[Federal Register Volume 87, Number 179 (Friday, September 16, 2022)]
[Notices]
[Pages 57008-57010]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-20039]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95742; File No. SR-NYSENAT-2022-17]


Self-Regulatory Organizations; NYSE National, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend the 
NYSE National Schedule of Fees and Rebates

September 12, 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 August 29, 2022, NYSE National, Inc. (``NYSE National'' 
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 Exchange. 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 the NYSE National Schedule of Fees 
and Rebates (``Fee Schedule'') to reflect the fee for Directed Orders 
routed directly by the Exchange to an alternative trading system 
(``ATS''). 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 the Fee Schedule to reflect the fee 
for Directed Orders routed directly by the Exchange to an ATS. The 
Exchange proposes to implement the fee change effective August 31, 
2022.
Background
    The Exchange operates in a highly competitive market. The 
Securities and Exchange Commission (``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 37496, 37499 (June 29, 2005) (File No. 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\ numerous alternative trading systems,\7\ and broker-
dealer internalizers and wholesalers, all competing for order flow. 
Based on publicly available information, no single exchange currently 
has more than 18% market share.\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 2%.\9\
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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 U.S. Equities Market Volume Summary, available at 
https://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/.
    \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. While it is not possible to know a firm's reason for shifting 
order flow, the Exchange believes that one such reason is because of 
fee changes at any of the registered exchanges or non-exchange venues 
to which a firm routes order flow. Accordingly, competitive forces 
constrain exchange transaction fees, and market participants can 
readily trade on competing venues if they deem pricing levels at those 
other venues to be more favorable.
Proposed Rule Change
    Pursuant to Commission approval, the Exchange adopted a new order 
type known as Directed Orders.\10\ A Directed Order is a Limit Order 
\11\ with instructions to route on arrival at its limit price to a 
specified ATS with which the Exchange maintains an electronic linkage. 
Under Exchange rules, the ATS to which a Directed Order is routed would 
be responsible for validating whether the order is eligible to be 
accepted, and if such ATS determines to reject the order, the order 
would be cancelled. Directed Orders must be designated with a Time in 
Force modifier of Day \12\ or IOC \13\ or and are eligible to be 
designated for the Core Trading Session \14\ only. Directed Orders that 
are the subject of this proposed rule

[[Page 57009]]

change would be routed to OneChronos LLC (``OneChronos'').
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    \10\ See Rule 7.31(f)(4). See also Securities Exchange Act 
Release No. 95426 (August 4, 2022), 87 FR 48718 (August 10, 2022) 
(SR-NYSENAT-2022-06).
    \11\ A Limit Order is defined in Rule 7.31(a)(2) as an order to 
buy or sell a stated amount of a security at a specified price or 
better.
    \12\ Pursuant to Rule 7.31(b)(1), any order to buy or sell 
designated Day, if not traded, will expire at the end of the 
designated session on the day on which it was entered.
    \13\ Pursuant to Rule 7.31(b)(2), a Limit Order may be 
designated with an Immediate-or-Cancel (``IOC'') modifier.
    \14\ The Core Trading Session for each security begins at 9:30 
a.m. Eastern Time and ends at the conclusion of Core Trading Hours. 
See Rule 7.34(a)(2). The term ``Core Trading Hours'' means the hours 
of 9:30 a.m. Eastern Time through 4:00 p.m. Eastern Time or such 
other hours as may be determined by the Exchange from time to time. 
See Rule 1.1.
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    In anticipation of the scheduled implementation of routing 
functionality to OneChronos,\15\ the Exchange proposes to amend the Fee 
Schedule to state that the Exchange will not charge a fee for Directed 
Orders routed to OneChronos. To reflect the no fee, the Exchange 
proposes to amend current Section II. Routing Fees (All ETP Holders) to 
state ``No fee for Directed Orders routed to OneChronos LLC'' for 
securities priced at or above $1.00. The Exchange also proposes to 
amend the rule text regarding the current routing fee of $0.0030 per 
share to clarify that the fee would apply to ``all other'' executions. 
Additionally, the Exchange proposes to define ``Directed Orders'' under 
Section I. A. As proposed, the term ``Directed Orders'' would mean a 
Limit Order with instructions to route on arrival at its limit price to 
a specified alternative trading system (``ATS'') with which the 
Exchange maintains an electronic linkage. The Exchange also proposes to 
renumber current definitions (5) through (7) to (6) through (8), 
respectively, in conjunction to the changes discussed herein.
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    \15\ See https://www.nyse.com/publicdocs/nyse/notifications/trader-update/110000456275/OneChronos_August_2022_Trader_Update_Final.pdf.
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    The Exchange believes that the Directed Orders functionality would 
facilitate additional trading opportunities by offering ETP Holders the 
ability to designate orders submitted to the Exchange to be routed to 
OneChronos for execution. The Exchange believes the functionality could 
create efficiencies for ETP Holders that choose to use the 
functionality by enabling them to send orders that they wish to route 
to OneChronos through the Exchange by leveraging order entry protocols 
already configured for their interaction with the Exchange. ETP Holders 
that choose not to utilize Directed Orders would continue to be able to 
trade on the Exchange as they currently do.
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) and (5).
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    As discussed above, the Exchange operates in a highly fragmented 
and competitive market. The Commission has repeatedly expressed its 
preference for competition over regulatory intervention in determining 
prices, products, and services in the securities markets. Specifically, 
in Regulation NMS, the Commission highlighted the importance of market 
forces in determining prices and SRO revenues and, also, recognized 
that current regulation of the market system ``has been remarkably 
successful in promoting market competition in its broader forms that 
are most important to investors and listed companies.'' \18\
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    \18\ See supra note 4.
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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 
shift order flow, or discontinue or reduce use of certain categories of 
products, in response to fee changes. Accordingly, changes to exchange 
transaction fees can have a direct effect on the ability of an exchange 
to compete for order flow.
    In particular, the Exchange believes the proposed rule change is a 
reasonable means to incent ETP Holders to utilize the Directed Orders 
functionality and allow ETP Holders to evaluate its efficacy. The 
proposed routing of orders to OneChronos is provided by the Exchange on 
a voluntary basis and no rule or regulation requires that the Exchange 
offer it. Nor does any rule or regulation require market participants 
to send orders to an ATS generally, let alone to OneChronos. The 
routing of orders to OneChronos would operate similarly to the Primary 
Only Order already offered by the Exchange, which is an order that is 
routed directly to the primary listing market on arrival, without 
interacting with the interest on the Exchange Book.\19\
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    \19\ See Rule 7.31(f)(1).
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    The Exchange believes its proposal equitably allocates its fees 
among its market participants. The Exchange believes that the proposal 
represents an equitable allocation of fees because it would apply 
uniformly to all ETP Holders, in that all ETP Holders will have the 
ability to designate orders submitted to the Exchange to be routed to 
OneChronos, and each such ETP Holder would not be charged a fee when 
utilizing the new functionality. While the Exchange has no way of 
knowing whether this proposed rule change would serve as an incentive 
to utilize the new order type, the Exchange expects that a number of 
ETP Holders will utilize the new functionality because it would create 
efficiencies for ETP Holders by enabling them to send orders that they 
wish to route to OneChronos through the Exchange, thereby enabling them 
to leverage order entry protocols already configured for their 
interactions with the Exchange.
    The Exchange believes that the proposal is not unfairly 
discriminatory. The Exchange believes it is not unfairly discriminatory 
as the proposal to not charge a fee would be assessed on an equal basis 
to all ETP Holders that use the Directed Order functionality. The 
proposal to not charge a fee would also enable ETP Holders to evaluate 
the efficacy of the new functionality. Moreover, this proposed rule 
change neither targets nor will it have a disparate impact on any 
particular category of market participant. The Exchange believes that 
this proposal does not permit unfair discrimination because the changes 
described in this proposal would be applied to all similarly situated 
ETP Holders. Accordingly, no ETP Holder already operating on the 
Exchange would be disadvantaged by the proposed allocation of fees. The 
Exchange further believes that the proposed rule change would not 
permit unfair discrimination among ETP Holders because the Directed 
Order functionality would be available to all ETP Holders on an equal 
basis and each such participant would not be charged a fee for using 
the functionality.
    Finally, the submission of orders to the Exchange is optional for 
ETP Holders in that they could choose whether to submit orders to the 
Exchange and, if they do, the extent of its activity in this regard. 
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,\20\ 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. 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

[[Page 57010]]

of individual stocks for all types of orders, large and small.'' \21\
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    \20\ 15 U.S.C. 78f(b)(8).
    \21\ See supra note 4.
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    Intramarket Competition. The Exchange believes the proposed 
amendment to its Fee Schedule would not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. The Exchange believes the proposed rule change is 
a reasonable means to incent ETP Holders to utilize the Directed Orders 
functionality and allow ETP Holders to evaluate its efficacy. The 
Directed Orders functionality would be available to all ETP Holders and 
all ETP Holders that use the Directed Orders functionality to route 
their orders to OneChronos will not be charged a routing fee. The 
proposed routing of orders to OneChronos is provided by the Exchange on 
a voluntary basis and no rule or regulation requires that the Exchange 
offer it. ETP Holders have the choice whether or not to use the 
Directed Orders functionality and those that choose not to utilize it 
will not be impacted by the proposed rule change. The Exchange also 
does not believe the proposed rule change would impact intramarket 
competition as the proposed rule change would apply to all ETP Holders 
equally that choose to utilize the Directed Orders functionality, and 
therefore the proposed change would not impose a disparate burden on 
competition among market participants on the Exchange.
    Intermarket Competition. The Exchange operates in a highly 
competitive market in which market participants can readily choose to 
send their orders to other exchange and off-exchange venues if they 
deem fee levels at those other venues to be more favorable. As noted 
above, the Exchange's market share of intraday trading is currently 
less than 2%. 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) \22\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \23\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \22\ 15 U.S.C. 78s(b)(3)(A).
    \23\ 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) \24\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \24\ 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-NYSENAT-2022-17 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-NYSENAT-2022-17. 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-NYSENAT-2022-17, and should be submitted 
on or before October 7, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-20039 Filed 9-15-22; 8:45 am]
BILLING CODE 8011-01-P


