[Federal Register Volume 87, Number 181 (Tuesday, September 20, 2022)]
[Notices]
[Pages 57541-57544]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-20267]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95773; File No. SR-NYSE-2022-41]


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

September 14, 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 31, 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 increase the NYSE 
Crossing Session II monthly per member organization fee cap. The 
Exchange proposes to implement the fee changes effective September 1, 
2022. 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.

[[Page 57542]]

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

1. Purpose
    The Exchange proposes to amend its Price List to increase the NYSE 
Crossing Session II (``CS II'') monthly per member organization fee 
cap.
    The Exchange proposes to implement the fee changes effective 
September 1, 2022.
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 20% 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 12%.\9\
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    \5\ See Securities Exchange Act Release No. 51808, 84FR 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. 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 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.
    To respond to this competitive environment, the Exchange has 
established incentives for its member organizations to utilize the 
Exchange's after-hours crossing session.\10\ The proposed fee change is 
designed to revise the incentives for CS II in order to facilitate 
after-hours trading following the decommissioning of the Exchange's 
affiliates' after-hours facility, as described below.
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    \10\ CS II runs on the Exchange from 4 p.m. to 6:30 p.m. eastern 
time and handles member organization crosses of baskets of 
securities of aggregate-priced buy and sell orders. See NYSE Rule 
7.39.
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Proposed Rule Change
    Currently, the Exchange charges a fee of $0.0004 per share (both 
sides) for executions in CS II.\11\ Fees for executions in CS II are 
capped at $200,000 per month per member organization.
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    \11\ See note 10, supra.
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    The Exchange proposes to increase the monthly cap per member 
organization to $300,000. The $0.0004 per share fee for executions in 
CS II would remain unchanged and would be subject to the proposed 
$300,000 per month per member organization cap.
    The Exchange proposed increasing the cap to reflect the 
decommissioning of the off-hours facility offered by the Exchange's 
affiliate NYSE American LLC (``NYSE American''), effective September 1, 
2022.\12\ The Exchange recently filed to adopt a new Rule 7.39 
governing its off-hours trading facility based on NYSE American Rule 
7.39E that would permit Exchange member organizations to enter 
aggregate-price coupled orders for securities, including UTP 
securities, listed and traded on NYSE.\13\ With the decommissioning of 
the NYSE American facility, the Exchange anticipates that the NYSE 
American ETP Holders that utilize the NYSE American off-hours facility, 
all of whom are also NYSE member organizations, would be in a position 
to transition to CS II. The NYSE American off-hours facility was 
subject to a $100,000 cap per month, equivalent to the proposed 
increase. No member organization qualifies for the Exchange's current 
fee cap. The Exchange further notes that it does not know how much 
order flow member organizations choose to route to off-exchange venues 
in the after-hours market.\14\
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    \12\ See Securities Exchange Act Release No. 95499 (August 12, 
2022), 87 FR 50894 (August 18, 2022) (SR-NYSEAMER-2022-35) (Notice 
of Filing and Immediate Effectiveness of Proposed Rule Change to 
Delete Current Rule 7.39E).
    \13\ See Securities Exchange Act Release No. 95498 (August 12, 
2022), 87 FR 50906 (August 18, 2022) (SR-NYSE-2022-37) (Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change to Adopt 
a New Rule 7.39 and Delete Current Rules 900-907).
    \14\ The Exchange also proposes the non-substantive correction 
of inserting a missing parenthesis following ``member 
organization.''
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    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,\15\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\16\ 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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    \15\ 15 U.S.C. 78f(b).
    \16\ 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.'' \17\ 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

[[Page 57543]]

Commission has recognized that ``such competition can lead to the 
fragmentation of order flow in that stock.'' \18\
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    \17\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37495, 37499 (June 29, 2005) (S7-10-04) (Final Rule) 
(``Regulation NMS'').
    \18\ See Securities Exchange Act Release No. 75793 (August 32, 
2015), 80 FR 53600 (September 04, 2015) (SR-NYSE-2015-37) (Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change to Amend 
its Price List to Raise the NYSE Crossing Session II Fee Cap).
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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, including with respect to after-
hours crossing sessions. Accordingly, competitive forces constrain 
exchange transaction fees that relate to after-hours crossing orders. 
Stated otherwise, changes to exchange transaction fees can have a 
direct effect on the ability of an exchange to compete for order flow.
    Given this competitive environment, the proposal represents a 
reasonable attempt to maintain a cap for member organizations that are 
particularly active during CS II in view of the decommissioning of the 
after-hours session on the Exchange's affiliate NYSE American. The 
Exchange anticipates that member organization volume that would have 
participated on NYSE American's after-hours session could migrate to CS 
II, and the proposal represents a reasonable attempt to encompass an 
increase in volume by particularly active member organizations. As 
noted above, the fee subject to the cap would remain unchanged. The 
Exchange notes that the last time this cap was changed was 2015.\19\
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    \19\ See Securities Exchange Act Release No. 61358, 75 FR 3594, 
3597 (January 21, 2010) (File No. S7-02-10) (Concept Release on 
Equity Market Structure).
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The Proposal Is an Equitable Allocation of Fees
    The Exchange believes the proposal equitably allocates its fees 
among its market participants. The Exchange is not proposing to adjust 
the fee for executions in CS II, which will remain at the current level 
for all market participants. Rather, by capping executions for all 
member organizations in CS II at an adjusted level that reflects the 
decommissioning of the NYSE American after-hours session and the 
anticipated migration of volume from NYSE American to the NYSE, the 
proposal would encourage member organizations to send additional orders 
to the Exchange's after-hours trading session. The Exchange notes that 
the proposed cap of $300,000 reflects the combination of the current 
NYSE cap of $200,000 and the current NYSE American cap of $100,000. As 
noted, the same member organizations that participate in CS II 
participated in the NYSE American after-hours session, and the Exchange 
anticipates that these member organizations will send additional volume 
to CS II, which can accept aggregate-price coupled orders for 
securities, including UTP securities, listed and traded on NYSE, 
following the decommissioning of the NYSE American after-hours 
facility.\20\ As proposed, all similarly situated member organizations 
will be subject to the same fee structure to participate in CS II and 
access to the Exchange's market will continue to be offered on fair and 
non-discriminatory terms.
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    \20\ See Rule 7.39.
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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 Exchange believes that the proposed increase in the monthly fee 
cap for CS II transactions is not unfairly discriminatory because the 
proposal would be provided on an equal basis to all member 
organizations that choose to utilize the after-hours facility, who 
would all be eligible for the proposed cap on an equal basis. The 
proposal neither targets nor will it have a disparate impact on any 
particular category of market participant. The proposal does not permit 
unfair discrimination because the higher cap would be applied to all 
similarly situated member organizations, who would all be eligible for 
the same cap on an equal basis. Accordingly, no member organization 
already operating on the Exchange would be disadvantaged by this 
allocation of fees. Further, as noted, the Exchange believes the 
proposal would provide an incentive for member organizations to send 
additional orders to CS II following the decommissioning of the NYSE 
American after-hours facility, which would benefit member organizations 
that would only need to send after-hours orders to a single facility 
for all tapes.
    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,\21\ the Exchange 
believes that the proposed rule change would not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. Instead, as discussed above, the increase in the 
fee cap for member organizations that are particularly active in CS II 
would not burden competition because it would apply to all member 
organizations on equal, fair and non-discriminatory terms. In addition, 
as noted, the Exchange believes that the proposed changes would 
encourage the submission of additional liquidity to the Exchange's 
after-hours facility following the decommissioning of NYSE American's 
after-hours facility. The Exchange anticipates that member 
organizations will send additional volume to CS II, which can accept 
aggregate-price coupled orders for securities, including UTP 
securities, listed and traded on NYSE. As a result, the Exchange 
believes that the proposed change furthers the Commission's goal in 
adopting Regulation NMS of fostering integrated competition among 
orders, which promotes ``more efficient pricing of individual stocks 
for all types of orders, large and small.'' \22\
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    \21\ 15 U.S.C. 78f(b)(8).
    \22\ Regulation NMS, 70 FR at 37498-99.
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    Intramarket Competition. The proposed change is designed to attract 
additional order flow to the Exchange. The Exchange believes that the 
proposed change would continue to incentivize market participants to 
direct after-hours order flow to the Exchange. Greater two-sided 
liquidity in the after-hours trading session benefits all market 
participants. The current credit and the proposed cap would continue to 
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

[[Page 57544]]

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.
    The Exchange believes that the proposed change could promote 
competition between the Exchange and other execution venues, including 
those that currently offer after-hours trading sessions and comparable 
transaction pricing, by encouraging additional orders to be sent to the 
Exchange.

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

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

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

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

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NYSE-2022-41 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-2022-41. 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 a.m. and 3 
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-2022-41, and should be submitted on 
or before October 11, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
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    \26\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-20267 Filed 9-19-22; 8:45 am]
BILLING CODE 8011-01-P


