[Federal Register Volume 89, Number 209 (Tuesday, October 29, 2024)]
[Notices]
[Pages 86070-86073]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-25048]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-101408; File No. SR-NYSE-2024-65]


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

October 23, 2024.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on October 10, 2024, New York Stock Exchange LLC (``NYSE'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by the 
Exchange. 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\ 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 modify two adding 
tiers for Midpoint Passive Liquidity (``MPL'') Orders that add 
liquidity to the Exchange. 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its Price List to modify two adding 
tiers for MPL Orders that add liquidity to the Exchange.
    The proposed changes respond to the current competitive environment 
where order flow providers have a choice of where to direct liquidity-
providing orders by offering further incentives for member 
organizations to send additional displayed liquidity to the Exchange.
    The Exchange proposes to implement the fee changes effective 
October 10, 2024.\3\
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    \3\ The Exchange originally filed to amend the Fee Schedule on 
October 1, 2024 (SR-NYSE-2024-62). SR-NYSE-2024-62 was subsequently 
withdrawn 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.'' \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, cash 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

[[Page 86071]]

single exchange currently has more than 20% market share.\8\ 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%.\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 https://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 the firm routes order flow. Accordingly, competitive forces 
compel the Exchange to use exchange transaction fees and credits 
because market participants can readily trade on competing venues if 
they deem pricing levels at those other venues to be more favorable.
    In response to this competitive environment, the Exchange has 
established incentives for member organizations who submit orders that 
provide liquidity on the Exchange in MPL Orders. The proposed fee 
change is designed to enhance incentives to member organizations to 
submit additional such liquidity to the Exchange.
Proposed Rule Change
    An MPL Order is defined in Rule 7.31 as a Limit Order that is not 
displayed and does not route, with a working price at the midpoint of 
the PBBO.\10\
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    \10\ See Rule 7.31(d)(3). Limit Order is defined in Rule 
7.31(a)(2).
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    Currently, the Exchange offers tiered credits, among others, of 
$0.0029 and $0.0030, respectively, for member organizations that have 
an average daily trading volume (``ADV'') that adds liquidity to the 
Exchange during the billing month (``Adding ADV'') in MPL Orders of at 
least 25 million shares and 30 million shares, respectively, excluding 
any liquidity added by a Designated Market Maker (``DMM'').
    The Exchange proposes to modify these adding tier credits for MPL 
Orders, as follows.
    First, the Exchange would raise the $0.0029 credit to $0.0030. The 
Exchange would also lower the ADV requirement from 25 million shares to 
20 million shares. As proposed, the tier would offer a $0.0030 credit 
for member organizations that have an Adding ADV in MPL Orders of 20 
million shares, excluding any liquidity added by a DMM.
    Second, the Exchange would raise the other tiered credit of $0.0030 
to $0.0031. The Exchange would also lower the ADV requirement from 30 
million shares to 25 million shares. As proposed, this tier would offer 
a $0.0031 credit for member organizations that have an Adding ADV in 
MPL Orders of at least 25 million shares, excluding any liquidity added 
by a DMM.
    In both instances, the Exchange believes that modifying the amount 
of the credit and the minimum share requirement would incentivize 
member organizations to trade on the Exchange in MPL Orders. 
Specifically, the Exchange believes that increasing the credits and 
lowering volume requirements would enable more member organizations 
with high volumes of Adding ADV in MPL Orders to qualify for the 
respective tiers, especially in high volume months.
    The purpose of the proposed change is to provide additional 
incentives for member organizations to qualify for higher credits for 
MPL Orders that add liquidity to the Exchange by lowering the minimum 
volume requirement. The Exchange believes that the proposal would 
thereby increase liquidity providing MPL Orders, which in turn would 
support the quality of price discovery on the Exchange and provide 
additional price improvement opportunities for incoming orders that 
take liquidity. The Exchange believes that by correlating the amount of 
credits to the level of MPL Orders that add liquidity sent by a member 
organization, the Exchange's fee structure would incentivize member 
organizations to submit more MPL Orders that add liquidity to the 
Exchange, thereby increasing the potential for price improvement and 
execution opportunities to incoming marketable orders submitted to the 
Exchange.
    As noted above, the Exchange operates in a competitive and 
fragmented market environment, particularly as it relates to attracting 
non-marketable orders, which add liquidity to the Exchange. Based on 
the profile of liquidity-adding firms generally, the Exchange believes 
that additional member organizations could qualify for these tiers if 
they choose to direct order flow to the Exchange. However, without 
having a view of member organization's activity on other exchanges and 
off-exchange venues, the Exchange has no way of knowing whether the 
proposed rule change would result in any member organization directing 
MPL Orders to the Exchange in order to qualify for a new proposed tier.
    The proposed changes are not otherwise intended to address other 
issues, and the Exchange is not aware of any significant problems that 
market participants would have in complying with the proposed changes.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\11\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\12\ 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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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(4) & (5).
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    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.'' \13\ 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.'' \14\
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    \13\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37495, 37499 (June 29, 2005) (S7-10-04) (Final Rule) 
(``Regulation NMS'').
    \14\ See Securities Exchange Act Release No. 61358, 75 FR 3594, 
3597 (January 21, 2010) (File No. S7-02-10) (Concept Release on 
Equity Market Structure).
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The Proposed Change Is Reasonable
    The proposed modifications to two of the Adding Tiers for MPL 
Orders are reasonable because they provide additional incentives for 
member organizations to qualify for higher credits for adding liquidity 
in MPL Orders by lowering the minimum volume requirement, thereby

[[Page 86072]]

encouraging the submission of additional liquidity to a national 
securities exchange. As noted, the Exchange believes that the proposed 
enhancements would enable more member organizations to add liquidity in 
MPL Orders. Submission of additional liquidity to the Exchange would 
promote price discovery and transparency and enhance order execution 
opportunities for member organizations from the substantial amounts of 
liquidity present on the Exchange. All member organizations benefit 
from the greater amounts of liquidity that will be present on the 
Exchange, which provides greater execution opportunities.
The Proposal Is an Equitable Allocation of Fees
    The Exchange believes the proposal equitably allocates its fees 
among its market participants. By providing additional incentives for 
member organizations to qualify for an adding credit, the proposal 
would continue to encourage member organizations to send orders that 
provide liquidity to the Exchange, thereby contributing to robust 
levels of liquidity, which benefits all market participants, and 
promoting price discovery and transparency. The proposal would also 
enhance order execution opportunities for member organizations from the 
substantial amounts of liquidity present on the Exchange. All member 
organizations would benefit from the greater amounts of liquidity that 
will be present on the Exchange, which would provide greater execution 
opportunities and additional price improvement opportunities for 
incoming orders. The Exchange believes that by offering higher credits 
correlated to lower volumes of Adding ADV in MPL Orders, more member 
organizations will be able to choose to route their liquidity-providing 
orders to the Exchange to qualify for the proposed credits. As 
previously noted, based on the profile of liquidity-providing member 
organizations generally, the Exchange believes additional member 
organizations could qualify for the proposed credits if they choose to 
direct order flow to the Exchange. Additional liquidity-providing 
orders benefits all market participants because it provides greater 
execution opportunities on the Exchange.
The Proposal Is Not Unfairly Discriminatory
    The Exchange believes its proposal is not unfairly discriminatory 
because the proposal would be provided on an equal basis to all member 
organizations that add liquidity, who would all be eligible for the 
same credits on an equal basis. Accordingly, no member organization 
already operating on the Exchange would be disadvantaged by this 
allocation of fees. Further, as noted, the Exchange believes the 
proposal would provide an incentive for member organizations to 
continue to send orders that provide liquidity to the Exchange, to the 
benefit of all market participants.
    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,\15\ 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 individual stocks for all types of orders, 
large and small.'' \16\
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    \15\ 15 U.S.C. 78f(b)(8).
    \16\ See Regulation NMS, 70 FR at 37498-99.
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    Intramarket Competition. The proposed change is designed to attract 
additional order flow to the Exchange. The Exchange believes that the 
proposed changes 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 trading 
opportunities and encourages member organizations to send orders, 
thereby contributing to robust levels of liquidity, which benefits all 
market participants on the Exchange. The proposed credits would be 
available to all similarly-situated market participants, and, as such, 
the proposed change would not impose a disparate burden on competition 
among market participants on the Exchange. As noted, the proposal would 
apply to all similarly situated member organizations on the same and 
equal terms, who would benefit from the changes on the same basis. 
Accordingly, the proposed change would not impose a disparate burden on 
competition among market participants on the Exchange.
    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

    Pursuant to Section 19(b)(3)(A)(ii) of the Act,\17\ and Rule 19b-
4(f)(2) thereunder \18\ the Exchange has designated this proposal as 
establishing or changing a due, fee, or other charge imposed on any 
person, whether or not the person is a member of the self-regulatory 
organization, which renders the proposed rule change effective upon 
filing. 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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    \17\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \18\ 17 CFR 240.19b-4.
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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

    <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#7c0e091019511f1311111912080f3c0f191f521b130a"><span class="__cf_email__" data-cfemail="9fedeaf3fab2fcf0f2f2faf1ebecdfecfafcb1f8f0e9">[email protected]</span></a>. Please include 
file number SR-NYSE-2024-65 on the subject line.

[[Page 86073]]

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-2024-65. 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-2024-65, and should be 
submitted on or before November 19, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-25048 Filed 10-28-24; 8:45 am]
BILLING CODE 8011-01-P


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