[Federal Register Volume 85, Number 140 (Tuesday, July 21, 2020)]
[Notices]
[Pages 44129-44135]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-15689]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89324; File No. SR-NYSE-2020-59]


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

July 15, 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 July 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 
and II below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its Price List to (1) adopt a new 
Step Up Tier 4 Adding Credit, and (2) extend through July 2020 the 
waiver of equipment and related service charges and trading license 
fees for NYSE Trading Floor-based member organizations implemented for 
April, May and June 2020. The Exchange proposes to implement the fee 
changes effective July 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.

[[Page 44130]]

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

1. Purpose
    The Exchange proposes to amend its Price List to (1) adopt a new 
Step Up Tier 4 Adding Credit, and (2) extend through July 2020 the 
waiver of equipment and related service charges and trading license 
fees for NYSE Trading Floor-based member organizations implemented for 
April, May and June 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, 
especially aggressively priced orders that improve the market by 
setting the National Best Bid and Offer (``NBBO'') on the Exchange. The 
proposed changes also 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'').
    The Exchange proposes to implement the fee changes effective July 
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 
incentivizing member organizations to submit additional displayed 
liquidity to, and quote aggressively in support of the price discovery 
process on, the Exchange.
    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\ On 
June 15, 2020, the Exchange announced that on June 17, 2020, the 
Trading Floor would reintroduce a subset of Designated Market Makers 
(``DMM''), also subject to safety measures designed to prevent the 
spread of COVID-19.\11\
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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.
    \10\ See Trader Update, dated May 14, 2020, available here: 
https://www.nyse.com/traderupdate/history#110000251588.
    \11\ See Trader Update, dated June 15, 2020, available here: 
https://www.nyse.com/trader-update/history#110000272018.
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    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 July 2020.
Proposed Rule Change
Step Up Tier 4 Adding Credit
    The Exchange proposes to adopt a new ``Step Up Tier 4 Adding 
Credit'' that would offer an incremental credit for providing displayed 
liquidity to the Exchange in Tapes A, B and C Securities.
    As proposed, the Exchange would provide an incremental $0.0006 
credit in Tapes A, B and C securities for all orders from a qualifying 
member organization market participant identifier (``MPID'') or 
mnemonic \12\ that sets the NBBO \13\ or a new BBO \14\ if the MPID or 
mnemonic:
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    \12\ Member organizations enter orders and order instructions, 
and receive information from the Exchange, by establishing a 
connection to a gateway that uses communication protocols that map 
to the order types and modifiers described in Exchange rules. These 
gateway connections, also known as logical port connections, are 
referred to as ``ports'' on the Exchange's Price List. Legacy ports 
connect with the Exchange via a Common Customer Gateway (known as 
``CCG'') that accesses its equity trading systems (``Phase I 
ports''). Since July 2019, the Exchange has also made available 
ports using Pillar gateways to its member organizations (``Phase II 
ports''). For purposes of the Step Up Tier 4 Adding Credit, 
references to an ``MPID'' means the unique identifier assigned to 
member organizations communicating with the Exchange using Phase II 
ports, and references to ``mnemonic'' means the unique identifier 
issued by the Exchange to member organizations communicating with 
the Exchange using Phase I ports
    \13\ See Rule 1.1(q) (defining ``NBBO'' to mean the national 
best bid or offer).
    \14\ See Rule 1.1(c) (defining ``BBO'' to mean the best bid or 
offer on the Exchange).
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     has adding average daily volume (``ADV'') in Tapes A, B 
and C Securities as a percentage of Tapes A, B and C CADV,\15\ 
excluding any liquidity added

[[Page 44131]]

by a DMM, that is at least 50% more than the MPID's or mnemonic's 
Adding ADV in Tapes A, B and C securities in June 2020 as a percentage 
of Tapes A, B and C CADV, and
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    \15\ The terms ``ADV'' and ``CADV'' are defined in footnote * of 
the Price List.
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     is affiliated with an Supplemental Liquidity Provider 
(``SLP'') that has an Adding ADV in Tape A securities at least 0.10% of 
NYSE CADV, and
     has Adding ADV in Tape A securities as a percentage of 
NYSE CADV, excluding any liquidity added by a DMM, that is at least 
0.20%.
    The proposed credit would be in addition to the MPID's or 
mnemonic's current credit for adding liquidity. The proposed credit 
also would not count toward the combined limit on SLP credits of 
$0.0032 per share provided for in the Incremental Credit per Share for 
affiliated SLPs whereby SLPs can qualify for incremental credits of 
$0.0001, $0.0002 or $0.0003.
    For example, assume Member Organization A has two MPIDs, MPID1 and 
MPID2, and that MPID1 is a SLP with at least 0.10% SLP Adding ADV of 
NYSE CADV in the billing month. Further assume that MPID2 has an Adding 
ADV in Tape A, B and C Securities of 15 million shares when US CADV is 
10 billion shares, or .15%.
    If in the billing month MPID2 has an Adding ADV of 22.5 million 
shares with 10 million shares in Tape A securities, and that US CADV is 
again 10 billion shares, with 4 billion shares in NYSE CADV, Member 
Organization A's MPID2 would qualify for the incremental credit of 
$0.0006 per share for setting the NBBO and NYSE BBO because:
     MPID2's Adding ADV of 22.5 million shares when US CADV is 
10 billion gives MPID2 an Adding ADV % of US CADV of 0.225%, a 50% 
increase over their 0.15% baseline;
     the 4 million shares in Adding ADV in Tape A when NYSE 
CADV is 4 billion shares gives MPID2 an Adding ADV of 0.25%; and
     MPID2 is affiliated with MPID1, which has at least 0.10% 
Adding ADV as a SLP in Tape A securities.
    Further assume MPID2 meets the current Adding Tier 1 credit of 
$0.0022. In that case, Member Organization A would receive a credit of 
$0.0028 for MPID2 orders that set the NBBO or BBO, and $0.0022 for all 
other orders. If MPID2 was a SLP that qualified for the SLP Tier 1 
adding credit of $0.0029, and also qualified for SLP Step Up credit of 
$.0003, MPID2 would receive $0.0038 for orders that set the NBBO or 
NYSE BBO, and $0.0032 for all other SLP orders that add liquidity to 
the Exchange.
    The purpose of this proposed change is to incentivize member 
organizations to increase aggressively priced liquidity-providing 
orders that improve the market by setting the NBBO or a new BBO on the 
Exchange. The proposed step up tier is thus intended to encourage 
higher levels of liquidity, which would support the quality of price 
discovery on the Exchange and is consistent with the overall goals of 
enhancing market quality. As noted above, the Exchange operates in a 
competitive environment, particularly as it relates to attracting non-
marketable orders, that adds liquidity to the Exchange. Because the 
proposed tier requires a member organization to receive an incremental 
per share credit if the member organization's eligible unique 
identifiers establish the NBBO or a new BBO on the Exchange and meet 
certain Adding ADV requirements directly and through affiliation with 
an SLP, the Exchange believes that the proposed credit would provide an 
incentive for such 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. Insofar 
as the tier, as proposed, requires a step up in Adding ADV from June 
2020, there are currently no member organizations that would qualify 
for the proposed Step Up Tier 4 Adding Credit based on their current 
trading profile on the Exchange. The Exchange believes, however, that 
at least 5 member organizations could qualify for the tier if they so 
choose. However, without having a view of member organization's 
activity on other exchanges and off-exchange venues, the Exchange has 
no way of knowing whether this proposed rule change would result in any 
member organization directing orders to the Exchange in order for their 
MPIDs or mnemonics to qualify for the new tier.
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.\16\ On May 26, 2020, the Trading Floor reopened on a limited 
basis to a reduced number of Floor brokers to accommodate health-
focused considerations. Following the partial reopening, the Exchange 
extended the equipment fee waiver for the month of June.\17\ As noted 
above, on June 15, 2020, a limited number of DMMs returned to the 
Trading Floor. The Trading Floor continues to operate with reduced 
headcount and additional health and safety precautions.\18\
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    \16\ 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.
    \17\ See Securities Exchange Act Release No. 89050 (June 11, 
2020), 85 FR 36637 (June 17, 2020) (SR-NYSE-2020-49).
    \18\ See Trader Update, dated June 15, 2020, available here: 
https://www.nyse.com/trader-update/history#110000272018. DMMs 
continue to support a subset of NYSE-listed securities remotely.
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    For the months of April, May and June, 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.\19\ 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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    \19\ The Service Charges also include an internet Equipment 
Monthly Hosting Fee that the Exchange did not waive for April, May 
and June 2020 and that the Exchange does not propose to waive for 
July 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 July 2020. To effectuate this change, the 
Exchange proposes to add ``and July'' between ``June'' 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, May and 
June 2020 monthly portion of all applicable annual fees for (1) member 
organizations with

[[Page 44132]]

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.\20\
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    \20\ See notes 16-17, supra. See footnote 15 of the Price List.
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    The Exchange proposes to also waive the July 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 July 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 July'' between ``June'' 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,\21\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\22\ 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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    \21\ 15 U.S.C. 78f(b).
    \22\ 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.'' \23\
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    \23\ 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 4 Adding Credit
    The Exchange believes that a new Step Up Tier 4 Adding Credit is 
reasonable. Specifically, the Exchange believes that the proposed Step 
Up Tier 4 Adding Credit would provide an incentive for member 
organizations to receive an incremental per share credit if the unique 
identifiers associated with the member organization for order entry and 
execution identification purposes establish the NBBO or a new BBO on 
the Exchange and meet certain Adding ADV requirements directly and 
through affiliation with an SLP. The proposed incremental credit would 
thus provide incentives to member organizations to provide aggressively 
priced orders that improve the market by setting the NBBO or a new BBO 
on the Exchange and to send additional liquidity providing orders to 
the Exchange in Tape A, B and C Securities. To the extent that the 
proposed change leads to an increase in overall liquidity activity on 
the Exchange and more competitive pricing, this will improve the 
quality of the Exchange's market, improve quote spreads and increase 
its attractiveness to existing and prospective participants.
    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 higher credits for orders that provide additional 
liquidity. Moreover, the Exchange believes that providing an 
incrementally higher credit for adding orders that set the NBBO or a 
new BBO is reasonable because it would encourage additional 
aggressively priced displayed liquidity on the Exchange and because 
market participants benefit from the greater amounts of liquidity and 
price improvement present on the Exchange. Further, the Exchange 
believes that requiring member organizations to meet specific Adding 
ADV requirements at the MPID and mnemonic level in order to qualify for 
the incremental credit is also reasonable. Specifically, requiring all 
eligible unique identifiers to (1) have Adding ADV in Tapes A, B and C 
Securities as a percentage of Tapes A, B and C CADV, excluding any 
liquidity added by a DMM, that is at least 50% more than the MPID's or 
mnemonic's Adding ADV in Tapes A, B and C securities in June 2020 as a 
percentage of Tapes A, B and C CADV; (2) be affiliated with an SLP that 
has an Adding ADV in Tape A securities at least 0.10% of NYSE CADV; and 
(3) have Adding ADV in Tape A securities as a percentage of NYSE CADV, 
excluding any liquidity added by a DMM, that is at least 0.20%, is 
reasonable because it would encourage additional displayed liquidity on 
the Exchange and because market participants benefit from the greater 
amounts of liquidity and price improvement present on the Exchange.
    Since the proposed Step Up Tier 4 would be new with a step up 
requirement, no member organization currently qualifies for the 
proposed pricing tier. As previously noted, there are a number of 
member organizations that could qualify for the proposed higher credit 
but without a view of member organization activity on other exchanges 
and off-exchange venues, the Exchange has no way of knowing whether the 
proposed rule change would result in any member organization qualifying 
for the tier. The Exchange believes the proposed credit is reasonable 
as it would provide an additional incentive for member organizations to 
direct their order flow

[[Page 44133]]

to the Exchange and provide meaningful added levels of liquidity in 
order to qualify for the higher incremental credit, thereby 
contributing to depth and market quality on the Exchange.
    The Exchange believes that requiring member organization's unique 
identifiers be affiliated with an SLP with an Adding ADV of at least 
0.10% of NYSE CADV will encourage members to act as a SLP, which will 
benefit market participants from increased quoting as required for 
SLPs. The Exchange notes that Step Up Tier 2 has a similar SLP 
affiliation requirement.
    Finally, the Exchange believes that excluding the incremental 
$0.0006 credit for NBBO and BBO setting adding volume from the $0.0032 
limit for SLP Step Up credits will incentivize improved quoting and 
tighter spreads. The Exchange notes that all other adding orders from 
those qualifying MPIDs and mnemonics will continue to subject to the 
$0.0032 limit.
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 and DMMs, 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 July 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 4 Adding Credit
    The Exchange believes that the proposed Step Up Tier 4 will 
allocate the proposed credits fairly among market participants. The 
proposed tier will allow member organizations to qualify for a credit 
by adding liquidity and setting the NBBO or a new BBO. 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. It is equitable for the Exchange to add additional 
incentives for member organizations to receive a credit when their 
orders add liquidity to the Exchange as a means of incentivizing 
increased liquidity adding activity. An increase in overall liquidity 
on the Exchange will improve the quality of the Exchange's market and 
increase its attractiveness to existing and prospective participants.
    The Exchange believes that requiring member organization's unique 
identifiers to have specific Adding ADV requirements in order to 
qualify for the proposed credit would also encourage additional 
displayed liquidity on the Exchange. Moreover, it is equitable for the 
Exchange to require the unique identifiers to be affiliated with an SLP 
that meets an Adding ADV requirement in Tape A securities due to the 
Exchange's goal to specifically promoting increased liquidity in 
securities in Tape A. 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 incremental credit is reasonable as it would incentivize 
activity that encourages the setting of the NBBO or a new BBO, 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 incremental credit proposed in Step Up Tier 4 if their unique 
identifier meets the Adding ADV requirements in Tapes A, B and C 
securities on its own and through affiliation with an SLP. Any market 
participant that is dissatisfied with the proposed new credit is free 
to shift order flow to competing venues that provide more favorable 
pricing or less stringent qualifying criteria.
    The Exchange believes that offering an incremental step up credit 
for setting the NBBO or a new BBO will encourage higher levels of 
liquidity provision into the price discovery process and is consistent 
with the overall goals of enhancing market quality, 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 July 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, May and June 
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 4 Adding Credit
    The Exchange believes it is not unfairly discriminatory to provide 
an additional per share step up credits for activity that encourages 
the setting of the NBBO or a new BBO 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's requirements. As 
noted, the Exchange intends for the proposal to improve market quality 
for all members on the Exchange and by extension attract more liquidity 
to the market, thereby improving market wide quality and price 
discovery. The Exchange notes that there are currently tiers offering 
similar incentives. For example, NYSE Arca, Inc. (``NYSE Arca'') offers 
a BBO Setter tier for qualifying ETP IDs

[[Page 44134]]

that provides an incremental credit of $0.0004 per share in Tape A and 
Tape C securities and an incremental credit of $0.0002 in Tape B 
securities for orders that set a new NYSE Arca BBO.\24\ 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.
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    \24\ See NYSE Arca Equities Fees and Charges, available https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf.
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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 July 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,\25\ 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.'' \26\
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    \25\ 15 U.S.C. 78f(b)(8).
    \26\ 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 July 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) \27\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \28\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \27\ 15 U.S.C. 78s(b)(3)(A).
    \28\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \29\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \29\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule

[[Page 44135]]

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-2020-59 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-2020-59. 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-2020-59 and should be submitted on 
or before August 11, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\30\
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    \30\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-15689 Filed 7-20-20; 8:45 am]
BILLING CODE 8011-01-P


