[Federal Register Volume 88, Number 223 (Tuesday, November 21, 2023)]
[Notices]
[Pages 81114-81121]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-25666]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98953; File No. SR-NYSE-2023-41]


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

November 15, 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 November 1, 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 (1) modify fee 
rates and requirements for transactions that remove liquidity from the 
Exchange; (2) offer a monthly rebate for Designated Market Maker 
(``DMM'') units with 150 or fewer assigned securities along with 
incentives for affiliated Supplemental Liquidity Providers (``SLPs''); 
and (3) eliminate an underutilized fee for transactions that remove 
liquidity from the Exchange in Tape B and C securities. The Exchange 
proposes to implement the fee changes effective November 1, The 
Exchange proposes to implement the fee changes effective September 25, 
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 its Price List to (1) modify fee 
rates and requirements for transactions that remove liquidity from the 
Exchange; (2) offer a monthly rebate for DMM units with 150 or fewer 
assigned securities along with incentives for affiliated SLPs; and (3) 
eliminate an underutilized fee for transactions that remove liquidity 
from the Exchange in Tape B and C securities.
    The proposed changes respond to the current competitive environment 
by incentivizing submission of additional liquidity in Tape A, B and 
Tape C

[[Page 81115]]

securities to a public exchange and offering an additional incentive to 
smaller DMM units and affiliated SLPs to quote on the Exchange. The 
proposed incentive also seeks to attract potential new DMM units and 
affiliated SLPs in order to expand and diversify the pool of Exchange 
marker makers.
    The Exchange proposes to implement the fee changes effective 
November 1, 2023.\4\
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    \4\ The Exchange originally filed to amend the Price List on 
September 1, 2023 (SR-NYSE-2023-31). SR-NYSE-2023-31 was withdrawn 
on September 13, 2023 and replaced by SR-NYSE-2023-32. SR-NYSE-2023-
32 was withdrawn on September 22, 2023 and replaced by SR-NYSE-2023-
33. SR-NYSE-2023-33 was withdrawn on September 28, 2023 and replaced 
by SR-NYSE-2023-35. SR-NYSE-2023-35 was withdrawn on November 1, 
2023 and replaced by this filing.
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Background
Current Market and 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 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 https://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 the competitive environment described above, the 
Exchange has established incentives for its member organizations who 
submit orders that remove liquidity on the Exchange. The Exchange 
believes that the proposed changes, taken together, will incentivize 
submission of additional liquidity in Tape A, B and Tape C securities 
to a public exchange, thereby promoting price discovery and 
transparency and enhancing order execution opportunities for member 
organizations. The Exchange has also established incentives for DMM 
units to quote at specified levels. The proposed fee change is designed 
to encourage market maker quoting by offering an additional incentive 
to smaller DMM units and affiliated SLPs to quote on the Exchange. The 
proposed change could also have the added benefit of potentially 
attracting new DMM units and affiliated SLPs to the Exchange.
Proposed Rule Change
    The Exchange proposes to revise the rates and requirements for fees 
for transactions that remove liquidity from the Exchange and pay DMM 
units with 150 or fewer assigned securities a new, monthly rebate based 
on the number of assigned securities and time at the National Best Bid 
(``NBB'') and National Best Offer (``NBO,'' together the ``NBBO'') in 
the applicable security in the applicable month, along with a minimum 
SLP credit for adding displayed liquidity. The Exchange also proposes 
to eliminate an underutilized fee for transactions that remove 
liquidity from the Exchange in Tape B and C securities.
Charges for Removing Liquidity
    Currently, the Exchange sets forth the fees for removing liquidity 
from the Exchange in Tape A securities in a different section of the 
Price List from fees for removing liquidity in Tape B and C securities, 
which are grouped with credits for adding liquidity in Tape B and C 
securities under their own heading in the Price List.
    The Exchange proposes to modify the rates and requirements for 
certain fees for removing liquidity in Tapes B and C securities.
    First, for non-Floor broker transactions that remove liquidity from 
the Exchange (i.e., when taking liquidity from the NYSE), the Exchange 
currently offers a fee of $0.00290 in Tape A securities and a fee of 
$0.00295 for Tape B and C securities where the member organization has 
an Adding ADV,\11\ excluding liquidity added by a DMM, that is at least 
2,000,000 ADV on the NYSE in Tape A securities.
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    \11\ The terms ``ADV'' and ``CADV'' are defined in footnote * of 
the Price List.
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    The Exchange proposes to change the fee for Tape A securities and 
revise the requirements to qualify for the fees, as follows. As 
proposed, for non-Floor broker transactions that remove liquidity from 
the Exchange, the Exchange would offer a fee of $0.00300 in Tape A 
securities and the current fee of $0.00295 for Tape B and C securities 
where the member organization has 0.05% Adding ADV of Tape A CADV.
    Second, the Exchange currently offers a fee of $0.00285 in Tape A 
securities and a fee of $0.00290 in Tape B and C securities for non-
Floor broker transactions if the member organization has Adding ADV, 
excluding liquidity added by a DMM, that is at least 7,000,000 in Tape 
A and 500,000 ADV in Tape B and Tape C combined during the billing 
month.
    The Exchange proposes to change the fee for Tape A securities and 
revise the requirements to qualify for the fees, as follows. As 
proposed, for non-Floor broker transactions that remove liquidity from 
the Exchange, the Exchange would offer a fee of $0.00295 in Tape A 
securities and the current fee of $0.00290 for Tape B and C securities 
where the member organization has 0.10% Adding ADV of Tape A CADV

[[Page 81116]]

and 0.007% Adding ADV in Tape B and Tape C CADV combined during the 
billing month.
    Third, the Exchange currently offers a fee of $0.0028 in Tape A 
securities and a fee of $0.00285 Tape B and C securities for non-Floor 
broker transactions if the member organization has Adding ADV, 
excluding liquidity added by a DMM, that is at least 14,000,000 ADV in 
Tape A securities and 750,000 ADV in Tape B and Tape C securities 
combined during the billing month.
    The Exchange proposes to change the fee for Tape A securities and 
revise the requirements to qualify for the fees, as follows. As 
proposed, for non-Floor broker transactions that remove liquidity from 
the Exchange, the Exchange would offer a fee of $0.00290 in Tape A 
securities and the current fee of $0.00285 for Tape B and C securities 
where the member organization has 0.30% Adding ADV in Tape A CADV and 
0.01% Adding ADV in Tape B and Tape C CADV combined during the billing 
month.
    Finally, the Exchange proposes a new tier for non-Floor broker 
transactions that remove liquidity from the Exchange. As proposed, 
member organizations would be eligible for a fee of $0.00285 in Tape A, 
Tape B and Tape C securities for non-Floor broker transactions if the 
member organization (1) has 1.05% Adding ADV in Tape A CADV and 0.01% 
Adding ADV in Tape B and Tape C CADV combined during the billing month, 
or (2) is affiliated \12\ with a DMM unit that is registered as a DMM 
unit in at least 25 securities and has 0.05% Adding ADV in Tape A CADV.
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    \12\ For purposes of the Price List, ``affiliate'' means any 
member organization under 75% common ownership or control of that 
member organization. See NYSE Price List, General, II(c), available 
at https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf.
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    The purpose of this proposed change is to encourage member 
organizations to send liquidity to the Exchange. Specifically, the 
first proposed qualification method seeks to encourage member 
organizations to send adding liquidity in all Tapes as way to achieve 
eligibility for a lower remove fee, which could in turn incentivize 
those member organizations to send removing liquidity to the Exchange 
in response to the lower remove fee. The second proposed qualification 
method seeks to encourage member organizations affiliated with a DMM 
unit that is registered in at least 25 securities to send adding 
liquidity in Tape A securities as way to achieve eligibility for a 
lower remove fee, which could in turn incentivize those member 
organizations to send removing liquidity to the Exchange to capture 
that lower remove fee. The Exchange believes that it is reasonable to 
offer a lower remove fee based on a combination of adding liquidity and 
affiliation with a DMM unit of a certain size. The Exchange notes that 
other marketplaces offer incremental credits to members affiliated with 
a lead market maker (``LMM'') registered in a minimum number of 
securities that adds a specified percentage of displayed liquidity.\13\ 
The Exchange further believes that eligibility for the proposed fee 
based on a combination of affiliation with a DMM unit with a certain 
number of registrations and an adding volume requirement is not 
unfairly discriminatory because member organizations that are not 
affiliated with a DMM unit can still qualify for the lower remove fee 
by sending adding liquidity to the Exchange and meeting the ADV 
requirements for all Tapes set out in the first qualification method.
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    \13\ For instance, Cboe BZX offers a higher tiered rebate based 
on a lower adding requirement if the member is enrolled in a minimum 
number of LLM securities. See Cboe BZX Equities Fee Schedule, 
available at https://www.cboe.com/us/equities/membership/fee_schedule/bzx/. The Exchange's affiliate NYSE Arca, Inc., offers 
incremental credits for adding liquidity in Tape B securities to 
permit ETP holders affiliated with an LMM based on the number of 
Less Active ETP Securities that meet at least two of four quoting 
requirements in which the LMM is registered as the LMM. See NYSE 
Arca Equities Fees and Charges, available at https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf.
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    Because the tier would be new, the Exchange does not know how many 
member organizations could qualify based on the proposed Adding ADV 
criteria set out in the first prong. The Exchange does not know, 
however, whether any of these member organizations would send 
sufficient adding ADV volume to the Exchange in Tape A, B and C 
securities to be eligible for the proposed fee based on the first 
qualification method. Similarly, there are 3 member organizations 
affiliated with a DMM unit that is registered in at least 25 securities 
that could be eligible for the lower remove if they send the proposed 
amount of adding ADV in Tape A securities. The Exchange does not know, 
however, whether any of these member organizations would send 
sufficient Adding ADV volume in Tape A securities to the Exchange in 
order to be eligible for the proposed fee based on the second 
qualification method.
    The Exchange proposes an approach for the removing tiers that will 
compare the liquidity added by member organizations from one based on 
ADV to a percentage threshold based on Tape A CADV and combined Tape B 
and C CADV. As proposed, the percentage threshold will adjust each 
calendar month based on the US average daily consolidated share volume 
in Tape A securities and Tape B and Tape C securities CADV for that 
month. By allowing tiers to move in sync with consolidated volume, the 
proposed change will provide a more consistent floor against which to 
measure member organizations' adding volume on the Exchange. In 
addition, the proposed change will provide a more straightforward way 
to communicate floating volume tiers while maintaining a minimum 
threshold, an approach similar to that adopted by other exchanges.\14\ 
Although the percentage thresholds will result in lower minimum share 
volume requirements for the removing tiers when consolidated volumes 
are lower, they will also result in higher minimum share volume 
requirements when consolidated volumes are higher.
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    \14\ For example, NYSE Arca, Inc. (``NYSE Arca'') charges fees 
for removing liquidity of $0.0030, or $0.0029 in Tape B securities 
for ETP Holders meeting the requirements of Adding Tiers 1-4, or 
$0.0029 in Tape C securities for ETP Holders meeting the 
requirements of Tape C Tier 1. See NYSE Arca Equities Fees and 
Charges, available at https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf.
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    The Exchange notes the proposed percentages of CADV are comparable 
to the current ADV levels. For example, Tape A CADV in May 2023 was 4 
billion shares. The current Tape A Add ADV requirements of 14 million 
shares ADV, 7 million shares ADV, and 2 million shares ADV would equate 
to 12 million shares ADV (using 0.30% of Tape A CADV), 4.0 million 
shares ADV (using 0.10% of Tape A CADV), and 2 million shares ADV 
(using 0.05% of Tape A CADV), respectively. The Exchange further notes 
that changing the 7 million share requirement to 0.10% of Tape A CADV 
represents a significant reduction in the requirement, which the 
Exchange believes should encourage more member organizations to 
participate in that tiered pricing.
    The Exchange believes that the proposed changes, taken together, 
will incentivize submission of liquidity in Tape A, B and Tape C 
securities to a public exchange, thereby promoting price discovery and 
transparency and enhancing order execution opportunities for member 
organizations. As noted above, 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

[[Page 81117]]

other exchanges or to off-exchange venues. Because the proposed 
reconfiguration involves the introduction of new fees, incentives, and/
or new requirements, the Exchange does not know how many member 
organizations could qualify for the new remove fees based on their 
current trading profile on the Exchange and if they choose to direct 
order flow to the NYSE. In short, 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 directing orders to the Exchange. 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.
Small DMM Incentive
    The Exchange proposes to pay DMM units with 150 or fewer assigned 
securities a new, monthly rebate based on the number of assigned 
securities and time at the NBBO in the applicable security in the 
applicable month. The proposed rebate would be payable for each 
security assigned to such a DMM in the previous month (regardless of 
whether the stock price exceeds $1.00) for which that DMM provides 
quotes at the NBBO at least 15% of the time in the applicable month, 
which the Exchange proposes to define in the Price List as the 
``Incentive Quoting Requirement'').\15\ The proposed monthly rebate 
would be in addition to the current rate on transactions and would be 
prorated to the number of trading days in a month that an eligible 
security is assigned to a DMM.
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    \15\ For purposes of the Price List, DMM NBBO Quoting means DMM 
quoting at the NBBO. See NYSE Price List, General, third bullet, 
available at https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf. Time at the NBBO or ``inside'' is calculated as 
the average of the percentage of time the DMM unit has a bid or 
offer at the inside. Reserve or other non-displayed orders entered 
by the DMM are not included in the inside quote calculations.
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    As proposed, a DMM unit that has at least 1 and not more than 24 
assigned securities that meets the Incentive Quoting Requirement would 
be eligible for a monthly rebate of $250 per qualifying symbol.
    A DMM unit that has a least 25 and no more than 74 assigned 
securities that meets the Incentive Quoting Requirement would be 
eligible for a monthly rebate of $500 per qualifying symbol. SLPs 
affiliated with a DMM unit that has between 25 and 74 assigned 
securities that meet the Incentive Quoting Requirement are eligible for 
a minimum display credit for SLP Adding of $0.0023 in SLP symbols that 
meet the 10% average quoting requirement in an assigned security 
pursuant to Rule 107B.\16\
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    \16\ Under Rule 107B, a SLP can be either a proprietary trading 
unit of a member organization (``SLP-Prop'') or a registered market 
maker at the Exchange (``SLMM''). For purposes of the 10% average or 
more quoting requirement in assigned securities pursuant to Rule 
107B, quotes of an SLP-Prop and an SLMM of the same member 
organization are not aggregated. However, for purposes of adding 
liquidity for assigned SLP securities in the aggregate, shares of 
both an SLP-Prop and an SLMM of the same member organization are 
included. SLPs affiliated with a DMM unit that has between 1 and 24 
assigned securities would not be eligible for a minimum display 
credit for SLP Adding. It should be noted that eligible SLPs would 
receive the better of the proposed minimum display credit or the 
applicable current SLP tiered credit.
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    Finally, a DMM unit that has at least 75 but no more than 150 
assigned securities that meets the Incentive Quoting Requirement would 
be eligible for a monthly rebate of $1,000 per qualifying symbol. SLPs 
affiliated with a DMM unit that has between 75 and 150 assigned 
securities that meet the Incentive Quoting Requirement are eligible for 
a minimum display credit for SLP Adding of $0.0026 in SLP symbols that 
meet the 10% average quoting requirement in an assigned security 
pursuant to Rule 107B.
    For example, assume a DMM has 35 assigned securities. Further 
assume the DMM quotes at the NBBO at least 15% of the time in 30 of 
those assigned securities and quotes under the NBBO 15% of the time in 
the remaining 5 assigned securities. For a billable month in those 30 
assigned securities that meet the Incentive Quoting Requirement, the 
DMM would receive a per qualified symbol credit of $500, with a total 
combined credit of $15,000 (30 securities x $500). In addition, a SLP 
affiliated with that DMM would receive a minimum credit of $0.0023 for 
displayed adding, and would receive a higher credit if that SLP 
qualified for higher credits under the SLP Tiers.
    The proposed rule change is designed to provide smaller market 
makers (i.e., DMM units with 150 or fewer assigned securities) with an 
added incentive to quote in their assigned securities at the NBBO at 
least 15% of the time in a given month and increase SLP displayed 
adding volume. As described above, member organizations have a choice 
of where to send order flow. The Exchange believes that incentivizing 
DMM units on the Exchange to quote at the NBBO more frequently could 
attract additional orders to the Exchange and contribute to price 
discovery which benefits all market participants. In addition, 
additional liquidity-providing quotes benefit all market participants 
because they provide greater execution opportunities on the Exchange 
and improve the public quotation. Moreover, the Exchange believes the 
proposed change could have the added benefit of attracting additional 
DMM units to the Exchange. Currently, the Exchange has three DMM units, 
only one of which has fewer than 150 assigned securities and therefore 
could qualify for the rebate.\17\ The Exchange cannot predict with 
certainty whether and how many member organizations would avail 
themselves of the opportunity to become an Exchange DMM unit. However, 
the Exchange believes that the proposed rebate could incentivize 
additional firms to become DMM units on the Exchange by increasing 
incentives for new and smaller entrants. Finally, the Exchange believes 
that the proposed minimum display credits for SLPs affiliated with a 
DMM unit is reasonable because it would incentivize greater adding 
liquidity by SLPs affiliated with a DMM unit, thereby contributing to 
depth and market quality on the Exchange.
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    \17\ In contrast, there are 14 competing Lead Marker Makers on 
NYSE Arca. See https://www.nyse.com/markets/nyse-arca/membership.
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Deletion of Underutilized Remove Tier Fee
    In August 2019, the Exchange adopted a new, lower fee of $0.0026 
per share for removing liquidity from the Exchange in both Tapes B and 
C securities as an alternative way for member organizations to qualify 
for the Remove Tier for Tape B and C Securities. The purpose of the 
change was to incentivize member organizations to remove additional 
liquidity from the Exchange, thereby increasing the number of orders 
adding liquidity that are executed on the Exchange and improving 
overall liquidity on a public exchange, resulting in lower costs for 
member organizations that qualify for the rate.
    The Exchange proposes to eliminate and remove the fee of $0.0026 
per share for removing liquidity from the Exchange in both Tapes B and 
C and the associated requirements. The fee has been underutilized by 
member organizations insofar as only three have achieved the fee since 
it was adopted. The Exchange does not anticipate that any additional 
member organization in the near future would qualify for the tiered fee 
that is the subject of this proposed rule change.

[[Page 81118]]

    The proposed change is 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,\18\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\19\ 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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    \18\ 15 U.S.C. 78f(b).
    \19\ 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.'' \20\ 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.'' \21\
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    \20\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37495, 37499 (June 29, 2005) (S7-10-04) (Final Rule) 
(``Regulation NMS'').
    \21\ 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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Charges for Removing Liquidity
    The Exchange believes that the proposal to revise the rates and 
requirements for fees for transactions that remove liquidity from the 
Exchange are reasonable. The purpose of these changes is to encourage 
additional liquidity on the Exchange because market participants 
benefit from the greater amounts of displayed liquidity present on a 
public exchange. The Exchange believes that the proposed modifications 
to the qualification requirements, including replacing a fixed volume 
number with a percentage of Adding ADV, and the new fees will 
incentivize additional liquidity in Tape A, Tape B and Tape C 
securities to a public exchange to qualify for lower fees for removing 
liquidity on those tapes, 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. As 
noted, the Exchange believes that replacing a fixed volume number with 
a percentage of Adding ADV is reasonable because the proposed 
percentages of Adding ADV are comparable to the current levels with one 
exception that represents a significant reduction in the requirement, 
which the Exchange believes is reasonable because it should encourage 
more member organizations to participate in that tiered pricing.
    With respect to the addition of percentage ADV thresholds to the 
existing share thresholds for the remove pricing tiers, the Exchange 
believes that the change is reasonable because the levels of liquidity 
provision required to receive the applicable credits will move month to 
month with respect to the levels of market volumes. The Exchange 
believes the levels of activity required to achieve higher tiers will 
be generally consistent with existing requirements for these tiers.
    For the same reasons, the Exchange believes that it is reasonable 
to offer a lower fee of $0.00285 fee in Tape A, B and C securities for 
non-Floor broker transactions if the member organization has 1.05% 
Adding ADV in Tape A CADV and 0.01% Adding ADV in Tape B and Tape C 
CADV combined during the billing month, or is affiliated with a DMM 
unit registered in at least 25 securities and sends a minimum of 0.05% 
Adding ADV in Tape A CADV. As noted above, the proposed fee is designed 
to encourage member organizations to send liquidity to the Exchange, 
which would be accomplished by member organizations sending adding 
liquidity to the Exchange to meet the proposed tier requirements. Under 
either proposed qualification method, by qualifying for the lower 
remove fee, the Exchange believes the member organization would have an 
incentive to send removing liquidity to the Exchange. The Exchange thus 
believes both methods are a reasonable way to increase liquidity on a 
public exchange.
    As noted, because the proposed fee is new, the Exchange does know 
how many member organizations would qualify for the proposed fee based 
on their current Exchange trading profile. The Exchange believes that 
offering the proposed tiered remove fee to member organizations that 
are affiliated with a DMM unit registered in at least 25 securities 
could incentivize other member organizations to become DMM units or 
increase their number of DMM registrations in order for their DMM unit 
affiliates to become eligible for the fee. The proposal is reasonable 
because all member organizations would benefit from such increased 
levels of liquidity. As noted, the Exchange believes the proposed 
alternative qualification method is reasonable and fair because member 
organizations that do not qualify for the proposed lower fee based on 
the revised alternative qualification criteria can still qualify by 
meeting the proposed adding ADV requirements for all Tapes. As also 
noted, other marketplaces offer incremental credits to members 
affiliated with an LMM that add a specified percentage of displayed 
liquidity or meet a minimum number of registrations in ETPs as LMM.\22\
---------------------------------------------------------------------------

    \22\ See note 13, supra.
---------------------------------------------------------------------------

Small DMM Incentive
    The Exchange believes that the proposal to offer an additional 
rebate to a DMM with 150 or fewer assigned securities if it increases 
its quoting at the NBBO, and associated incentives for affiliated SLPs, 
is a reasonable means to improve market quality, attract additional 
order flow to a public market, and enhance execution opportunities for 
member organizations on the Exchange, to the benefit of all market 
participants. The Exchange notes that the proposal would also foster 
liquidity provision and stability in the marketplace and reduce smaller 
DMM's reliance on transaction fees. The proposal would also reward DMM 
units, who have greater risks and heightened quoting and other 
obligations than other market participants. The proposed change is also 
a reasonable attempt to potentially attract additional DMM units to the 
Exchange by providing financial incentives for smaller firms to become 
DMM units. Moreover, offering minimum display credits for SLPs 
affiliated with a DMM unit is a reasonable method to incentivize 
greater adding liquidity by SLPs that are affiliated with a DMM unit, 
thereby contributing to depth and market quality on the Exchange. The 
Exchange further believes that it is reasonable to offer the proposed 
minimum display

[[Page 81119]]

credits to SLPs affiliated with an DMM unit because the proposed 
credits are in line with the current adding credits for all SLPs.\23\
---------------------------------------------------------------------------

    \23\ See NYSE Price List, SLP Provide Tiers, available at 
https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf. See note 16, infra.
---------------------------------------------------------------------------

Deletion of Underutilized Remove Tier Fee
    The Exchange believes that the proposed elimination of the 
underutilized remove tier fee is reasonable because member 
organizations have underutilized this fee. As noted, only three member 
organizations have achieved the fee since it was adopted. The Exchange 
does not anticipate that any additional member organization in the near 
future would qualify for the tiered fee that is the subject of this 
proposed rule change. The Exchange believes it is reasonable to 
eliminate fee when such incentives become underutilized. The Exchange 
also believes eliminating underutilized incentives would add clarity 
and transparency to the Price List.
The Proposal Is an Equitable Allocation of Fees
Charges for Removing Liquidity
    The Exchange believes that, for the reasons discussed above, the 
proposed changes taken together, will incentivize member organizations 
to send additional adding liquidity to achieve lower fees when removing 
liquidity in Tape A, Tape 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 believes that providing a new lower fee 
when removing liquidity from the Exchange based on Adding ADV in all 
Tapes or Adding ADV in Tape A securities where the member organization 
is affiliated with a DMM unit registered in at least 25 securities is 
equitable because it the proposed lower fee would apply equally to all 
similarly situated member organizations. Further, the proposed 
alternative qualification criteria is equitable because a member 
organization that would not qualify for the lower fee based on adding 
volume and affiliation with a DMM unit with a minimum number of 
assigned securities has the ability to qualify for the lower fee based 
on adding volume in Tapes A, B and C under the first qualification 
criteria.
    The proposed change also is equitable because it would be in line 
with the applicable rates on other marketplaces.\24\ As previously 
noted, the Exchange operates in a competitive environment, particularly 
as it relates to attracting orders, which add or 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. Because the proposed reconfiguration of the fees involves the 
introduction of new requirements and/or new fees, the Exchange does not 
know how many member organizations could qualify for the new remove 
fees based on their current trading profile on the Exchange and if they 
choose to direct order flow to the NYSE. As noted, although there are 
currently 3 member organizations affiliated with a DMM unit that is 
registered in at least 25 securities that could qualify for the 
proposed new $0.00285 fee in all Tapes if they send the proposed amount 
of adding ADV in Tape A securities, the Exchange does not know whether 
any of these member organizations or how many additional member 
organizations could qualify for the proposed rate based on the member 
organization's trading profile on the Exchange. Hence, 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 directing 
orders to the Exchange.
---------------------------------------------------------------------------

    \24\ For example, NYSE Arca, Inc. (``NYSE Arca'') charges fees 
for removing liquidity of $0.0030, or $0.0029 in Tape B securities 
for ETP Holders meeting the requirements of Adding Tiers 1-4, or 
$0.0029 in Tape C securities for ETP Holders meeting the 
requirements of Tape C Tier 1. See NYSE Arca Equities Fees and 
Charges, available at https://www.nyse.com/publicdocs/nyse/markets/nysearca/NYSE_Arca_Marketplace_Fees.pdf.
---------------------------------------------------------------------------

Small DMM Incentive
    The Exchange believes the proposal equitably allocates its fees 
among its market participants by fostering liquidity provision and 
stability in the marketplace and reducing smaller DMM's reliance on 
transaction fees. Moreover, the proposal is an equitable allocation of 
fees because it would reward DMM units for their increased risks and 
heightened quoting and other obligations. As such, it is equitable to 
offer smaller DMM units an additional flat, per security credit for 
orders that add liquidity. Moreover, the proposal is an equitable 
allocation of fees because it would reward DMM units for their 
increased risks and heightened quoting requirements and other 
obligations. As such, it is equitable to offer smaller DMM units an 
additional flat, per qualified security credit for orders that add 
liquidity. The proposed rebate is also equitable because it would apply 
equally to any DMM unit of a certain size. The Exchange notes that at 
this time there is currently only one DMM unit that could qualify for 
the proposed rebate based on its number of assigned securities. The 
Exchange believes that the proposal would provide an equal incentive to 
any member organization to maintain a DMM unit, and that the proposal 
constitutes an equitable allocation of fees because all similarly 
situated member organizations would be eligible for the same rebate. 
Similarly, the Exchange believes that it is equitable to offer minimum 
display credits to SLPs affiliated with a DMM because the proposed 
credits would apply to all similarly situated member organizations that 
are affiliated with a DMM unit on a full and equal basis. Further, the 
Exchange believes the proposed minimum display credits are equitable 
because, as noted, the proposed rates are in line with the current 
adding tiered rates for all SLPs and thus an SLP that is not affiliated 
with a DMM unit could qualify for comparable rates by satisfying the 
current SLP adding requirements.
Deletion of Underutilized Remove Tier Fee
    The Exchange believes the proposal equitably allocates fees among 
its market participants because the underutilized fee the Exchange 
proposes to eliminate would be eliminated in its entirety, and would no 
longer be available to any member organization in any form. Similarly, 
the Exchange believes the proposal equitably allocates fees among its 
market participants because elimination of the underutilized fee would 
apply to all similarly-situated member organizations that remove 
liquidity from the Exchange on an equal basis. All such member 
organizations would continue to be subject to the same fee structure, 
and access to the Exchange's market would continue to be offered on 
fair and nondiscriminatory terms.
The Proposal Is Not Unfairly Discriminatory
Charges for Removing Liquidity
    The Exchange believes that that reconfiguring the fee for member 
organizations that remove liquidity from the Exchange will incentivize 
submission of additional liquidity in Tape A, Tape B and Tape C 
securities

[[Page 81120]]

to a public exchange to qualify for the 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 new rates 
for removing liquidity in Tape A, Tape B and Tape C securities would be 
applied to all similarly situated member organizations and other market 
participants, who would all be eligible for the same credits on an 
equal basis. Moreover, the new lower fee when removing liquidity also 
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 proposed alternative criteria would be 
applied to all similarly situated member organizations, who would all 
be eligible for the same credit on an equal basis. Member organizations 
could qualify the new lower rate either by meeting the proposed Adding 
ADV requirements in all Tapes or meeting the proposed Adding ADV 
requirement in Tape A securities and affiliation with a DMM unit 
registered in at least 25 securities based on affiliation with a DMM 
unit. In both cases, the proposal does not permit unfair discrimination 
because the proposed criteria apply equally to all similarly situated 
member organizations, and all member organizations eligible for the new 
fee under either criteria would be eligible for the same credit on an 
equal and non-discriminatory basis. Accordingly, no member organization 
already operating on the Exchange would be disadvantaged by the 
proposed allocation of fees.
    The Exchange believes it is not unfairly discriminatory to provide 
higher fees for removing liquidity in Tape A securities insofar as the 
proposed fees would be provided on an equal basis to all member 
organizations that remove liquidity by meeting the tiered requirements. 
Further, the Exchange believes the proposed fee would provide an 
incentive for member organizations to remove additional liquidity from 
the Exchange in Tape B and C securities. 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. As noted, the proposed change also is 
not unfairly discriminatory because it would be in line with the 
applicable rates on other marketplaces.\25\ It should be noted that 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. 
Lastly, the Exchange believes that it is subject to significant 
competitive forces, as described below in the Exchange's statement 
regarding the burden on competition.
---------------------------------------------------------------------------

    \25\ See note 13, supra.
---------------------------------------------------------------------------

Small DMM Incentive
    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. For example, member 
organizations could display quotes on competing exchanges rather than 
quoting sufficiently on the Exchange to meet the 15% NBBO quoting 
requirement. The Exchange believes that offering a rebate for DMM units 
with 150 or fewer assigned securities in the previous month would 
provide a further incentive for smaller DMM units to quote and trade 
their assigned securities on the Exchange, and will generally allow the 
Exchange and DMM units to better compete for order flow, thus enhancing 
competition. The Exchange also believes that the requirement of 150 or 
fewer assigned securities to qualify for the credit is not unfairly 
discriminatory because it would apply equally to all existing and 
prospective member organizations with 150 or fewer assigned securities 
that choose to maintain a DMM unit on the Exchange. The Exchange does 
not believe that it is unfairly discriminatory to offer incentives 
based on a maximum threshold. The Exchange notes that it currently 
offers incentives that apply equally to all member organizations that 
cannot or choose not to exceed a certain volume threshold.\26\ The 
Exchange believes that the proposal would provide an equal incentive to 
any member organization to maintain a DMM unit, and that the proposal 
would not be unfairly discriminatory because the threshold-based 
incentive would be offered on equal terms to all similarly situated 
member organizations. Finally, the proposed minimum display credits for 
SLPs affiliated with a DMM unit 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 proposed 
minimum display credits would be applied to all similarly situated SLPs 
that are affiliated with a DMM unit, who would all be eligible for the 
same credit on an equal and non-discriminatory basis. Moreover, the 
proposal does not permit unfair discrimination because SLPs that are 
not affiliated with a DMM unit can qualify for comparable rates by 
satisfying the current SLP adding requirements. Accordingly, no member 
organization already operating on the Exchange would be disadvantaged 
by the proposed allocation of fees.
---------------------------------------------------------------------------

    \26\ For instance, the first 750,000 ADV of the aggregate of 
executions at the close by a member organization are not charged. 
See NYSE Price List, available at https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf.
---------------------------------------------------------------------------

Deletion of Underutilized Remove Tier Fee
    The Exchange believes that the proposal is not unfairly 
discriminatory because it neither targets nor will it have a disparate 
impact on any particular category of market participant. The Exchange 
believes that the proposal is not unfairly discriminatory because the 
proposed elimination of the underutilized fee would affect all 
similarly-situated market participants on an equal and non-
discriminatory basis. The Exchange believes that eliminating a fee that 
is underutilized and ineffective would no longer be available to any 
member organization on an equal basis. The Exchange also believes that 
the proposed change would protect investors and the public interest 
because the deletion of an underutilized fee would make the Price List 
more accessible and transparent.
    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,\27\ 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 changes 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 member organizations. 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

[[Page 81121]]

individual stocks for all types of orders, large and small.'' \28\
---------------------------------------------------------------------------

    \27\ 15 U.S.C. 78f(b)(8).
    \28\ Regulation NMS, 70 FR at 37498-99.
---------------------------------------------------------------------------

    Intramarket Competition. The proposed change is designed to attract 
additional order flow and new potential DMM units to the Exchange. The 
Exchange believes that the proposed changes, including the DMM rebate 
that would continue to incentivize smaller DMM units to quote at the 
NBBO more frequently, would continue to incentivize market participants 
to direct order flow to the Exchange. Greater liquidity benefits all 
market participants on the Exchange by providing more execution 
opportunities on the Exchange and encourages member organizations to 
send orders, thereby contributing to robust levels of liquidity, which 
benefits all market participants on the Exchange. The proposed fees and 
rebate would be available to all similarly-situated market 
participants, and, as such, the proposed changes 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. 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) \29\ 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.
---------------------------------------------------------------------------

    \29\ 15 U.S.C. 78s(b)(3)(A).
---------------------------------------------------------------------------

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

    <bullet> Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#a0d2d5ccc58dc3cfcdcdc5ced4d3e0d3c5c38ec7cfd6"><span class="__cf_email__" data-cfemail="3341465f561e505c5e5e565d4740734056501d545c45">[email protected]</span></a>. Please include 
file number SR-NYSE-2023-41 on the subject line.

Paper Comments

    <bullet> 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-2023-41. 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 (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-2023-41 and should be 
submitted on or before December 12, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\30\
---------------------------------------------------------------------------

    \30\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-25666 Filed 11-20-23; 8:45 am]
BILLING CODE 8011-01-P


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