[Federal Register Volume 85, Number 174 (Tuesday, September 8, 2020)]
[Notices]
[Pages 55550-55561]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-19851]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89754; File No. SR-NYSE-2020-71]


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

September 2, 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 August 20, 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) revise the 
Step Up Tier 1 Adding Credit; (2) revise the Step Up Tier 4 Adding 
Credit; (3) revise a requirement for the Incremental Rebate Per Share 
for Designated Market Makers (``DMM'') in most active securities; (4) 
adopt a new National Best Bid and Offer (``NBBO'') Setter pricing tier 
for DMMs; (5) adopt a new NBBO Setter pricing tier for Supplemental 
Liquidity Providers (``SLP''); and (6) extend through August 2020 the 
waiver of equipment and related service charges and trading license 
fees for NYSE Trading Floor-based member organizations implemented for 
April, May, June and July 2020, make Floor broker member organizations 
that had no March 2020 volumes eligible for both waivers, and provide a 
one-time credit of the equipment and related service charges and 
trading license fees for member organizations that became member 
organizations after April 1, 2020. The Exchange proposes to implement 
the fee changes effective August 20, 2020.\4\ 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.
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    \4\ The Exchange originally filed to amend the Price List on 
August 3, 2020 (SR-NYSE-2020-65). SR-NYSE-2020-65 was subsequently 
withdrawn and replaced by SR-NYSE-2020-70. SR-NYSE-2020-70 was 
subsequently withdrawn and replaced by this filing.
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II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

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

1. Purpose
    The Exchange proposes to amend its Price List to:
     Revise the Step Up Tier 1 Adding Credit;
     revise the Step Up Tier 4 Adding Credit;
     revise a requirement for the Incremental Rebate Per Share 
for DMMs in most active securities;
     adopt a new NBBO Setter pricing tier for DMMs;
     adopt a new NBBO Setter pricing tier for SLPs; and
     extend through August 2020 the waiver of equipment and 
related service charges and trading license fees for NYSE Trading 
Floor-based member organizations implemented for April, May, June and 
July 2020, make Floor broker member organizations that had no March 
2020 volumes eligible for both waivers, and provide a one-time credit 
of the equipment and related service charges and trading license fees 
for member organizations that became member organizations after April 
1, 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 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,

[[Page 55551]]

which are both related to the ongoing spread of the novel coronavirus 
(``COVID-19'').
    The Exchange proposes to implement the fee changes effective August 
20, 2020.\5\
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    \5\ The Exchange originally filed to amend the Price List on 
August 3, 2020 (SR-NYSE-2020-65). SR-NYSE-2020-65 was subsequently 
withdrawn and replaced by SR-NYSE-2020-70. SR-NYSE-2020-70 was 
subsequently withdrawn and replaced by this filing.
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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.'' \6\
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    \6\ 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.'' 
\7\ Indeed, equity trading is currently dispersed across 13 
exchanges,\8\ 31 alternative trading systems,\9\ 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).\10\ 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 10%.
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    \7\ 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'').
    \8\ 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.
    \9\ 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.
    \10\ 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 new pricing tiers and lowering a step up requirement in order 
to incentivize member organizations to submit additional 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.\11\ 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.\12\ On 
June 15, 2020, the Exchange announced that on June 17, 2020, the 
Trading Floor would reintroduce a subset of DMMs, also subject to 
safety measures designed to prevent the spread of COVID-19.\13\
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    \11\ See Press Release, dated March 18, 2020, available here: 
https://ir.theice.com/press/press-releases/allcategories/2020/03-18-2020-204202110.
    \12\ See Trader Update, dated May 14, 2020, available here: 
https://www.nyse.com/traderupdate/history#110000251588.
    \13\ 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 August 2020 and providing relief for member organizations that 
became member organizations after the partial closure of the Trading 
Floor.
Proposed Rule Change
Step Up Tier 1 Adding Credit
    Currently, the Step Up Tier 1 Adding Credit offers a higher credit 
to member organizations that qualify for the tier and an additional 
credit for member organizations providing displayed liquidity in Tapes 
B and C securities. Specifically, under the current tier, a member 
organization that sends orders, except MPL and Non-Displayed Limit 
Orders, that add liquidity in Tape A securities would receive a credit 
of $0.0019 if:
     The member organization has Adding ADV, excluding any 
liquidity added by a DMM, that is at least 0.45% of NYSE CADV,\14\ and
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    \14\ The terms ``ADV'' and ``CADV'' are defined in footnote * of 
the Price List.
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     the member organization has Adding ADV, excluding any 
liquidity added by a DMM, that is at least 0.20% of NYSE CADV for the 
billing month over the member organization's March 2019 Adding ADV as a 
percentage of NYSE CADV in March 2019.
    In addition, a member organization that meets these requirements, 
and thus qualifies for the $0.0019 credit in Tape A securities, 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 SLP, equal to at least 0.20% of 
Tape B and Tape C CADV combined.
    The Exchange proposes to retain the current credit and offer an 
additional tiered credit based on a member organization's Adding ADV 
percentage of NYSE CADV. Specifically, the Exchange proposes that a 
$0.0020 credit would be available to member organizations that have 
Adding ADV, excluding any liquidity added by a DMM, that is at least 
0.65% of NYSE CADV and at least 0.60% of NYSE CADV over that Member 
Organization's March 2019 adding liquidity taken as a percentage of 
NYSE CADV.
    The requirement that a member organization has Adding ADV, 
excluding any liquidity added by a DMM, that is at least 0.20% of NYSE 
CADV for the billing month over the member organization's March 2019 
Adding ADV as a percentage of NYSE CADV in March 2019 would remain 
unchanged.
    For example, assume Member Organization B, excluding any liquidity 
added by a DMM, has an Adding ADV in March 2019 of 0.15% of NYSE CADV.

[[Page 55552]]

In the applicable billing month, Member Organization B has an Adding 
ADV of 0.85% of NYSE CADV. Member Organization B would qualify for the 
Step Up Tier 1's higher Adding Credit of $0.0020 per share in the 
billing month because it both (1) meets the Adding ADV requirement of 
0.65% of NYSE CADV with 0.85%, and (2) meets the Adding ADV increase 
over that firm's March 2019 Adding ADV by at least 0.60% (Adding ADV of 
0.85% of NYSE CADV in the billing month minus the Adding ADV of 0.15% 
of NYSE CADV in the baseline month for a step up of 0.70% Adding ADV of 
NYSE CADV).
    The purpose of this proposed change is to continue 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 to provide an incentive 
for member organizations to send more orders because they would then 
qualify for the credit.
    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. Currently, two (2) member organizations 
qualify for the Step Up Tier 1 Adding Credit. The Exchange does not 
know how much order flow member organizations choose to route to other 
exchanges or to off-exchange venues. There are currently approximately 
five (5) firms that could qualify for the proposed higher Step Up Tier 
1 Adding Credits based on their current trading profile on the Exchange 
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 credits.
Step Up Tier 4 Adding Credit
    The Exchange currently provides 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 that 
sets the NBBO \15\ or a new BBO \16\ if the MPID or mnemonic:
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    \15\ See Rule 1.1(q) (defining ``NBBO'' to mean the national 
best bid or offer).
    \16\ 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, 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, and
     is affiliated with an 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 credits are in addition to the MPID's or mnemonic's current 
credit for adding liquidity and also do 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.
    The Exchange proposes that member organizations meeting the above 
current Step Up Tier 4 Adding Credit requirements and that also have

 an Adding ADV that is at least 0.45% of Tapes A, B and C CADV, 
and
 Adding ADV setting the NBBO that is at least 0.18% of Tapes A, 
B and C CADV (``US CADV'')

would qualify for the following credits instead of the existing credit 
combined with the incremental $0.0006 credit:
 $0.0036 for adding orders that set the NBBO; or
 $0.0031 for all other displayed adding orders in Tape A, B and 
C Securities.

    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 0.10% of US CADV in June 2020.
    If in the billing month MPID2 has an Adding ADV in Tape A, B and C 
Securities of 0.50% of US CADV, of which 0.20% of US CADV is in Adding 
ADV that sets the NBBO, and MPID2 also has Adding ADV in Tape A 
Securities of 0.25% of NYSE CADV, then Member Organization A's MPID2 
would qualify for the current higher incremental credit of $0.0006 per 
share for setting the NBBO and NYSE BBO in the billing month because 
MPID2:
     Is affiliated with MPID1 that has an SLP Adding ADV of at 
least 0.10%;
     has an Adding ADV of 0.50% of US CADV, which is at least 
50% higher than June's Adding ADV of 0.10% of US CADV; and
     also meets the Adding ADV in Tape A securities as a 
percentage of NYSE CADV of least 0.20% with an Adding ADV of 0.25% of 
NYSE ADV in the billing month.
    However, since MPID2 has an Adding ADV of 0.50% of US CADV with 
0.20% of US CADV of Adding ADV that sets the NBBO, MPID2 would instead 
qualify for the proposed credits of $0.0036 for adding orders that set 
the NBBO, and $0.0031 for all other displayed adding orders, both in 
Tape A, B and C Securities. MPID1 would also receive the new credits as 
it is affiliated with MPID2, unless it's current SLP credits combined 
with the SLP Step Up credits are higher.
    The purpose of this proposed change is to continue incentivizing 
member organizations to increase aggressively priced liquidity-
providing orders that improve the market by setting the NBBO or a new 
BBO on the Exchange and 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. Currently, one (1) member organizations 
qualifies for the Step Up Tier 4 Adding Credit. The Exchange does not 
know how much order flow member organizations choose to route to other 
exchanges or to off-exchange venues but there are currently 
approximately three (3) firms that could qualify for the proposed 
alternative credits based on their current trading profile on the 
Exchange 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 credits.
NYSE CADV Requirement for DMM Incremental Rebate
    Currently, the Exchange offers an additional per share credit to 
DMMs in each eligible assigned More Active Security with a stock price 
of at least $1.00 on current rebates of $0.0034 or

[[Page 55553]]

less, i.e., adding credits of $0.0015, $0.0027, $0.0031, and $0.0034 
per share. Specifically, DMMs are eligible for an incremental rebate 
$0.0002 per share in each eligible assigned More Active Security with a 
stock price of at least $1.00 where NYSE CADV is equal to or greater 
than 4.5 billion shares, when adding liquidity with orders, other than 
MPL Orders, in such securities and the DMM either:
    (1) Has providing liquidity in all assigned securities as a 
percentage of NYSE CADV that is an increase of 0.30% more than the 
DMM's April 2020 providing liquidity in all assigned securities as a 
percentage of NYSE CADV, or
    (2) has providing liquidity in all assigned securities as a 
percentage of NYSE CADV that is an increase of at least 40% more than 
the DMM's April 2020 providing liquidity in all assigned securities as 
a percentage of NYSE CADV for DMMs with 750 or fewer assigned 
securities in the previous month.
    The Exchange proposes that the incremental credit would be 
available in months where NYSE CADV is equal to or greater than 4.0 
billion shares. The purpose of this proposed change is to continue to 
incentivize DMM to increase their added liquidity on the Exchange 
during periods of high market volumes, thereby improving quoting and 
increase adding liquidity across securities where there may be more 
liquidity providers. The Exchange notes that the lower NYSE CADV 
requirement is still higher than the average NYSE CADV in 2019 (3.56 
billion shares) and 2018 (3.64 billion shares). The Exchange therefore 
believes that the proposed NYSE CADV level will continue to increase 
DMM liquidity during periods of higher market volumes.
DMM NBBO Setter Tier
    The Exchange proposes to adopt a new pricing tier--the DMM NBBO 
Setter Tier--for securities with a per share price of $1.00 or 
above.\17\
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    \17\ For both the DMM NBBO Setter Tier and the SLP NBBO Setter 
Tier discussed below, the Exchange also proposes the non-substantive 
change of inserting a column to the right of the proposed fee that 
would identify the relevant Exchange liquidity indicator as set 
forth in the NYSE Pillar Gateway Binary Protocol Specification 
(August 3, 2020). The value represents the conditions under which an 
order was executed and whether it added or removed liquidity from 
the Exchange. For the DMM NBBO Setter Tier, the relevant liquidity 
indicators would be a combination of the following: ``ASP'' (Add 
Limit Order Setting New NBBO with Priority), ``ASB'' (Add Limit 
Order Setting New BBO) and ``AJP'' (Add Limit Order Joining NBBO 
with Priority). The SLP NBBO Setter Tier would utilize the ASP 
liquidity indicator.
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    The Exchange proposes an incremental rebate per share for orders, 
other than MPL Orders, in DMM assigned securities that provide 
displayed liquidity in Tape A, B and C Securities, as follows:
    1. A DMM with providing liquidity in all assigned securities as a 
percentage of NYSE CADV of the DMM's assigned securities of

 at least 0.65% and less than 0.90%, and
 at least 0.12% of a DMM's Adding ADV setting the NBBO or BBO 
combined would receive an incremental DMM BBO Setter Credit in Tape A, 
B and C Securities of $0.00005 per share for adding orders that set the 
BBO.

    2. A DMM with providing liquidity in all assigned securities as a 
percentage of NYSE CADV of the DMM's assigned securities of

 at least 0.90% and less than 1.25%, and
 at least 0.225% of a DMM's Adding ADV setting the NBBO or BBO 
combined would receive an incremental DMM NBBO Setter Credit in Tape A, 
B and C Securities of
 $0.0002 per share for adding orders that set the NBBO; or
 $0.000075 per share for adding orders that set the BBO; or
 $0.00005 per share for all other adding orders, other than MPL 
Orders.

    3. Finally, a DMM with providing liquidity in all assigned 
securities as a percentage of NYSE CADV of the DMM's assigned 
securities of

 at least 1.25%, and
 at least 0.375% Adding ADV setting the NBBO or BBO combined 
would receive an incremental DMM NBBO Setter Credit in Tape A, B and C 
Securities of
 $0.0003 per share for adding orders that set the NBBO; or
 $0.0001 per share for adding orders that set the BBO; or
 $0.0001 per share for all other adding orders, other than MPL 
Orders.

    For example, assume DMM A has an Adding ADV of NYSE CADV of 1.30% 
in their assigned securities, with 0.30% Adding ADV of NYSE CADV that 
sets the NBBO or BBO. DMM A would then qualify for incremental credits 
per share of:
     Adding orders that set the NBBO: $0.0002.
     Adding orders that set the BBO: $0.000075.
     All other adding orders, other than MPL Orders: $0.00005.
    If the DMM A's current credit in a symbol was $0.0031, then the 
credits in that symbol for DMM A would now be $ 0.0033 when setting the 
NBBO ($0.0031 + $0.0002), $0.003175 when setting the BBO ($0.0031 + 
$0.000075), and $0.00315 for all other adding orders, other than MPL 
Orders ($0.0031 + $0.00005).
    However, if DMM A has the same Adding ADV of NYSE CADV of 1.30% but 
instead had an Adding ADV of NYSE CADV that sets the NBBO or BBO of 
0.39%, then DMM A would qualify for higher DMM incremental credits of:
     $0.0003 per share for adding orders that set the NBBO; or
     $0.0001 per share for adding orders that set the BBO; or
     $0.0001 per share for all other displayed adding orders, 
other than MPL Orders.
    The purpose of this proposed change is to incentivize DMMs to 
increase aggressively priced liquidity-providing orders that improve 
the market by setting the NBBO on the Exchange. The proposed DMM NBBO 
Setter Tier is thus intended to encourage higher levels of liquidity by 
DMMs on the Exchange, 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, and member organizations have a choice of 
where to send order flow. Because the proposed tier requires DMMs to 
receive an incremental per share credit if the DMM meets certain 
trading qualifications and establishes the NBBO on the Exchange, the 
Exchange believes that the proposed credit would provide an incentive 
for all four (4) DMMs to quote more aggressively on the Exchange in 
order to qualify for it. The Exchange believes that incentivizing DMMs 
on the Exchange to add liquidity that improve the market by setting the 
NBBO on the Exchange could contribute to price discovery and improve 
quoting on the Exchange. In addition, additional liquidity providing 
quotes benefit all market participants because they provide greater 
execution opportunities on the Exchange and improve the public 
quotation, which benefits all member organizations.
SLP NBBO Setter Tier
    The Exchange proposes to adopt a new pricing tier--the SLP NBBO 
Setter Tier--for securities with a per share price of $1.00 or above.
    The Exchange proposes three tiered credits for orders that provide 
displayed liquidity in Tape A, B and C Securities, on a monthly basis, 
from SLPs and member organizations affiliated with SLPs in addition to 
the tiered or non-

[[Page 55554]]

tiered SLP credit for adding displayed liquidity, as follows:
    1. A member organization that has an

 Adding ADV, including any liquidity added by a DMM, that is at 
least 1.25% of US CADV combined, and
 Adding ADV setting the NBBO of at least 0.30% of US CADV 
combined would receive an NBBO Setter Credit in Tape A, B and C 
Securities of
 $0.0038 per share for adding orders that set the NBBO; and
 $0.0033 per share for all other displayed adding orders.

    2. A member organization that has an

 Adding ADV, including any liquidity added by a DMM, that is at 
least 0.95% of US CADV combined, and
 Adding ADV setting the NBBO of at least 0.18% of US CADV 
combined would receive an NBBO Setter Credit in Tape A, B and C 
Securities of
 $0.0037 per share for adding orders that set the NBBO; and
 $0.0032 per share for all other displayed adding orders.

    3. A member organization that has an

 has an Adding ADV, including any liquidity added by a DMM, 
that is at least 0.65% of US CADV combined, and
 has an Adding ADV setting the NBBO of at least 0.09% of US 
CADV combined would receive an NBBO Setter Credit in Tape A, B and C 
Securities of
 $0.0036 per share for adding orders that set the NBBO; and
 $0.0031 per share for all other displayed adding orders.

    4. Finally, a member organization that has an

     has an Adding ADV, including any liquidity added by a DMM, 
that is at least 0.55% of US CADV combined, and
 has an Adding ADV setting the NBBO of at least 0.05% of US 
CADV combined would receive an NBBO Setter Credit in Tape A, B and C 
Securities of
 $0.0035 per share for adding orders that set the NBBO; or
 $0.00305 per share for all other displayed adding orders.

    For example, assume Member Organization B affiliated with an SLP 
has an Adding ADV of at least 0.60% of US CADV, of which at least 0.05% 
of US CADV sets the NBBO. Member Organization B would qualify for a 
credit of $0.0035 for orders that set the NBBO and $0.00305 for all 
other displayed adding orders. Further assume that Member Origination B 
qualifies for the current SLP Tier 1 credit of $0.0029 and Incremental 
SLP Step Up Tier credit of $0.0003 for a combined current SLP credit of 
$0.0032.
    For the billing month, Member Organization B would qualify for 
credits per share of:
     $0.0035 per share for adding orders that set the NBBO,
     $0.0032 per share for SLP adding orders that meet the 
current 10% average or more quoting requirement in an assigned security 
pursuant to Rule 107B
     $0.00305 per share for all other displayed adding orders.
    The Incremental SLP Step Up Tier credit would not apply to the 
proposed $0.0035 or $00305 credits.
    The purpose of this proposed change is to incentivize member 
organizations that are SLPs to increase aggressively priced liquidity-
providing orders that improve the market by setting the NBBO. The 
proposed SLP NBBO Setter 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, which add liquidity to the Exchange. Because the proposed tier 
requires an SLP to receive an per share credit if the SLP meets certain 
trading qualifications and establish the NBBO on the Exchange, the 
Exchange believes that the proposed credit would provide an incentive 
for SLPs and their affiliates to send additional liquidity to the 
Exchange to set the NBBO 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 
proposed tier is new, the Exchange does not know how many SLPs and 
their affiliates could qualify for the proposed tiered credits based on 
their current trading profile on the Exchange. However, without having 
a view of member organization's activity on other exchanges and off-
exchange venues, there are currently approximately six (6) SLPs and 
affiliated firms that could qualify for the new setting tier based on 
their current trading profile on the Exchange 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 setting 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.\18\ 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 months of June and July.\19\ 
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.\20\
---------------------------------------------------------------------------

    \18\ 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.
    \19\ See Securities Exchange Act Release No. 89050 (June 11, 
2020), 85 FR 36637 (June 17, 2020) (SR-NYSE-2020-49); Securities 
Exchange Act Release No. 89324 (July 15, 2020), 85 FR 44129 (July 
21, 2020) (SR-NYSE-2020-59).
    \20\ 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.
---------------------------------------------------------------------------

    For the months of April, May, June and July, 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.\21\ 
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

[[Page 55555]]

license that are Designated Market Makers with 30 or fewer assigned 
securities for the billing month of March 2020.
---------------------------------------------------------------------------

    \21\ 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 
August 2020.
---------------------------------------------------------------------------

    Because the Trading Floor continues to operate with reduced 
capacity, the Exchange proposes to extend the waiver of these Trading 
Floor-based fees through August 2020. To effectuate this change, the 
Exchange proposes to add ``and August'' between ``July'' and ``2020'' 
in footnote 11 to the Price List.
    In addition, the Exchange proposes to enable member organizations 
that had no Floor broker executions during March 1 to March 20, 2020 to 
be eligible for the waiver of these Trading Floor-based fees through 
August 2020. As proposed, a Floor member organization member 
organizations with at least one trading license and a physical Trading 
Floor presence that had no Floor broker executions during March 1 to 
March 20, 2020 would be eligible for the waiver if it had Floor broker 
executions accounting for 40% or more of the member organization's 
combined adding, taking, and auction volumes during its first month as 
a member organization on or after May 26, 2020, i.e., the date the 
Trading Floor re-opened on a limited basis.
    Finally, the Exchange also proposes that member organizations with 
a physical trading Floor presence that became member organizations on 
or after April 1, 2020 would be eligible for a one-time credit for the 
member organization's Booth Telephone System charges and all Service 
Charges except the internet Equipment Monthly Hosting Fee for the 
months of April through July 2020 if the member organization meets the 
other requirements for the waiver described in footnote 11 of the Price 
List.
    In order to further reduce costs for member organizations with a 
Trading Floor presence, the Exchange also waived the April, May, June 
and July 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.\22\
---------------------------------------------------------------------------

    \22\ See notes 17-19, supra. See footnote 15 of the Price List.
---------------------------------------------------------------------------

    The Exchange proposes to also waive the August 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 August 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 August'' between ``July'' and ``2020'' 
in footnote 15.
    In addition, the Exchange proposes to enable member organizations 
that had no Floor broker executions during March 1 to March 20, 2020, 
as they were not NYSE members, to be eligible for waiver of the monthly 
portion of the applicable annual fees through August 2020. As proposed, 
a Floor member organization member organizations with at least one 
trading license and a physical Trading Floor presence that had no Floor 
broker executions during March 1 to March 20, 2020 would be eligible 
for the waiver if it had Floor broker executions accounting for 40% or 
more of the member organization's combined adding, taking, and auction 
volumes during its first full month as a member organization on or 
after May 26, 2020.
    Similarly, the Exchange proposes that member organizations with a 
physical trading Floor presence that became member organizations on or 
after April 1, 2020 would be eligible for a one-time credit for the 
member organization's indicated annual trading license fee for the 
months of April through July 2020 if the member organization meets the 
other requirements for the waiver described in footnote 15 of the Price 
List.
    The 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 a 
significant portion of trading on the Trading Floor would benefit from 
this proposed fee change. In addition, enabling member organizations 
with a Trading Floor presence and at least one trading license who 
became member organizations on or after May 26, 2020 to be eligible for 
the proposed waivers for August 2020 and to provide a one-time credit 
for the waivers for the months April through July 2020 would reduce 
monthly costs and ease the financial burden associated with the ongoing 
partial Trading Floor closure for member organizations that became 
member organizations after the temporary closure of the Trading Floor 
in March and who, like other Floor-based member organizations, are not 
operating at full capacity while the Trading Floor remains partially 
closed.
    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,\23\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\24\ 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.
---------------------------------------------------------------------------

    \23\ 15 U.S.C. 78f(b).
    \24\ 15 U.S.C. 78f(b)(4) & (5).
---------------------------------------------------------------------------

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.'' \25\
---------------------------------------------------------------------------

    \25\ See Regulation NMS, 70 FR at 37499.
---------------------------------------------------------------------------

    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

[[Page 55556]]

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 1 Adding Credit
    The Exchange believes that the proposed revisions to the Step Up 
Tier 1 Adding Credit represent a reasonable attempt to attract 
additional order flow to the Exchange.
    Specifically, the Exchange believes that providing additional 
higher credits for incremental increases in Adding ADV as a percentage 
of NYSE CADV would continue to provide an incentive for member 
organizations to route additional liquidity-providing orders to the 
Exchange in Tape A securities, which would support the quality of price 
discovery on the Exchange and provide additional price improvement 
opportunities for incoming orders. Submission of additional liquidity 
to the Exchange would promote price discovery and transparency and 
enhance order execution opportunities for member organizations from the 
substantial amounts of liquidity present on the Exchange. All member 
organizations would benefit from the greater amounts of liquidity that 
will be present on the Exchange, which would provide greater execution 
opportunities. The Exchange further 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 to provide an incentive for member 
organizations to send more orders because they would then qualify for 
the credit.
    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. 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 4 Adding Credit
    The Exchange believes that the proposed alternative incentives to 
member organizations that meet the current Step Up Tier 4 Adding Credit 
requirements and add additional liquidity to the Exchange is 
reasonable.
    Specifically, the Exchange believes that providing alternative 
credits to member organizations that increase aggressively priced 
liquidity-providing orders that improve the market by setting the NBBO 
on the Exchange and encourage higher levels of liquidity would continue 
to 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 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 a 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 additional specific Adding ADV requirements is reasonable. 
Specifically, requiring additional Adding ADV that is at least 0.45% of 
US CADV, and at least 0.18% of US CADV 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.
    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 
alternate credits. The Exchange believes the proposed 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 
incremental credit, thereby contributing to depth and market quality on 
the Exchange.
NYSE CADV Requirement for DMM Incremental Rebate
    The Exchange believes that requiring that the DMM incremental 
credit be available in months where NYSE CADV is equal to or greater 
than 4.0 billion shares is reasonable. As noted, the purpose of this 
proposed change is to continue to incentivize DMM to increase their 
added liquidity on the Exchange during periods of high market volumes, 
thereby improving quoting and increase adding liquidity across 
securities where there may be more liquidity providers and contributing 
to price discovery, thus benefiting all market participants. As noted 
above, the lower NYSE CADV requirement is still higher than the average 
NYSE CADV in 2019 (3.56 billion shares) and 2018 (3.64 billion shares). 
The Exchange therefore believes that the proposed NYSE CADV level will 
continue to increase DMM liquidity during periods of high market 
volumes. Revising the NYSE CADV requirement would not impair the 
fostering of liquidity provision and stability in the marketplace 
during periods of high volumes.
    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. The Exchange believes that the proposed 
revision would continue to provide an incentive for DMMs to send 
additional liquidity to the Exchange to set the NBBO in order to 
qualify for the credit. In addition, the proposal would continue to 
foster liquidity provision and stability in the marketplace during 
periods of high volumes and continue to reward DMMs, who have greater 
risks and heightened quoting and other obligations than other market 
participants.
DMM NBBO Setter Tier
    The Exchange believes that the proposed DMM NBBO Setter Tier is 
reasonable. Specifically, the Exchange believes that a new DMM NBBO 
Setter Tier would provide an incentive for DMMs to increase 
aggressively priced liquidity-providing orders that improve the market 
by setting the NBBO and BBO on the Exchange. The proposed DMM NBBO 
Setter Tier is thus intended to encourage higher levels of liquidity by 
DMMs on the Exchange, which would support the quality of price 
discovery on the Exchange and is consistent with the overall goals of 
enhancing market quality. To the extent that the proposed change leads 
to an

[[Page 55557]]

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 competitive environment, 
and member organizations have a choice of where to send order flow. 
Because the proposed tier requires DMMs to receive an incremental per 
share credit if the DMM meets certain trading qualifications and 
establishes the NBBO or BBO, the Exchange believes that the proposed 
credit would provide an incentive for all DMMs to quote more 
aggressively on the Exchange in order to qualify for it. The Exchange 
believes that incentivizing DMMs on the Exchange to add liquidity that 
improves the market by setting the NBBO or BBO on the Exchange could 
contribute to price discovery and improve quoting on the Exchange. In 
addition, additional liquidity providing quotes benefit all market 
participants because they provide greater execution opportunities on 
the Exchange and improve the public quotation.
SLP NBBO Setter Tier
    The Exchange believes that the proposed SLP NBBO Setter Tier is 
reasonable. Specifically, the Exchange believes that a new NBBO Setter 
Tier would provide an incentive for SLPs to provide aggressively priced 
orders that improve the market by setting the NBBO 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 and set the NBBO. Moreover, the Exchange believes that 
providing an incrementally higher credit for adding orders that set the 
NBBO is reasonable because it would encourage additional aggressively 
priced displayed liquidity on the Exchange by SLPs and because market 
participants benefit from the greater amounts of liquidity and price 
improvement present on the Exchange. Further, the Exchange believes 
that requiring SLPs to meet specific Adding ADV requirements in order 
to qualify for the credits is also reasonable because it would 
encourage additional 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 tier would be new, no SLP currently qualifies 
for the proposed pricing tier. As previously noted, based on the 
profile of liquidity-providing SLPs generally, the Exchange believes 
that a number of SLPs and affiliated firms could qualify for the 
credits if they choose to direct order flow to, and increase quoting 
on, the Exchange. The Exchange believes the proposed credit is also 
reasonable because it would provide an additional incentive for member 
organizations that are not SLPs to become SLPs and direct their order 
flow to 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 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 August 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. For the same reasons, the Exchange believes that it 
is reasonable to provide an alternate benchmark for member 
organizations with a Floor presence that were not member organizations 
in March 2020 in order to be eligible for the waiver in August. 
Similarly, the Exchange believes that it is reasonable to provide 
member organizations with a Floor presence that became member 
organizations after April 1, 2020 and could not previously qualify for 
the waivers between April and July 2020 with a one-time credit for 
those fees if the member organization meets the requirements for the 
waiver described in the Price List.
    Finally, the Exchange believes the proposed non-substantive changes 
to add relevant liquidity indicators to the proposed NBBO setter tiers 
is reasonable and would not be inconsistent with the public interest 
and the protection of investors because investors will not be harmed 
and in fact would benefit from increased clarity and transparency on 
the Price List, thereby reducing potential confusion.
The Proposal Is an Equitable Allocation of Fees
    The Exchange believes the proposal equitably allocates its fees 
among its market participants by fostering liquidity provision and 
stability in the marketplace.
Step Up Tier 1 Adding Credit
    The Exchange believes that the proposed revisions to the Step Up 
Tier 1 Adding Credit is equitable because the magnitude of the 
additional credits are not unreasonably high relative to the other 
adding tier and step up tier credits, which range from $0.0015 to 
$0.0029, in comparison to the credits paid by other exchanges for 
orders that provide additional step up liquidity.\26\ 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 marketwide quality and 
price discovery.
---------------------------------------------------------------------------

    \26\ The tiered adding credits (Tier 1-4 Adding Credits, Step Up 
Tier 1-4) range from $0.0029 to $0.0015. See Cboe BZX Fee Schedule, 
which has adding credits ranging from $0.0020 to $0.0032, at https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/.
---------------------------------------------------------------------------

    As noted, 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 new tier rates. 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. Member organizations 
that add liquidity to the Exchange and meet the current Step Up Tier 1 
Adding requirements would be eligible for the additional credits by 
increasing their amount of Adding ADV as a percentage of NYSE CADV, and 
because the tiered thresholds would apply equally to all

[[Page 55558]]

similarly situated member organizations. Similarly, member 
organizations that currently qualify for adding liquidity credit of 
$0.0019 will continue to receive credits when they provide liquidity to 
the Exchange. With the proposed new tiered requirements, all member 
organizations would be eligible to qualify for the higher credits if 
they increase their Adding ADV as a percentage of NYSE CADV. The 
Exchange believes that offering higher step up credits for providing 
liquidity 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 
credit, the proposal will not adversely impact their existing pricing 
or their ability to qualify for other credits provided by the Exchange.
Step Up Tier 4 Adding Credit
    The Exchange believes that the proposed alternative incentives for 
member organizations that meet the current Step Up Tier 4 Adding Credit 
requirements will allocate the proposed credits fairly among market 
participants. The proposal will allow member organizations to qualify 
for an enhanced credit by adding liquidity and setting the NBBO. 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 marketwide 
quality and price discovery. It is equitable for the Exchange to add 
additional incentives for member organizations 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.
    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 
alternate credits. The Exchange believes the proposed incremental 
credits are reasonable as it would incentivize activity that encourages 
the setting of the NBBO, 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 proposed credits if the Adding ADV 
requirements are met. 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 alternative step up 
credit for setting the NBBO 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 Step Up Tier 4 Adding Credit, the proposal 
will not adversely impact their existing pricing or their ability to 
qualify for other credits provided by the Exchange.
NYSE CADV Requirement for DMM Incremental Rebate
    The Exchange believes that the proposal for the DMM incremental 
credit to be available in months where NYSE CADV is equal to or greater 
than 4.0 billion shares is an equitable allocation of fees because it 
would apply equally to all existing and potential DMM firms on an equal 
basis. As noted, the purpose of this proposed change is to continue to 
incentivize DMM to increase their added liquidity on the Exchange 
during periods of higher market volumes, thereby improving quoting and 
increase adding liquidity across securities where there may be more 
liquidity providers and contributing to price discovery, thus 
benefiting all market participants. The Exchange believes that the 
proposal would provide an equal incentive to all DMMs to add liquidity 
in more active securities, and that the proposal constitutes an 
equitable allocation of fees because all similarly situated DMMs would 
be eligible for the same incremental rebate.
DMM NBBO Setter Tier
    The Exchange believes the proposed DMM NBBO Setter Tier is 
equitable and not unfairly discriminatory because the proposed 
incremental credits would be available to all DMMs on an equal basis. 
The Exchange believes that the proposed setter tier will allocate the 
proposed credits fairly among DMMs and allow DMMs to qualify for a 
credit by adding liquidity and setting the NBBO or BBO. The Exchange 
believes the proposed rule change would improve market quality by 
providing incentives for all DMMs to increase aggressively priced 
liquidity-providing orders that improve the market by setting the NBBO 
or BBO on the Exchange, thereby encouraging higher levels of liquidity 
by DMMs on the Exchange, which would support the quality of price 
discovery on the Exchange and is consistent with the overall goals of 
enhancing market quality.
SLP NBBO Setter Tier
    The Exchange believes that the proposed SLP NBBO Setter Tier will 
allocate the proposed credits fairly among market participants. The 
proposed tier will allow SLPs to qualify for a credit by adding 
liquidity and setting the NBBO on the Exchange. 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 SLPs 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.
    Since the proposed tier would be new, no SLP currently qualifies 
for the proposed pricing tier. As previously noted, based on the 
profile of liquidity-providing SLPs generally, the Exchange believes 
that a number of SLPs and affiliated firms could qualify for the 
credits if they choose to direct order flow to, and increase quoting 
on, the Exchange.
    The proposal neither targets nor will it have a disparate impact on 
any particular category of market participant. All similarly situated 
SLPs would be eligible to qualify for the proposed credits if the 
Adding ADV requirements in Tapes A, B and C securities are met. 
Moreover, the Exchange believes that the proposed provides an equal 
incentive for all member organizations that are not SLPs to become SLPs 
and qualify for the proposed credits on an equal basis by directing 
their order flow to the Exchange. The Exchange believes that offering 
SLPs credits for setting the NBBO will encourage higher levels of 
liquidity provision into the price discovery process and is consistent 
with the overall goals of enhancing market

[[Page 55559]]

quality, thereby providing additional price improvement opportunities 
on the Exchange and benefiting investors generally.
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 August 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, June and July 2020, and is designed to 
reduce monthly costs for Trading Floor-based member organizations that 
are unable to fully conduct Floor operations. For the same reasons, 
providing a way for member organizations with a Floor presence that 
were not member organizations during March 2020 to qualify for the 
waivers in August in the same way as all other Trading Floor-based 
member organizations is also an equitable allocation of fees. Finally, 
the Exchange believes that providing member organizations with a Floor 
presence that became member organizations after April 1, 2020 with a 
one-time credit for those fees during April-July 2020 is an equitable 
allocation of fees because it would have the effect of treating all 
similarly situated Floor-based member organizations the same for the 
period April and July 2020.
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 1 Adding Credit
    The Exchange believes it is not unfairly discriminatory to provide 
a higher per share step up credit, as the proposed credit would be 
provided on an equal basis to all member organizations that add 
liquidity by meeting the new Step Up Tier 1's requirements. Further, 
the Exchange believes the proposed Step Up Tier 1 credit would 
incentivize member organizations that meet the current tiered 
requirements to send more orders to the Exchange to qualify for higher 
credits. The Exchange also believes that the proposed change is not 
unfairly discriminatory because it is reasonably related to the value 
to the Exchange's market quality associated with higher volume. 
Finally, the submission of orders to the Exchange is optional for 
member organizations in that they could choose whether to submit orders 
to the Exchange and, if they do, the extent of its activity in this 
regard.
Step Up Tier 4 Adding Credit
    The Exchange believes it is not unfairly discriminatory to provide 
an alternative per share step up credits for activity that encourages 
the setting of the NBBO or a new BBO as the proposed credits would be 
provided on an equal basis to all member organizations that add 
liquidity by meeting the new proposed 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 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.
NYSE CADV Requirement for DMM Incremental Rebate
    The proposal for the DMM incremental credit to be available in 
months where NYSE CADV is equal to or greater than 4.0 billion shares 
is also not unfairly discriminatory because the proposal would continue 
to provide an additional incentive to DMMs to quote and trade their 
assigned securities on the Exchange in very active months, and will 
still allow the Exchange and DMMs to better compete for order flow, 
thus enhancing competition. The proposed lower NYSE CADV requirement 
would apply equally to all similarly situated DMMs. As described above, 
member organizations have a choice of where to send order flow. The 
Exchange believes that incentivizing DMMs on the Exchange to add more 
liquidity during period of high volumes could contribute to greater 
price discovery on the Exchange. In addition, additional liquidity-
providing quotes benefit all market participants because they provide 
greater execution opportunities on the Exchange and improve the public 
quotation.
DMM NBBO Setter Tier
    The Exchange believes it is not unfairly discriminatory to provide 
credits for adding liquidity that encourages DMMs on the Exchange to 
set the NBBO or BBO as the proposed credits would be provided on an 
equal basis to all similarly situated DMMs that add liquidity by 
meeting the new proposed DMM Setter Tier's requirements. For the same 
reason, the Exchange believes it is not unfairly discriminatory to 
provide incrementally higher credits for increased adding ADV setting 
the NBBO or BBO combined because the proposed higher credits would 
equally encourage all DMMs to provide additional liquidity on the 
Exchange. 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 encouraging higher levels of 
liquidity by DMMs on the Exchange, which would support the quality of 
price discovery on the Exchange and is consistent with the overall 
goals of enhancing market quality.
SLP NBBO Setter Tier
    The Exchange believes it is not unfairly discriminatory to provide 
credits for adding liquidity that encourages SLPs to set the NBBO on 
the Exchange as the proposed credits would be provided on an equal 
basis to all SLPs and add liquidity by meeting the new proposed 
requirements. For the same reason, the Exchange believes it is not 
unfairly discriminatory to provide incrementally higher credits for 
increased adding ADV setting the NBBO in Tapes A, B and C CADV combined 
because the proposed higher credits would equally encourage all SLPs to 
provide additional liquidity on the Exchange in all three tapes. As 
noted, the Exchange believes that the proposed credit would provide an 
incentive for SLPs to send additional liquidity to the Exchange to set 
the NBBO 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 Exchange believes 
that the proposed provides an equal incentive for all member 
organizations that are not SLPs to become SLPs or becomes affiliated 
with SLPs and qualify for the proposed credits on an

[[Page 55560]]

equal basis by directing their order flow to the Exchange. The Exchange 
believes that offering SLPs credits for setting the NBBO 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.
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.
    For the same reasons, it is not unfairly discriminatory to provide 
a way for member organizations with a Floor presence that were not 
member organizations during March 2020 to qualify for the waivers in 
August in the same way as all other Trading Floor-based member 
organizations. Similarly, the Exchange believes that providing member 
organizations with a Floor presence that became member organizations 
after April 1, 2020 with a one-time credit for the fees waived during 
April-July 2020 if the member organization meets the requirements for 
the waiver is not unfairly discriminatory because it would treat all 
similarly situated Floor-based member organizations equally for the 
period April and July 2020.
    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,\27\ 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.'' \28\
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    \27\ 15 U.S.C. 78f(b)(8).
    \28\ 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 August 2020 and the one-time credit for Floor 
brokers that became member organizations after April 2020 provides 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 10%. 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) \29\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \30\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \29\ 15 U.S.C. 78s(b)(3)(A).
    \30\ 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

[[Page 55561]]

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) \31\ of the Act to determine 
whether the proposed rule change should be approved or disapproved.
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    \31\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSE-2020-71 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-2020-71. 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-2020-71, and should be submitted on 
or before September 29, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\32\
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    \32\ 17 CFR 200.30-3(a)(12), (59).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-19851 Filed 9-4-20; 8:45 am]
BILLING CODE 8011-01-P


