[Federal Register Volume 84, Number 240 (Friday, December 13, 2019)]
[Notices]
[Pages 68236-68239]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-26853]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87695; File No. SR-NYSENAT-2019-30]


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

December 9, 2019.
    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 November 27, 2019, NYSE National, Inc. (``NYSE National'' or the 
``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\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its Schedule of Fees and Rebates 
(``Fee Schedule'') to eliminate the fees currently charged for MPL 
orders that add liquidity on the Exchange and provide that liquidity-
removing orders that execute at prices better than the contra-side NBBO 
will not be subject to any fee. 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its Fee Schedule to (1) eliminate 
the fee currently charged for non-tiered MPL orders adding liquidity in 
securities priced at or above $1.00, (2) eliminate the fee currently 
charged for liquidity-adding MPL orders in Adding Tiers 1, 2, and 3, 
and (3) revise its rates for removing liquidity to provide that 
liquidity-removing orders that execute at prices better than the 
contra-side NBBO will not be subject to any fee.
    The Exchange proposes to implement the rule change on December 2, 
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.'' \3\
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    \3\ 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.'' 
\4\ Indeed, equity trading is currently dispersed across 13 
exchanges,\5\ 31 alternative trading systems,\6\ and numerous broker-
dealer internalizers and wholesalers. Based on publicly-available 
information, no single exchange has more than 17% of the market share 
of executed volume of equity trades (whether excluding or including 
auction volume).\7\ Therefore, no exchange possesses significant 
pricing power in the execution of equity order flow. More specifically, 
in each of the last three months, the Exchange had approximately 2% 
market share of executed volume of equity trades (whether excluding or 
including auction volume).\8\
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    \4\ 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'').
    \5\ 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.
    \6\ 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.
    \7\ See Cboe Global Markets U.S. Equities Market Volume Summary, 
available at http://markets.cboe.com/us/equities/market_share/.
    \8\ 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 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

[[Page 68237]]

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 generally 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 amend its transaction fees as follows.
    First, by eliminating the $0.0010 fee currently applied to non-
tiered MPL orders adding liquidity in securities priced at or above 
$1.00. To effect this change, the Exchange proposes to revise the table 
in Section C of the Fee Schedule to replace the ``$0.0010 per share'' 
text with ``No charge'' in the first row under the ``Adding Liquidity'' 
header. The Exchange's General Rates would otherwise remain the same.
    The Exchange believes that eliminating the per share charge for MPL 
orders that add liquidity to the Exchange will incentivize ETP Holders 
to route liquidity-providing MPL orders to the Exchange, thereby 
attracting liquidity-providing and price improving order flow to the 
Exchange and enhancing order execution opportunities, to the benefit of 
all ETP Holders seeking to remove liquidity. In addition, by 
eliminating this charge in its General Rates, the Exchange believes 
that ETP Holders may be more likely to contribute liquidity-adding MPL 
order flow even if they do not qualify for an Adding Tier.
    Second, by eliminating the $0.0005 fee currently applied to MPL 
orders adding liquidity in Adding Tiers 1, 2, and 3 (as set forth in 
Section D.1. of the Fee Schedule). Currently, MPL orders adding 
liquidity, on all Tapes, are subject to a $0.0005 fee in Adding Tiers 
1, 2, and 3. To effect the proposed change, the Exchange proposes to 
revise the table in Section D.1. to replace the current fee of $0.0005 
with ``No charge'' in the ``Adding MPL Rate'' column for Adding Tiers 
1, 2, and 3. The Exchange's Tiered Rates for Adding Liquidity would 
otherwise remain the same.
    The Exchange believes that the elimination of the fee currently 
charged for MPL orders adding liquidity at these tiers will encourage 
ETP Holders to send additional mid-point liquidity to the Exchange, 
thereby enhancing order execution and price improvement opportunities 
for ETP Holders seeking to remove liquidity.
    Finally, by amending its rates for removing liquidity to provide 
that liquidity-removing orders that execute at prices better than the 
contra-side NBBO will not be subject to any fee, across all Removing 
Tiers set forth in Section D.2. of the Fee Schedule. Under the 
Exchange's current Tiered Rates for Removing Liquidity, as reflected in 
Section D.2. of the Fee Schedule, MPL orders removing liquidity receive 
a rebate of $0.0002 at Removing Tiers 1, 2, and 3.
    To effect this proposed change, the Exchange proposes to revise the 
table in Section D.2. to reflect that all orders removing liquidity 
(not just MPL orders) that execute at a price better than the contra-
side NBBO will carry no charge and will not be eligible for a rebate. 
The Exchange proposes to revise the header of the third column in the 
table in Section D.2. to ``Removing Rate for Orders that Execute at a 
Price Better than Contra-Side NBBO'' and replace ``($0.0002)'' with 
``No Charge'' as the rate applicable to each Removing Tier in this 
column. The remainder of the Removing Rates in this section would 
remain unchanged.
    The Exchange believes that the proposed change reflects a 
reasonable effort to both encourage ETP Holders to route liquidity-
removing order flow to the Exchange and remain consistent with the 
Exchange's taker-maker fee model. The Exchange proposes to eliminate 
credits available to removing orders that execute at a price better 
than the contra-side NBBO because such orders receive the benefit of an 
execution at a price superior to the best protected quote in the 
national market system (including the Exchange's best protected bid or 
offer). As proposed, the tiered rates for such orders would be at no 
charge, which remains better than the current General Rate to remove 
liquidity, which is $0.0005 per share. The Exchange believes that the 
proposed change would continue to promote market quality and execution 
opportunities for ETP Holders. Accordingly, the Exchange proposes that 
while such orders will not receive a rebate, they also will not be 
subject to a fee at any of the Removing Tiers.
    Although the Exchange does not have a full view of ETP Holders' 
activity on other markets and off-exchange venues, the Exchange 
believes that these changes would be significant enough to incentivize 
market participants to direct increased order flow to the Exchange. The 
Exchange believes that the changes will encourage ETP Holders to route 
additional liquidity to the Exchange and further believes that ETP 
Holders are likely to respond by in turn routing more liquidity-
providing order flow to the Exchange.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\9\ in general, and furthers the 
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\10\ 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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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4) & (5).
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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. With respect to non-marketable order flow 
that would provide 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 
liquidity on an exchange.
    Given the current competitive environment, the Exchange believes 
that this proposal represents a reasonable attempt to attract 
additional order flow to the Exchange. Specifically, the Exchange 
believes that eliminating the fees currently charged for both tiered 
and non-tiered MPL orders adding liquidity, as described above, is

[[Page 68238]]

reasonable because ETP Holders will have an incentive to route 
additional liquidity-providing orders to the Exchange without incurring 
any transaction fees, thereby providing meaningful liquidity and 
increasing the opportunity for contra-side order flow to receive price 
improvement. In addition, the Exchange believes that the proposed 
changes to the Removing Tiers are reasonable because they would promote 
execution opportunities for ETP Holders routing order flow to the 
Exchange.
    The Exchange believes that the proposal as a whole represents a 
reasonable effort to promote price improvement and enhanced order 
execution opportunities for ETP Holders. All ETP Holders would benefit 
from the greater amounts of liquidity on the Exchange, which would 
represent a wider range of execution opportunities.
The Proposal Is an Equitable Allocation of Fees
    The Exchange believes its proposed change equitably allocates its 
fees among its market participants. The proposed change would continue 
to encourage ETP Holders to both submit additional liquidity to the 
Exchange and execute orders on the Exchange, thereby contributing to 
robust levels of liquidity, to the benefit of all market participants. 
The Exchange believes that eliminating fees in connection with MPL 
orders adding liquidity would encourage the submission of additional 
liquidity to a national securities exchange, thus enhancing order 
execution opportunities for ETP Holders from the substantial amounts of 
liquidity present on the Exchange. All ETP Holders seeking to remove 
liquidity would benefit from the greater amounts of liquidity that will 
be present on the Exchange, which would provide greater execution 
opportunities.
    The Exchange believes the proposed rule change would also improve 
market quality for all market participants seeking to remove liquidity 
on the Exchange and, as a consequence, attract more liquidity to the 
Exchange, thereby improving market-wide quality. 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 the revised 
fees would apply equally to all similarly situated ETP Holders.
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.
    Moreover, 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 at prices more favorable than the 
NBBO. The Exchange believes that the proposal does not permit unfair 
discrimination because the proposal would be applied to all similarly 
situated ETP Holders and all ETP Holders would be subject to the same 
rates, and, in this case, benefit from the elimination of fees 
previously charged to ETP Holders. Accordingly, no ETP Holder already 
operating on the Exchange would be disadvantaged by the proposed 
allocation of fees.
    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,\11\ 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 change would encourage the submission of additional 
liquidity and order flow to a public exchange, thereby 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.'' \12\
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    \11\ 15 U.S.C. 78f(b)(8).
    \12\ Regulation NMS, 70 FR at 37498-99.
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    Intramarket Competition. The proposed change is designed to attract 
additional order flow to the Exchange. The Exchange believes that its 
proposal to eliminate certain fees applying to MPL orders adding 
liquidity and apply no charge to liquidity-removing orders that execute 
at a price better than the contra-side NBBO would provide additional 
incentives for market participants to route 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. The 
proposed revised fees would be available to all similarly-situated 
market participants, and thus, 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 exchanges 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 was less than 2% 
in each of the last three months. In such an environment, the Exchange 
must continually adjust its fees and rebates to remain competitive with 
other exchanges and 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.

[[Page 68239]]

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) \13\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \14\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \15\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \15\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSENAT-2019-30 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-2019-30. 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-2019-30, and should be submitted 
on or before January 3, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2019-26853 Filed 12-12-19; 8:45 am]
BILLING CODE 8011-01-P


