[Federal Register Volume 85, Number 72 (Tuesday, April 14, 2020)]
[Notices]
[Pages 20730-20735]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-07779]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88602; File No. SR-NYSE-2020-27]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend its Price List To Respond to the Current Volatile Market 
Environment That Has Resulted in Unprecedented Average Daily Volumes 
and the Temporary Closure of the Trading Floor

April 8, 2020.
    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 April 1, 2020, New York Stock Exchange LLC (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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) clarify for 
purposes of certain rebates applicable to Designated Market Makers 
(``DMM'') that in a month where the average monthly NYSE consolidated 
average daily volume (``CADV'') equals or exceeds a certain threshold, 
the Exchange will use the most recent month where the average monthly 
NYSE CADV is less than that threshold to calculate ``Security CADV''; 
(2) revise the providing liquidity requirement for certain DMM rebates 
in a month where the average monthly NYSE CADV equals or exceeds a 
certain threshold; (3) cap the maximum average number of shares per day 
for the billing month for purposes of calculating NYSE CADV for the 
Supplemental Liquidity Provider (``SLP'') Tape A adding tiers; (4) 
introduce maximum average share caps applicable to SLPs for adding 
displayed and non-displayed liquidity in Tape B and C securities; and 
(5) waive equipment and related service charges and trading license 
fees for NYSE Trading Floor-based member organizations for April 2020 
in connection with the recent temporary closing of the Trading Floor. 
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 Price List to (1) clarify for 
purposes of certain rebates applicable to DMMs that in a month where 
the average monthly NYSE CADV equals or exceeds a certain threshold, 
the Exchange will use the most recent month where the average monthly 
NYSE CADV is less than that threshold to calculate ``Security CADV''; 
(2) revise the providing liquidity requirement for certain DMM rebates 
in a month where the average monthly NYSE CADV equals or exceeds a 
certain threshold; (3) cap the maximum average number of shares per day 
for the billing month for purposes of calculating NYSE CADV for the SLP 
Tape A adding tiers; (4) introduce maximum average share caps 
applicable to SLPs for adding displayed and non-displayed liquidity to 
the Exchange in Tape B and C securities; and (5) waive equipment and 
related service charges and trading license fees for NYSE Trading 
Floor-based member organizations for April 2020 in connection with the 
recent temporary closing of the Trading Floor.
    The proposed changes respond to the current volatile market 
environment that has resulted in unprecedented average daily volumes 
and the temporary closure of the Trading Floor, which are both related 
to the ongoing spread of the novel coronavirus (``COVID-19''), by 
providing a degree of certainty to DMMs and SLPs adding liquidity to 
the Exchange by adjusting the threshold requirements for specified fees 
and credits to account for the unprecedented volume and to Trading 
Floor-based member organizations impacted by the temporary closing of 
the Trading Floor by waiving specified Floor-based fees for the month 
of April 2020.
    Specifically, the Exchange proposes the following:
     For purposes of DMM rebates that are based on whether the 
DMM meets either the More Active Securities Quoting Requirement or the 
Less Active Securities Quoting Requirement, as those terms are defined 
in the Price List, which thresholds are based the average daily 
consolidated volume of securities (``Security ADV''), specify that in a 
month where NYSE CADV equals or is greater than 5.5 billion shares, the 
NYSE will use the most recent month where the average monthly NYSE CADV 
is less than 5.5 billion shares to calculate the Security CADV.

[[Page 20731]]

     In order for DMMs to qualify for rebates when adding 
liquidity in More Active Securities, in a month where the average 
monthly NYSE CADV is equal to or greater than 5.5 billion shares, lower 
the DMM providing requirements as a percent of the NYSE's total 
intraday adding liquidity.
     For purposes of calculating NYSE CADV for SLP Tiers 1, 1A, 
2, 3, 4, SLP Step Up Tier and Incremental SLP Step Up Tier adding 
credits, establish a monthly maximum average cap of 5.5 billion shares 
per day for NYSE CADV.
     For purposes of calculating Tier 1 and Tier 2 SLP credits 
for adding displayed and non-displayed liquidity to the Exchange in 
Tape B and C securities, establish a monthly maximum average cap of 
2.75 billion shares per day for Tape B, 3.25 billion shares for Tape C, 
and 6.0 billion shares for Tape B and C combined.
     Waive booth telephone and related service charges and 
trading license fees for the billing month of April 2020 for (1) member 
organizations with at least one trading license, a physical Trading 
Floor presence, and Floor broker executions accounting for 40% or more 
of the member organization's combined adding, taking and auction 
volumes during March 1 to March 20, 2020, and (2) member organizations 
with at least one trading license that are DMMs with 30 or fewer 
assigned securities for the billing month of March 2020.
    The Exchange proposes to implement the fee changes effective April 
1, 2020.
Current Market and Competitive Environment
    Since March 9, 2020, markets worldwide have been experiencing 
unprecedented market-wide declines and volatility because of the 
ongoing spread of COVID-19. Trading volumes on the Exchange have 
surged. For instance, between March 1 and March 30, 2020, NYSE CADV was 
7.4 billion shares, 95% higher than the average NYSE CADV between 2018 
and 2020.
    Beginning on March 16, 2020, to slow the spread of COVID-19 through 
social distancing measures, significant limitations were placed on 
large gatherings throughout the country. As a result, on March 18, 
2020, the Exchange determined that beginning March 23, 2020, the 
physical Trading Floor facilities located at 11 Wall Street in New York 
City would close and that the Exchange would move, on a temporary 
basis, to fully electronic trading.\4\
---------------------------------------------------------------------------

    \4\ See Press Release, dated March 18, 2020, available here: 
https://ir.theice.com/press/press-releases/allcategories/2020/03-18-2020-204202110.
---------------------------------------------------------------------------

    Moreover, the Exchange operates in a highly competitive market. The 
Commission has repeatedly expressed its preference for competition over 
regulatory intervention in determining prices, products, and services 
in the securities markets. In Regulation 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.'' \5\
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37495, 37499 (June 29, 2005) (S7-10-04) (Final Rule) 
(``Regulation NMS'').
---------------------------------------------------------------------------

    As the Commission itself recognized, the market for trading 
services in NMS stocks has become ``more fragmented and competitive.'' 
\6\ Indeed, equity trading is currently dispersed across 13 
exchanges,\7\ 31 alternative trading systems,\8\ and numerous broker-
dealer internalizers and wholesalers, all competing for order flow. 
Based on publicly-available information, no single exchange has more 
than 20% market share (whether including or excluding auction 
volume).\9\ Therefore, no exchange possesses significant pricing power 
in the execution of equity order flow. More specifically, the 
Exchange's market share of trading in Tape A, B and C securities 
combined is less than 13%.
---------------------------------------------------------------------------

    \6\ 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'').
    \7\ 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.
    \8\ 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.
    \9\ See Cboe Global Markets U.S. Equities Market Volume Summary, 
available at http://markets.cboe.com/us/equities/market_share/.
---------------------------------------------------------------------------

    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.
    The proposed rule change accordingly responds to these 
unprecedented events and the current competitive landscape where market 
participants can and do move order flow, or discontinue or reduce use 
of certain categories of products, in response to fee changes.
Proposed Rule Change
DMM Rebates Based on Calculation of Security CADV
    The section of the Exchange's Price List entitled ``Fees and 
Credits Applicable to DMMs'' sets out different monthly rebate amounts 
to DMMs depending on the CADV of the security and the DMM quoting 
percentage and size in any month in which the DMM meets the More Active 
Securities Quoting Requirement \10\ and the Less Active Securities 
Quoting Requirement,\11\ as well as DMM providing as a percent of the 
NYSE's total intraday adding liquidity, as those terms are defined in 
the Price List. Specifically, the monthly rebates offered by the 
Exchange for DMMs meeting the More Active Securities Quoting 
Requirement and the Less Active Securities Quoting Requirement are 
determined based on securities with a Security CADV (i.e., the average 
daily consolidated volume for the applicable security) equal to or 
greater than 1,000,000 shares per month, respectively, in the previous 
month. The Exchange also provides monthly rebates to DMMs depending on 
the Security CADV and the DMM quoting percentage. Finally, the Exchange 
allocates market data quote revenue (``Quoting Share'') received by the 
Exchange from the Consolidated Tape Association under the Revenue 
Allocation Formula of Regulation to DMMs for securities with a Security 
CADV of less than 1,500,000 shares in the previous month (regardless of 
whether the stock price exceeds $1.00) based on the DMM meeting 
specified quoting percentage requirements at the NBBO.\12\
---------------------------------------------------------------------------

    \10\ The ``More Active Securities Quoting Requirement'' is met 
if the More Active Security has a stock price of $1.00 or more and 
the DMM quotes at the NBBO in the applicable security at least 10% 
of the time in the applicable month.
    \11\ The ``Less Active Securities Quoting Requirement'' is met 
when a security has a consolidated ADV of less than 1,000,000 shares 
per month in the previous month and a stock price of $1.00 or more, 
and the DMM quotes at the NBBO in the applicable security at least 
15% of the time in the applicable month.
    \12\ See NYSE Price List, at 8-13, available at https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf.
---------------------------------------------------------------------------

    For each of these calculations based on Security CADV, the Exchange 
proposes to add a footnote following

[[Page 20732]]

each use of ``previous month'' in the DMM section of the Price List 
providing that in a month where NYSE CADV equals or is greater than 5.5 
billion shares, the Exchange will use the most recent month where NYSE 
CADV is less than 5.5 billion shares to calculate the Security CADV.
    For example, assume the relevant billing month is April 2020. 
Assume NYSE CADV in the preceding month of March 2020 was equal to or 
greater than 5.5 billion shares and that the most recent month where 
NYSE CADV was less than 5.5 billion shares was February 2020. In this 
example, the Exchange would use trading volumes from February 2020 to 
calculate Security CADV and, as long as NYSE CADV was under 5.5 billion 
shares, the Security CADV for each security would be based on that 
symbol's CADV in the month of February. In the event that NYSE CADV in 
February 2020 was also equal to or greater than 5.5 billion shares, the 
Exchange would use the next most recent month prior to February where 
NYSE CADV was under 5.5 billion shares.
DMM Adding Liquidity Credits in More Active Securities
    Currently, DMMs earn a rebate of $0.0031 per share when adding 
liquidity, other than MPL Orders, in More Active Securities if the More 
Active Security has a stock price of $1.00 or more and the DMM meets 
the More Active Securities Quoting Requirement \13\ and the DMM (1) has 
a DMM Quoted Size \14\ for an applicable month that is at least 10% of 
the NYSE Quoted Size, and (2) quotes at the National Best Bid or Offer 
(``NBBO'') in the applicable security at least 20% of the time in the 
applicable month, and (3) has providing liquidity that is more than 5% 
of the NYSE's total intraday adding liquidity in each such security for 
that month.
---------------------------------------------------------------------------

    \13\ See note 10, supra.
    \14\ The ``NYSE Quoted Size'' is calculated by multiplying the 
average number of shares quoted on the NYSE at the NBBO by the 
percentage of time the NYSE had a quote posted at the NBBO. The 
``DMM Quoted Size'' is calculated by multiplying the average number 
of shares of the applicable security quoted at the NBBO by the DMM 
by the percentage of time during which the DMM quoted at the NBBO. 
See NYSE Price List, n. 7.
---------------------------------------------------------------------------

    DMMs electing the optional monthly rebate per security (``Rebate 
per Security'') instead receive a lower monthly rebate per share 
(``Optional Credit'') of $0.0030 per share if the quoting and providing 
requirements are met. A DMM that meets (1) these requirements, and (2) 
the DMM Additional Quoting Requirement \15\ would receive an 
incremental credit of $0.0003 per share in each eligible assigned More 
Active Security.
---------------------------------------------------------------------------

    \15\ The ``DMM Additional Quoting Requirement'' is defined as 
the DMM increasing their quoting at the NBBO by at least 5% over 
their quoting at the NBBO in September 2019, in at least 300 
assigned securities.
---------------------------------------------------------------------------

    The Exchange proposes that in a month where NYSE CADV is equal to 
or greater than 5.5 billion shares, the DMM providing liquidity 
requirement would instead be 2.5% of the NYSE's total intraday adding 
liquidity in each such security for that month. The other current 
requirements and credits would otherwise remain unchanged.
    Similarly, DMMs currently earn a rebate of $0.0034 per share when 
adding liquidity with orders, other than MPL Orders, in More Active 
Securities if the More Active Security has a stock price of $1.00 or 
more and the DMM meets the More Active Securities Quoting Requirement 
and (1) has a DMM Quoted Size for an applicable month that is at least 
15% of the NYSE Quoted Size, (2) for providing liquidity that is more 
than 15% of the NYSE's total intraday adding liquidity in each such 
security for that month, and (3) quotes at the NBBO in the applicable 
security at least 30% of the time in the applicable month. DMMs 
electing the optional Rebate per Security instead receive an Optional 
Credit of $0.0033 per share if the quoting and providing requirements 
are met. A DMM that meets (1) these current requirements, and (2) the 
DMM Additional Quoting Requirement receives an incremental credit of 
$0.0001 per share in each eligible assigned More Active Security.
    The Exchange proposes that in a month where NYSE CADV is equal to 
or greater than 5.5 billion shares, the DMM providing liquidity 
requirement would instead be more than 7.5% of the NYSE's total 
intraday adding liquidity in each such security for that month. The 
other current requirements and credits would otherwise remain 
unchanged.
    Finally, DMMs currently earn a rebate of $0.0035 per share when 
adding liquidity with orders, other than MPL Orders, in More Active 
Securities if the More Active Security has a stock price of $1.00 or 
more and the DMM meets the More Active Securities Quoting Requirement 
and (1) has a DMM Quoted Size for an applicable month that is at least 
25% of the NYSE Quoted Size, (2) for providing liquidity that is more 
than 15% of the NYSE's total intraday adding liquidity in each such 
security for that month, and (3) quotes at the NBBO in the applicable 
security at least 50% of the time in the applicable month. DMMs 
electing the optional Rebate per Security instead receive an Optional 
Credit of $0.0034 per share if the quoting and providing requirements 
are met.
    The Exchange proposes that in a month where NYSE CADV is equal to 
or greater than 5.5 billion shares, the DMM providing liquidity 
requirement would instead be more than 7.5% of the NYSE's total 
intraday adding liquidity in each such security for that month. The 
other current requirements and credits would otherwise remain 
unchanged.
NYSE CADV Cap for SLP Tape A Tiers
    The Exchange currently offers tiered and non-tiered credits in Tape 
A securities to SLPs that meet certain quoting obligations in assigned 
securities based upon the total percent of NYSE CADV executed. For 
purposes of calculating NYSE CADV as currently used in SLP Tiers 1, 1A, 
2, 3, 4, the SLP Step Up Tier and the Incremental SLP Step Up Tier, the 
Exchange proposes to establish a monthly maximum average cap of 5.5 
billion shares per day for NYSE CADV in the billing month. To 
effectuate this change, the Exchange would add a footnote ** after 
``NYSE CADV'' where the term appears in each tier specifying that, in a 
month where NYSE CADV equals or exceeds 5.5 billion shares per day for 
the billing month, NYSE CADV for that month will be subject to a cap of 
5.5 billion shares per day for the billing month. Because SLP Tiers 1, 
1A, 2, 4, and the SLP Step Up Tier contain cross-tier incentives based 
on adding liquidity as a percentage of Tape B and C CADV combined, the 
proposed footnote would also reference the proposed cap for Tape B and 
C securities combined discussed below applicable to CADV calculations 
for SLP Tiers 1 and 2 in Tape B and C securities. The Exchange would 
also add proposed footnote ** after ``Tape B and Tape C CADV'' in the 
SLP Tape A tiers referenced above.
    For example, assume in the billing month that an SLP has an average 
daily adding volume of 5.5 million shares. Further assume that NYSE 
CADV was 7.5 billion shares during that month. To calculate the SLP 
adding ADV as a percent of NYSE CADV, the Exchange would use the NYSE 
CADV cap of 5.5 billion shares, yielding an adding percent of NYSE CADV 
of 0.10% rather than 0.07% if the Exchange had used 7.5 billion shares.
SLP CADV Caps for SLP Tiers in Tape B and C Securities
    For Tape B and C securities, the Exchange currently offers several 
levels

[[Page 20733]]

of credits for SLP orders that provide displayed and non-displayed 
liquidity to the Exchange in Tape B and C securities priced at or above 
$1.00 based on the volume of orders as a percentage of CADV 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. 
As described below, the Exchange proposes to cap the SLP provide 
percentage CADV for Tape B, Tape C and for Tape B and C combined.
    Under current SLP Tier 1, in order for SLPs to qualify for the 
current $0.0031 per share credit per tape and the current $0.0033 per 
share credit per tape in an assigned Tape B or C security, an SLP must, 
among other things, add liquidity for all assigned Tape B securities of 
a CADV of at least 0.10% for Tape B and a CADV of at least 0.075% for 
Tape C. The requirements for the $0.0033 per share credit also provide 
that an SLP add liquidity for all assigned securities of at least 0.25% 
of Tape B and Tape C CADV combined. Under current SLP Provide Tier 2, 
SLPs are eligible for a $0.0029 per share credit per tape in an 
assigned Tape B or C security when adding displayed liquidity to the 
Exchange if the SLP, among other things, adds liquidity for all 
assigned Tape B and C securities in the aggregate of a CADV of at least 
0.03% per tape.
    The Exchange proposes to add footnote # specifying that the 
calculation of the relevant SLP provide percentage tape CADV would be 
subject to a maximum average for the billing month of 2.75 billion 
shares per day for Tape B, 3.25 billion shares for Tape C, and 6.0 
billion shares for Tape B and C combined. The proposed caps would apply 
to all CADV calculations for SLP Tiers 1 and 2.
Fee Waivers for Trading Floor-Based Member Organizations
    The Exchange charges certain equipment fees for the booth telephone 
system on the Trading Floor and associated service charges. 
Specifically, the Exchange charges an Annual Telephone Line Charge of 
$400 per phone number and $129 for a single line phone, jack, and data 
jack. The Exchange also assesses related service charges, as follows: 
$161.25 to install single jack (voice or data); $107.50 to relocate a 
jack; $53.75 to remove a jack; $107.50 to install voice or data line; 
$53.75 to disconnect data line; $53.75 to change a phone line 
subscriber; and miscellaneous telephone charges billed at $106 per hour 
in 15 minute increments.\16\
---------------------------------------------------------------------------

    \16\ The Service Charges also include an Internet Equipment 
Monthly Hosting Fee that the Exchange does not propose to waive for 
April 2020.
---------------------------------------------------------------------------

    Because, as described above, the Trading Floor at 11 Wall Street is 
temporarily closed, the Exchange proposes to waive these Trading Floor-
based fees for April 2020 for member organizations with at least one 
trading license, a physical Trading Floor presence, and Floor broker 
executions accounting for 40% or more of the member organization's 
combined adding, taking, and auction volumes during March 1 to March 
20, 2020. The Exchange also proposes to waive these fees for April 2020 
for member organizations with at least one trading license that are 
Designated Market Makers with 30 or fewer assigned securities for the 
billing month of March 2020.
    To effectuate this change, the Exchange proposes a new footnote 11 
following ``Equipment Fee.'' \17\
---------------------------------------------------------------------------

    \17\ The Exchange proposes to delete current footnote 11, which 
provides that the Annual Telephone Line Charge will be waived on a 
prorated basis for Floor brokers for January, February and March 
2013, as obsolete. There is no footnote 12 so the Exchange proposes 
to renumber current footnotes 13 and 14.
---------------------------------------------------------------------------

    The proposed change is designed to reduce monthly costs for member 
organizations with a Trading Floor presence that are unable to use the 
services associated with the fees while the Trading Floor is 
temporarily closed. The Exchange believes that this fee waiver would 
ease the financial burden associated with the temporary Trading Floor 
closure.
    In order to further reduce costs for member organizations with a 
Trading Floor presence, the Exchange also proposes to waive trading 
license fees for April 2020. The Exchange currently offers tiered 
trading license fees, as follows.
    For all member organizations, including Floor brokers with more 
than ten trading licenses but excluding Regulated Only Members as 
defined in Rule 2(b)(ii), the trading license fee is $50,000 for the 
first license held by the member organization unless one of the other 
rates is deemed applicable. For member organizations with 3-9 trading 
licenses, the Exchange charges $35,000 for the first license held by a 
member organization that has Floor broker executions accounting for 40% 
or more of the member organization's combined adding and taking volumes 
during the billing month. For Floor brokers with 1-2 trading licenses, 
the Exchange charges $25,000 for the first license held by a member 
organization that has Floor broker executions accounting for 40% or 
more of the member organization's combined adding and taking volumes 
during the billing month. Regulated Only Members are charged an annual 
administrative fee of $25,000.
    The Exchange proposes to waive the April 2020 monthly portion of 
all applicable annual fees for member organizations with at least one 
trading license, a physical Trading Floor presence and Floor broker 
executions accounting for 40% or more of the member organization's 
combined adding, taking, and auction volumes during March 1 to March 
20, 2020. The indicated annual trading license fees will also be waived 
for April 2020 for member organizations with at least one trading 
license that are DMMs with 30 or fewer assigned securities for the 
billing month of March 2020.
    To effectuate this change, the Exchange proposes to add text 
describing the waiver to current footnote 15.
    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,\18\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\19\ 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.
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78f(b).
    \19\ 15 U.S.C. 78f(b)(4) & (5).
---------------------------------------------------------------------------

The Proposed Change Is Reasonable
    As discussed above, beginning March 2020, markets worldwide have 
experienced unprecedented declines and volatility because of the 
ongoing spread of COVID-19 that has also resulted in the temporary 
closure of the NYSE Trading Floor. As a result of this volatility, the 
equity markets have experienced unprecedented trading volumes. 
Moreover, as also discussed above, the Exchange operates in a highly 
fragmented and competitive market. In view of these unprecedented 
events, and the current competitive landscape where market participants 
can and do move order flow, or discontinue or reduce use of certain 
categories of

[[Page 20734]]

products, in response to fee changes, the Exchange believes that the 
proposed rule change is reasonable.
    Specifically, the Exchange believes that using the most recent 
month where NYSE CADV is less than 5.5 billion shares to calculate the 
Security CADV for DMM monthly rebates for the More Active Securities 
Quoting Requirement and the Less Active Securities Quoting Requirement, 
is reasonable because significantly fewer symbols would qualify as Less 
Active Securities when NYSE CADV is equal to or exceeds 5.5 billion 
shares.
    Similarly, lowering the DMM providing requirements as a percent of 
the NYSE's total intraday adding liquidity in a month where NYSE CADV 
is equal to or greater than 5.5 billion shares in order for DMMs to 
qualify for rebates when adding liquidity in More Active Securities is 
reasonable because such extraordinarily high market volumes would make 
is significantly harder for DMMs to meet the DMM providing 
requirements.
    Further, capping the Tape A monthly CADV at a maximum of 5.5 
billion shares when calculating all Tape A SLP tiers and the Tape B 
CADV, Tape C CADV and Tape B and C combined CADV when calculating all 
Tape B and C SLP tiers is reasonable because such extraordinarily high 
market volumes would make it significantly harder for SLPs, whose 
adding volume is limited to proprietary adding liquidity, to meet the 
adding requirements for the aforementioned SLP tiers.
    Finally, the proposed waiver of equipment and related service fees 
and the applicable monthly trading license fee for Trading Floor-based 
member organizations is reasonable in light of the temporary closure of 
the NYSE Trading Floor. The proposed change is designed to reduce costs 
for Floor participants for the month of April 2020 that are unable to 
conduct Floor operations while the Trading Floor remains temporarily 
closed. The Exchange believes that this fee waiver would ease the 
financial burden faced by member organizations that conduct business on 
the Trading Floor and benefit all such member organizations.
The Proposal Is an Equitable Allocation of Fees
    The Exchange believes the proposal equitably allocates its fees 
among its market participants by fostering liquidity provision and 
stability in the marketplace.
    The Exchange believes that the proposed use of a lower threshold to 
calculate Security CADV for DMM rebates and lowering the DMM providing 
requirements as a percent of the NYSE's total intraday adding liquidity 
in a month where NYSE CADV is equal to or greater than 5.5 billion 
shares is an equitable allocation of fees because the proposed changes 
would apply to all similarly situated member organizations that are 
DMMs on the Exchange, and that all such member organizations would 
continue to be subject to the same fee structure, and access to the 
Exchange's market would continue to be offered on fair and 
nondiscriminatory terms.
    For the same reasons, the proposed caps for calculating all Tape A 
SLP tiers and CADV for SLP credits for adding displayed and non-
displayed liquidity to the Exchange in Tape B and C securities also 
constitute an equitable allocation of fees. The proposed caps for 
calculating SLP CADV across all tapes would apply equally to all 
similarly situated member organizations that are SLPs, all of whom 
would continue to be subject to the same fee structure, and access to 
the Exchange's market would continue to be offered on fair and 
nondiscriminatory terms.
    Finally, the proposed waiver of equipment and related service fees 
and the applicable monthly trading license fee for Trading Floor-based 
member organizations during April 2020 are also an equitable allocation 
of fees. The proposed waivers apply to all Trading Floor-based firms 
meeting specific requirements during the period that the Trading Floor 
is temporarily closed. The proposed change is equitable as it is 
designed to reduce monthly costs for Trading Floor-based member 
organizations that are unable to conduct Floor operations.
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 proposal is not unfairly discriminatory because it neither 
targets nor will it have a disparate impact on any particular category 
of market participant. The proposed use of a lower threshold to 
calculate Security CADV for DMM rebates and lowering the DMM providing 
requirements as a percent of the NYSE's total intraday adding liquidity 
in a month where NYSE CADV is equal to or greater than 5.5 billion 
shares does not permit unfair discrimination because the proposed 
changes would apply to all similarly situated member organizations that 
are DMMs, who would benefit from use of the lower volume threshold to 
calculate Security CADV on an equal basis.
    The proposed caps for calculating all Tape A SLP tiers and CADV for 
SLP credits for adding displayed and non-displayed liquidity to the 
Exchange in Tape B and C securities also does not permit unfair 
discrimination because the proposed changes would apply to all 
similarly situated member organizations that are SLPs, who would all 
benefit from use of the lower volume threshold to calculate SLP adding 
tier CADV across tapes on an equal basis.
    The proposed waiver of equipment and related service fees and the 
applicable monthly trading license fee for Trading Floor-based member 
organizations during April 2020 is not unfairly discriminatory because 
the proposed waivers would benefit all similarly-situated market 
participants on an equal and non-discriminatory basis. The Exchange is 
not proposing to waive the Floor-related fixed indefinitely, but rather 
during the period that the Trading Floor is temporarily closed. The 
proposed fee change is designed to ease the financial burden on Trading 
Floor-based member organizations that cannot conduct Floor operations 
while the Trading Floor remains closed.
    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 continued participation 
of member organizations on the Exchange by providing certainty and fee 
relief during the unprecedented volatility and market declines caused 
by the continued spread of COVID-19. 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

[[Page 20735]]

individual stocks for all types of orders, large and small.'' \21\
---------------------------------------------------------------------------

    \20\ 15 U.S.C. 78f(b)(8).
    \21\ Regulation NMS, 70 FR at 37498-99.
---------------------------------------------------------------------------

    Intramarket Competition. The Exchange believes that the use of a 
lower threshold to calculate Security CADV for DMM rebates and lowering 
the DMM providing requirements as a percent of the NYSE's total 
intraday adding liquidity in a month where NYSE CADV is equal to or 
greater than 5.5 billion shares, the proposed caps for calculating all 
Tape A SLP tiers and CADV for SLP credits for adding displayed and non-
displayed liquidity to the Exchange in Tape B and C securities, and the 
proposed waiver of equipment and related service fees and the 
applicable monthly trading license fee for Trading Floor-based member 
organizations during April 2020 are designed to provide a degree of 
certainty to DMMs and SLPs adding liquidity to the Exchange during high 
volatility and to ease the financial burden on Trading Floor-based 
member organizations impacted by the temporary closing of the Trading 
Floor. As noted, the proposal would apply to all similarly situated 
member organizations on the same and equal terms, who would benefit 
from the changes on the same basis. Accordingly, 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 
previously noted, the Exchange's market share of trading in Tape A, B 
and C securities combined is less than 13%. 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 rule change reflects this competitive environment 
because it modifies the Exchange's fees in a manner designed to provide 
a degree of certainty and ease the financial burdens of the current 
unsettled market environment, and permit affected member organizations 
to continue to conduct market-making operations on the Exchange and 
avoid unintended costs of doing business on the Exchange while the 
Trading Floor is inoperative, which could make the Exchange a less 
competitive venue on which to trade as compared to other options 
exchanges.

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) \22\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \23\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
---------------------------------------------------------------------------

    \22\ 15 U.S.C. 78s(b)(3)(A).
    \23\ 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) \24\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \24\ 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:

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-2020-27 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-2020-27. 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-2020-27 and should be submitted on 
or before May 5, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
---------------------------------------------------------------------------

    \25\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-07779 Filed 4-13-20; 8:45 am]
 BILLING CODE 8011-01-P


