
[Federal Register Volume 88, Number 157 (Wednesday, August 16, 2023)]
[Notices]
[Pages 55740-55743]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-17607]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98116; File No. SR-NYSENAT-2023-15]


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 To Adopt a Fee for Directed 
Orders Routed Directly by the Exchange to an Alternative Trading System

August 11, 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 July 31, 2023, 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 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 the NYSE National Schedule of Fees 
and Rebates (``Fee Schedule'') to adopt a fee for Directed Orders 
routed directly by the Exchange to an alternative trading system 
(``ATS''). The proposed 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 55741]]

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 adopt a fee for 
Directed Orders routed directly by the Exchange to an ATS. The Exchange 
proposes to implement the fee change effective August 1, 2023.
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 1%.\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 an order type 
known as Directed Orders.\10\ Under Exchange rules, the ATS to which a 
Directed Order is routed is 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 that are the 
subject of this proposed rule change are those that are routed to 
OneChronos LLC (``OneChronos'').
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    \10\ A Directed Order is a Limit Order with instructions to 
route on arrival at its limit price to a specified ATS with which 
the Exchange maintains an electronic linkage. 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).
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    The Exchange implemented the routing functionality to OneChronos on 
August 31, 2022,\11\ and introduced the functionality at that time 
without charging a fee.\12\ The Exchange now proposes to adopt a fee of 
$0.0015 per share for Directed Orders routed to OneChronos. To reflect 
the proposed fee, the Exchange proposes to amend current Section II. 
Routing Fees (All ETP Holders) to state ``$0.0015 per share for 
Directed Orders routed to OneChronos LLC'' for securities priced at or 
above $1.00.
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    \11\ See https://www.nyse.com/publicdocs/nyse/notifications/trader-update/110000456275/OneChronos_August_2022_Trader_Update_Final.pdf.
    \12\ See Securities Exchange Act Release No. 95742 (September 
12, 2022), 87 FR 57008 (September 16, 2022) (SR-NYSENAT-2022-17).
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    Since its implementation, the Directed Order functionality has 
facilitated additional trading opportunities by offering ETP Holders 
the ability to designate orders submitted to the Exchange to be routed 
to OneChronos for execution. The functionality has also created 
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. Routing 
functionality offered by the Exchange is completely optional and 
Participants can readily select between various providers of routing 
services, including other exchanges and non-exchange venues. 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,\13\ in general, and furthers the 
objectives of sections 6(b)(4) and (5) of the Act,\14\ 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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    \13\ 15 U.S.C. 78f(b).
    \14\ 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.'' \15\
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    \15\ 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.
    The routing of orders to OneChronos is provided by the Exchange on 
a voluntary basis and no rule or regulation requires that the Exchange

[[Page 55742]]

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 operates 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.\16\
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    \16\ See Rule 7.31(f)(1).
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    The Exchange believes its proposal equitably allocates its fees 
among 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 be charged the proposed fee 
when utilizing the functionality. Without having a view of ETP Holders' 
activity on other exchanges and off-exchange venues, the Exchange has 
no way of knowing whether the proposed fee would result in any ETP 
Holder from reducing or discontinuing its use of the routing 
functionality. While the Exchange has no way of knowing whether this 
proposed rule change would serve as a disincentive to utilize the order 
type, the Exchange believes that a number of ETP Holders will continue 
to utilize the functionality because of the efficiencies created for 
ETP Holders that enables them to send orders that they wish to route to 
OneChronos through the Exchange by leveraging order entry protocols 
already configured for their interactions with the Exchange.
    The Exchange reiterates that the routing functionality offered by 
the Exchange is completely optional and that the Exchange operates in a 
highly competitive market in which market participants can readily 
select between various providers of routing services with different 
product offerings and different pricing. The Exchange believes that the 
proposed flat fee structure for orders routed to away venues is a fair 
and equitable approach to pricing, as it will provide certainty with 
respect to execution fees.
    The Exchange believes that the proposal is not unfairly 
discriminatory. The Exchange believes it is not unfairly discriminatory 
as the proposal to charge a fee would be assessed on an equal basis to 
all ETP Holders that use the Directed Order 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 remain available to all 
ETP Holders on an equal basis and each such participant would be 
charged the same 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,\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. 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\ The Exchange does not believe that the proposed fee 
change represents a significant departure from previous pricing offered 
by the Exchange or pricing offered by the Exchange's competitors. ETP 
Holders may opt to disfavor the Exchange's pricing if they believe that 
alternatives offer them better value. Accordingly, the Exchange does 
not believe that the proposed change will impair the ability of ETP 
Holders or competing venues to maintain their competitive standing in 
the financial markets.
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    \17\ 15 U.S.C. 78f(b)(8).
    \18\ 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 Directed Order functionality is available to 
all ETP Holders and all ETP Holders that use the functionality to route 
their orders to OneChronos would be charged the proposed fee. The 
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 Order 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 fee would apply to all ETP Holders equally 
that choose to utilize the Directed Order 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 1%. 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 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

[[Page 55743]]

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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-NYSENAT-2023-15 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-2023-15. 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 (https://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. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-NYSENAT-2023-15 and should 
be submitted on or before September 6, 2023.
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    \20\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2023-17607 Filed 8-15-23; 8:45 am]
BILLING CODE 8011-01-P


