fee for Directed Orders
Routed Directly by the Exchange to an Alternative Trading System
August 11, 2023.
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 July 31, 2023, the NYSE Chicago, Inc. (``NYSE Chicago'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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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 fee for Directed Orders routed
directly by the Exchange to an alternative trading system (``ATS'').
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.
[[Page 55799]]
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 fee for
Directed Orders routed directly by the Exchange to an ATS. The Exchange
proposes to implement the fee change effective August 1, 2023.
Background
The Exchange operates in a highly competitive market. The
Securities and Exchange Commission (``Commission'') has repeatedly
expressed its preference for competition over regulatory intervention
in determining prices, products, and services in the securities
markets. In Regulation NMS, the Commission highlighted the importance
of market forces in determining prices and SRO revenues and, also,
recognized that current regulation of the market system ``has been
remarkably successful in promoting market competition in its broader
forms that are most important to investors and listed companies.'' \4\
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\4\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 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.'' \5\ Indeed, equity trading is currently dispersed across
16 exchanges,\6\ numerous alternative trading systems,\7\ 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.\8\ Therefore, no exchange possesses
significant pricing power in the execution of equity order flow. More
specifically, the Exchange's share of executed volume of equity trades
in Tapes A, B and C securities is less than 1%.\9\
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\5\ 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).
\6\ See Cboe U.S Equities Market Volume Summary, available at
https://markets.cboe.com/us/equities/market_share.
\7\ See FINRA ATS Transparency Data, available at https://otctransparency.finra.org/otctransparency/AtsIssueData. A list of
alternative trading systems registered with the Commission is
available at https://www.sec.gov/foia/docs/atslist.htm.
\8\ See Cboe Global Markets U.S. Equities Market Volume Summary,
available at https://markets.cboe.com/us/equities/market_share/.
\9\ 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. Accordingly, competitive forces
constrain exchange transaction fees, and market participants can
readily trade on competing venues if they deem pricing levels at those
other venues to be more favorable.
Proposed Rule Change
Pursuant to Commission approval, the Exchange adopted an order type
known as Directed Orders.\10\ Under Exchange rules, the ATS to which a
Directed Order is routed is responsible for validating whether the
order is eligible to be accepted, and if such ATS determines to reject
the order, the order would be cancelled. Directed Orders that are the
subject of this proposed rule change are those that are routed to
OneChronos LLC (``OneChronos'').
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\10\ A Directed Order is a Limit Order with instructions to
route on arrival at its limit price to a specified ATS with which
the Exchange maintains an electronic linkage. See Rule 7.31(f)(4).
See also Securities Exchange Act Release No. 95425 (August 4, 2022),
87 FR 48735 (August 10, 2022) (SR-NYSECHX-2022-06).
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The Exchange implemented the routing functionality to OneChronos on
November 21, 2022,\11\ and introduced the functionality at that time
without charging a fee.\12\ The Exchange now proposes to adopt a fee of
$0.0015 per share for Directed Orders routed to OneChronos. To reflect
the proposed fee, the Exchange proposes to amend footnote 1 under
current Section E. titled Transaction and Order Processing Fees. As
proposed, the first sentence under footnote 1 would state ``$0.0015 per
share for Directed Orders routed to OneChronos LLC.''
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\11\ See https://www.nyse.com/publicdocs/nyse/notifications/trader-update/110000486743/ALO_MPL_One_Chronos_Chicago.pdf.
\12\ See Securities Exchange Act Release No. 96433 (December 1,
2022), 87 FR 75113 (December 7, 2022) (SR-NYSECHX-2022-27).
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Since its implementation, the Directed Order functionality has
facilitated additional trading opportunities by offering Participants
\13\ the ability to designate orders submitted to the Exchange to be
routed to OneChronos for execution. The functionality has also created
efficiencies for Participants that choose to use the functionality by
enabling them to send orders that they wish to route to OneChronos
through the Exchange by leveraging order entry protocols already
configured for their interaction with the Exchange. Routing
functionality offered by the Exchange is completely optional and
Participants can readily select between various providers of routing
services, including other exchanges and non-exchange venues.
Participants that choose not to utilize Directed Orders would continue
to be able to trade on the Exchange as they currently do.
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\13\ 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).
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with section 6(b) of the Act,\14\ in general, and furthers the
objectives of sections 6(b)(4) and (5) of the Act,\15\ in particular,
because it provides for the equitable allocation of reasonable dues,
fees, and other charges among its members, issuers and other persons
using its facilities and does not unfairly discriminate between
customers, issuers, brokers or dealers.
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\14\ 15 U.S.C. 78f(b).
\15\ 15 U.S.C. 78f(b)(4) and (5).
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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
[[Page 55800]]
NMS, the Commission highlighted the importance of market forces in
determining prices and SRO revenues and, also, recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \16\
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\16\ See supra note 4.
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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. Accordingly, changes to exchange
transaction fees can have a direct effect on the ability of an exchange
to compete for order flow.
The routing of orders to OneChronos is provided by the Exchange on
a voluntary basis and no rule or regulation requires that the Exchange
offer it. Nor does any rule or regulation require market participants
to send orders to an ATS generally, let alone to OneChronos. The
routing of orders to OneChronos operates similarly to the Primary Only
Order already offered by the Exchange, which is an order that is routed
directly to the primary listing market on arrival, without interacting
with the interest on the Exchange Book.\17\
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\17\ See Rule 7.31(f)(1).
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The Exchange believes its proposal equitably allocates its fees
among market participants. The Exchange believes that the proposal
represents an equitable allocation of fees because it would apply
uniformly to all Participants, in that all Participants will have the
ability to designate orders submitted to the Exchange to be routed to
OneChronos, and each such Participant would be charged the proposed fee
when utilizing the functionality. Without having a view of
Participants' activity on other exchanges and off-exchange venues, the
Exchange has no way of knowing whether the proposed fee would result in
any Participant from reducing or discontinuing its use of the routing
functionality. While the Exchange has no way of knowing whether this
proposed rule change would serve as a disincentive to utilize the order
type, the Exchange believes that a number of Participants will continue
to utilize the functionality because of the efficiencies created for
Participants that enables them to send orders that they wish to route
to OneChronos through the Exchange by leveraging order entry protocols
already configured for their interactions with the Exchange.
The Exchange reiterates that the routing functionality offered by
the Exchange is completely optional and that the Exchange operates in a
highly competitive market in which market participants can readily
select between various providers of routing services with different
product offerings and different pricing. The Exchange believes that the
proposed flat fee structure for orders routed to away venues is a fair
and equitable approach to pricing, as it will provide certainty with
respect to execution fees.
The Exchange believes that the proposal is not unfairly
discriminatory. The Exchange believes it is not unfairly discriminatory
as the proposal to charge a fee would be assessed on an equal basis to
all Participants that use the Directed Order functionality. Moreover,
this proposed rule change neither targets nor will it have a disparate
impact on any particular category of market participant. The Exchange
believes that this proposal does not permit unfair discrimination
because the changes described in this proposal would be applied to all
similarly situated Participants. Accordingly, no Participant already
operating on the Exchange would be disadvantaged by the proposed
allocation of fees. The Exchange further believes that the proposed
rule change would not permit unfair discrimination among Participants
because the Directed Order functionality would remain available to all
Participants on an equal basis and each such Participant would be
charged the same fee for using the functionality.
Finally, the submission of orders to the Exchange is optional for
Participants 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,\18\ 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. 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.'' \19\ The Exchange does not believe that the proposed fee
change represents a significant departure from previous pricing offered
by the Exchange or pricing offered by the Exchange's competitors.
Participants may opt to disfavor the Exchange's pricing if they believe
that alternatives offer them better value. Accordingly, the Exchange
does not believe that the proposed change will impair the ability of
Participants or competing venues to maintain their competitive standing
in the financial markets.
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\18\ 15 U.S.C. 78f(b)(8).
\19\ See supra note 4.
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Intramarket Competition. The Exchange believes the proposed
amendment to its Fee Schedule would not impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act. The Directed Order functionality is available to
all Participants and all Participants that use the functionality to
route their orders to OneChronos would be charged the proposed fee. The
routing of orders to OneChronos is provided by the Exchange on a
voluntary basis and no rule or regulation requires that the Exchange
offer it. Participants have the choice whether or not to use the
Directed Order functionality and those that choose not to utilize it
will not be impacted by the proposed rule change. The Exchange also
does not believe the proposed rule change would impact intramarket
competition as the proposed fee would apply to all Participants equally
that choose to utilize the Directed Order functionality, and therefore
the proposed change would not impose a disparate burden on competition
among market participants on the Exchange.
Intermarket Competition. The Exchange operates in a highly
competitive market in which market participants can readily choose to
send their orders to other exchange and off-exchange venues if they
deem fee levels at those other venues to be more favorable. As noted
above, the Exchange's market share of intraday trading 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
[[Page 55801]]
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) \20\ 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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\20\ 15 U.S.C. 78s(b)(3)(A).
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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-NYSECHX-2023-15 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-2023-15. 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
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-NYSECHX-2023-15 and should
be submitted on or before September 6, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2023-17605 Filed 8-15-23; 8:45 am]
BILLING CODE 8011-01-P
