[Federal Register Volume 84, Number 243 (Wednesday, December 18, 2019)]
[Notices]
[Pages 69415-69421]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-27199]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87724; File No. SR-NYSE-2019-69]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Amending Its Price List

December 12, 2019.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on December 2, 2019, New York Stock Exchange LLC (``NYSE'' 
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 its Price List to (1) adopt a new 
Step Up Tier 3 Adding Credit in Tape A, B and C securities; (2) revise 
the requirements for the Remove Tier 1 for Tape B and C securities; and 
(3) revise the credits available to Supplemental Liquidity Providers 
(``SLPs'') under SLP Provide Tier 1 for adding liquidity to the 
Exchange in Tapes B and C securities. The Exchange also proposes 
certain non-substantive changes to the Price List. 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.

[[Page 69416]]

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

1. Purpose
    The Exchange proposes to amend its Price List to (1) adopt a new 
Step Up Tier 3 Adding Credit in Tape A, B and C securities; (2) revise 
the requirements for the Remove Tier 1 for Tape B and C securities; and 
(3) revise the credits available to SLPs under SLP Provide Tier 1 for 
adding liquidity to the Exchange in Tapes B and C securities. The 
Exchange also proposes certain non-substantive changes to the Price 
List.
    The proposed changes respond to the current competitive environment 
where order flow providers have a choice of where to direct liquidity-
providing orders by offering further incentives for member 
organizations to send additional displayed liquidity to the Exchange.
    The Exchange proposes to implement the fee changes effective 
December 2, 2019.
Competitive Environment
    The Commission has repeatedly expressed its preference for 
competition over regulatory intervention in determining prices, 
products, and services in the securities markets. In Regulation NMS, 
the Commission highlighted the importance of market forces in 
determining prices and SRO revenues and, also, recognized that current 
regulation of the market system ``has been remarkably successful in 
promoting market competition in its broader forms that are most 
important to investors and listed companies.'' \4\
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    \4\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37495, 37499 (June 29, 2005) (S7-10-04) (Final Rule) 
(``Regulation NMS'').
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    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, all competing for order flow. 
Based on publicly-available information, no single exchange has more 
than 18% market share (whether including or excluding auction 
volume).\8\ Therefore, no exchange possesses significant pricing power 
in the execution of equity order flow. More specifically, for the month 
of November 2019, the Exchange's market share of intraday trading 
(i.e., excluding auctions) in Tapes A, B and C securities was only 
9.4%.\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. 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 
move order flow, or discontinue or reduce use of certain categories of 
products, in response to fee changes. With respect to non-marketable 
order flow that would provide displayed liquidity on an Exchange, 
member organizations can choose from any one of the 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.
    In response to this competitive environment, the Exchange has 
established incentives for its member organizations who submit orders 
that provide and remove liquidity on the Exchange, including cross-tape 
incentives for member organizations and SLPs based on submission of 
orders that provide displayed and non-displayed liquidity in Tapes B 
and C securities. The proposed fee change is designed to attract 
additional order flow to the Exchange by:
     Offering a new pricing tier to incentivize member 
organizations to step up their liquidity-providing orders on the 
Exchange on all tapes;
     revising the requirements to achieve the current Remove 
Tier 1 rate in Tape B and C securities for removing liquidity from the 
Exchange to require that a percentage of the removing ADV requirement 
represent an increase over November 2019; and
     restructuring the credits for SLPs that provide displayed 
liquidity to the Exchange in Tapes B and C securities for Tapes B and C 
combined by lowering the credit for SLPs meeting the current 
requirements and requiring adding liquidity in all assigned securities 
of at least 0.30% of Tape B and Tape C CADV combined in order for SLPs 
to qualify for the current $0.0033 credit per share per tape.
Proposed Rule Change
Proposed Step Up Tier 3 Adding Credit \10\
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    \10\ The Exchange proposes the non-substantive change to the 
current Step Up Adding Tier 2 Credit of deleting the Adding ADV 
requirements for the November 2019 billing month from the first 
bullet of the rule and the introductory language in the second 
bullet as obsolete. The applicable requirements going forward will 
remain unchanged.
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    The Exchange proposes to adopt a ``Step Up Tier 3 Adding Credit'' 
that would offer a credit to member organizations providing displayed 
liquidity to the Exchange in Tapes A, B and C securities.
    As proposed, a member organization that sends orders, except Mid-
Point Liquidity Orders (``MPL'') and Non-Displayed Limit Orders, that 
add liquidity (``Adding ADV'') in Tape A, B and C securities would 
receive a credit of $0.0029 in Tape A, B and C securities if:
     The member organization quotes at least 15% of the 
National Best Bid or Offer (``NBBO'') \11\ in 300 or more Tape A 
securities on a monthly basis, and
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    \11\ See Rule 1.1(q) (defining ``NBBO'' to mean the national 
best bid or offer).
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     the member organization's Adding ADV in Tapes A, B and C 
securities as a percentage of Tapes A, B and C consolidated average 
daily volume (``US CADV''),\12\ excluding any liquidity added by a 
Designated Market Maker (``DMM''), is at least two times more than the 
member organization's July 2019 Adding ADV in Tapes A, B and C 
securities as a percentage of US CADV, and
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    \12\ The terms ``ADV'' and ``CADV'' are defined in footnote * of 
the Price List.
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     the member organization's Adding ADV as a percentage of US 
CADV, excluding any liquidity added by a DMM, exceeds that member 
organization's Adding ADV in Tapes A, B and C securities in July 2019 
as a percentage of US CADV by at least 0.20% of US CADV, and
     add liquidity as an SLP in Tape A securities of at least 
0.10% of NYSE CADV.
    In addition, member organizations that meet these requirements and 
qualify for the $0.0029 credit in Tape A, B and C securities would be 
eligible to receive an additional $0.00005 per share for adding 
liquidity in Tape A securities if trades in Tapes B and C securities 
against the member organization's orders that add liquidity, excluding 
orders as an SLP, equal to at least 0.20% of Tape B and Tape C CADV 
combined.
    For example, Member Organization A has an Adding ADV of 18 million 
shares when US CADV (Tape A) was 6.0 billion, or 0.30% of US CADV in 
all

[[Page 69417]]

securities, in the baseline month of July 2019 (the ``Baseline 
Month''). Member Organization A also has an Adding ADV of 33 million 
shares or 0.55% of US CADV in Tape A securities in December 2019 when 
US CADV was also 6.0 billion.
    Based on the foregoing, Member Organization A would meet the 0.20% 
step up requirement for December 2019 with an increase of 0.25% but 
fall short of the two times Adding ADV as a percentage of US CADV 
requirement in order to qualify for the proposed tier. In order to 
qualify for the proposed rate in December 2019, Member Organization A 
would need two times its 0.20% of US CADV in the Baseline Month or at 
least 0.60% of US CADV.
    The purpose of this proposed change is to incentivize member 
organizations to increase the liquidity-providing orders in the Tape A, 
B and C securities they send to the Exchange, which would support the 
quality of price discovery on the Exchange and provide additional 
liquidity for incoming orders. The Exchange notes that this tier 
provides an alternative way for Member Organizations to qualify for a 
$0.0029 credit in Tape A Securities, in addition to Step Up Adding Tier 
2. As noted above, the Exchange operates in a competitive environment, 
particularly as it relates to attracting non-marketable orders, which 
add liquidity to the Exchange. Because, as proposed, the tier requires 
a member organization to increase the volume of its trades in orders 
that add liquidity over that member organization's July 2019 baseline 
and add liquidity as an SLP in Tape A securities of at least 0.10% of 
NYSE CADV, the Exchange believes that the proposed credit would provide 
an incentive for member organizations to send additional liquidity to 
the Exchange in order to qualify for it.
    The Exchange does not know how much order flow member organizations 
choose to route to other exchanges or to off-exchange venues. There are 
currently no firms that qualify for the proposed higher Step Up Tier 3 
Adding Credit based on their current trading profile on the Exchange, 
but the Exchange believes that at least 4 member organizations could 
qualify for the tier if they so choose. However, without having a view 
of member organization's activity on other exchanges and off-exchange 
venues, the Exchange has no way of knowing whether this proposed rule 
change would result in any member organization directing orders to the 
Exchange in order to qualify for the new tier.
Tape B and C Securities \13\
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    \13\ The Exchange proposes two additional non-substantive 
changes to the Price List. First, under the heading ``Credit 
Applicable to Supplemental Liquidity Providers (`SLPs'),'' the 
Exchange proposes to replace the current list of applicable credits 
with the general phrase ``applicable Non-Tier or Tiered non-SLP 
Adding Credit'' to reference current and future non-SLP Non-Tiered 
and Tiered credits, rather than specifying each such credit. Second, 
the Exchange proposes to delete ``Traded Pursuant to Unlisted 
Trading Privileges (Tapes B and C) on the Pillar Trading Platform'' 
from the heading relating to fees and credits applicable to trading 
in Tape B and C securities.
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    For Tape B and C securities, the Exchange currently offers a Remove 
Tier for securities at or above $1.00 for member organizations that 
have a minimum amount of Adding ADV in non-SLP and Floor broker order 
flow. Further, the Exchange offers several levels of credits for SLP 
orders that provide liquidity to the Exchange in Tape B and C 
securities priced at or above $1.00 based on the volume of orders that 
member organizations send to the Exchange. The SLP Provide Tier credits 
(Non Tier, Tier 2, Tier 1 and Tape A Tier) range from $0.00005 to 
$0.0033.
Remove Tier 1 Fee For Securities At or Above $1.00
    Currently, under Remove Tier 1 for securities at or above $1.00 in 
Tape B and C securities, the Exchange charges a per tape fee of $0.0026 
per share to remove liquidity from the Exchange for member 
organizations that either have:
     0.175% of Removing ADV in Tapes B and C combined as a 
percentage of Tape B and C CADV, or
     0.075% of Removing ADV in Tapes B and C combined as a 
percentage of Tape B and C CADV, and execute an ADV of Market-on-Close 
(``MOC'') and Limit-on-Close (``LOC'') Orders combined on the NYSE in 
Tape A securities of at least 0.35% of NYSE CADV.
    In order for member organizations to achieve the current Remove 
Tier 1 per tape fee of $0.0026 per share to remove liquidity from the 
Exchange, the Exchange proposes the additional requirement that the 
member organization's removing ADV in Tapes B and C combined as a 
percentage of Tape B and C CADV represent an increase of at least 
0.050% over the member organization's removing ADV in November 2019, 
taken as a percentage of Tape B and C combined.
    For example, if Member Organization B averaged a Removing ADV in 
Tape B and C securities of 6 million shares in a month where the Tape B 
and C CADV is 3 billion shares, Member Organization B would have a 
Removing ADV of 0.20% of Tape B and C CADV and would previously qualify 
for the reduced fee of $0.0026 per share for removing liquidity from 
the Exchange in both Tapes B and C. Further assume that Member 
Organization B averaged also Removing ADV of 0.20% of Tape B and C CADV 
in the baseline month of November 2019. Under the proposed change, 
Member Organization B would need a Removing ADV of at least 7.5 million 
shares in the billing month to qualify, assuming Tape B and C CADV was 
again 3 billion shares.
    Assume that Member Organization B instead averaged a Removing ADV 
in Tape B and C securities of 3 million shares in a month where the 
Tape B and C CADV is 3 billion shares, or 0.10% of Tape B and C CADV, 
and an ADV of MOC and LOC Orders in Tape A securities of 14 million 
shares in a month where NYSE CADV was 3.5 billion shares, or 0.40% of 
NYSE CADV. Under the proposed change, Member Organization B would need 
a Removing ADV of at least 4.5 million shares in the billing month to 
qualify, assuming Tape B and C CADV was again 3 billion shares, for an 
increase in Removing ADV of 0.05%.
    There are currently 5 member organizations that qualify for the 
current Removing Tier 1 based on their current trading profile on the 
Exchange. There are currently no firms that qualify for the proposed 
Removing Tier 1 as the additional requirement requires a step up in 
Removing ADV over November 2019, but the Exchange believes that at 
least 12 additional member organizations could qualify for the proposed 
tier if they so choose. However, without having a view of member 
organization's activity on other exchanges and off-exchange venues, the 
Exchange has no way of knowing whether this proposed rule change would 
result in any member organization directing orders to the Exchange in 
order to qualify for this tier.
Displayed Liquidity Under SLP Provide Tier 1
    Under current SLP Provide Tier 1, SLPs that add displayed liquidity 
to the Exchange in securities with a per share price at or above $1.00 
and that:
     Add liquidity for all assigned Tape B securities of a CADV 
of at least 0.10% for Tape B or for all assigned Tape C Securities of a 
CADV of at least 0.075% for Tape C, and
     meet the 10% average or more quoting requirement in 400 or 
more assigned securities in Tapes B and C combined pursuant to Rule 
107B are eligible for a $0.0033 per share credit

[[Page 69418]]

per tape in an assigned Tape B or C security.
    The Exchange proposes that SLPs meeting the above current 
requirements would be eligible for a $0.0031 per share credit per tape 
in an assigned Tape B or C security. Further, as proposed, SLPs that 
meet the additional requirement of adding liquidity for all assigned 
securities of at least 0.30% of Tape B and Tape C CADV combined, would 
be eligible for a $0.0033 per share credit per tape in an assigned Tape 
B or C security.
    For example, assume in the billing month that SLP C adds an average 
of 1.0 million shares in Tape B securities and 1.5 million shares in 
Tape C securities in a month where Tape B CADV was 1 billion shares and 
Tape C CADV was 2 billion shares. SLP C would meet the current 
requirements by having an Adding ADV of 0.10% of Tape B and 0.075% in 
Tape C securities. SLP C would then need an Adding ADV of at least 9 
million shares across both Tape B and Tape C securities combined to 
meet the proposed 0.30% Adding ADV requirement of Tapes B and C.
    There are currently 2 SLPs that qualify for the proposed SLP Tier 1 
based on their current trading profile on the Exchange, but the 
Exchange believes that at least 5 more SLPs could qualify for the tier 
if they so choose. However, without having a view of SLP's activity on 
other exchanges and off-exchange venues, the Exchange has no way of 
knowing whether this proposed rule change would result in any SLP 
directing orders to the Exchange in order to qualify for this tier.
    The proposed changes are not otherwise intended to address other 
issues, and the Exchange is not aware of any significant problems that 
market participants would have in complying with the proposed changes.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\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) & (5).
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The Proposed Change is Reasonable
    As discussed above, the Exchange operates in a highly fragmented 
and competitive market. The Commission has repeatedly expressed its 
preference for competition over regulatory intervention in determining 
prices, products, and services in the securities markets. Specifically, 
in Regulation NMS, the Commission highlighted the importance of market 
forces in determining prices and SRO revenues and, also, recognized 
that current regulation of the market system ``has been remarkably 
successful in promoting market competition in its broader forms that 
are most important to investors and listed companies.'' \16\
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    \16\ See Regulation NMS, 70 FR at 37499.
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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, in response to fee changes. With respect to non-marketable 
orders which provide liquidity on an Exchange, member organizations 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. Stated otherwise, changes to 
exchange transaction fees can have a direct effect on the ability of an 
exchange to compete for order flow.
    Given this competitive environment, the proposal represents a 
reasonable attempt to attract additional order flow to the Exchange. As 
noted, the Exchange's market share of intraday trading (i.e., excluding 
auctions) for the month of November 2019, in Tapes A, B and C 
securities was only 9.4%.\17\
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    \17\ See note 9 supra.
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    Specifically, the Exchange believes that the proposed Step Up Tier 
3 Adding Credit would provide an incentive for member organizations to 
send additional liquidity providing orders to the Exchange in Tape A 
securities. As noted above, the Exchange operates in a highly 
competitive environment, particularly for attracting non-marketable 
order flow that provides liquidity on an exchange. The Exchange 
believes that requiring member organizations to quote at least 15% of 
the NBBO in 300 or more securities on a monthly basis in order to 
qualify for the proposed Step Up Tier 3 Adding Credit is reasonable 
because it would encourage additional displayed liquidity on the 
Exchange and because market participants benefit from the greater 
amounts of displayed liquidity present on the Exchange. The Exchange 
notes that this tier provides an alternative way for Member 
Organizations to qualify for a $0.0029 credit in Tape A Securities, in 
addition to Step Up Tier 2. Similarly, the Exchange believes that it is 
reasonable to provide an incremental credit to member organizations 
that meet the requirements of the proposed Step Up Tier 3 that add 
additional liquidity in Tapes B and C securities.
    Since the proposed Step Up Tier 3 would be new with a step up 
requirement, no member organization currently qualifies for the 
proposed pricing tier. As previously noted, there are a number of 
member organizations that could qualify for the proposed higher credit 
but without a view of member organization activity on other exchanges 
and off-exchange venues, the Exchange has no way of knowing whether the 
proposed rule change would result in any member organization qualifying 
for the tier. The Exchange believes the proposed credit is reasonable 
as it would provide an additional incentive for member organizations to 
direct their order flow to the Exchange and provide meaningful added 
levels of liquidity in order to qualify for the higher credit, thereby 
contributing to depth and market quality on the Exchange.
    The Exchange also believes that revising the requirements for the 
current Remove Tier 1 rate for removing liquidity from the Exchange to 
require that a percentage of the removing ADV requirement represent an 
increase over November 2019 is reasonable because it would incentivize 
member organizations to remove additional liquidity from the Exchange, 
thereby increasing the number of orders adding liquidity that are 
executed on the Exchange and improving overall liquidity on a public 
exchange and resulting in lower costs for member organizations that 
qualify for the rates.
    Without having a view of a member organization's activity on other 
markets and off-exchange venues, the Exchange believes the proposed 
revised Remove Tier 1 would provide an incentive for member 
organizations to remove additional liquidity from the Exchange in Tape 
B and C securities. As previously noted, a number of member 
organizations can qualify for the Remove Tier fee and additional member 
organizations could qualify for the new tiered rate under either 
proposed criteria if they choose to direct order flow to, and increase 
quoting on, the Exchange
    The Exchange believes lowering the credit under SLP Provide Tier 1 
for member organizations that are SLPs that meet the current 
requirements and

[[Page 69419]]

requiring adding liquidity in all assigned securities of at least 0.30% 
of Tape B and Tape C CADV combined in order for SLPs to qualify for the 
current $0.0033 credit per share per tape is reasonable because it 
would provide further incentives for such member organizations to 
provide additional liquidity to a public exchange in Tape B and C 
securities to reach the proposed Adding ADV requirement of 0.30%, 
thereby promoting price discovery and transparency and enhancing order 
execution opportunities for member organizations. All member 
organizations 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 proposal would provide an 
incentive for member organizations that are SLPs to route additional 
liquidity-providing orders to the Exchange in Tape B and C securities. 
As noted above, the Exchange operates in a highly competitive 
environment, particularly for attracting non-marketable order flow that 
provides liquidity on an exchange. The Exchange believes it is 
reasonable to provide a higher credit for orders that provide 
additional liquidity.
    Without having a view of a member organization's activity on other 
markets and off-exchange venues, the Exchange believes the proposed 
additional requirement to qualify for the higher SLP credit would 
provide an incentive for member organizations who are SLPs to submit 
additional adding liquidity to the Exchange in Tape B and C securities. 
As previously noted, a number of SLPs are qualifying for the SLP 
Provide Tier 1credit for adding. Based on the profile of liquidity-
providing SLPs generally, the Exchange believes additional SLPs could 
qualify for the displayed and non-displayed SLP Provide Tier 1credits 
if they choose to direct order flow to, and increase quoting on, the 
Exchange.
    The Exchange notes that the proposed credits remains in line with 
the credits the Exchange currently credits SLPs for adding displayed 
and non-displayed liquidity in Tape A securities. The Exchange notes 
that in Tape A securities, SLPs can qualify for an adding credit of 
$0.0032 per share by qualifying for the SLP Tier 1 credit of $0.0029 
per share and also qualifying for the Step Up Tier 1 credit of $0.0003, 
for a combined credit of $0.0032.\18\
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    \18\ See page 5 of the current NYSE Price List, available at 
https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf.
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    Finally, the Exchange also believes the proposed non-substantive 
changes are reasonable and would not be inconsistent with the public 
interest and the protection of investors because investors will not be 
harmed and in fact would benefit from increased clarity and 
transparency on the Price List, thereby reducing potential confusion.
The Proposal Is an Equitable Allocation of Fees
    The Exchange believes its proposal equitably allocates its fees 
among its market participants. The Exchange believes its proposal 
equitably allocates its fees among its market participants by fostering 
liquidity provision and stability in the marketplace. Moreover, the 
proposal is an equitable allocation of fees because it would reward 
SLPs for their increased risks and heightened quoting and other 
obligations.
    The Exchange believes that the proposed Step Up Tier 3 is equitable 
because the magnitude of the additional credit is the same as the 
current Step Up Tier 2 credit in Tape A securities. Moreover, the 
proposed credit is not unreasonably high relative to the other non-SLP 
adding tier credits, which as range from $0.0015 to $0.0026, in 
comparison to the credits paid by other exchanges for orders that 
provide additional step up liquidity.\19\ 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 Exchange believes that requiring member 
organizations to quote at least 15% of the NBBO in 300 or more Tape A 
securities on a monthly basis in order to qualify for the proposed 
credit would also encourage additional displayed liquidity on the 
Exchange and is same as the current Step Up Tier 2 quoting requirement.
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    \19\ See Cboe BZX Fee Schedule, which has adding credits ranging 
from $0.0025 to $0.0032, at https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/.
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    Since the proposed Step Up Tier 3 would be new and includes a step 
up Adding ADV requirement, no member organization currently qualifies 
for it. As noted, there are currently a number of member organizations 
that could qualify for the proposed tier, but without a view of member 
organization activity on other exchanges and off-exchange venues, the 
Exchange has no way of knowing whether this proposed rule change would 
result in any member organization qualifying for the tier. The Exchange 
believes the proposed credit is reasonable as it would provide an 
additional incentive for member organizations to direct their order 
flow to the Exchange and provide meaningful added levels of liquidity 
in order to qualify for the higher credit, thereby contributing to 
depth and market quality on the Exchange.
    The proposal neither targets nor will it have a disparate impact on 
any particular category of market participant. All member organizations 
would be eligible to qualify for the credit proposed in Step Up Tier 3 
if they increase their Adding ADV over their own baseline of order 
flow. The Exchange believes that offering a step up credit for 
providing liquidity if the step up requirements for Tape A, B and C 
securities are met, along with the SLP and quoting requirements, will 
continue to attract order flow and liquidity to the Exchange, thereby 
providing additional price improvement opportunities on the Exchange 
and benefiting investors generally. As to those market participants 
that do not presently qualify for the adding liquidity credits, the 
proposal will not adversely impact their existing pricing or their 
ability to qualify for other credits provided by the Exchange.
    The Exchange believes that, for the reasons discussed above, the 
proposed changes to the Remove Tier 1 fee would incentivize member 
organizations to remove additional liquidity from the Exchange, thereby 
increasing the number of orders adding liquidity that are executed on 
the Exchange and improving overall liquidity on a public exchange. As 
previously noted, a number of member organizations are qualifying for 
the Remove Tier 1 fee. Based on the profile of liquidity-removing firms 
generally, the Exchange believes additional member organizations could 
qualify for the new tiered rate under either proposed criteria if they 
choose to direct order flow to, and increase quoting on, the Exchange.
    The Exchange believes that revising the credits for SLPs for adding 
displayed liquidity to the Exchange in Tapes B and C securities will 
encourage the SLPs to add liquidity to the market in Tape B and C 
securities, thereby providing customers with a higher quality venue for 
price discovery, liquidity, competitive quotes and price improvement. 
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 member organizations from the substantial amounts of liquidity 
present on the Exchange. All member organizations would benefit from 
the greater amounts of liquidity

[[Page 69420]]

that will be present on the Exchange, which would provide greater 
execution opportunities. As the Exchange previously noted that, a 
number of the current SLP firms are qualifying for the SLP Provide Tier 
1credit based on adding displayed liquidity and adding non-displayed 
liquidity. Based on the profile of liquidity-providing SLPs generally, 
the Exchange believes that additional SLPs could qualify for the 
displayed and non-displayed SLP Provide Tier 1credits if they choose to 
direct order flow to, and increase quoting on, the Exchange.
    The proposed rebates are also equitable because they would apply 
equally to all existing and potential SLPs. The Exchange believes the 
proposed rebates could provide an incentive for other market 
participants to become SLPs on the Exchange. The Exchange believes that 
the proposal would provide an equal incentive to all member 
organizations to become SLPs, and that the proposal constitutes an 
equitable allocation of fees because all similarly situated member 
organizations would be eligible for the same rebates.
The Proposal Is Not Unfairly Discriminatory
    The Exchange believes that the proposal is not unfairly 
discriminatory. In the prevailing competitive environment, member 
organizations are free to disfavor the Exchange's pricing if they 
believe that alternatives offer them better value.
    The Exchange believes it is not unfairly discriminatory to provide 
an additional per share step up credit, as the proposed credit would be 
provided on an equal basis to all member organizations that add 
liquidity by meeting the new proposed Step Up 3 Tier's requirements. 
For the same reason, the Exchange believes it is not unfairly 
discriminatory to provide a higher adding credit to member 
organizations that satisfy the Step Up Tier 3 requirements and add 
liquidity that include Tapes B and C securities, as the higher credit 
of $0.0029 applies in Tape A, B and C securities and is in line with 
the $0.0029 Tape A credit for Step Up 2 tier. Further, the Exchange 
believes the proposed Step Up Tier 3 credit would incentivize member 
organizations that meet the current tiered requirements to send more 
orders to the Exchange to qualify for higher credits. 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. Finally, the submission of 
orders to the Exchange is optional for member organizations in that 
they could choose whether to submit orders to the Exchange and, if they 
do, the extent of its activity in this regard.
    The proposed changes to the Remove Tier 1 fee are also not unfairly 
discriminatory because the enhanced step up requirement to achieve the 
fee would be applied to all similarly situated member organizations and 
other market participants, who would all be eligible for the same 
credit on an equal basis. Accordingly, no member organization already 
operating on the Exchange would be disadvantaged by this allocation of 
fees. Further, the Exchange believes the proposal would provide an 
incentive for member organizations to remove additional liquidity from 
the Exchange in Tape B and C securities, to the benefit of all market 
participants.
    Similarly, the Exchange believes that the proposed credits for SLP 
Provide Tier 1 would incentivize member organizations that are SLPs to 
send more orders to the Exchange to qualify for higher credits. 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. Finally, the 
submission of orders to the Exchange is optional for member 
organizations in that they could choose whether to submit orders to the 
Exchange and, if they do, the extent of its activity in this regard.
    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,\20\ the Exchange 
believes that the proposed rule change would not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. Instead, as discussed above, the Exchange believes 
that the proposed changes would encourage the submission of additional 
liquidity to a public exchange, thereby promoting market depth, price 
discovery and transparency and enhancing order execution opportunities 
for member organizations. As a result, the Exchange believes that the 
proposed change furthers the Commission's goal in adopting Regulation 
NMS of fostering integrated competition among orders, which promotes 
``more efficient pricing of individual stocks for all types of orders, 
large and small.'' \21\
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    \20\ 15 U.S.C. 78f(b)(8).
    \21\ Regulation NMS, 70 FR at 37498-99.
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    Intramarket Competition. The proposed changes are designed to 
attract additional order flow to the Exchange. The Exchange believes 
that the proposed changes would continue to incentivize market 
participants to direct displayed order flow to the Exchange. Greater 
liquidity benefits all market participants on the Exchange by providing 
more trading opportunities and encourages member organizations to send 
orders, thereby contributing to robust levels of liquidity, which 
benefits all market participants on the Exchange. The current and 
proposed credits would be available to all similarly-situated market 
participants, and, as such, the proposed change would not impose a 
disparate burden on competition among market participants on the 
Exchange.
    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) for the month of November 2019, in Tapes A, B and C 
securities was only 9.4%.\22\ 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.
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    \22\ See note 9 supra.
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    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. The Exchange also believes that the proposed 
change is designed to provide the public and investors with a Price 
List that is clear and consistent, thereby reducing burdens on the 
marketplace and facilitating investor protection.

[[Page 69421]]

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) \23\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \24\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \23\ 15 U.S.C. 78s(b)(3)(A).
    \24\ 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) \25\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \25\ 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-NYSE-2019-69 on the subject line.

Paper Comments

     Send paper comments in triplicate to: Secretary, 
Securities and Exchange Commission, 100 F Street NE, Washington, DC 
20549-1090.

All submissions should refer to File Number SR-NYSE-2019-69. 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 office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NYSE-2019-69 and should be submitted on 
or before January 8, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
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    \26\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2019-27199 Filed 12-17-19; 8:45 am]
 BILLING CODE 8011-01-P


