[Federal Register Volume 86, Number 50 (Wednesday, March 17, 2021)]
[Notices]
[Pages 14656-14659]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-05451]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91297; File No. SR-NYSE-2021-16]


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

March 11, 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 March 1, 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 cap the maximum 
average number of shares per day for the billing month in calculating 
the average monthly consolidated average daily volume (``CADV'') and 
NYSE CADV for purposes of Step Up Adding Tier 3. The Exchange proposes 
to implement the fee changes effective March 1, 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.

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

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

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

1. Purpose
    The Exchange proposes to amend its Price List to cap the maximum 
average number of shares per day for the billing month in calculating 
CADV and NYSE CADV for purposes of Step Up Adding Tier 3.
    The proposed changes respond to the current volatile market 
environment that has resulted in unprecedented average daily volumes 
and the temporary closure of the Trading Floor,\4\

[[Page 14657]]

which are both related to the ongoing spread of the novel coronavirus 
(``COVID-19''), by providing a degree of certainty to member 
organizations adding liquidity to the Exchange.
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    \4\ Beginning on March 16, 2020, in order to slow 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. See Press 
Release, dated March 18, 2020, available here: https://ir.theice.com/press/press-releases/allcategories/2020/03-18-2020- 
204202110. 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 health and 
safety measures designed to prevent the spread of COVID-19. See 
Trader Update, dated May 14, 2020, available here: https://www.nyse.com/traderupdate/history#110000251588. The Trading Floor 
continues to operate with reduced headcount and additional health 
and safety precautions. See Trader Update, dated June 15, 2020, 
available here: https://www.nyse.com/trader-update/history#110000272018.
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    The Exchange proposes to implement the fee changes effective March 
1, 2021.
Background
Current Market and Competitive Environment
    Beginning in March 2020 and continuing into 2021, markets worldwide 
have experienced unprecedented volatility given the ongoing spread of 
the novel coronavirus (``COVID-19''). Trading volumes on the Exchange 
have surged and remain high. For instance, between March 1 and March 
30, 2020, NYSE CADV was 7.4 billion shares, 95% higher than the average 
NYSE CADV between 2018 and 2020. In January 2021, NYSE CADV was 5.5 
billion shares, 56% higher than the average NYSE CADV for 2019.
    The Exchange also operates in a highly competitive market. The 
Commission has repeatedly expressed its preference for competition over 
regulatory intervention in determining prices, products, and services 
in the securities markets. In Regulation NMS, the Commission 
highlighted the importance of market forces in determining prices and 
SRO revenues and, also, recognized that current regulation of the 
market system ``has been remarkably successful in promoting market 
competition in its broader forms that are most important to investors 
and listed companies.'' \5\
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    \5\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37495, 37499 (June 29, 2005) (S7-10-04) (Final Rule) 
(``Regulation NMS'').
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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.'' \6\ Indeed, equity trading is currently dispersed across 
16 exchanges,\7\ 31 alternative trading systems,\8\ and numerous 
broker-dealer internalizers and wholesalers, all competing for order 
flow. Based on publicly available information, no single exchange has 
more than 16% market share.\9\ Therefore, no exchange possesses 
significant pricing power in the execution of equity order flow. More 
specifically, the Exchange's market share of trading in Tape A, B and C 
securities combined is less than 10%.
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    \6\ 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).
    \7\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, available at http://markets.cboe.com/us/equities/market_share/. See generally https://www.sec.gov/fast-answers/divisionsmarketregmrexchangesshtml.html.
    \8\ See FINRA ATS Transparency Data, available at https://otctransparency.finra.org/otctransparency/AtsIssueData. A list of 
alternative trading systems registered with the Commission is 
available at https://www.sec.gov/foia/docs/atslist.htm.
    \9\ See Cboe Global Markets U.S. Equities Market Volume Summary, 
available at http://markets.cboe.com/us/equities/market_share/.
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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.
    The proposed rule change accordingly responds to these 
unprecedented events and the current competitive landscape where market 
participants can and do move order flow, or discontinue or reduce use 
of certain categories of products, in response to fee changes.
Proposed Rule Change
    Under the Step Up Adding Tier 3, the Exchange 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 \10\ or a new BBO 
\11\ if the MPID or mnemonic:
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    \10\ See Rule 1.1(q) (defining ``NBBO'' to mean the national 
best bid or offer).
    \11\ See Rule 1.1(c) (defining ``BBO'' to mean the best bid or 
offer on the Exchange).
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     Has adding ADV in Tapes A, B and C Securities as a 
percentage of Tapes A, B and C CADV,\12\ 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
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    \12\ The terms ``ADV'' and ``CADV'' are defined in footnote * of 
the Price List.
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     is affiliated with a Supplemental Liquidity Provider 
(``SLP'') that has an Adding ADV in Tape A securities at least 0.10% of 
NYSE CADV, and
     has Adding ADV in Tape A securities as a percentage of 
NYSE CADV, excluding any liquidity added by a DMM, that is at least 
0.20%.
    The credit is in addition to the MPID's or mnemonic's current 
credit for adding liquidity and also does not count toward the combined 
limit on SLP credits of $0.0032 per share provided for in the 
Incremental Credit per Share for affiliated SLPs whereby SLPs can 
qualify for incremental credits of $0.0001, $0.0002 or $0.0003.
    For purposes of calculating Tapes A, B and C CADV as currently used 
in Step Up Adding Tier 3, the Exchange proposes to establish a monthly 
maximum average cap of 11.5 billion shares per day for Tapes A, B and C 
CADV in the billing month for MPIDs or mnemonics of qualifying member 
organizations that are SLPs. To effectuate this change, the Exchange 
would add text to the tier specifying that, in a month where Tapes A, B 
and C CADV equals or exceeds 11.5 billion shares per day for the 
billing month, Tapes A, B and C CADV for that month will be subject to 
a cap of 11.5 billion shares per day for the billing month.
    Similarly, for purposes of calculating NYSE CADV as currently used 
in Step Up Adding Tier 3, the Exchange proposes to establish a monthly 
maximum average cap of 5.5 billion shares per day for NYSE CADV in the 
billing month for MPIDs or mnemonics of qualifying member organizations 
that are SLPs. To effectuate this change, the Exchange would add text 
to the tier specifying that for MPIDs or mnemonics of qualifying member 
organizations that are SLPs, in a month where NYSE CADV equals or 
exceeds 5.5 billion shares per day for the billing month, NYSE CADV for 
that month will be subject to a cap of 5.5 billion shares per day for 
the billing month.
    For example, assume in the billing month that a member organization 
that is an SLP has an average daily adding volume of 11.5 million 
shares. Further assume that Tapes A, B and C CADV was 14.0 billion 
shares during that month. To calculate the adding ADV as

[[Page 14658]]

a percent of Tapes A, B and C CADV, the Exchange would use the CADV cap 
of 11.5 billion shares, yielding an adding percent of Tapes A, B and C 
CADV of 0.10% rather than 0.082% if the Exchange had used 14.0 billion 
shares. The example would work the same for the NYSE CADV cap of 5.5 
billion shares if NYSE CADV was over 5.5 billion shares.
    The Exchange does not propose to change the requirements to qualify 
for or the credits associated with Step Up Adding Tier 3.
    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,\13\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\14\ 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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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(4) & (5).
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The Proposed Change Is Reasonable
    As discussed above, beginning March 2020, markets worldwide have 
experienced unprecedented volatility because of the ongoing spread of 
COVID19. As a result of this volatility, the equity markets have 
experienced unprecedented trading volumes. Moreover, as also discussed 
above, the Exchange operates in a highly fragmented and competitive 
market. In view of these unprecedented events, and the current 
competitive landscape where market participants can and do move order 
flow, or discontinue or reduce use of certain categories of products, 
in response to fee changes, the Exchange believes that the proposed 
rule change is reasonable. Specifically, the Exchange believes that 
capping the monthly Tape A, B and C CADV at a maximum of 11.5 billion 
shares and the monthly NYSE CADV at a maximum of 5.5 billion shares 
when calculating CADV for Step Up Adding Tier 3 for MPIDs or mnemonics 
of qualifying member organizations that are SLPs is reasonable because 
such extraordinarily high market volumes would make it significantly 
harder for member organizations that are SLPs, whose adding volume is 
limited to proprietary adding liquidity, to meet the adding 
requirements for the tier. The Exchanges notes that the CADV share 
volumes cap levels are the same levels as the current CADV caps for SLP 
tiers in the fee schedule.
The Proposal Is an Equitable Allocation of Fees
    The Exchange believes the proposal equitably allocates its fees 
among its market participants by fostering liquidity provision and 
stability in the marketplace. The Exchange believes that the proposed 
cap for calculating CADV for Step Up Adding Tier 3 credits in a month 
where Tape A, B and C CADV is equal to or greater than 11.5 billion 
share or when NYSE CADV is equal to or greater than 5.5 billion shares 
constitutes an equitable allocation of fees because the proposed change 
would apply to all similarly situated member organizations that are 
SLPs, all of whom would continue to be subject to the same fee 
structure, and access to the Exchange's market would continue to be 
offered on fair and nondiscriminatory terms.
The Proposal Is Not Unfairly Discriminatory
    The Exchange believes that the proposal is not unfairly 
discriminatory. In the prevailing competitive environment, member 
organizations are free to disfavor the Exchange's pricing if they 
believe that alternatives offer them better value.
    The proposal is not unfairly discriminatory because it neither 
targets nor will it have a disparate impact on any particular category 
of market participant. The proposed caps for calculating monthly 
combined CADV for Step Up Adding Tier 3 credits for adding liquidity to 
the Exchange also does not permit unfair discrimination because the 
proposed changes would apply to all similarly situated member 
organizations that are SLPs, who would all benefit from use of the 
lower volume threshold to calculate the relevant adding tier CADV 
across tapes 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,\15\ 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 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.'' \16\
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    \15\ 15 U.S.C. 78f(b)(8).
    \16\ 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.

[[Page 14659]]

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) \17\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \18\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 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) \19\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \19\ 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-2021-16 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-2021-16. 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-2021-16, and should be submitted on 
or before April 7, 2021.
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    \20\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-05451 Filed 3-16-21; 8:45 am]
BILLING CODE 8011-01-P


