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[Federal Register Volume 89, Number 242 (Tuesday, December 17, 2024)]
[Notices]
[Pages 102231-102234]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-29626]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-101879; File No. SR-NYSECHX-2024-35]

Self-Regulatory Organizations; NYSE Chicago, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
the Fee Schedule of NYSE Chicago, Inc.

December 11, 2024.
    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 December 2, 2024, the NYSE Chicago, Inc. (``NYSE Chicago'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the Fee Schedule of NYSE Chicago, 
Inc. (the ``Fee Schedule'') by modifying certain fees and credits 
applicable to Participants for executions resulting from single-sided 
orders. 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 Fee Schedule by modifying 
certain fees and credits applicable to Participants \4\ for executions 
resulting from single-sided orders, as described below. The Exchange 
proposes to implement the fee changes effective December 2, 2024.
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    \4\ The term ``Participant'' is defined in Article 1, Rule 1(s) 
to mean, among other things, any Participant Firm that holds a valid 
Trading Permit and that a Participant shall be considered a 
``member'' of the Exchange for purposes of the Act. If a Participant 
is not a natural person, the Participant may also be referred to as 
a Participant Firm.
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Background
    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, 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 20% market share.\9\ Therefore, no exchange possesses 
significant pricing power in the execution of equity order flow. More 
specifically, the Exchange's share of executed volume of equity trades 
in Tapes A, B and C securities is less than 1%.\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.
    \8\ See FINRA ATS Transparency Data, available at https://otctransparency.finra.org/otctransparency/AtsIssueData. A list of 
alternative trading systems registered with the Commission is 
available at https://www.sec.gov/foia/docs/atslist.htm.
    \9\ See Cboe Global Markets U.S. Equities Market Volume Summary, 
available at http://markets.cboe.com/us/equities/market_share/.
    \10\ See id.
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    The Exchange believes that the ever-shifting market share among the 
exchanges from month to month demonstrates that market participants can 
move order flow, or discontinue or reduce use of certain categories of 
products. While it is not possible to know a firm's reason for shifting 
order flow, the Exchange believes that one such reason is because of 
fee changes at any of the registered exchanges or non-exchange venues 
to which the firm routes order flow. Accordingly, competitive forces 
compel the Exchange to use exchange transaction fees and credits 
because market participants can readily trade on competing venues if 
they deem pricing levels at those other venues to be more favorable.
Proposed Rule Change
    Pursuant to Section E.1 of the Fee Schedule, the Exchange currently 
charges a fee for removing liquidity and for providing liquidity in 
single-sided orders in Tape A, B and C securities. For each of Tape A, 
B and C securities with a share price equal to or greater than $1.00, 
the Exchange charges a fee of $0.0010 per share for orders that both 
remove liquidity and provide liquidity.
    The Exchange proposes the following changes for single-sided orders 
in Tape A, B and C securities that remove liquidity and provide 
liquidity. For each single-sided order in Tape A, B and C

[[Page 102232]]

securities that removes liquidity, the Exchange proposes to modify the 
fee from $0.0010 per share to $0.0030 per share. For each single-sided 
order in Tape A, B and C securities that provides liquidity, the 
Exchange proposes to replace the current fee of $0.0010 per share with 
a credit of $0.0029 per share for orders that provide displayed 
liquidity, and a credit of $0.0014 per share for orders that provide 
non-displayed liquidity, including Mid-Point Liquidity (``MPL'') 
Orders.\11\
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    \11\ A MPL Order is a limit order that is not displayed and does 
not route, with a working price at the lower (higher) of the 
midpoint of the Protected Best Bid/Offer or its limit price. See 
NYSE Chicago Rule 7.31(d)(3).
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    The proposed rule change is intended to encourage Participants to 
direct orders that add liquidity, thereby contributing to robust levels 
of trading, which would benefit all market participants. The Exchange 
believes that the proposed changes, taken together, will encourage 
submission of additional liquidity in Tape A, B and C securities to 
qualify for higher credits, thereby promoting price discovery and 
transparency and enhancing order execution opportunities for 
Participants. The Exchange notes that despite the fee increase proposed 
for orders that remove liquidity, the Exchange's fees remain 
competitive with the fees to remove liquidity in securities with a 
share price equal to or greater than $1.00 charged by other equities 
exchanges.\12\
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    \12\ See infra, note 17.
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    In connection with the proposed rule change, the Exchange also 
proposes to amend the heading of Section E. of the Fee Schedule by 
adding the words ``and Credits.'' With this proposed change, Section E. 
would be titled ``Transaction and Order Processing Fees and Credits.'' 
The Exchange similarly proposes to add the words ``and credits'' to the 
text that immediately follows the pricing table under Section E.1. 
Additionally, the Exchange proposes to amend the text of paragraph (a) 
under Section E.1 by adding the word ``fee'' after ``liquidity 
removing'' and replacing the word ``fee'' with ``credits'' after 
``liquidity providing'' and replace the word ``charged'' with 
``assessed'' to account for the proposed change to adopt credits 
payable to Participants under this proposed rule change. Finally, the 
Exchange proposes to amend the heading titled ``Liquidity Providing 
Fee'' under Section E.1 of the Fee Schedule to ``Liquidity Providing 
Rate'' as that column will now contain fees and credits assessed to 
Participants.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\13\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\14\ in particular, 
because it provides for the equitable allocation of reasonable dues, 
fees, and other charges among its members, issuers and other persons 
using its facilities and does not unfairly discriminate between 
customers, issuers, brokers or dealers.
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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange operates in a highly fragmented and competitive market 
in which market participants can readily direct their order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or incentives to be insufficient. More specifically, the 
Exchange is only one of sixteen registered equities exchanges, and 
there are a number of alternative trading systems and other off-
exchange venues, to which market participants may direct their order 
flow. As noted above, based on publicly available information, no 
single registered equities exchange has more than approximately 20% of 
the total market share of executed volume of equities trading.\15\ 
Thus, in such a low-concentrated and highly competitive market, no 
single equities exchange possesses significant pricing power in the 
execution of order flow, and the Exchange represents less than 1% of 
the overall market share.\16\ The Commission and the courts have 
repeatedly expressed their 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.'' \17\
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    \15\ See Cboe U.S Equities Market Volume Summary, available at 
https://markets.cboe.com/us/equities/market_share.
    \16\ Id.
    \17\ See Regulation NMS, supra note 5, 70 FR at 37499.
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    The Exchange believes that the ever-shifting market share among the 
exchanges from month to month demonstrates that market participants can 
shift order flow or discontinue or reduce use of certain categories of 
products, in response to new or different pricing structures being 
introduced into the market. Accordingly, competitive forces constrain 
the Exchange's transaction fees and rebates, and market participants 
can readily trade on competing venues if they deem pricing levels at 
those other venues to be more favorable. The Exchange believes the 
proposal reflects a reasonable and competitive pricing structure 
designed to incentivize Participants to direct orders that add and 
remove liquidity to the Exchange, which the Exchange believes would 
deepen liquidity and promote market quality on the Exchange to the 
benefit of all market participants.
Fees for Orders That Remove Liquidity
    The Exchange believes that the proposed increase to the fees for 
transactions that remove liquidity in Tape A, B and C securities with a 
share price equal to or greater than $1.00 is reasonable, equitably 
allocated and not unfairly discriminatory. Combined with the adoption 
of credits proposed herein, the purpose of this proposed rule change is 
to encourage additional liquidity on the Exchange. The proposed pricing 
structure is designed to continue to encourage Participants to maintain 
or increase their order flow directed to the Exchange, thereby 
contributing to a deeper and more liquid market to the benefit of all 
market participants and enhancing the attractiveness of the Exchange as 
a trading venue. The Exchange notes that the proposed fee for 
executions of single-sided orders that remove liquidity is comparable 
to, and competitive with, the fees charged for executions of liquidity-
removing orders charged by other equities exchanges.\18\ The Exchange 
further believes the proposed increased fee is fair, equitable and not 
unfairly discriminatory because the pricing tier will continue to be 
available to all Participants whose orders remove liquidity. In 
addition, the Exchange believes that the proposed increased fee is 
equitable and not unfairly discriminatory as all similarly situated 
market participants will be subject to the same fee on an equal and 
non-discriminatory basis.
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    \18\ Cboe EDGA Exchange, Inc. (``EDGA''), for example, charges a 
fee of $0.0030 per share for orders that remove liquidity in 
securities priced at or above $1.00. See EDGA fee schedule, 
available at https://www.cboe.com/us/equities/membership/fee_schedule/edga/. Long-Term Stock Exchange (``LTSE'') similarly 
charges a fee of $0.0030 per share for orders that remove liquidity 
in securities priced at or above $1.00. See LTSE fee schedule, 
available at https://ltse.com/trading/fee-schedules.

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[[Page 102233]]

Credits for Orders That Provide Displayed and Non-Displayed Liquidity
    The Exchange believes that the proposed changes to replace the 
current fee with proposed credits for orders that provide displayed and 
non-displayed liquidity in Tape A, B and C securities with a share 
price equal to or greater than $1.00, including MPL Orders, are 
reasonable, equitable and not unfairly discriminatory. The proposed 
credits for adding liquidity are reasonable because they would serve to 
incentivize submission of liquidity to a public exchange, thereby 
benefiting all Participants. The Exchange believes the proposed credits 
are also reasonable as they would apply to all Participants. The 
Exchange believes that providing a credit of $0.0029 per share for 
executions of single-sided orders that provide displayed liquidity, and 
a credit of $0.0014 per share for executions of single-sided orders 
that provide non-displayed liquidity and for MPL Orders is also 
reasonable because the proposed credits are comparable to credits 
provided by other equities exchanges.\19\
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    \19\ LTSE, for example, provides a credit of $0.0028 per share 
for orders that provide displayed liquidity, and a credit of $0.0014 
per share for orders that provide non-displayed liquidity. See LTSE 
fee schedule, available at https://ltse.com/trading/fee-schedules. 
NYSE Arca, Inc. (``NYSE Arca''), for example, provides a credit of 
$0.0010 per share for MPL Orders. See NYSE Arca fee schedule, 
available at https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf.
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    The Exchange believes that the proposed changes will encourage the 
submission of a greater number of orders to a national securities 
exchange, thus promoting price discovery and transparency and enhancing 
order execution opportunities for Participants on the Exchange. 
However, without having a view of Participant's activity on other 
markets and off-exchange venues, the Exchange has no way of knowing 
whether this proposed rule change would result in a change in trading 
behavior by Participants. The Exchange believes that the recalibrated 
fees and credits for orders that add and remove liquidity may provide 
an incentive for Participants to increase the number of orders they 
submit to the Exchange, thereby promote price discovery and increased 
execution opportunities for all Participants.
    The Exchange believes the proposed rule change would improve market 
quality for all market participants on the Exchange and, as a 
consequence, attract more liquidity to the Exchange, thereby improving 
market-wide quality and price discovery. Additionally, with respect to 
MPL Orders, the Exchange believes that the proposed credit is 
reasonable, equitable and not unfairly discriminatory because it may 
provide increased opportunities for market participants to interact 
with orders priced at the midpoint of the PBBO, thus providing price 
improving liquidity to market participants and thereby increase the 
quality of order execution on the Exchange, which would benefit all 
market participants. Moreover, all market participants would be 
eligible for the proposed credit.
    The Exchange also believes that the proposed changes to the text 
under Section E.1. of the Fee Schedule would not be inconsistent with 
the public interest and the protection of investors because investors 
will not be harmed and in fact would benefit from increased clarity and 
transparency, thereby reducing potential confusion.
    The proposal neither targets nor will it have a disparate impact on 
any particular category of market participant.
    Finally, the submission of orders to the Exchange is optional for 
Participants in that they could choose whether to submit orders to the 
Exchange and, if they do, the extent of its activity in this regard. 
The Exchange believes that it is subject to significant competitive 
forces, as described below in the Exchange's statement regarding the 
burden on competition. For the foregoing reasons, the Exchange believes 
that the proposal is consistent with the Act.

B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act,\20\ 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 orders to a 
public exchange, thereby promoting market depth, price discovery and 
transparency and enhancing order execution opportunities for 
Participants. As a result, the Exchange believes that the proposed 
change furthers the Commission's goal in adopting Regulation NMS of 
fostering integrated competition among orders, which promotes ``more 
efficient pricing of individual stocks for all types of orders, large 
and small.'' \21\
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    \20\ 15 U.S.C. 78f(b)(8).
    \21\ See Securities Exchange Act Release No. 51808, 70 FR 37495, 
37498-99 (June 29, 2005) (S7-10-04) (Final Rule).
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    Intramarket Competition. The Exchange believes the proposed change 
would not impose any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The proposed 
change is designed to attract additional orders to the Exchange. The 
Exchange believes that despite the increased fee, Participants would 
continue to direct their orders to be executed on the Exchange instead 
of at a competing exchange, given the introduction of credits for 
adding liquidity. Greater overall order flow, trading opportunities, 
and pricing transparency benefit all market participants on the 
Exchange by enhancing market quality and continuing to encourage 
Participants to send orders, thereby contributing towards a robust and 
well-balanced market ecosystem. Additionally, the Exchange believes the 
proposed credits applicable to orders that provide non-displayed 
liquidity and to MPL Orders would enhance order execution opportunities 
for all Participants. The Exchange notes that the current and proposed 
fees would be available to all similarly situated market participants, 
and, as such, the proposed change would not impose a disparate burden 
on competition among market participants on the Exchange. As noted, the 
proposal would apply to all similarly situated Participants on the same 
and equal terms, who would benefit from the changes on the same basis.
    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 (i.e., excluding 
auctions) is currently less than 1%. In such an environment, the 
Exchange must continually review, and consider adjusting 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, the Exchange does not believe its proposed fee 
change can impose any burden on intermarket competition.
    The Exchange believes that the proposed changes could promote 
competition between the Exchange and other execution venues, including 
those that currently offer similar order types and comparable 
transaction pricing, by encouraging additional orders to be sent to the 
Exchange for execution.

[[Page 102234]]

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 pursuant to Section 
19(b)(3)(A)(ii) of the Act \22\ and Rule 19b-4(f)(2) thereunder.\23\ 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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    \22\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \23\ 17 CFR 240.19b-4(f)(2).
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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-NYSECHX-2024-35 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-NYSECHX-2024-35. 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-NYSECHX-2024-35 and should 
be submitted on or before January 7, 2025.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-29626 Filed 12-16-24; 8:45 am]
BILLING CODE 8011-01-P
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