
[Federal Register Volume 88, Number 157 (Wednesday, August 16, 2023)]
[Notices]
[Pages 55788-55790]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-17609]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98111; File No. SR-NYSE-2023-30]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Its Price List 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 August 9, 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 adopt a 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 NYSE Price List 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 9, 
2023.\4\
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    \4\ The Exchange originally filed to amend the Fee Schedule on 
July 31, 2023 (SR-NYSE-2023-28). SR-NYSE-2023-28 was subsequently 
withdrawn and replaced by this filing.
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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.'' \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 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 currently has less 
than 10%.\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 a firm routes order flow. Accordingly, competitive forces 
constrain exchange transaction fees because 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.\11\ 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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    \11\ 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)(1). 
See also Securities Exchange Act Release No. 95423 (August 4, 2022), 
87 FR 48741 (August 10, 2022) (SR-NYSE-2022-20).
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    The Exchange implemented the routing functionality to OneChronos on 
September 9, 2022,\12\ and introduced the functionality at that time 
without charging a fee.\13\ 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 the current table 
under the section titled

[[Page 55789]]

Transaction Fees. Specifically, under ``Routing Fee--per share'', the 
Exchange proposes to amend the current rule text to state ``$0.0015 for 
a Directed Order, as defined in Rule 7.31(f)(1), routed to OneChronos 
LLC'' for securities priced at or above $1.00. Additionally, the 
Exchange proposes to adopt similar rule text under the section titled 
Transaction Fees and Credits For Tape B and C Securities. Specifically, 
the Exchange proposes to amend the first bullet under ``Routing Fees''. 
As proposed, the first bullet would state:
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    \12\ See https://www.nyse.com/publicdocs/nyse/notifications/trader-update/110000456275/OneChronos_August_2022_Trader_Update_Final.pdf.
    \13\ See Securities Exchange Act Release No. 95798 (September 
15, 2022), 87 FR 57741 (September 21, 2022) (SR-NYSE-2022-43).
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     For securities at or above $1.00, $0.0015 per share for a 
Directed Order, as defined in Rule 7.31(f)(1), routed to OneChronos 
LLC; $0.0005 per share in a NYSE American Auction; $0.0010 per share 
execution in an Away Market Auction at venues other than NYSE American; 
$0.0035 per share for all other executions, or $0.0030 if the member 
organization has adding ADV in Tapes A, B, and C combined that is at 
least 0.20% of Tapes A, B and C CADV combined.
    Since its implementation, the Directed Order functionality has 
facilitated additional trading opportunities by offering member 
organizations the ability to designate orders submitted to the Exchange 
to be routed to OneChronos for execution. The functionality has also 
created efficiencies for member organizations 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 member 
organizations can readily select between various providers of routing 
services, including other exchanges and non-exchange venues. Member 
organizations 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,\14\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\15\ 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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    \14\ 15 U.S.C. 78f(b).
    \15\ 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.'' \16\
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    \16\ See supra note 5.
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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 
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 offered by the Exchange's affiliates NYSE American LLC (``NYSE 
American''), NYSE Arca, Inc. (``NYSE Arca''), NYSE Chicago, Inc. 
(``NYSE Chicago'') and NYSE National, Inc. (``NYSE National'') 
(``collectively, the ``Affiliated Exchanges''). On the Affiliated 
Exchanges, a Primary Only Order is an order that is routed directly to 
the primary listing market on arrival, without being assigned a working 
time or interacting with interest on the order book of the exchange to 
which it was submitted.\17\
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    \17\ See NYSE American Rule 7.31E(f)(1); NYSE Arca Rule 7.31-
E(f)(1); NYSE Chicago Rule 7.31(f)(1); NYSE National 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 member organizations, in that all member organizations 
will have the ability to designate orders submitted to the Exchange to 
be routed to OneChronos, and each such member organization would be 
charged the proposed fee when utilizing the functionality. Without 
having a view of member organizations' activity on other exchanges and 
off-exchange venues, the Exchange has no way of knowing whether the 
proposed fee would result in any member organization 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 member organizations will continue to utilize the 
functionality because of the efficiencies created for member 
organizations 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 member organizations 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 member organizations. Accordingly, no 
member organization 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 member organizations because the Directed Order 
functionality would remain available to all member organizations 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 
member organizations in that they could choose

[[Page 55790]]

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,\18\ 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.'' \19\ 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. 
Member organizations 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 member organizations or competing venues to maintain their 
competitive standing in the financial markets.
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    \18\ 15 U.S.C. 78f(b)(8).
    \19\ See supra note 5.
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    Intramarket Competition. The Exchange believes the proposed 
amendment to its Price List 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 member 
organizations and all member organizations 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. Member organizations 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 member organizations 
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 10%. 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) \20\ 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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    \20\ 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-NYSE-2023-30 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-2023-30. 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-NYSE-2023-30 and should be 
submitted on or before September 6, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2023-17609 Filed 8-15-23; 8:45 am]
BILLING CODE 8011-01-P


