[Federal Register Volume 88, Number 57 (Friday, March 24, 2023)]
[Notices]
[Pages 17907-17910]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-06058]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97170; File No. SR-NYSE-2023-18]


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

March 20, 2023.
    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 March 13, 2023, 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 amend the charges 
for transactions that remove liquidity from the Exchange. The Exchange 
proposes to implement the fee changes effective March 13, 2023. 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 it Price List to amend the charges 
for transactions that remove liquidity from the Exchange.
    The proposed changes respond to the current competitive environment 
where order flow providers have a choice of where to direct liquidity-
removing orders by offering further incentives for member organizations 
to send additional liquidity to the Exchange.
    The Exchange proposes to implement the fee changes effective March 
13, 2023.\4\
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    \4\ The Exchange originally filed to amend the Price List on 
March 1, 2023 (SR-NYSE-2023-16). SR-NYSE-2023-16 was withdrawn on 
March 13, 2023 and replaced by this filing.
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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. 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) (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.'' \6\ Indeed, cash equity trading is currently dispersed 
across 16 exchanges,\7\ numerous alternative trading systems,\8\ and 
broker-dealer

[[Page 17908]]

internalizers and wholesalers, all competing for order flow. Based on 
publicly-available information, no single exchange currently has more 
than 17% market share.\9\ Therefore, no exchange possesses significant 
pricing power in the execution of cash 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. 61358, 75 FR 3594, 
3597 (January 21, 2010) (File No. S7-02-10) (Concept Release on 
Equity Market Structure).
    \7\ 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.
    \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. 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 the firm routes order flow. Accordingly, competitive forces 
compel the Exchange to use exchange transaction fees and credits 
because market participants can readily trade on competing venues if 
they deem pricing levels at those other venues to be more favorable.
    In response to this competitive environment, the Exchange has 
established incentives for member organizations who submit orders that 
remove liquidity from the Exchange. These incentives offer a base 
remove fee that decreases as the member organization provides 
additional removing liquidity to the Exchange. As detailed below, the 
proposed higher fees are intended to encourage additional liquidity 
removing order flow to a public exchange, which benefits all market 
participants.
Proposed Rule Change
    The Exchange currently offers a fee of $0.00290 in Tape A 
securities and a fee of $0.00285 for Tape B and C securities for non-
Floor broker transactions if the member organization has an average 
daily volume (``ADV'') that adds liquidity to the Exchange during the 
billing month (``Adding ADV''),\11\ excluding liquidity added by a 
Designated Market Maker (``DMM''), that is at least 2,000,000 ADV on 
the NYSE in Tape A securities. The Exchange proposes to increase the 
fee for removing in Tape B and C securities to $0.00295. The current 
fee for removing in Tape A securities of $0.00290 and the requirements 
to qualify for the fees would remain unchanged. Member organizations 
that do not qualify for the proposed fee based on the current 
requirements would receive the $0.0030 base remove rate for all tapes.
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    \11\ The terms ``ADV'' and ``CADV'' are defined in footnote * of 
the Price List.
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    In addition, the Exchange currently offers a fee of $0.00285 in 
Tape A, B and C securities for non-Floor broker transactions if the 
member organization has an Adding ADV, excluding liquidity added by a 
DMM, that is at least 7,000,000 ADV in Tape A securities and 500,000 
ADV in Tape B and Tape C securities combined during the billing month. 
The Exchange proposes to increase the fee for removing in Tape B and C 
securities to $0.00290. The current fee for removing in Tape A 
securities of $0.00285 and the requirements to qualify for the fees 
would remain unchanged. Member organizations that do not qualify for 
the current and proposed fees based on the current requirements would 
receive the $0.0030 base remove rate for all tapes.
    The Exchange believes that the proposed changes, taken together, 
will encourage submission of additional removing liquidity in Tape A, B 
and C securities to qualify for lower fees, thereby promoting price 
discovery and transparency and enhancing order execution opportunities 
for member organizations. The proposal seeks to encourage member 
organizations that are meeting or exceeding current ADV requirements to 
send additional removing liquidity in order to meet the next level 
requirements and therefore qualify for lower fees. As noted above, the 
Exchange operates in a competitive environment, particularly as it 
relates to attracting non-marketable orders, that remove liquidity to 
the Exchange. The Exchange does not know how much order flow member 
organizations choose to route to other exchanges or to off-exchange 
venues. 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 increasing or decreasing their directing of orders to the 
Exchange.
    The proposed changes are not otherwise intended to address any 
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, is designed to prevent fraudulent and 
manipulative acts and practices and to promote just and equitable 
principles of trade, 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) and (5).
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The Proposed Fee Change Is Reasonable
    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.'' \14\
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    \14\ See Regulation NMS, supra note 3, 70 FR at 37499.
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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 to reduce use of certain categories of 
products, in response to fee changes. Member organizations can choose 
from any one of the 16 currently operating registered exchanges, and 
numerous off-exchange venues, to route such order flow. Accordingly, 
competitive forces constrain exchange transaction fees that relate to 
orders on an exchange. 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 attract additional order flow to the Exchange by 
adjusting the incentives for all market participants to send additional 
order flow to a public exchange and increase the quality of order 
execution on the Exchange's market, which benefits all market 
participants.

[[Page 17909]]

    More specifically, the Exchange believes that the proposed increase 
to the fees for transactions that remove liquidity from the Exchange in 
Tape A, B and C securities are reasonable. The purpose of these changes 
is to encourage additional liquidity on the Exchange by providing 
incentives for member organizations to send additional liquidity to 
qualify for the next incentive level, which would result in lower fees 
for removing liquidity for the member organization. The Exchange 
believes that the proposal will continue to encourage additional 
liquidity to a public exchange to qualify for lower fees for removing 
liquidity in Tape A, B and Tape C securities, thereby promoting price 
discovery and transparency and enhancing order execution opportunities 
for member organizations. The proposal is thus reasonable because all 
member organizations would benefit from such increased levels of 
liquidity and from lower fees.
The Proposed Change Is an Equitable Allocation of Fees and Credits
    The Exchange believes its proposal equitably allocates its fees 
among its market participants by fostering liquidity provision and 
stability in the marketplace.
    The Exchange believes that, for the reasons discussed above, the 
proposed changes taken together, will encourage member organizations to 
send additional removing liquidity to achieve lower fees when removing 
liquidity in Tape A, B and Tape C securities from the Exchange, thereby 
increasing the number of orders that are executed on the Exchange, 
promoting price discovery and transparency and enhancing order 
execution opportunities and improving overall liquidity on a public 
exchange. The Exchange also believes that the proposed change is 
equitable because it would apply to all similarly situated member 
organizations that remove liquidity in Tape A, B or Tape C securities. 
As previously noted, the Exchange operates in a competitive 
environment, particularly as it relates to attracting non-marketable 
orders, which add liquidity to the Exchange. The Exchange does not know 
how much order flow member organizations choose to route to other 
exchanges or to off-exchange venues. Without having a view of member 
organization's 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 increasing or decreasing orders to 
the Exchange. The Exchange notes that the proposed fees from removing 
liquidity in Tape B and C securities are in line with what the Exchange 
charges in Tape A securities. The proposed fees are also in line with 
or better than what other exchanges charge. For example, the fee to 
remove liquidity at Cboe BZX is $0.0030 per share.\15\ On MEMX, the fee 
to remove liquidity is $0.0030 per share and $0.00295 per share if the 
member (1) has an adding ADV of at least 0.50% of CADV and a removing 
ADV of at least 0.25% of CADV, or (2) a total ADV of at least 1.00% of 
CADV.\16\
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    \15\ See Cboe BZX Equities Fee Schedule, available at https://www.cboe.com/us/equities/membership/fee_schedule/bzx/.
    \16\ See MEMX Fee Schedule, available at https://info.memxtrading.com/fee-schedule/.
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The Proposed Fee Change Is Not Unfairly Discriminatory
    The Exchange believe that the proposed rule is not unfairly 
discriminatory for the following reasons.
    The Exchange believes that that the proposed increased fees for 
member organizations that remove liquidity in Tapes B and C securities 
will, taken together, encourage submission of additional liquidity in 
Tape A, B and Tape C securities to a public exchange in order to 
qualify for lower fees for removing liquidity, thereby promoting price 
discovery and transparency and enhancing order execution opportunities 
for member organizations. The proposal does not permit unfair 
discrimination because the proposed fees for removing liquidity would 
be applied to all similarly situated member organizations and other 
market participants, who would all be eligible for the same fees on an 
equal basis. Accordingly, no member organization already operating on 
the Exchange would be disadvantaged by this allocation of fees. The 
Exchange believes it is not unfairly discriminatory to increase fees 
for removing liquidity in as the proposed fees would be provided on an 
equal basis to all member organizations. 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.
    In addition, 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 above and 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,\17\ 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 fee change 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 market participants. 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.'' \18\
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    \17\ 15 U.S.C. 78f(b)(8).
    \18\ See Securities Exchange Act Release No. 51808, 70 FR 37495, 
37498-99 (June 29, 2005) (S7-10-04) (Final Rule).
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    Intramarket Competition. The Exchange believes the proposed change 
would not impose any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The proposed 
change is designed to attract additional orders to the Exchange. The 
Exchange believes that the proposed changes would encourage market 
participants to direct their liquidity-removing orders to the Exchange. 
Greater overall order flow, trading opportunities, and pricing 
transparency benefit all market participants on the Exchange by 
enhancing market quality and continuing to encourage member 
organizations to send orders, thereby contributing towards a robust and 
well-balanced market ecosystem. The current and proposed fees would be 
available to all similarly situated market participants, and, as such, 
the proposed change would not impose a disparate burden on competition 
among market participants on the Exchange. As noted, the proposal would 
apply to all similarly situated member organizations on the same and 
equal terms, who would benefit from the changes on the same basis. 
Accordingly, the proposed change would not impose a disparate burden on 
competition among market participants on the Exchange.

[[Page 17910]]

    Intermarket Competition. The Exchange operates in a highly 
competitive market in which market participants can readily choose to 
send their orders to other exchange and off-exchange venues if they 
deem fee levels at those other venues to be more favorable. In such an 
environment, the Exchange must continually adjust its fees and rebates 
to remain competitive with other exchanges and with off-exchange 
venues. Because competitors are free to modify their own fees and 
credits in response, and because market participants may readily adjust 
their order routing practices, the Exchange does not believe its 
proposed fee change can impose any burden on intermarket competition.
    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 has become effective upon filing pursuant 
to Section 19(b)(3)(A) \19\ of the Act and paragraph (f) thereunder. At 
any time within 60 days of the filing of the 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.
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    \19\ 15 U.S.C. 78s(b)(3)(A).
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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-2023-18 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-2023-18. 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-2023-18 and should be submitted on 
or before April 14, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-06058 Filed 3-23-23; 8:45 am]
BILLING CODE 8011-01-P


