[Federal Register Volume 84, Number 158 (Thursday, August 15, 2019)]
[Notices]
[Pages 41761-41769]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-17484]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-86618; File No. SR-NYSENAT-2019-18]


Self-Regulatory Organizations; NYSE National, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend Its 
Schedule of Fees and Rebates

August 9, 2019.
    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 August 1, 2019, NYSE National, Inc. (``NYSE National'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by the 
Exchange. The Commission is publishing this notice to solicit comments 
on the proposed rule change from interested persons.
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    \1\ 15 U.S.C.78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.

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[[Page 41762]]

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its Schedule of Fees and Rebates 
(``Fee Schedule'') to (1) offer one general rate for adding displayed 
and non-displayed liquidity; (2) revise the requirements to qualify for 
Adding Tier 1, Adding Tier 2 and Adding Tier 3 and the rates available 
under those tiers; (3) offer a new Non-Displayed Adding Tier 1 rate; 
(4) delete current Adding Tier 4, Step Up Adding Tier 1 and Step Up 
Adding Tier 2; (5) revise the requirements to qualify for Taking Tier 1 
and Taking Tier 2 and increase the credits available under those tiers 
and Taking Tier 3; and (6) make certain non-substantive changes to the 
presentation of the Fee Schedule. The Exchange proposes to implement 
the rule change on August 1, 2019. The proposed rule change is 
available on the Exchange's website at www.nyse.com, at the principal 
office of the Exchange, and at the Commission's Public Reference Room.

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

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

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

1. Purpose
    The Exchange proposes to amend its Fee Schedule to:
    (1) Offer one general rate for adding displayed and non-displayed 
liquidity. Specifically, the Exchange proposes to offer a single 
general fee of $0.0028 per share for orders executed on the Exchange 
that provide liquidity in securities priced at or above $1.00, which 
would be applicable regardless of whether an execution results from a 
displayed or non-displayed order that provided liquidity. This general 
rate would apply unless an ETP Holder qualifies for one of the tiered 
rates;
    (2) Revise the requirements to qualify for Adding Tier 1, Adding 
Tier 2 and Adding Tier 3 and the rates available under those tiers. 
Specifically, an ETP Holder would qualify for Adding Tier 1, Adding 
Tier 2, and Adding Tier 3 if its average daily volume (``ADV'') of 
shares executed on the Exchange that provide liquidity meet specified 
percentage thresholds. An ETP Holder that meets these thresholds would 
be charged a revised per share single rate of $0.0020, $0.0024, $0.0026 
under Adding Tier 1, Adding Tier 2, and Adding Tier 3, respectively, 
for orders that provide displayed liquidity on Tapes A, B and C. The 
current separate Adding Tier 1, Adding Tier 2, and Adding Tier 3 fees 
for Non-displayed liquidity and BBO setting interest would be 
eliminated. The current rate for MPL Orders would remain unchanged;
    (3) Offer a new Non-Displayed Adding Tier 1 rate of $0.0026 for 
Tapes A, B and C if an ETP Holder's ADV of shares executed on the 
Exchange that provide liquidity meet specified percentage thresholds;
    (4) Delete current Adding Tier 4, Step Up Adding Tier 1 and Step Up 
Adding Tier 2 and associated footnotes * and **;
    (5) Revise the requirements to qualify for Taking Tier 1 and Taking 
Tier 2, and increase the credits available under those Tiers and Taking 
Tier 3. Specifically, an ETP Holder would qualify for Taking Tier 1 and 
Taking Tier 2 (which will be renamed as Removing Tiers) based on 
whether its ADV of shares executed on the Exchange that remove 
liquidity meet specified percentage thresholds. The Exchange proposes 
to increase the per share credits that would be available to an ETP 
Holder that qualifies under Removing Tier 1, Removing Tier 2, and 
Removing Tier 3 to a single rate of $0.0030, $0.00275, and $0.0025 
respectively, for orders that remove liquidity from the Exchange. The 
credit for MPL Orders that remove liquidity from the Exchange would 
remain unchanged; and
    (6) Make certain non-substantive changes to the presentation of the 
Fee Schedule by consolidating current text relating to Transaction Fees 
under Section I of the Fee Schedule, adding defined terms to provide 
for consistent use of terminology, and adding new headings under that 
Section of the Fee Schedule.
    The Exchange proposes to implement the rule change on August 1, 
2019.
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. 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.'' \4\
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    \4\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (S7-10-04) (Final Rule) (``Regulation 
NMS'').
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    As the Commission itself recognized, the market for trading 
services in NMS stocks has become ``more fragmented and competitive.'' 
\5\ Indeed, equity trading is currently dispersed across 13 
exchanges,\6\ 31 alternative trading systems,\7\ and numerous broker-
dealer internalizers and wholesalers. Based on publicly-available 
information, no single exchange has more than 18% of the market share 
of executed volume of equity trades (whether excluding or including 
auction volume).\8\ Therefore, no exchange possesses significant 
pricing power in the execution of equity order flow. More specifically, 
in June 2019, the Exchange had 1.2% market share of executed volume of 
equity trades (excluding auction volume), which was down from 1.5% in 
March 2019.\9\
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    \5\ See Securities Exchange Act Release No. 51808, 84 FR 5202, 
5253 (February 20, 2019) (File No. S7-05-18) (Transaction Fee Pilot 
for NMS Stocks Final Rule) (``Transaction Fee Pilot'').
    \6\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, available at http://markets.cboe.com/us/equities/market_share/. See generally https://www.sec.gov/fast-answers/divisionsmarketregmrexchangesshtml.html.
    \7\ See FINRA ATS Transparency Data, available at https://otctransparency.finra.org/otctransparency/AtsIssueData. Although 54 
alternative trading systems were registered with the Commission as 
of July 29, 2019, only 31 are currently trading. 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 http://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 
shift order flow, or discontinue or reduce use of certain 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 trading 
venues to which a firm routes order flow. These fees vary month to 
month, and not all are publicly available. With respect to non-
marketable order flow that would provide liquidity on an

[[Page 41763]]

Exchange, ETP Holders can choose from any one of the 13 currently 
operating registered exchanges to route such order flow. Accordingly, 
competitive forces constrain the Exchange's transaction fees, and 
market participants can readily trade on competing venues if they deem 
pricing levels at those other venues to be more favorable.
    The Exchange utilizes a ``taker-maker'' or inverted fee model to 
attract orders that provide liquidity at the most competitive prices. 
Under the taker-maker model, offering rebates for taking liquidity 
increases the likelihood that market participants will send orders to 
the Exchange to trade with liquidity providers' orders. This increased 
taker order flow provides an incentive for market participants to send 
orders that provide liquidity. The Exchange charges fees for order flow 
that provides liquidity. These fees are reasonable due to the 
additional marketable interest (in part attracted by the exchange's 
rebate to remove liquidity) with which those order flow providers can 
trade.
Proposed Rule Change
    To respond to this competitive environment, the Exchange proposes 
to streamline its transaction fees and credits by providing a single 
general rate that would be applicable to all adding liquidity that does 
not otherwise qualify for a tiered rate and by revising and simplifying 
the adding and removing liquidity tiers.
    The Exchange believes that by increasing the credits available for 
removing liquidity on the Exchange, more ETP Holders will choose to 
route liquidity-removing order flow to the Exchange. The Exchange 
further believes ETP Holders that route orders that provide liquidity 
will respond to this increased order flow by routing more liquidity-
providing order flow to the Exchange. The Exchange further believes 
that offering a single, slightly higher fee for orders that add 
liquidity to the Exchange, more ETP Holders will choose to route their 
liquidity-providing order flow to the Exchange to qualify for one of 
the adding tiers that, as described below, would have lower fees as 
compared to the General Rate as the ETP Holder adds more liquidity to 
the Exchange.
    Without having a view of ETP Holder's activity on other markets and 
off-exchange venues, the Exchange believes that this combination of 
revising the quoting and volume requirements and rates available for 
each of the adding tiers, offering a separate adding tier for non-
displayed orders, eliminating current Adding Tier 4 and Step Up Adding 
Tiers 1 and 2, and revising the requirements and credits available for 
the removing tiers would be significant enough to incentivize market 
participants to direct their order flow to the Exchange.
Non-Substantive Changes
    The Exchange proposes the following non-substantive changes to 
reorganize the presentation of the Fee Schedule in order to enhance its 
clarity and transparency, thereby making the Fee Schedule easier to 
navigate. Specifically, the Exchange proposes to consolidate all 
information applicable only to Transaction Fees under Section I of the 
Fee Schedule.
    First, the Exchange would add a new subsection A under Section I 
titled ``Transaction Fees'' that would set forth the following seven 
definitions applicable to Transaction Fees:
     ``ADV'' would mean average daily volume;
     ``Adding ADV'' would mean an ETP Holder's average daily 
volume of shares executed on the Exchange that provided liquidity;
     ``Adding Liquidity'' would mean execution of an ETP 
Holder's order on the Exchange that provided liquidity;
     ``CADV'' would mean consolidated average daily volume;
     ``Removing Liquidity'' would mean execution of an ETP 
Holder's Aggressing Order, as defined under Rule 7.36(a)(5), or other 
orders that removed liquidity;
     ``Removing ADV'' would mean an ETP Holder's average daily 
volume of shares executed on the Exchange that removed liquidity; and
     ``US CADV'' would mean the United States consolidated 
average daily volume of transactions reported to a securities 
information processor (``SIP'').\10\ Transactions that are not reported 
to a SIP are not included in the US CADV.
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    \10\ The Exchange proposes to refer to the SIP rather than 
Consolidated Tape because the latter term does not encompass Tape C 
securities.
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    The Exchange proposes these definitions to use consistent terms 
throughout Section I of the Fee Schedule relating to Transaction Fees. 
Specifically, the Exchange proposes to use the term ``Adding'' when 
referring to an order that when executed, provides liquidity, and to 
use the term ``Removing'' when referring to an order that when 
executed, takes liquidity. By consolidating definitions used in Section 
I of the Fee Schedule, the Exchange would eliminate the need to 
separately define these terms within the tables of the Fee Schedule or 
in end notes.
    Second, the Exchange proposes to relocate the text in the first 
four of the five bullets under the heading ``Fees and Credits 
Applicable to Market Participants,'' which set forth general 
information applicable to Transaction Fees, to a new subsection B under 
Section I titled ``General.'' \11\ In moving this text, the Exchange 
proposes to add ``of Section I'' before ``of this Schedule of Fees and 
Rebates'' in the beginning of subsection (c) of the third bullet.\12\
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    \11\ The final bullet would remain under the heading ``Fees and 
Credits Applicable to Market Participants.''
    \12\ The Exchange also proposes non-substantive grammatical 
changes to subsections (a) and (c) of the third bullet to use 
``must'' or ``will'' rather than ``shall.''
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    Third, because the Exchange has added two new subsections, the 
Exchange proposes that current subsection A (``General Rates'') would 
become new subsection C and current subsection B (``Tiered Rates'') 
would become new subsection D.
    Fourth, the Exchange proposes to add new subsections D.1 titled 
``Rates for Adding Liquidity (Per Share)'' and D.2 titled ``Rates for 
Removing Liquidity (Per Share)'' before the Adding Tiers and Removing 
Tiers, respectively. The Exchange believes these new subsections will 
make the Fee Schedule easier to navigate by separating the tiers for 
adding liquidity from the tiers for removing liquidity.
    Fifth, the Exchange proposes to use the term ``rate'' throughout 
Section I of the Fee Schedule rather than the term ``Fee'' and 
therefore proposes to replace reference to the term ``fees'' in the D.1 
heading with the term ``rates'' so that the second column would become 
``Adding Rate''. The Exchange proposes to use the more general term 
``Rate'' as it would be applicable both to fees charged and credits 
provided under the Fee Schedule.
    Sixth, the Exchange proposes that in both the Adding Tiers and 
Removing Tiers, the rates for MPL Orders would be separated into their 
own columns. The Exchange does not propose any substantive changes to 
the rates applicable to MPL Orders.
    Finally, consistent with the proposal to use consistent terminology 
described above, under new subsection D.2 (Rates for Removing Liquidity 
(Per Share)): (1) References to ``taking'' would be replaced with 
``removing'' in four places, including the heading of the third column; 
(2) ``Removing'' would be added before ``Rate'' in the second column; 
and (3) ``Per share'' would be deleted in six places in the second and 
third column since the phrase would

[[Page 41764]]

appear in the heading.\13\ The Exchange would also correct a 
typographical error to add a zero to the left of the decimal for the 
Removing MPL rates.
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    \13\ ``Per share'' would also be deleted in the heading below 
new subsection D.1 following ``Adding Rate.''
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General Rates
    Under the current General Rates, for securities priced at or above 
$1.00, ETP Holders are charged the following rates for executions that 
add liquidity to the Exchange, unless a better tiered credit or fee set 
forth in Fee Schedule applies:
     $0.0023 per share for executions on the Exchange of 
displayed orders that add liquidity to the Exchange;
     $0.0021 per share for executions on the Exchange of orders 
that set a new BBO and that add liquidity to the Exchange;
     $0.0025 per share for executions on the Exchange of non-
displayed orders that add liquidity to the Exchange; and
     $0.0010 per share for executions on the Exchange of MPL 
Orders that add liquidity to the Exchange.
    For securities priced at or above $1.00, ETP Holders are charged 
$0.0005 per share for executions that remove liquidity from the 
Exchange, unless a better tiered credit or fee set forth in Fee 
Schedule applies.
    For securities priced below $1.00, the Exchange does not charge a 
fee for executions that add or remove liquidity from the Exchange.
    The Exchange proposes to streamline and simplify the general rates 
for adding liquidity in securities priced at or above $1.00. The new 
general rate for orders that add liquidity would be a single rate of 
$0.0028 per share, regardless of whether the order was displayed or 
non-displayed, excluding MPL Orders that add liquidity, which have 
their own rate. This new general rate would apply unless the ETP Holder 
is eligible for one of the tiered rates, described below. The separate 
charges described above for executions on the Exchange of orders that 
add liquidity and set a new BBO and for executions of non-displayed 
orders that add liquidity to the Exchange would be eliminated. The 
current charge for MPL Orders that add liquidity to the Exchange would 
remain unchanged. Similarly, the current per share charge for 
executions that remove liquidity to the Exchange would remain 
unchanged. The Exchange would also continue not to charge a fee for 
executions that add or remove liquidity from the Exchange for 
securities priced below $1.00.
    With this change, the General Rate available for orders that add 
liquidity would be a flat $0.0028, rather than the current variable 
rates of $0.0023, $0.0021 or $0.0025 that change depending on whether 
the order was displayed or non-displayed or set a new BBO.
    The Exchange believes that by offering a single, slightly higher 
fee for orders that add liquidity to the Exchange, more ETP Holders 
will choose to route their liquidity-providing order flow to the 
Exchange to qualify for one of the adding tiers, described below, which 
would have lower fees as compared to the General Rate as the ETP Holder 
adds more liquidity to the Exchange.
Adding Tiers
    The Exchange currently has six tiers of differentiated pricing for 
orders that add liquidity on the Exchange. In addition to six different 
qualifications, within each tier, the rates vary depending on whether 
the order adds displayed or non-displayed liquidity, sets the BBO, or 
whether the order is in a Tape A, B, or C Security. These tiers include 
two ``step up'' Adding Tiers that do not have quoting or minimum volume 
requirements but require ETP Holders to provide additional incremental 
liquidity, thus ``stepping up'' their liquidity provision, in order to 
qualify for better pricing based on smaller amounts of liquidity than 
are required to qualify for Adding Tiers 1-3.
    As described below, the Exchange proposes to reduce the number of 
adding tiers from six to four and revise and simplify both the 
qualifications and rates. Adding Tiers 1-3 would be streamlined by (1) 
simplifying the qualification for each tier to be a percentage of 
Adding ADV as a percentage of the US CADV, and (2) if the ETP Holder 
qualifies for the applicable tier, applying a single new rate for 
displayed liquidity that adds liquidity, regardless of the Tape. The 
Exchange further proposes to add a separate Adding Tier that would be 
applicable to orders that provide non-displayed liquidity. Finally, 
Adding Tier 4, Step Up Tier 1, and Step Up Tier 2 would be eliminated.
Adding Tier 1
    Under current Adding Tier 1, ETP Holders that add liquidity to the 
Exchange in securities with a per share price of $1.00 or more and 
that:
    (i) quote at the NBBO \14\ at least 5% of the time in 950 or more 
securities on an average daily basis, calculated monthly, and have an 
ADV of adding liquidity as a percentage of US consolidated ADV 
(``CADV'') of 0.20% or more, or
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    \14\ See footnote ** in the current Fee Schedule, which notes 
that ``NBBO'' (among other terms) is defined in in NYSE National 
Rule 1.1. As discussed below, the Exchange propose to delete 
footnote ** in connection with the elimination of qualifications 
based on the NBBO.
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    (ii) quote at the NBBO at least 5% of the time in 2,450 or more 
securities on an average daily basis, calculated monthly, and have an 
ADV of adding liquidity as a percentage of US CADV of 0.10% or more, 
are charged the following fees:
     $0.0008 per share for adding displayed orders in Tape B 
and C securities and $0.0011 per share in Tape A securities;
     $0.0008 per share for orders that set a new Exchange BBO 
in Tape B and C securities and $0.0011 per share in Tape A securities;
     $0.0010 per share for adding non-displayed orders in Tape 
B and C securities and $0.0013 per share in Tape A securities; and
     $0.0005 per share for MPL Orders.
    The Exchange proposes to replace the current requirements to 
qualify for Adding Tier 1 with the single requirement that an ETP 
Holder execute at least 0.15% or more Adding ADV as a percentage of US 
CADV.
    The Exchange also proposes to streamline the Adding Tier 1 fees. A 
uniform fee of $0.0020 per share for adding displayed orders in Tapes 
A, B and C securities would replace the current distinct fees of 
$0.0008 per share for adding displayed orders in Tape B and C 
securities and $0.0011 per share for adding displayed orders in Tape A 
securities. The fees for Non-displayed liquidity and BBO setting would 
be eliminated. The current rate for MPL Orders that add liquidity would 
not change.
Adding Tier 2
    Under current Adding Tier 2, ETP Holders that add liquidity to the 
Exchange in securities with a per share price of $1.00 or more and that 
quote at least 5% of the NBBO in 1,950 or more symbols on an average 
daily basis, calculated monthly, and with an ADV of adding liquidity as 
a percentage of US CADV of 0.10% or more, are charged the following 
fees:
     $0.0012 per share for adding displayed orders in Tape B 
and C securities and $0.0015 per share in Tape A securities;
     $0.0012 per share for orders that set a new Exchange BBO 
in Tape B and C securities and $0.0015 per share in Tape A securities;

[[Page 41765]]

     $0.0014 per share for adding non-displayed orders in Tape 
B and C securities and $0.0017 per share in Tape A securities; and
     $0.0005 per share for MPL Orders.
    The Exchange proposes to replace the current requirement to qualify 
for Adding Tier 2 with the single requirement that an ETP Holder 
execute at least 0.10% or more Adding ADV as a percentage of US CADV.
    The Exchange also proposes to streamline the Adding Tier 2 fees. A 
uniform fee of $0.0024 per share for adding displayed orders in Tapes 
A, B and C securities would replace the current distinct fees of 
$0.0012 per share for adding displayed orders in Tape B and C 
securities and $0.0015 per share in Tape A securities. The fees for 
Non-displayed liquidity and BBO setting would be eliminated. The 
current rate for MPL Orders that add liquidity would not change.
Adding Tier 3
    Under current Adding Tier 3, ETP Holders that add liquidity to the 
Exchange in securities with a per share price of $1.00 or more and that 
quote at least 5% of the NBBO in 550 or more symbols on an average 
daily basis, calculated monthly, are charged the following fees:
     $0.0015 per share for adding displayed orders in Tape B 
and C securities and $0.0017 per share in Tape A securities;
     $0.0015 per share for orders that set a new Exchange BBO 
in Tape B and C securities and $0.0017 per share in Tape A securities;
     $0.0017 per share for adding non-displayed orders in Tape 
B and C securities and $0.0019 per share in Tape A securities; and
     $0.0005 per share for MPL Orders.
    The Exchange proposes to replace the current requirement to qualify 
for Adding Tier 3 with the single requirement that an ETP Holder 
execute at least 0.05% or more Adding ADV as a percentage of US CADV.
    The Exchange also proposes to streamline the Adding Tier 3 fees. A 
uniform fee of $0.0026 per share for adding displayed orders in Tapes 
A, B and C securities would replace the current distinct fees of 
$0.0015 per share for adding displayed orders in Tape B and C 
securities and $0.0017 per share in Tape A securities. The fees for 
Non-displayed liquidity and BBO setting would be eliminated. The 
current rate for MPL Orders that add liquidity would remain unchanged.
Deletion of Adding Tier 4 and Step Up Adding Tiers 1 and 2
    As noted above, as part of the streamlining of the Exchange's 
tiered rates, current Adding Tier 4 \15\ and Step Up Adding Tiers 1 and 
2 would be deleted in their entirety.
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    \15\ Footnote * in the current Fee Schedule provides that the 
Adding Tier 4 volume requirements are waived. Since the Exchange 
proposes to delete Adding Tier 4, the Exchange would delete footnote 
* as well.
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Non-Displayed Adding Tier 1
    The separate fees for non-displayed liquidity for ETP Holders 
meeting the requirements of Adding Tiers 1-3 would be deleted and 
replaced with a new, uniform Non-Displayed Adding Tier 1. To qualify 
for this tier, the Exchange proposes that an ETP Holder would need at 
least 0.08% or more of Adding ADV as a percentage of US CADV. If an ETP 
Holder qualifies for this tier, it would be eligible for a $0.0026 fee 
for non-displayed orders in all Tapes, excluding MPL Orders that add 
liquidity. Because, as described above, the rates for MPL Orders would 
be addressed in Adding Tiers 1-3, the Exchange proposes that the Non-
Displayed Adding Tier rate would not be applicable to MPL Orders that 
add liquidity.
Application of the Proposed Changes to the Adding Tiers
    The proposed changes to the Adding Tiers is designed to provide 
order flow providers with incentives to route liquidity-providing order 
flow to the Exchange. The proposed rates for these Adding Tiers 
correlate to the proposed rates for the Removing Tiers, described 
below. As described above, ETP Holders with liquidity-providing order 
flow have a choice of where to send that order flow.
    For example, if US CADV is 7 billion shares, an ETP Holder would be 
eligible for the following fees based on their Adding ADV:
     An adding ADV of 5.25 million shares in the billing month 
would be 0.075% of US CADV. That ETP Holder would qualify for Adding 
Tier 3 fee of $0.0026 per share for its displayed orders that provide 
liquidity and the General Rate of $0.0028 for its non-displayed orders 
that provide liquidity.
     An adding ADV of 8.75 million shares in the billing month 
would be 0.125% of US CADV. That ETP Holder would qualify for Adding 
Tier 2 fee of $0.0024 per share for displayed orders that provide 
liquidity and the Non-Displayed Adding tier fee of $0.0026 per share 
for non-displayed orders that provide liquidity.
     An adding ADV of 12.25 million shares in the billing month 
would be 0.175% of US CADV. That ETP Holder would qualify for Adding 
Tier 1 fee of $0.0020 per share for displayed orders that provide 
liquidity and the Non-Displayed Adding Tier fee of $0.0026 per share 
for non-displayed orders that provide liquidity.
     An adding ADV of less than 3.5 million shares in the 
billing month would be less than 0.05% of US CADV. That ETP Holder 
would be eligible for the General Rate fee of $0.0028 per share for 
both displayed and non-displayed orders that provide liquidity.
    The Exchange believes that simplifying the requirements to qualify 
for Adding Tiers 1-3, eliminating three tiers, and establishing a 
single, higher rate for displayed orders across all three tapes, 
coupled with a single tier for non-displayed orders with simplified 
qualification requirements and a higher rate, would make it easier for 
ETP Holders to qualify for the tiers and would incent ETP Holders to 
route their liquidity-providing order flow to the Exchange. The 
Exchange cannot predict with certainty how many ETP Holders would avail 
themselves of the opportunities presented by the new Adding Tiers. 
However, based on levels of order flow historically routed to the 
Exchange, the Exchange believes that as many as four ETP Holders out of 
49 ETP Holders on the Exchange could qualify for new Adding Tier 1 if 
they so choose; two more ETP Holders could qualify for new Adding Tier 
2; six more ETP Holders could qualify for new Adding Tier 3; and four 
ETP Holders could qualify for the new Non-Displayed Adding Tier 1. 
Additional liquidity-providing order flow benefits all market 
participants because it provides greater execution opportunities on the 
Exchange.
Removing Tiers \16\
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    \16\ As noted, the Exchange proposes to replace ``taking'' with 
``removing'' in the Fee Schedule. Current Taking Tiers 1-3 would 
accordingly become Removing Tiers 1-3.
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    The Exchange currently sets forth the rebates it provides in three 
Taking Tiers that establish minimum quoting and volume requirements 
that an ETP Holder must satisfy in order to be eligible for 
corresponding rebate, including a separate ``Taking MPL Rate'' setting 
forth the rebate for ETP Holders using MPL Orders to remove liquidity 
receive if the quoting and volume requirements are met. As described 
above, the Exchange proposes to rename the Taking Tiers as ``Removing 
Tiers.''
    The Exchange proposes to revise both the Removing Tier 1 and 
Removing Tier

[[Page 41766]]

2 qualification requirements and the credits available under those 
Tiers, and increase the credit for Removing Tier 3. As noted above, the 
Exchange believes that simplifying the qualification requirements and 
increasing the credits for removing liquidity will incent more ETP 
Holders will choose to route liquidity-removing order flow to the 
Exchange.
Removing Tier 1
    Under current Taking Tier 1, ETP Holders that remove liquidity from 
the Exchange in securities with a per share price of $1.00 or more and 
that have at least (1) 0.0025% Adding ADV as a percentage of US CADV, 
or (2) 0.0125% Adding ADV as a percentage of US CADV and 0.032% 
Removing ADV as percentage of US CADV, or (3) 0.00125% Adding ADV as a 
percentage of US CADV and 0.25% Removing ADV as percentage of US CADV, 
would be eligible for the following credits:
     $0.0020 per share for orders; and
     $0.0002 per share for MPL Orders.
    The Exchange proposes to replace the current alternative 
requirements to qualify for Removing Tier 1 with the requirement that 
ETP Holders have at least 0.10% Removing ADV as a percentage of US CADV 
and 250,000 Adding ADV.
    The Exchange also proposes to increase the rebate for qualifying 
for Removing Tier 1 from $0.0020 per share to $0.0030 per share. The 
current rate for MPL Orders would not change.
Removing Tier 2
    Under current Taking Tier 2, ETP Holders that remove liquidity from 
the Exchange in securities with a per share price of $1.00 or more and 
that have at least 0.0125% Adding ADV as a percentage of US CADV, would 
be eligible for the following credits:
     $0.0018 per share for orders; and
     $0.0002 per share for MPL Orders.
    The Exchange proposes to replace the current requirement to qualify 
for Removing Tier 2 with the requirement that ETP Holders have at least 
0.04% Removing ADV as a percentage of US CADV and 100,000 Adding ADV.
    The Exchange also proposes to increase the rebate for qualifying 
for Removing Tier 1 from $0.0018 per share to $0.00275 per share. The 
current rate for MPL Orders would not change.
Removing Tier 3
    Under current Taking Tier 3, ETP Holders that remove liquidity from 
the Exchange in securities with a per share price of $1.00 or more and 
that have at least 50,000 Adding ADV, would be eligible for the 
following credits:
     $0.0010 per share for orders; and
     $0.0002 per share for MPL Orders.
    The Exchange proposes to increase the rebate for qualifying for 
Removing Tier 3 from $0.0010 per share to $0.0025 per share. The 
current rate for MPL Orders would not change.
Application and Impact of the Proposed Changes to the Removing Tiers
    The proposed change to the Removing Tiers is designed to provide 
order flow providers with incentives to route liquidity-removing order 
flow to a public exchange, thereby promoting price discovery and 
transparency and enhancing order execution opportunities for ETP 
Holders.
    For example, an ETP Holder has an Adding ADV of 75,000 shares. That 
ETP Holder would qualify for Removing Tier 3 credit of $0.0025 per 
share.
    In a month when US CADV was 7 billion shares, an ETP Holder would 
be eligible for the following credits:
     A Removing ADV of 3.5 million shares in a billing month 
would be 0.05% of US CADV. If that ETP Holder also has an Adding ADV of 
125,000 shares, the ETP Holder would qualify for Removing Tier 2 credit 
of $0.00275 per share for orders that remove liquidity by exceeding the 
requirements.
     A Removing ADV of 8.75 million shares in a billing month 
would be 0.125% of US CADV. If the ETP Holder also has an Adding ADV of 
300,000 shares, that ETP Holder would qualify for Removing Tier 1 
credit of $0.0030 per share for orders that remove liquidity by 
exceeding the requirements.
     An ETP Holder with an Adding ADV of less than 50,000 
shares would then be eligible for the base fee of $0.0005 per share for 
orders that remove liquidity.
    As described above, ETP Holders with liquidity-removing order flow 
have a choice of where to send that order flow. The Exchange believes 
that by simplifying the requirements to qualify for the two removing 
tiers with the highest rebate and increasing the rebate for all three 
removing tiers, more ETP Holders will choose to route their liquidity-
removing order flow to the Exchange in order to interact with the 
increased liquidity-providing order flow the Exchange anticipates from 
its proposed changes to the Adding Tiers.
    The Exchange cannot predict with certainty how many ETP Holders 
would avail themselves of the opportunities presented by the revised 
removing tiers. Based on prior order flow routed to the Exchange, the 
Exchange believes that as many as five ETP Holders of the 49 current 
Exchange ETP Holders could qualify for the revised Removing Tier 1 if 
they so choose; six more ETP Holders could qualify for the revised 
Removing Tier 2; and six more ETP Holders could qualify for the revised 
Removing Tier 3. Additional liquidity-providing order flow benefits all 
market participants because it provides greater execution opportunities 
on the Exchange.
    The proposed changes are not otherwise intended to address any 
other issues, and the Exchange is not aware of any problems that ETP 
Holders would have in complying with the proposed change.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\17\ in general, and furthers the 
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\18\ 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.
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78f(b).
    \18\ 15 U.S.C. 78f(b)(4) & (5).
---------------------------------------------------------------------------

The Proposed Change is Reasonable
    As discussed above, the Exchange operates in a highly fragmented 
and competitive market. The Exchange believes that the ever-shifting 
market share among the exchanges from month to month demonstrates that 
market participants can move order flow, or discontinue or reduce use 
of certain categories of products, in response to fee changes. 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 
one of the registered exchanges or non-exchange trading venues that a 
firm routes order flow to, which vary month to month, and not all of 
which are publicly known about. With respect to non-marketable order 
flow that would provide displayed liquidity on an Exchange, ETP Holders 
can choose from any one of the 13 currently operating registered 
exchanges to route such order flow. Accordingly, competitive forces 
constrain exchange transaction fees that relate to orders that would 
provide displayed liquidity on an exchange.
    Given the current competitive environment, the proposal represents 
a reasonable attempt to attract additional order flow to the Exchange. 
Specifically, the Exchange believes that offering a single, higher 
General Rate that would be applicable to all adding liquidity that does 
not otherwise qualify for a tiered rate is reasonable because a higher 
rate

[[Page 41767]]

would provide an incentive for ETP Holders to route additional 
liquidity-providing orders to the Exchange to qualify for one of the 
Adding Tier rates, thereby promoting price discovery and providing 
meaningful added levels of liquidity and contributing to the depth and 
market quality on the Exchange. Similarly, the Exchange believes that 
revising and simplifying the adding liquidity tier rates and which 
rates would be available for displayed and non-displayed orders is also 
reasonable because the Exchange believes that lower tiered rates, 
coupled with simplified qualification requirements that would make it 
easier for ETP Holders to qualify for the respective tiers, would 
incent more ETP Holders to route their liquidity-providing order flow 
to the Exchange, thereby attracting liquidity-providing order flow to 
the Exchange.
    In addition, the Exchange believes that the proposed changes to the 
removing tiers are reasonable because the proposed changes would 
incentivize submission of additional liquidity to a public exchange, 
thereby enhancing order execution opportunities for ETP Holders. 
Specifically, simplifying the requirements to qualify for the two 
removing tiers with the highest rebate and increasing the rebate for 
all three removing tiers would incentivize ETP Holders to send 
additional liquidity to the Exchange in order to receive a higher 
credits and avoid the General Rate fees by meeting the higher liquidity 
requirements for a Removing Tier credit.
    As noted, the Exchange's market share of intraday trading has 
declined from March 2019 to June 2019. The Exchange believes that the 
proposal represents a reasonable attempt to encourage the submission of 
additional liquidity to a national securities exchange, thus promoting 
price discovery and transparency and enhancing order execution 
opportunities for ETP Holders from the substantial amounts of liquidity 
present on the Exchange. All ETP Holders would benefit from the greater 
amounts of liquidity that will be present on the Exchange, which would 
provide greater execution opportunities.
    Finally, the Exchange also believes the proposed non-substantive 
changes to consolidate text relating to transaction fees under Section 
I of the Fee Schedule and to add a definitions section are reasonable 
and would not be inconsistent with the public interest and the 
protection of investors because investors will not be harmed and in 
fact would benefit from increased clarity and transparency on the Fee 
Schedule, thereby reducing potential confusion.
The Proposal is an Equitable Allocation of Fees
    The Exchange believes its proposal equitably allocates its fees 
among its market participants. The proposal would continue to encourage 
ETP Holders to send orders to the Exchange, thereby contributing to 
robust levels of liquidity, which benefits all market participants. The 
Exchange believes that, for the reasons discussed above, revising and 
simplifying the qualification requirements for adding and removing tier 
rates would make it easier for current and new liquidity providers to 
qualify for the respective tier fees and credits, thereby encouraging 
submission of additional liquidity to the Exchange. The proposed change 
will thereby encourage the submission of additional liquidity to a 
national securities exchange, thus promoting price discovery and 
transparency and enhancing order execution opportunities for ETP 
Holders from the substantial amounts of liquidity present on the 
Exchange. All ETP Holders would benefit from the greater amounts of 
liquidity that will be present on the Exchange, which would provide 
greater execution opportunities.
    The Exchange further believes that the proposed uniform higher 
general fee of $0.0028 for adding displayed and non-displayed liquidity 
is equitable because the magnitude of the uniform rate is not 
unreasonably higher than the current separate fees for displayed 
($0.0023) and non-displayed ($0.0025) adding liquidity that it would 
replace, and in comparison to the general rates charged by other 
exchanges with taker-maker fee models for adding liquidity. For 
example, Cboe EDGA charges a non-tier fee of $0.0030 per share for 
adding liquidity.\19\
---------------------------------------------------------------------------

    \19\ See Cboe EDGA U.S. Equities Exchange Fee Schedule, 
available at https://markets.cboe.com/us/equities/membership/fee_schedule/edga/.
---------------------------------------------------------------------------

    The proposed higher fees for adding displayed liquidity in Tape A, 
Tape B and Tape C securities in Adding Tier 1 ($0.0020), Adding Tier 2 
($0.0024) and Adding Tier 3 ($0.0026) and the single, higher Non-
Displayed Adding Tier 1 charge are equitable because the magnitude of 
the uniform rates is not unreasonably higher than the current separate 
rates each replaces, and in comparison to the fees charged by other 
exchanges for orders that add displayed and non-displayed liquidity. 
For example, Cboe EDGA charges a tiered fees of $0.0022 and $0.0026 for 
adding liquidity.\20\
---------------------------------------------------------------------------

    \20\ See id.
---------------------------------------------------------------------------

    Finally, the higher proposed credits for Removing Tier 1 ($0.0030), 
Removing Tier 2 ($0.00275), and Removing Tier 3 ($0.0025) are similarly 
equitable because the magnitude of the uniform rates is not 
unreasonably higher than the current separate rates each replaces, and 
in comparison to the fees charged by other exchanges for orders that 
add displayed and non-displayed liquidity. For example, Cboe EDGA 
offers a tiered credit of ($0.0026) per share for removing 
liquidity.\21\
---------------------------------------------------------------------------

    \21\ See id.
---------------------------------------------------------------------------

    The number of ETP Holders that could qualify for the General Rate, 
each of the Adding Tiers, and the Removing Tiers are noted above. 
Without having a view of an ETP Holder's activity on other markets and 
off-exchange venues, the Exchange believes the proposed revised 
requirements and corresponding higher rates would provide an incentive 
for market participants to increase the orders they send to the 
Exchange in order to meet the new lower requirement and submit 
additional adding liquidity to the Exchange. In addition, based on the 
profile of liquidity-providing firms generally, the Exchange believes 
that numerous firms could qualify for the Adding Tiers Removing Tiers 
if they choose to direct order flow to, as noted earlier, and increase 
trading on, the Exchange.
    The Exchange believes the proposed rule change would improve market 
quality for all market participants on the Exchange and, as a 
consequence, attract more liquidity to the Exchange thereby improving 
market-wide quality and price discovery. The proposal neither targets 
nor will it have a disparate impact on any particular category of 
market participant.
    Specifically, the Exchange believes that the proposal constitutes 
an equitable allocation of fees because all similarly situated ETP 
Holders and other market participants would be eligible for the same 
general and tiered rates and would be eligible for the same fees and 
credits. Moreover, the proposed change is equitable because all 
qualifying ETP Holders that meet the new requirements for Adding Tiers 
1-3 would be eligible for the fee by satisfying the revised 
requirements, and because the revised requirements would apply equally 
to all similarly situated ETP Holders. Similarly, the proposed change 
is equitable because all qualifying ETP Holders that meet the new 
requirements for Removing Tiers 1-3 would be eligible for the credits 
by satisfying the revised requirements, and because the revised 
requirements would apply equally to all similarly situated ETP Holders.

[[Page 41768]]

The Proposal is Not Unfairly Discriminatory
    The Exchange believes that the proposal is not unfairly 
discriminatory. In the prevailing competitive environment, ETP Holders 
are free to disfavor the Exchange's pricing if they believe that 
alternatives offer them better value.
    The proposal neither targets nor will it have a disparate impact on 
any particular category of market participant. The Exchange also 
believes that the proposed change is not unfairly discriminatory 
because it is reasonably related to the value to the Exchange's market 
quality associated with higher volume. The Exchange believes that the 
proposal does not permit unfair discrimination because the proposal 
would be applied to all similarly situated ETP Holders and other market 
participants would be charged the same rates or receive the same 
credits.
    The Exchange further believes that the proposal does not permit 
unfair discrimination because the Exchange will be making the Adding 
Tier and Removing Tier rates available to all ETP Holders on an equal 
basis. Accordingly, no ETP Holder already operating on the Exchange 
would be disadvantaged by the proposed allocation of fees. For the same 
reasons, the Exchange believes that the proposal would not permit 
unfair discrimination among ETP Holders. The Exchange believes that the 
proposed change is not unfairly discriminatory because all qualifying 
ETP Holders that meet the revised requirements would be eligible for 
the Adding Tiers 1-3 fees by satisfying the revised thresholds, and 
because the revised thresholds would apply equally to all similarly 
situated ETP Holders. Similarly, the proposed change is equitable 
because all qualifying ETP Holders that meet the new requirements for 
Removing Tiers 1-3 would be eligible for the credits by satisfying the 
revised requirements, and because the revised requirements would apply 
equally to all similarly situated ETP Holders.
    The Exchange further believes that the proposed changes would not 
permit unfair discrimination among ETP Holders because the general and 
tiered rates are available equally to all ETP Holders. As described 
above, in today's competitive marketplace, order flow providers have a 
choice of where to direct liquidity-providing order flow, and the 
Exchange believes there are additional ETP Holders that could qualify 
if they chose to direct their order flow to the Exchange.
    Finally, the Exchange believes that it is subject to significant 
competitive forces, as described below in the Exchange's statement 
regarding the burden on competition.
    For the foregoing reasons, the Exchange believes that the proposal 
is consistent with the Act.

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

    In accordance with Section 6(b)(8) of the Act,\22\ 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 ETP Holders. As a result, the Exchange believes that the proposed 
change furthers the Commission's goal in adopting Regulation NMS of 
fostering competition among orders, which promotes ``more efficient 
pricing of individual stocks for all types of orders, large and 
small.'' \23\
---------------------------------------------------------------------------

    \22\ 15 U.S.C. 78f(b)(8).
    \23\ Regulation NMS, 70 FR at 37498-99.
---------------------------------------------------------------------------

    Intramarket Competition. The proposed change is designed to attract 
additional order flow to the Exchange. The Exchange believes that the 
proposed increased fees and credits would continue to incentivize 
market participants to direct liquidity providing and removing orders 
to the Exchange. Greater liquidity benefits all market participants on 
the Exchange by providing more trading opportunities and encourages ETP 
Holders to send orders, thereby contributing to robust levels of 
liquidity, which benefits all market participants. The proposed reduced 
requirements for the tiers would be available to all similarly-situated 
market participants, and, as such, the proposed change would not impose 
a disparate burden on competition among market participants on the 
Exchange.
    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, 
the Exchange's market share of intraday trading (i.e., excluding 
auctions) declined from March to June 2019. 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.
    The Exchange believes that the proposed change could promote 
competition between the Exchange and other execution venues, including 
those that currently offer similar order types and comparable 
transaction pricing, by encouraging additional orders to be sent to the 
Exchange for execution.

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

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

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

    The foregoing rule change is effective upon filing pursuant to 
Section 19(b)(3)(A) \24\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \25\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
---------------------------------------------------------------------------

    \24\ 15 U.S.C. 78s(b)(3)(A).
    \25\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \26\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \26\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

[[Page 41769]]

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NYSENAT-2019-18 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-NYSENAT-2019-18. 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 (http://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 offices 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-NYSENAT-2019-18, and should be submitted 
on or before September 5, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\27\
---------------------------------------------------------------------------

    \27\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-17484 Filed 8-14-19; 8:45 am]
 BILLING CODE P


