[Federal Register Volume 87, Number 99 (Monday, May 23, 2022)]
[Notices]
[Pages 31280-31283]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-10959]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94933; File No. SR-NYSE-2022-22]


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

May 17, 2022.
    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 May 11, 2022, 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 introduce a new 
adding credit for providing displayed liquidity to the Exchange in Tape 
B and C Securities. The Exchange proposes to implement the fee changes 
effective May 11, 2022.\4\ The proposed rule change is available on the 
Exchange's website at www.nyse.com, at the principal office of the 
Exchange, and at the Commission's Public Reference Room.
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    \4\ The Exchange originally filed to amend the Price List on May 
2, 2022 (SR-NYSE-2022-21). On May 11, 2002, SR-NYSE-2022-21 was 
withdrawn and replaced by this filing.
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II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

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

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

1. Purpose
    The Exchange proposes a new adding credit for providing displayed 
liquidity to the Exchange in Tape B and C Securities.
    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 May 
11, 2022.
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. 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.'' \5\
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    \5\ 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.'' 
\6\ Indeed, equity trading is currently dispersed across 16 
exchanges,\7\ 31 alternative trading systems,\8\ and numerous broker-
dealer internalizers and wholesalers. Based on publicly-available 
information, no single exchange has more than 20% of the market.\9\ 
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 12%.\10\
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    \6\ 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'').
    \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/.
    \10\ 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 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 the Exchange.

[[Page 31281]]

Proposed Rule Change
    The Exchange proposes a new adding credit in Tape B and C 
securities for the market participant identifier (``MPID'') or mnemonic 
of member organizations that meet the current requirements for Step Up 
Adding Tier 5 as well as certain additional proposed requirements, as 
follows.
    The current Step Up Tier 5 Adding Credit offers incremental credits 
for providing displayed liquidity to the Exchange in Tape A securities 
for all orders, other than MPL and Non-Displayed Limit Orders, from a 
qualifying member organization's MPID or mnemonic if the member 
organization has Adding ADV, excluding any liquidity added by a 
Designated Market Maker (``DMM''), that is at least 1.00% of Tape A 
CADV,\11\ and if the MPID or mnemonic has an Adding ADV as a percentage 
of Tape A CADV, excluding any liquidity added by a DMM, that is:
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    \11\ The terms ``ADV'' and ``CADV'' are defined in footnote * of 
the Price List.
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     At least two times more than that MPID's or mnemonic's 
Adding ADV in January 2021 (``Baseline Month'') as a percentage of Tape 
A CADV, and
     at least 0.10% of Tape A CADV over that MPID's or 
mnemonic's Adding ADV in in the Baseline Month as a percentage of Tape 
A CADV.
    A member organizations meeting the above requirements receives a 
$0.0001 incremental credit for an increase of at least 0.10% and less 
than 0.175% of Tape A CADV over the Baseline Month. Member 
organizations receive a $0.0002 incremental credit for an increase of 
at least 0.175% of Tape A CADV over the Baseline Month.
    The Exchange proposes a new $0.0029 credit for providing displayed 
liquidity in Tape B and C Securities based on similar requirements to 
the Step Up Tier 5 Adding Credit. Specifically, the proposed credit 
would be available for providing displayed liquidity in Tape B and C 
Securities for a qualifying member organization's MPID or mnemonic that 
has providing volume in Tape A Securities of at least 1.0% of Tape A 
CADV, and the MPID or mnemonic has providing volume in Tape A 
Securities that is:
     At least two times more than that MPID's or mnemonic's 
baseline in January 2021 as a percentage of Tape A CADV, and
     at least 0.10% of Tape A CADV over that MPID's or 
mnemonic's Adding ADV in January 2021 baseline as a percentage of Tape 
A CADV, and
     at least 0.25% of Tape A CADV over that MPID's or 
mnemonic's Adding ADV in January 2021 as a percentage of Tape A CADV.
    To effectuate this change, the Exchange would amend the chart 
setting forth the Adding Tiers for transaction fees and credits for 
Tape B and C Securities to add a new column titled ``Step Up Tier'' and 
set forth the proposed requirements and proposed credit.
    For example, assume Member Organization A has an Adding ADV as a 
percentage of Tape A CADV of 1.10%, and adding ADV of Tape B and C of 
CADV 0.075% each, in the billing month. Member Organization A would 
currently qualify for Tape B and C Tier 2 credits of $0.0023 per share 
each based on the current Tape B and C Tier 2 requirement of 0.05% for 
each tape.
    Further assume that one of Member Organization A's MPIDs, MPID1, 
has an Adding ADV of 0.30% of Tape A CADV and that MPID1 has an Adding 
ADV of 0.10% in the Baseline Month and, as such, MPID1's Adding ADV is 
2.5 times its Baseline Month with a step up of 0.20% and qualifies for 
Step Up Tier 5. If instead MPID1 had a Tape A Adding ADV of 0.40% of 
CADV, for step up of Tape A Adding ADV of 0.30% CADV, MPID 1 would 
qualify for the proposed Tape B and C credit of $0.0029 for adding 
displayed liquidity.
    The purpose of this proposed change is to incentivize member 
organizations to increase the liquidity-providing orders in the Tape B 
and C 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's MPID or mnemonic to 
increase the volume of its trades in orders that add liquidity over 
that MPID or mnemonic's January 2021 Adding ADV 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 proposed credit 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.
    The proposed change is 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,\12\ in general, and furthers the 
objectives of Sections 6(b)(4) and (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 Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37495, 37499 (June 29, 2005) (S7-10-04) (Final Rule) 
(``Regulation NMS'').
    \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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    The new proposed adding credit in Tape B and C credit is 
reasonable. Specifically, the Exchange believes that the proposed 
credit would provide an

[[Page 31282]]

incentive for member organizations to send additional liquidity 
providing orders to the Exchange in Tape B and C 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 it's reasonable to provide a $0.0029 
credit in Tape B and C Securities to the qualifying MPID or mnemonic 
based on the proposed increased adding requirements because this would 
encourage individual MPIDs or mnemonics of a member organization 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. 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's MPID or mnemonic qualifying for the tier. Based on the 
profile of liquidity-adding firms generally, the Exchange believes that 
additional member organizations could qualify for the proposed credit 
if they choose to direct order flow to, and increase quoting on, the 
Exchange. The Exchange believes the proposed credit is reasonable as it 
would provide an additional incentive for member organization's MPID or 
mnemonic 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 Is an Equitable Allocation of Fees
    The Exchange believes that the proposed credit is equitable because 
the proposed rule change would improve market quality for all market 
participants on the Exchange and, as a consequence, attract more 
liquidity to the Exchange, thereby improving market wide quality and 
price discovery. 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's MPID or mnemonic qualifying for the tier. Based 
on the profile of liquidity-adding firms generally, the Exchange 
believes that additional member organizations could qualify for the 
proposed credit if they choose to direct order flow to, and increase 
quoting on, the Exchange. The Exchange believes the proposed credit is 
equitable as it would provide an additional incentive for member 
organization's MPID or mnemonic 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 organization's MPIDs or mnemonics that provide liquidity 
could be eligible to qualify for the proposed credit if they increase 
their Adding ADV over their own baseline of order flow and the member 
organization meets the 0.25% increase in Adding ADV of Tape CADV 
requirement. The Exchange believes that offering a step up credit for 
providing liquidity if the step up requirements for Tape B and C 
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 in Tape A Securities, 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 it is not unfairly discriminatory to provide 
an additional per share step up credit in Tape B and C Securities, as 
the proposed credit would be provided on an equal basis to all member 
organizations and their MPIDs or mnemonics that add liquidity by 
meeting the new proposed requirements and would equally encourage all 
member organizations and their MPIDs or mnemonics to provide additional 
displayed liquidity on the Exchange. As noted, the Exchange believes 
that the proposed credit would provide an incentive for member 
organizations and their MPIDs or mnemonics to send additional liquidity 
to the Exchange in order to qualify for the additional credit. 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 and their MPIDs or mnemonics in that they could choose 
whether to submit orders to the Exchange and, if they do, the extent of 
its activity in this regard.
    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 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.'' \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 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 change 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

[[Page 31283]]

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) \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 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 [email protected]. Please include 
File Number SR-NYSE-2022-22 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-2022-22. 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-2022-22 and should be submitted on 
or before June 13, 2022.
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    \21\ 17 CFR 200.30-3(a)(12).
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    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-10959 Filed 5-20-22; 8:45 am]
BILLING CODE 8011-01-P


