[Federal Register Volume 86, Number 131 (Tuesday, July 13, 2021)]
[Notices]
[Pages 36850-36853]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-14798]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92343; File No. SR-NYSE-2021-39]


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

July 7, 2021.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that, on June 30, 2021, New York Stock Exchange LLC (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``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 modify the 
requirements to qualify for Supplemental Liquidity Provider (``SLP'') 
Tier 5. The Exchange proposes to implement the rule change on July 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 to modify the requirements to 
qualify for SLP Tier 5.
    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 rule change on July 1, 2021.
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. 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.'' \4\
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    \4\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005) (S7-10-04) (Final Rule) 
(``Regulation NMS'').
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    As the Commission itself has recognized, the market for trading 
services in NMS stocks has become ``more fragmented and competitive.'' 
\5\ Indeed, equity trading is currently dispersed across 16 
exchanges,\6\ 31 alternative trading systems,\7\ and numerous broker-
dealer internalizers and wholesalers. Based on publicly-available 
information, no single exchange has more than 18% of the market.\8\ 
Therefore, no exchange possesses significant pricing power in the 
execution of equity order flow. More specifically, the Exchange's share 
of executed volume of equity trades in Tapes A, B and C securities is 
less than 14%.\9\
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    \5\ See Securities Exchange Act Release No. 51808, 84 FR 5202, 
5253 (February 20, 2019) (File No. S7-05-18) (Transaction Fee Pilot 
for NMS Stocks Final Rule) (``Transaction Fee Pilot'').
    \6\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, available at http://markets.cboe.com/us/equities/market_share/. See generally https://www.sec.gov/fast-answers/divisionsmarketregmrexchangesshtml.html.
    \7\ See FINRA ATS Transparency Data, available at https://otctransparency.finra.org/otctransparency/AtsIssueData. Although 54 
alternative trading systems were registered with the Commission as 
of July 29, 2019, only 31 are currently trading. 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/.
    \9\ See id.
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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 numerous 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 [sic].
Proposed Rule Change
    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 the Exchange.
Proposed Changes to SLP Tier 5
    Under current SLP Tier 5, an SLP adding liquidity in securities 
with a per share price of $1.00 or more with orders, other than Mid-
Point Liquidity (``MPL'')

[[Page 36851]]

orders, is eligible for a per share credit of $0.0031 (or $0.0012 if a 
Non-Displayed Reserve Order) if the SLP:
    (1) Meets the 10% average or more quoting requirement in an 
assigned security pursuant to Rule 107B;
    (2) adds liquidity for all assigned SLP securities in the aggregate 
(including shares of both an SLP-Prop and an SLMM of the same or an 
affiliated member organization) of an average daily volume (``ADV'') of 
more than 0.65% of Tape A consolidated ADV (``CADV'') \10\ (for SLPs 
that are also DMMs and subject to Rule 107B(i)(2)(A), more than 0.65% 
after a discount of the percentage for the prior quarter of Tape A CADV 
in DMM assigned securities as of the last business day of the prior 
month);
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    \10\ The terms ``ADV'' and ``CADV'' are defined in footnote * of 
the Price List.
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    (3) has Adding ADV,\11\ including non-SLP Adding ADV but excluding 
any liquidity added by a DMM, that is at least 0.85% of Tape A CADV; 
and
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    \11\ Footnote 2 to the Price List defines ``Adding ADV'' as ADV 
that adds liquidity to the Exchange during the billing month.
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    (4) executes an ADV, including non-SLP Adding ADV but excluding any 
liquidity added by a DMM, of at least 250,000 shares in Retail Price 
Improvements Orders.
    The Exchange proposes to lower the Adding ADV requirements to 
qualify for the SLP Tier 5. Specifically, the Exchange proposes that a 
SLP add liquidity for all assigned SLP securities in the aggregate 
(including shares of both an SLP-Prop and an SLMM of the same or an 
affiliated member organization) of an ADV of more than 0.60% of Tape A 
CADV. For SLPs that are also DMMs and subject to Rule 107B(i)(2)(A), 
the requirement would be more than 0.60% after a discount of the 
percentage for the prior quarter of Tape A CADV in DMM assigned 
securities as of the last business day of the prior month. In addition, 
the Exchange would require an Adding ADV, including non-SLP Adding ADV 
but excluding any liquidity added by a DMM, that is at least 0.80% of 
Tape A CADV.
    The remaining requirements for qualifying for SLP Tier 5 and the 
existing credits would remain unchanged.
    The Exchange believes that lowering the ADV requirements to qualify 
for SLP Tier 5 as proposed above will allow greater numbers of SLPs to 
potentially qualify for the tier, and will incentivize more SLPs to 
route their liquidity-providing order flow to the Exchange in order to 
qualify for the tier. This in turn would support the quality of price 
discovery on the Exchange and provide additional price improvement 
opportunities for incoming orders.
    As noted above, the Exchange operates in a competitive environment, 
particularly as relates to attracting non-marketable orders, which add 
liquidity to the Exchange. The Exchange believes that the lower 
requirements will provide greater incentives for SLPs to add more 
liquidity to the Exchange. The Exchange does not know how much order 
flow SLPs 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 SLPs could qualify for the tier under the 
revised qualification criteria if they choose to direct order flow to, 
and increase quoting on, the Exchange. However, without having a view 
of SLP'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 additional SLPs directing orders to the Exchange in order 
to qualify for the SLP Tier 5 rates.
    The proposed changes are not otherwise intended to address any 
other issues, and the Exchange is not aware of any problems that member 
organizations 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,\12\ in general, and furthers the 
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\13\ 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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    \12\ 15 U.S.C. 78f(b).
    \13\ 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.'' \14\ 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.'' \15\
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    \14\ See Regulation NMS, supra note 4, at 37499.
    \15\ 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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    Given the current competitive environment, the Exchange believes 
that the proposed revisions to the requirements for SLPs to qualify for 
SLP Tier 5 represents a reasonable attempt to attract additional order 
flow to the Exchange. Specifically, the Exchange believes that the 
proposed revisions are reasonable because they would provide further 
incentives for member organizations that are SLPs to route additional 
liquidity-providing orders to a public exchange to reach the proposed 
Adding ADV requirements, thereby promoting price discovery and 
transparency and enhancing order execution opportunities for member 
organizations. All member organizations would benefit from the greater 
amounts of liquidity that will be present on the Exchange, which would 
provide greater execution opportunities.
    As noted above, the Exchange operates in a competitive environment, 
particularly as relates to attracting non-marketable orders, which add 
liquidity to the Exchange. The Exchange believes that the lower 
requirements will provide greater incentives for SLPs to add more 
liquidity to the Exchange. The Exchange does not know how much order 
flow SLPs 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 SLPs could qualify for the tier under the 
revised qualification criteria if they choose to direct order flow to, 
and increase quoting on, the Exchange. However, without having a view 
of SLP'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 additional SLPs directing orders to the Exchange in order 
to qualify for the SLP Tier 5 credits.

[[Page 36852]]

The Proposal Is an Equitable Allocation of Fees
    The Exchange believes the proposed rule change equitably allocates 
its fees among its market participants. The proposed change would 
continue to encourage member organizations that are SLPs to submit 
additional liquidity to the Exchange and execute orders on the 
Exchange, thereby contributing to robust levels of liquidity, to the 
benefit of all market participants.
    The Exchange believes that modifying the requirements to qualify 
for SLP Tier 5 would encourage the submission of additional liquidity 
to the Exchange, thereby providing customers with a higher quality 
venue for price discovery, liquidity, competitive quotes and price 
improvement. The proposed change will thereby encourage the submission 
of additional liquidity to a national securities exchange, thus 
promoting price discovery and transparency and enhancing 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 proposal neither targets nor will it have a disparate impact on 
any particular category of market participant. Specifically, the 
Exchange believes that the proposal constitutes an equitable allocation 
of fees because all similarly situated SLPs would be eligible for the 
same credits if they meet the revised requirements for the tier. As to 
those SLPs 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.
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 proposed changes to the SLP Tier 5 are not unfairly 
discriminatory because the lower ADV requirements to achieve the fee 
would be applied to all similarly situated member organizations and 
other market participants, who would all be subject to the same 
modified requirements to qualify for the tier and the same credits on 
an equal basis. For the same reason, the proposal neither targets nor 
will it have a disparate impact on any particular category of market 
participant. Accordingly, no member organization already operating on 
the Exchange would be disadvantaged by this allocation of fees. 
Further, the Exchange believes the proposal would incentivize member 
organizations that are SLPs to send more orders to the Exchange to 
qualify for higher credits.
    The Exchange believes that the proposed changes would not permit 
unfair discrimination among SLPs because the tiered rates are available 
equally to all SLPs. As described above, in today's competitive 
marketplace, order flow providers have a choice of where to direct 
liquidity-providing order flow, and the Exchange believes there are 
additional SLPs that could qualify if they chose to direct their order 
flow to the Exchange. 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.
    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,\16\ 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 change would encourage the submission of additional 
liquidity and order flow to a public exchange, thereby 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 competition among orders, 
which promotes ``more efficient pricing of individual stocks for all 
types of orders, large and small.'' \17\
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    \16\ 15 U.S.C. 78f(b)(8).
    \17\ Regulation NMS, 70 FR at 37498-99.
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    Intramarket Competition. The proposed change is designed to attract 
additional order flow to the Exchange. As described above, the Exchange 
believes that the proposed change would provide additional incentives 
for market participants to route liquidity-providing and liquidity-
removing orders 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.
    Intermarket Competition. The Exchange operates in a highly 
competitive market in which market participants can readily choose to 
send their orders to other exchanges 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 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 change could promote 
competition between the Exchange and other execution venues, including 
those that currently offer similar order types and comparable 
transaction pricing, by encouraging additional orders to be sent to the 
Exchange for execution.

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) \18\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \19\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \18\ 15 U.S.C. 78s(b)(3)(A).
    \19\ 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

[[Page 36853]]

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) \20\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \20\ 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-2021-39 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-2021-39. 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-2021-39 and should be submitted on 
or before August 3, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-14798 Filed 7-12-21; 8:45 am]
BILLING CODE 8011-01-P


