[Federal Register Volume 85, Number 117 (Wednesday, June 17, 2020)]
[Notices]
[Pages 36637-36644]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-12989]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89050; File No. SR-NYSE-2020-49]


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

June 11, 2020.
    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 June 1, 2020, 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 step 
up tier for member organizations adding liquidity in Non-Displayed 
Limit Orders in Tapes A, B and C securities; (2) revise the credits for 
member organizations qualifying for Step Up Tier 2 Adding Credit; and 
(3) extend through June 2020 the waiver of equipment and related 
service charges and trading license fees for NYSE Trading Floor-based 
member organizations implemented for April and May 2020. The Exchange 
proposes to implement the fee changes effective June 1, 2020. 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) adopt a step 
up tier for member organizations adding liquidity in Non-Displayed 
Limit Orders in Tapes A, B and C securities; (2) revise the credits for 
member organizations qualifying for Step Up Tier 2 Adding Credit; and 
(3) extend through June 2020 the waiver of equipment and related 
service charges and trading license fees for NYSE Trading Floor-based 
member organizations implemented for April and May 2020.
    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 proposed changes also respond to the current volatile market

[[Page 36638]]

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'').
    The Exchange proposes to implement the fee changes effective June 
1, 2020.
Current Market and Competitive Environment
    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.'' \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 20% 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, the 
Exchange's market share of trading in Tape A, B and C securities 
combined is less than 13%.
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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/.
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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 the competitive environment described above, the 
Exchange has established incentives for its member organizations who 
submit orders that provide liquidity on the Exchange. 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 Non-Displayed Limit Orders and Mid-Point 
Liquidity (``MPL'') Orders on the Exchange and revising the credits for 
member organizations adding liquidity by qualifying for Step Up Tier 2 
Adding Credit.
    Moreover, beginning on March 16, 2020, in order 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.\9\ On May 14, 2020, the Exchange 
announced that on May 26, 2020 trading operations on the Trading Floor 
would resume on a limited basis to a subset of Floor brokers, subject 
to safety measures designed to prevent the spread of COVID-19.\10\ The 
proposed rule change responds to these unprecedented events by 
extending the waiver of equipment and related service charges and 
trading license fees for NYSE Trading Floor-based member organizations 
for June 2020.
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    \9\ See Press Release, dated March 18, 2020, available here: 
https://ir.theice.com/press/press-releases/allcategories/2020/03-18-2020-204202110 [sic].
    \10\ See Trader Update, dated May 14, 2020, available here: 
https://www.nyse.com/traderupdate/history#110000251588 [sic].
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Proposed Rule Change
Step Up Tier for Adding Liquidity in Non-Displayed Limit Orders
    The Exchange proposes to adopt a step up tier that would offer 
credits to member organizations providing non-displayed liquidity to 
the Exchange in Tape A, B, and C securities.
    As proposed, a member organization that
     sends orders that add liquidity to the Exchange in Non-
Displayed Limit Orders, and
     that has adding average daily volume (``ADV'') in Non-
Displayed Limit Orders and MPL Orders in Tapes A, B, and C consolidated 
ADV (``CADV'') \11\ combined, excluding any liquidity added by a 
Designated Market Makers (``DMM''), that is at least 0.02% of NYSE CADV 
over that member organization's May 2020 adding liquidity in Non-
Displayed Limit Orders and MPL Orders as a percentage of NYSE CADV (the 
``Baseline Tape A Share'')
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    \11\ The terms ``ADV'' and ``CADV'' are defined in footnote * 
[sic] of the Price List.

would receive a credit of $0.0005 for adding liquidity if the increase 
in Adding ADV over the Baseline Tape A Share is at least 0.02% and less 
than 0.04%. If the increase in Adding ADV over the Baseline Tape A 
Share is at least 0.04% and less than 0.08%, a member organization 
meeting the above requirements would receive a credit of $0.0010. If 
the increase in Adding ADV over the Baseline Tape A Share is at least 
0.08% or more, a member organization meeting the above requirements 
would receive a credit of $0.0015.
    For example, Member Organization A had an adding ADV in Non-
Displayed Limit Orders and MPL Orders in Tape A, Tape B and Tape C 
securities combined of 6 million shares in the baseline month of May 
2020 when Tape A, Tape B and Tape C CADV combined (``US CADV'') was 
10.0 billion shares or 0.06% of US CADV. Further assume that in the 
billing month, Member Organization A had an adding ADV in Non-Displayed 
Limit Orders and MPL Orders combined of 10 million shares when US CADV 
was again 10 billion shares, or 0.10% of US CADV. In this scenario, 
Member Organization A would have a step up percentage of US CADV of 
0.04% (0.10% minus 0.06%), which would qualify Member Organization A 
for a credit of $0.0010 per share for Non-Displayed Limit Orders.
    If Member Organization A had an adding ADV of 18 million shares, or 
0.18%, for a step up ADV of 0.12%, Member Organization A would instead 
qualify for a credit of $0.0015 because Member Organization A's 
increase in Adding ADV over the Baseline Tape A Share is at least 
0.08%.
    If in the same billing month Member Organization A's adding ADV of 
18 million shares was solely in Non-Displayed Limit Orders (i.e., the 
share

[[Page 36639]]

number did not include MPL Orders) for an Adding ADV in Non-Displayed 
Limit Orders of 0.18%, Member Organization A would also qualify for the 
existing Non-Displayed Limit Order credit of $0.0018 by meeting the 
existing adding ADV requirement of 0.15%. In this scenario, Member 
Organization A would achieve the higher of the two credits, or $0.0018.
    The purpose of this proposed change is to incentivize member 
organizations to increase the liquidity-providing orders in Non-
Displayed Limit Orders and MPL Orders they send to the Exchange, which 
would support the quality of price discovery on the Exchange and 
provide additional liquidity for incoming orders. 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 the proposed tier requires a member organization to 
increase the volume of its trades in orders that add liquidity over 
that member organization's May 2020 baseline, the Exchange believes 
that the proposed credit would provide an incentive for all 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. Since the 
tier's requirements utilize an increase in volume from the most recent 
month, the Exchange does not know how many member organizations could 
qualify for the proposed tiered credits based on their current trading 
profile on the Exchange, but the Exchange notes that, since the lowest 
step up is only an Adding ADV of 0.02% of US CADV in Non-Display Limit 
Orders and MPL Orders combined, the Exchange believes that many member 
organizations could qualify 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.
Revised Credits for the Step Up Tier 2 Adding Credit
    Under the current Step Up Tier 2 Adding Credit, 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 securities receive a credit of $0.0029 if:
     The member organization quotes at least 15% of the 
National Best Bid or Offer (``NBBO'') \12\ in 300 or more Tape A 
securities on a monthly basis, and
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    \12\ 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 CADV, excluding any 
orders by a DMM, that
    [cir] is at least two times more than the Member Organization's 
Adding ADV in Tapes A, B and C securities in July 2019 as a percentage 
of Tapes A, B and C CADV, and
    [cir] adds liquidity as an Supplemental Liquidity Provider in Tape 
A securities of at least 0.10% of NYSE CADV, and
    [cir] exceeds the Member Organization's Adding ADV, excluding any 
liquidity added by a DMM, in Tapes A, B and C securities in July 2019 
as a percentage of Tapes A, B and C CADV by at least 0.20% of Tapes A, 
B and C CADV.
    In addition, a member organization that meets these requirements, 
and thus qualifies for the $0.0029 credit, would be eligible to receive 
an additional $0.00005 per share if trades in Tapes B and C securities 
against the member organization's orders that add liquidity, excluding 
orders as a Supplemental Liquidity Provider (``SLP''), equal to at 
least 0.20% of Tape B and Tape C CADV combined.
    The Exchange proposes two higher credits for member organizations 
that meet the current Step Up Tier 2 Adding Credit requirements and 
increase their Adding ADV, excluding any liquidity added by a DMM, in 
Tapes A, B and C securities in July 2019 as a percentage of Tapes A, B 
and C CADV (``July 2019 Adding ADV'').
    Specifically, member organizations whose Adding ADV as a percentage 
of US CADV represents an increase of at least 0.20% and less than 0.35% 
over their July 2019 Adding ADV as a percentage of US CADV would 
receive the current $0.0029 credit. Member organizations whose Adding 
ADV as a percentage of US CADV represents an increase of at least 0.35% 
and less than 0.45% over their July 2019 Adding ADV as a percentage of 
US CADV would receive a $0.0030 credit. Finally, member organizations 
whose Adding ADV as a percentage of US CADV represents an increase of 
at least 0.45% or more over their July 2019 Adding ADV as a percentage 
of US CADV would receive a $0.0031 credit.
    The Exchange does not propose to change any of the other 
requirements to qualify for the Step Up Tier 2 Adding Credit.
    The purpose of this proposed change is to incentivize member 
organizations to increase the liquidity-providing orders in Tape A 
securities they send to the Exchange, which would support the quality 
of price discovery on the Exchange and provide additional price 
improvement opportunities for incoming orders. The Exchange believes 
that by correlating the amount of the credit to the level of orders 
sent by a member organization that add liquidity, the Exchange's fee 
structure would incentivize member organizations to submit more orders 
that add liquidity to the Exchange, thereby increasing the potential 
for price improvement to incoming marketable orders submitted to the 
Exchange. The Exchange proposes higher credits under this tier to 
provide an incentive for member organizations to send more orders 
because they would then qualify for the credits. 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 against orders that add liquidity, 
the Exchange believes that the proposed higher credits based on a 
commensurate increase in Adding ADV would provide an incentive for 
member organizations to route additional liquidity to the Exchange in 
order to qualify for the higher credits.
    The Exchange does not know how much order flow member organizations 
choose to route to other exchanges or to off-exchange venues. No firms 
currently qualify for the proposed higher Step Up Tier 2 Adding Credits 
based on their current trading profile on the Exchange, but the 
Exchange believes that at least five member organizations could qualify 
for the tier if they so choose. The Exchange notes that, given the 
lower requirement for Adding ADV of 0.20% as a percentage of US CADV 
requirement when compared to other Exchange Adding Tiers (for example, 
Tier 1 Adding Credit and Tier 2 Adding Credit), a number of firms would 
be eligible to qualify 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.

[[Page 36640]]

Fee Waivers for Trading Floor-Based Member Organizations
    As noted above, on March 18, 2020, the Exchange announced that it 
would temporarily close the Trading Floor, effective March 23, 2020, as 
a precautionary measure to prevent the potential spread of COVID-19. 
Following the temporary closure of the Trading Floor, the Exchange 
waived certain equipment fees for the booth telephone system on the 
Trading Floor and associated service charges for the months of April 
and May.\13\ On May 26, 2020, the Trading Floor reopened on a limited 
basis to a reduced number of Floor brokers to accommodate health-
focused considerations. DMMs continue to operate remotely.\14\
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    \13\ See Securities Exchange Act Release No. 88602 (April 8, 
2020), 85 FR 20730 (April 14, 2020) (SR-NYSE-2020-27); Securities 
Exchange Act Release No. 88874 (May 14, 2020), 85 FR 30743 (May 20, 
2020) (SR-NYSE-2020-29). See footnote 11 of the Price List.
    \14\ DMMs will be provided access to the Trading Floor on 
trading days when an IPO Auction or Core Open Auction for a post-IPO 
public offering is scheduled. DMMs will continue to otherwise be 
absent from the Trading Floor and, thus, all intra-day trading and 
other Auctions will be conducted remotely by DMMs.
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    For the months of April and May, the Exchange waived the Annual 
Telephone Line Charge of $400 per phone number and the $129 fee for a 
single line phone, jack, and data jack. The Exchange also waived 
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.\15\ These fees 
were waived 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 
Designated Market Makers with 30 or fewer assigned securities for the 
billing month of March 2020.
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    \15\ The Service Charges also include an internet Equipment 
Monthly Hosting Fee that the Exchange did not waive for April and 
May 2020 and that the Exchange does not propose to waive for June 
2020.
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    Because the Trading Floor will continue to operate with reduced 
capacity, the Exchange proposes to extend the waiver of these Trading 
Floor-based fees through June 2020. To effectuate this change, the 
Exchange proposes to add ``and June'' between ``May'' and ``2020'' in 
footnote 11 to the Price List.
    In order to further reduce costs for member organizations with a 
Trading Floor presence, the Exchange also waived the April and May 2020 
monthly portion of all applicable annual fees 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.\16\
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    \16\ See note 13, supra. See footnotes 15 of the Price List.
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    The Exchange proposes to also waive the June 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 would also be 
waived for June 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 ``and June'' between ``May'' and ``2020'' in footnote 
15.
    This proposed extension of the fee waivers would reduce monthly 
costs for member organizations with a Trading Floor presence whose 
operations were disrupted by the Floor closure, which lasted 
approximately two months, and remains partially closed. The Exchange 
believes that extension of the fee waiver would ease the financial 
burden associated with the ongoing partial Trading Floor closure. The 
Exchange believes that all member organization that conduct business on 
the Trading Floor would benefit from this proposed fee change.
    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,\17\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\18\ in particular, 
because it provides for the equitable allocation of reasonable dues, 
fees, and other charges among its members, issuers and other persons 
using its facilities and does not unfairly discriminate between 
customers, issuers, brokers or dealers.
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    \17\ 15 U.S.C. 78f(b).
    \18\ 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.'' \19\
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    \19\ 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.
Step Up Tier for Adding Liquidity in Non-Displayed Limit Orders
    Given the competitive environment, the proposed Step Up Tier for 
Adding Liquidity in Non-Displayed Limit Orders would provide an 
incentive for member organizations to route 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 it is 
reasonable to provide a higher credit for orders that provide 
additional liquidity. The Exchange believes that requiring member

[[Page 36641]]

organizations to have an Adding ADV in Non-Displayed Limit Orders and 
MPL Orders in Tapes A, B and C CADV combined, excluding any liquidity 
added by a DMM, that is at least 0.02% of NYSE CADV over that member 
organization's May 2020 adding liquidity in Non-Displayed Limit Orders 
and MPL Orders taken as a percentage of NYSE CADV in order to qualify 
for the proposed Step Up Tier is reasonable because it would encourage 
additional non-displayed and mid-point liquidity on the Exchange and 
because market participants benefit from the greater amounts of 
liquidity and price improvement present on the Exchange.
    Similarly, the Exchange believes that it is reasonable to provide 
an incremental credit to member organizations that meet the 
requirements of the Step Up Tier that add additional liquidity in Non-
Displayed Limit Orders and MPL Orders. Since the proposed Step Up Tier 
would be new with a requirement for increased Adding ADV over the 
baseline month, 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 higher 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.
Step Up Tier 2 Adding Credit
    The Exchange believes that higher credits for meeting the Step Up 
Tier 2 Adding Credit requirements is reasonable. Specifically, the 
Exchange believes that offering higher credits for increased Adding ADV 
of a minimum and maximum percentage over a baseline would provide an 
incentive for member organizations to route additional liquidity 
providing orders to the Exchange. 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 incrementally higher 
credits for orders that provide additional liquidity 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. Because, as proposed, the tier 
requires a member organization to increase the volume of its trades 
against orders that add liquidity, the Exchange believes that the 
proposed higher credits based on a commensurate increase in Adding ADV 
would provide an incentive for member organizations to route additional 
liquidity to the Exchange in order to qualify for the higher credits.
    The Exchange does not know how much order flow member organizations 
choose to route to other exchanges or to off-exchange venues. As 
previously noted, there are currently a number of firms that could 
qualify for the proposed higher Step Up Tier 2 Adding Credits based on 
their current trading profile on the Exchange if they so choose, 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 higher 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.
Fee Waivers for Trading Floor-Based Member Organizations
    The proposed extension of the 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 partial 
continued closure of the NYSE Trading Floor. Beginning March 2020, 
markets worldwide have experienced unprecedented declines and 
volatility because of the ongoing spread of COVID-19 also resulted in 
the temporary closure of the NYSE Trading Floor. As noted, the Trading 
Floor was recently partially reopened on a limited basis to a subset of 
Floor brokers, subject to safety measures designed to prevent the 
spread of COVID-19. The proposed change is designed to reduce costs for 
Floor participants for the month of June 2020 and therefore ease the 
financial burden faced by member organizations that conduct business on 
the Trading Floor while it continues to operate with reduced capacity.
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.
Step Up Tier for Adding Liquidity in Non-Displayed Limit Orders
    The Exchange believes that the proposed Step Up Tier is equitable 
because the magnitude of the additional credit is not unreasonably high 
relative to the current tiered credits for Non-Displayed Limit orders 
that add liquidity of $0.0010 and $0.0018. 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 having 
an Adding ADV in Non-Displayed Limit Orders and MPL Orders in Tapes A, 
B and C CADV combined, excluding any liquidity added by a DMM, that is 
at least 0.02% of NYSE CADV over that member organization's May 2020 
adding liquidity in Non-Displayed Limit Orders and MPL Orders combined 
taken as a percentage of NYSE CADV in order to qualify for the proposed 
credits would also encourage additional displayed liquidity on the 
Exchange. Since the proposed Step Up Tier would be new, no member 
organization currently qualifies for it. As noted, there are currently 
no 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 this proposed rule change would result in any member 
organization qualifying for the tier.
    The Exchange believes the proposed higher 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 and increased price 
improvement 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 higher credit proposed in Step Up Tier if they increase their 
Adding ADV in Non-Displayed Limit orders and MPL Orders combined over

[[Page 36642]]

their own baseline of order flow. The Exchange believes that offering a 
higher step up credits for providing liquidity if the step up 
requirements for Tape A, Tape B and Tape C securities are met, 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.
Step Up Tier 2 Adding Credit
    The Exchange is not proposing to adjust the current requirements to 
qualify for the Step Up Tier 2 Adding Credit, which will remain the 
same for all market participants. Rather, the proposal would provide 
incrementally higher credits for member organizations that increase 
Adding ADV over the current baseline. The Exchange believes that the 
proposed higher credits are equitable because the magnitude of the 
additional credits is not unreasonably high compared to the current 
credit for Step Up Tier 2 and also relative to the other adding tier 
credits, which noted above range from $0.0015 to $0.0022, in comparison 
to the credits paid by other exchanges for orders that provide 
additional step up liquidity.\20\ 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.
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    \20\ 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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    The Exchange believes that requiring member organizations to having 
an Adding ADV in Non-Displayed Limit Orders and MPL Orders in Tapes A, 
B and C CADV combined, excluding any liquidity added by a DMM, that is 
at least 0.02% of NYSE CADV over that member organization's May 2020 
adding liquidity in Non-Displayed Limit Orders and MPL Orders taken as 
a percentage of NYSE CADV in order to qualify for the proposed credits 
would also encourage additional displayed liquidity on the Exchange. 
Since the proposed Step Up Tier would be new, no member organization 
currently qualifies for it. As noted, there are currently no member 
organizations that currently 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 
this proposed rule change would result in any member organization 
qualifying for the tier. The Exchange believes the proposed higher 
credits are 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 higher credits 
proposed in Step Up Tier 2 if they increase their Adding ADV over their 
own baseline of order flow accordingly. The Exchange believes that 
offering higher step up credits for providing liquidity if the step up 
requirements for Tape A securities are met, 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.
Fee Waivers for Trading Floor-Based Member Organizations
    Finally, the proposed extension of the waiver of equipment and 
related service fees and the applicable monthly trading license fee for 
Trading Floor-based member organizations to June 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 partially open. The proposed change is equitable 
as it merely continues the fee waiver granted in April and May 2020, 
and is designed to reduce monthly costs for Trading Floor-based member 
organizations that are unable to fully 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.
Step Up Tier for Adding Liquidity in Non-Displayed Limit Orders
    The Exchange believes it is not unfairly discriminatory to provide 
additional per share step up credits for adding liquidity in Non-
Displayed Limit Orders, as the proposed credits would be provided on an 
equal basis to all member organizations that add liquidity by meeting 
the new proposed Step Up Tier's requirements. For the same reason, the 
Exchange believes it is not unfairly discriminatory to provide 
additional incrementally higher credits for increased adding ADV over 
the member organization's May 2020 adding liquidity in Non-Displayed 
Limit Orders and MPL Orders combined taken as a percentage of NYSE CADV 
because the proposed higher credits would equally encourage all member 
organizations to provide additional liquidity on the Exchange in Non-
Displayed Limit Orders and MPL Orders. As noted, 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 the additional 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.
Step Up Tier 2 Adding Credit
    The Exchange believes it is not unfairly discriminatory to provide 
higher per share step up credits, 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 Tier 2 requirements. For 
the same reason, the Exchange believes it is not unfairly 
discriminatory to provide additional incremental credits to member 
organizations that satisfy the Step Up Tier 2 requirements and add 
liquidity in Tape A, B and C securities. Further, the Exchange believes 
the proposed Step Up Tier 2 credits 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

[[Page 36643]]

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.
Fee Waivers for Trading Floor-Based Member Organizations
    The proposed continuation of the waiver of equipment and related 
service fees and the applicable monthly trading license fee for Trading 
Floor-based member organizations during June 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 not fully open. The proposed fee change is designed to 
ease the financial burden on Trading Floor-based member organizations 
that cannot fully conduct Floor operations.
    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,\21\ 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 further 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 individual 
stocks for all types of orders, large and small.'' \22\
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    \21\ 15 U.S.C. 78f(b)(8).
    \22\ Regulation NMS, 70 FR at 37498-99.
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    Intramarket Competition. The proposed changes are designed to 
respond to the current competitive environment and 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. Further, the 
proposed continued waiver of equipment and related service fees and the 
applicable monthly trading license fee for Trading Floor-based member 
organizations during June 2020 provide a degree of certainty and ease 
the financial burden on Trading Floor-based member organizations 
impacted by the temporary closing and partial reopening 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 not fully open, 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) \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).
---------------------------------------------------------------------------

    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).
---------------------------------------------------------------------------

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

[[Page 36644]]

     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSE-2020-49 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-2020-49. 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-2020-49 and should be submitted on 
or before July 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. 2020-12989 Filed 6-16-20; 8:45 am]
BILLING CODE 8011-01-P


