[Federal Register Volume 86, Number 15 (Tuesday, January 26, 2021)]
[Notices]
[Pages 7138-7144]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-01586]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90947; File No. SR-NYSE-2021-02]


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

January 19, 2021.
    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 January 4, 2021, 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) provide an 
alternative way to qualify for the adding tier for MPL orders; (2) 
eliminate current Adding Tier 4 and Step Up Tier 3; (3) introduce a new 
Step Up Adding Tier 4; (4) restrict Supplemental Liquidity Providers 
(``SLP'') National Best Bid and Offer (``NBBO'') Setter pricing tier 
credits to member organizations that are SLPs; and (5) eliminate the 
optional monthly per security credit payable to Designated Market 
Makers (``DMMs'') and make related non-substantive conforming changes. 
The Exchange proposes to implement the fee changes effective January 4, 
2021. 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.

[[Page 7139]]

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 (1) provide an 
alternative way to qualify for the adding tier for MPL orders; (2) 
eliminate current Adding Tier 4 and Step Up Tier 3; (3) introduce a new 
Step Up Adding Tier 4; (4) restrict SLP NBBO setter pricing tier 
credits to member organizations that are SLPs; and (5) eliminate the 
optional monthly per security credit payable to DMMs and make related 
non-substantive conforming changes.
    The proposed changes respond to the current competitive environment 
where order flow providers have a choice of where to direct liquidity-
providing orders by offering further incentives for member 
organizations to send additional displayed liquidity to the Exchange.
    The Exchange proposes to implement the fee changes effective 
January 4, 2021.
Background
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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    While Regulation NMS has enhanced competition, it has also fostered 
a ``fragmented'' market structure where trading in a single stock can 
occur across multiple trading centers. When multiple trading centers 
compete for order flow in the same stock, the Commission has recognized 
that ``such competition can lead to the fragmentation of order flow in 
that stock.'' \5\ Indeed, equity trading is currently dispersed across 
16 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 16% market share.\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 10%.
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    \5\ See Securities Exchange Act Release No. 61358, 75 FR 3594, 
3597 (January 21, 2010) (File No. S7-02-10) (Concept Release on 
Equity Market Structure).
    \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 16 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.
Proposed Rule Change
Alternative Qualification Adding Tier for MPL Orders
    Currently, a member organization that has an average daily trading 
volume (``ADV'') that adds liquidity to the Exchange during the billing 
month (``Adding ADV'') in MPL orders \9\ that is at least 0.075% of 
Tapes A, B and C consolidated average daily volume (``CADV''),\10\ 
excluding any liquidity added by a DMM, would be eligible for a 
$0.00275 credit.
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    \9\ An MPL Order is defined in Rule 7.31 as a Limit Order that 
is not displayed and does not route, with a working price at the 
midpoint of the PBBO. See Rule 7.31(d)(3). Limit Order is defined in 
Rule 7.31(a)(2).
    \10\ Footnote 2 to the Price List defines ADV as ``average daily 
volume'' and ``Adding ADV'' as ADV that adds liquidity to the 
Exchange during the billing month. CADV is defined in footnote * of 
the Price List.
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    The Exchange proposes an alternative way for member organizations 
to qualify for this adding tier credit in MPL orders. As proposed, a 
member organization that has an Adding ADV in MPL orders of at least 
7.25 million shares would also be eligible for a $0.00275 credit for 
MPL Orders that add liquidity under this tier. The Exchange believes 
that the alternative method would enable more member organizations to 
qualify for the tier, especially in high volume months. The purpose of 
the proposed change is to incentivize member organizations to trade on 
the Exchange in MPL orders in Tapes A, B and C securities. Providing an 
alternative way for member organizations to qualify for the $0.00275 
credit would increase liquidity providing MPL orders in Tapes A, B and 
C securities, which would support the quality of price discovery on the 
Exchange and provide additional price improvement opportunities for 
incoming orders that take liquidity. The Exchange believes that by 
correlating the amount of credits to the level of MPL orders sent by a 
member organization that add liquidity, the Exchange's fee structure 
would incentivize member organizations to submit more MPL orders that 
add liquidity to the Exchange, thereby increasing the potential for 
price improvement and execution opportunities to incoming marketable 
orders submitted to the Exchange.
    As noted above, the Exchange operates in a competitive and 
fragmented market environment, particularly as it relates to attracting 
non-marketable orders, which add liquidity to the Exchange. Based on 
the profile of liquidity-adding firms generally, the Exchange believes 
that additional member organizations could

[[Page 7140]]

qualify for the tiered rate under the new qualification criteria if 
they choose to direct order flow to, and increase quoting on, the 
Exchange. 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 the proposed rule change would result in any 
member organization directing orders to the Exchange in order to 
qualify for the tier under the new proposed requirements.
Elimination of Adding Tier 4 and Step Up Tier 3
    Currently, a member organization qualifies for Tier 4 Adding Credit 
of $0.0015 if the member organization
     has Adding ADV in MPL orders that is at least 4 million 
shares ADV, excluding any liquidity added by a DMM, and
     executes MOC and LOC orders of at least 0.10% of NYSE 
CADV, or
     has an Adding ADV that is at least 0.175% of NYSE CADV,
     ADV of the Member Organization's total close activity 
(MOC/LOC and other executions at the close) on the NYSE of at least 
0.05% of NYSE CADV, and
     an Adding ADV 25,000 shares in Orders designated as 
``retail'' (i.e., orders that satisfy the Retail Modifier requirements 
of Rule 13) that add liquidity to the NYSE.
    In addition, member organizations that meet the above requirements 
and add liquidity, excluding liquidity added as an SLP, in securities 
traded pursuant to Unlisted Trading Privileges (Tapes B and C) on the 
Pillar Trading Platform of at least 0.20% of Tape B and Tape C CADV 
combined, are eligible for an additional $0.0001 per share.
    Similarly, the current Step Up Tier 3 Adding Credit offers a credit 
to member organizations providing displayed liquidity to the Exchange 
in Tape A securities. As proposed, a member organization that has 
Adding ADV, excluding any liquidity added by a DMM, that is at least 
0.05% of NYSE CADV over that member organization's Fourth Quarter 2019 
adding liquidity taken as a percentage of NYSE CADV (the ``Baseline 
Tape A Share'') would receive a credit of $0.0015 for adding liquidity, 
except MPL and Non-Displayed Limit Orders, if the increase in Adding 
ADV over the Baseline Tape A Share is at least 0.05% and less than 
0.10%. If the increase in Adding ADV over the Baseline Tape A Share is 
at least 0.10% or more, a member organization meeting the above 
requirements would receive a credit of $0.0018 for adding liquidity, 
except MPL and Non-Displayed Limit Orders.
    In addition, member organizations that meet these requirements and 
qualify for the $0.0015 or $0.0018 credit in Tape A securities would be 
eligible to receive an additional $0.0001 per share for adding 
liquidity in Tape A securities if trades in Tapes B and C securities 
against the member organization's orders that add liquidity, excluding 
orders as an SLP, equal to at least 0.20% of Tape B and Tape C CADV 
combined.
    The Exchange proposes to eliminate the Adding Tier 4 and Step Up 
Tier 3 pricing tiers in their entirety and to remove both from the 
Price List because each pricing tier has been underutilized by member 
organizations insofar as no member organization has qualified for 
either tier. As such, Exchange does not anticipate any member 
organization in the near future would qualify for either tier that is 
the subject of this proposed rule change.
    With the proposed elimination of the Step Up Tier 3 Adding Credit, 
the Exchange proposes to rename the current Step Up Tier 4 Adding 
Credit as Step Up Tier 3 Adding Credit. The Exchange also proposes a 
new Step Up Tier 4 Adding Credit, as discussed below.
New 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 a $0.0015 credit in Tape A 
securities for all orders, other than MPL and Non-Displayed Limit 
Orders, if the member organization:
     Has an Adding ADV that is at least 0.20% of NYSE CADV, and
     has an Adding ADV, excluding any liquidity added by a DMM, 
that is at least 0.05% of NYSE CADV over that Member Organization's 
November 2020 adding liquidity taken as a percentage of NYSE CADV.
    In addition, member organizations that meet the above requirements 
and add liquidity, excluding liquidity added as an SLP, in Tapes B and 
C Securities of at least 0.20% of Tape B and Tape C CADV combined would 
be eligible to receive an additional $0.0001 per share.
    For example, assume a Member Organization A has an adding ADV of 
0.16% of NYSE CADV in the baseline month of November 2020. Further 
assume that Member Organization A has an adding ADV of 0.21% of US CADV 
in the billing month. Member Organization A would meet both the 
requirement of Adding ADV of at least 0.20% of NYSE CADV and the 
requirement of an Adding ADV that is at least 0.05% of NYSE CADV over 
that member organization's November 2020 adding liquidity taken as a 
percentage of NYSE CADV.
    The purpose of this proposed change is to incentivize member 
organizations to increase the liquidity-providing orders in the Tape A 
securities they send to the Exchange, which would support the quality 
of price discovery on the Exchange and provide additional liquidity for 
incoming orders. As noted above, the Exchange operates in a competitive 
environment, particularly as it relates to attracting non-marketable 
orders, which add liquidity to the Exchange. Because the proposed tier 
requires a member organization to increase the volume of its trades in 
orders that add liquidity over that member organization's November 2020 
baseline, the Exchange believes that the proposed credit would provide 
an incentive for all member organizations to send additional liquidity 
to the Exchange in order to qualify for it. The Exchange does not know 
how much order flow member organizations choose to route to other 
exchanges or to off-exchange venues. Based on the profile of liquidity-
adding firms generally, the Exchange believes that additional member 
organizations could qualify for the tiered rate under the new 
qualification criteria if they choose to direct order flow to, and 
increase quoting on, the Exchange. 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.
SLP NBBO Setter Tier
    In September 2020, the Exchange adopted the SLP NBBO Setter Tier 
for securities with a per share price of $1.00 or above that offers 
four sets of tiered credits for orders that set the NBBO or provide 
other 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-tiered SLP credit for adding displayed 
liquidity.\11\ As adopted, both SLPs and affiliated member 
organizations are eligible for the SLP NBBO Setter Tier credits. The 
Exchange proposes to restrict eligibility

[[Page 7141]]

for the credits under this tier to member organizations that are SLPs. 
To effectuate this change, the Exchange would add text describing SLPs 
are those member organizations that meet the 10% average or more 
quoting requirement in an assigned security pursuant to Rule 107B 
(quotes of an SLP Prop and an SLMM of the same member organization 
shall not be aggregated). The Exchange proposes no additional changes 
to the SLP NBBO Setter Tier.
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    \11\ See Securities Exchange Act Release No. 89754 (September 2, 
2020), 85 FR 55550 (September 8, 2020) (SR-NYSE-2020-71).
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    The purpose of this proposed change is to restrict the incentives 
to increase aggressively priced liquidity-providing orders that improve 
the market by setting the NBBO to member organizations that are SLPs. 
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 SLP NBBO Setter Tier is designed to 
encourage higher levels of liquidity, which support the quality of 
price discovery on the Exchange and is consistent with the overall 
goals of enhancing market quality. By limiting eligibility for the SLP 
setter credits to SLPs, the Exchange brings these credits in line with 
other SLP credits that are only credited to the SLP, and not the 
affiliated member organizations.
Elimination of the Monthly Rebate per Security and Optional Credit for 
DMMs
    Currently, the Exchange offers an optional monthly rebate per 
security (``Rebate Per Security'') to DMMs with 100 or more assigned 
securities, up to a maximum credit of $100,000 per month across all DMM 
assigned securities, that elect to receive a lower monthly rebate per 
share credit (``Optional Credit'') for all assigned securities. DMMs 
electing the Rebate per Security and corresponding Optional Credit for 
all assigned securities are required to notify the Exchange prior to 
the start of a calendar quarter to be effective for that and subsequent 
quarters. Similarly, DMMs electing to suspend the Rebate per Security 
and corresponding Optional Credit for that suspension to be effective 
for that and subsequent quarters are required to notify the Exchange 
prior to the start of that calendar quarter. The Rebate Per Security is 
currently available for the start of a calendar quarter for assigned 
securities that meet the following quoting requirements:
    First, in More Active Securities,\12\ if the DMM that elects the 
Optional Credit meets the More Active Securities Quoting Requirement in 
an assigned security,\13\ that DMM's assigned security is eligible for 
a
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    \12\ ``More Active Securities'' are securities with an average 
daily consolidated volume (``Security CADV'') in the previous month 
equal to or greater than 1,000,000 shares per month.
    \13\ The ``More Active Securities Quoting Requirement'' is met 
if the More Active Security has a stock price of $1.00 or more and 
the DMM quotes at the National Best Bid or Offer (``NBBO'') in the 
applicable security at least 10% of the time in the applicable 
month. Both ``More Active Securities'' and the ``More Active 
Securities Quoting Requirement'' are defined in the Price List. The 
Exchange is not proposing any changes to these definitions and 
proposes to relocate them from the text describing the optional 
rebate that the Exchange proposes to delete.
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     $100.00 Rebate per Security if the DMM quotes at the NBBO 
in the applicable security 30% of the time or more in the applicable 
month;
     $75.00 Rebate Per Security if the DMM quotes at least 20% 
and up to 30% of the time in the applicable month; and
     $50.00 if the DMM quotes at least 10% and up to 20% of the 
time in the applicable month.
    Second, in Less Active Securities,\14\ if the DMM that elects the 
Optional Credit meets the Less Active Securities Quoting Requirement 
\15\ in an assigned security, that DMM's assigned security is eligible 
for a:
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    \14\ ``Less Active Securities'' are securities with Security 
CADV of less than 1,000,000 shares per month in the previous month.
    \15\ The ``Less Active Securities Quoting Requirement'' is met 
if the Less Active Security has a stock price of $1.00 or more and 
the DMM quotes at the NBBO in the applicable security at least 15% 
of the time in the applicable month. Both ``Less Active Securities'' 
and the ``Less Active Securities Quoting Requirement'' are defined 
in the current Price List. As with the definitions of More Active 
Securities and the More Active Securities Quoting Requirement, the 
Exchange is not proposing any changes to these definitions and 
proposes to relocate them from the text describing the optional 
rebate.
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     $200.00 Rebate per Security if the DMM quotes at the NBBO 
in the applicable security 60% of the time or more in the applicable 
month;
     $125.00 if the DMM quotes at least 40% and up to 60% of 
the time in the applicable month; and
     $100.00 if the DMM quotes at least 15% and up to 40% of 
the time in the applicable month.
    The Exchange proposes to eliminate the monthly Rebate Per Security 
and the associated Optional Credits in their entirety and remove them 
from the Price List because the credits have been underutilized by 
DMMs. As noted, the definitions of More Active Securities, More Active 
Securities Requirement, Less Active Securities and Less Active 
Securities Requirement would be relocated with no substantive changes 
to the section of the Price List describing DMM rebates where these 
terms are also utilized.
    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,\16\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\17\ 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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    \16\ 15 U.S.C. 78f(b).
    \17\ 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 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.'' \18\ While Regulation 
NMS has enhanced competition, it has also fostered a ``fragmented'' 
market structure where trading in a single stock can occur across 
multiple trading centers. When multiple trading centers compete for 
order flow in the same stock, the Commission has recognized that ``such 
competition can lead to the fragmentation of order flow in that 
stock.'' \19\
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    \18\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37495, 37499 (June 29, 2005) (S7-10-04) (Final Rule) 
(``Regulation NMS'').
    \19\ See Securities Exchange Act Release No. 61358, 75 FR 3594, 
3597 (January 21, 2010) (File No. S7-02-10) (Concept Release on 
Equity Market Structure).
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Additional MPL Adding Tier Requirement
    The proposed alternative way to qualify for the Adding Tier for MPL 
orders is reasonable because an additional way to qualify for the tier 
would make it easier for member organizations to qualify for the 
credit, thereby encouraging the submission of additional liquidity by 
more member

[[Page 7142]]

organizations to a national securities exchange. As noted, the Exchange 
believes that the alternative method would enable more member 
organizations to qualify for the tier, especially in high volume 
months. 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.
New Step UP Tier 4 Adding Credit
    The new proposed 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 
send additional liquidity providing orders to the Exchange in Tape A 
securities. As noted above, the Exchange operates in a highly 
competitive environment, particularly for attracting non-marketable 
order flow that provides liquidity on an exchange.
    The Exchange believes that requiring member organizations to have 
adding ADV, excluding any liquidity added by a DMM, that is at least 
0.20% of NYSE CADV and to add liquidity to the NYSE if the member 
organization has Adding ADV, excluding any liquidity added by a DMM, 
that is at least 0.05% of NYSE CADV over that member organization's 
November 2020 adding liquidity taken as a percentage of NYSE CADV in 
order to qualify for the proposed Step Up Tier 4 Adding Credit is 
reasonable because it would encourage additional displayed liquidity on 
the Exchange and because market participants benefit from the greater 
amounts of displayed liquidity present on the Exchange. Finally, the 
Exchange believes it's reasonable to provide an additional $0.0001 per 
share for adding liquidity in Tape A securities for member 
organizations meet the proposed tier requirements and qualify for the 
$0.0015 credit in Tape A securities if trades in Tapes B and C 
securities against the member organization's orders that add liquidity, 
excluding orders as an SLP, equal to at least 0.20% of Tape B and Tape 
C CADV combined, is reasonable as this same incentive is offered in the 
NYSE`s other adding tiers (Tier 1-3 Adding Credits).
    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, without a view of member 
organization activity on other exchanges and off-exchange venues, the 
Exchange has no way of knowing whether the proposed rule change would 
result in any member organization qualifying for the tier. The Exchange 
believes the proposed credit is reasonable as it would provide an 
additional incentive for member organizations to direct their order 
flow to the Exchange and provide meaningful added levels of liquidity 
in order to qualify for the higher credit, thereby contributing to 
depth and market quality on the Exchange.
SLP NBBO Setter Tier
    Clarifying that the SLP NBBO Setter Tier credits are not available 
for member organizations that are affiliated with SLPs is also 
reasonable as it brings those credits in line with other SLP tiers and 
credits. It is also reasonable to limit the higher credits available 
under this tier to SLP adding ADV given the SLP's additional quoting 
requirements, which non-SLP member organizations do not have.
Elimination of Pricing Tiers and Optional DMM Rebates and Credits
    The Exchange believes that the proposed elimination of the Adding 
Tier 4 and Step Up Tier 3 pricing tiers is reasonable because each of 
these pricing tiers have been underutilized and have generally not 
incentivized member organizations to bring liquidity and increase 
trading on the Exchange. The Exchange does not anticipate any member 
organization in the near future to qualify for any of the tiers that 
are the subject of this proposed rule change. Similarly, the Exchange 
believes eliminating the option for DMMs to receive lower per share 
transaction credits in exchange for monthly rebates per assigned 
security is reasonable because DMMs have underutilized these 
incentives. The Exchange believes it is reasonable to eliminate 
requirements and credits, and even entire pricing tiers, when such 
incentives become underutilized. The Exchange believes eliminating 
underutilized incentive programs would also simplify the Price List. 
The Exchange further believes that removing reference to the pricing 
tiers and the optional DMM rebates and credits from the Price List 
would also add clarity and transparency to the Price List.
The Proposal Is an Equitable Allocation of Fees
Additional MPL Adding Tier Requirement
    The Exchange believes its proposal to offer an alternative way for 
member organizations to qualify for the Adding Tier for MPL orders 
equitably allocates its fees among its market participants. The 
Exchange is not proposing to adjust the amount of the Adding Tier 
Credit for MPL orders that add liquidity, which will remain at the 
current level for all market participants. Rather, by providing an 
alternative way for member organizations to qualify for the adding 
credit, the proposal would continue to encourage member organizations 
to send orders that provide liquidity to the Exchange, thereby 
contributing to robust levels of liquidity, which benefits all market 
participants, and promoting price discovery and transparency. The 
proposal would also 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 believes that 
offering an alternate way for member organizations to qualify for a 
tiered credit, more member organizations will be able to choose to 
route their liquidity-providing orders to the Exchange to qualify for 
the credit. As previously noted, based on the profile of liquidity-
providing member organizations generally, the Exchange believes 
additional member organizations could qualify for the adding credit if 
they choose to direct order flow to, and increase quoting on, the 
Exchange. Additional liquidity-providing orders benefits all market 
participants because it provides greater execution opportunities on the 
Exchange.
New Step UP Tier 4 Adding Credit
    The Exchange believes that the proposed Step Up Tier 4 is equitable 
because the magnitude of the additional credit is less than the current 
Step Up Tier 2 credit in Tape A securities. Moreover, the proposed 
credit is not unreasonable relative with the other non-SLP adding tier 
credits, which as range from $0.0015 to $0.0031, in comparison to the 
credits paid by other exchanges for orders that provide additional step 
up liquidity.\20\
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    \20\ 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 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

[[Page 7143]]

price discovery. Since the proposed Step Up Tier 4 would be new and 
includes a step up Adding ADV requirement, no member organization 
currently qualifies for it. 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 the tier. The Exchange 
believes the proposed credit is reasonable as it would provide an 
additional incentive for member organizations to direct their order 
flow to the Exchange and provide meaningful added levels of liquidity 
in order to qualify for the credit, thereby contributing to depth and 
market quality on the Exchange. The proposal neither targets nor will 
it have a disparate impact on any particular category of market 
participant. All member organizations that provide liquidity could be 
eligible to qualify for the credit proposed in Step Up Tier 4 if they 
increase their Adding ADV over their own baseline of order flow. The 
Exchange believes that offering a step up credit for providing 
liquidity if the step up requirements for Tape A securities are met 
will continue to attract order flow and liquidity to the Exchange, 
thereby providing additional price improvement opportunities on the 
Exchange and benefiting investors generally. As to those market 
participants that do not presently qualify for the adding liquidity 
credits, the proposal will not adversely impact their existing pricing 
or their ability to qualify for other credits provided by the Exchange.
SLP NBBO Setter Tier
    The Exchange believes that limiting the incentives available under 
the SLP NBBO Tier only to SLPS is not unfairly discriminatory because 
the tier will continue to allocate the credits fairly among market 
participants. The tier will continue to allow SLPs to qualify for a 
credit by adding liquidity and setting the NBBO on the Exchange, 
thereby continuing to 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 limit additional 
incentives to SLPs to receive a credit when their orders add liquidity 
to the Exchange as a means of incentivizing increased liquidity adding 
activity by SLPs, given the SLP's additional quoting requirements, 
which non-SLP member organizations do not have. 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.
Elimination of Pricing Tiers and Optional DMM Rebates and Credits
    The Exchange believes that eliminating requirements and credits, 
and even entire pricing tiers, from the Price List when such incentives 
become ineffective is equitable because the two pricing tiers and DMM 
rebate and credits the Exchange proposes to eliminate would be 
eliminated in their entirety, and would no longer be available to any 
member organization in any form.
The Proposal Is Not Unfairly Discriminatory
Additional MPL Adding Tier Requirement
    The Exchange believes its proposal to offer an alternative way for 
member organizations to qualify for the MPL Adding Tier is not unfairly 
discriminatory because the proposal would be provided on an equal basis 
to all member organizations that add liquidity by meeting the new 
proposed alternative requirements, who would all be eligible for the 
same credit on an equal basis. Accordingly, no member organization 
already operating on the Exchange would be disadvantaged by this 
allocation of fees. Further, as noted, the Exchange believes the 
proposal would provide an incentive for member organizations to 
continue to send orders that provide liquidity to the Exchange, to the 
benefit of all market participants.
New Step Up Tier 4 Adding Credit
    The Exchange believes it is not unfairly discriminatory to provide 
an additional per share step up credit, as the proposed credit would be 
provided on an equal basis to all member organizations that add 
liquidity by meeting the new proposed Step Up Tier 4's requirements and 
would equally encourage all member organizations to provide additional 
displayed liquidity on the Exchange. As noted, the Exchange believes 
that the proposed credit would provide an incentive for member 
organizations to send additional liquidity to the Exchange in order to 
qualify for the additional credits. The Exchange also believes that the 
proposed change is not unfairly discriminatory because it is reasonably 
related to the value to the Exchange's market quality associated with 
higher volume. Finally, the submission of orders to the Exchange is 
optional for member organizations in that they could choose whether to 
submit orders to the Exchange and, if they do, the extent of its 
activity in this regard.
SLP NBBO Setter Tier
    The Exchange believes that modifying the tiers in that member 
organizations affiliated with SLPs are not eligible for the incentives 
under the SLP NBBO Setter Tier is not unfairly discriminatory because 
the requirements to achieve the fees would be applied to all similarly 
situated member organizations, who would all be eligible for the same 
credit based on the revised requirement on an equal basis. Limiting the 
credits to SLPs is reasonable given the SLP's additional quoting 
requirements, which non-SLP member organizations do not have. The 
proposal neither targets nor will it have a disparate impact on any 
particular category of market participant. The proposal does not permit 
unfair discrimination because the existing qualification criteria would 
be applied to all similarly situated member organizations, who would 
all be eligible for the same credit on an equal basis.
Elimination of Pricing Tiers and Optional DMM Rebates and Credits
    The Exchange believes that the proposal is not unfairly 
discriminatory because the proposed elimination of two pricing tiers 
and optional DMM rebate and credits would affect all similarly-situated 
market participants on an equal and non-discriminatory basis. The 
Exchange believes that eliminating requirements and credits, and even 
entire pricing tiers, from the Price List when such incentives become 
ineffective is not unfairly discriminatory because the pricing tiers 
the Exchange proposes to eliminate would no longer be available to any 
member organization on an equal basis. Similarly, eliminating optional 
DMM rebate and credits that are underutilized and ineffective would no 
longer be available to any DMM on an equal basis.
    For the foregoing reasons, the Exchange believes that the proposal 
is consistent with the Act.

B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act,\21\ the Exchange 
believes that the proposed rule change would not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. Instead, as discussed above, the Exchange believes 
that the proposed changes would encourage the submission of additional 
liquidity to a public exchange, thereby promoting market depth, price

[[Page 7144]]

discovery and transparency and enhancing order execution opportunities 
for member organizations. As a result, the Exchange believes that the 
proposed change furthers the Commission's goal in adopting Regulation 
NMS of fostering integrated competition among orders, which promotes 
``more efficient pricing of individual stocks for all types of orders, 
large and small.'' \22\
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    \21\ 15 U.S.C. 78f(b)(8).
    \22\ Regulation NMS, 70 FR at 37498-99.
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    Intramarket Competition. The proposed changes are designed to 
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 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. 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. 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.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change is effective upon filing pursuant to 
Section 19(b)(3)(A) \23\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \24\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \23\ 15 U.S.C. 78s(b)(3)(A).
    \24\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \25\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \25\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSE-2021-02 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-2021-02. 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-2021-02, and should be submitted on 
or before February 16, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
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    \26\ 17 CFR 200.30-3(a)(12), (59).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-01586 Filed 1-25-21; 8:45 am]
BILLING CODE 8011-01-P


