Document ID: SEC-2020-0077-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange, LLC
Posted Date: 2020-01-21T05:00Z

[Federal Register Volume 85, Number 13 (Tuesday, January 21, 2020)]
[Notices]
[Pages 3440-3446]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-00801]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87957; File No. SR-NYSE-2020-02]

Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Its Price List To Eliminate the Alternative $10,000 Monthly Fee 
Cap for Executions at the Open

January 14, 2020.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on January 2, 2020, 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) eliminate the 
alternative $10,000 monthly fee cap for executions at the open; (2) 
eliminate the separate fee for verbal executions by Floor brokers at 
the close and clarify that Floor broker executions swept into the close 
include verbal interest; (3) adopt an alternate way to qualify for the 
Tier 4 Adding Credit in Tape A securities; (4) eliminate the NYSE 
Crossing Session II fee cap; and (5) revise the requirements for the 
credits available to Supplemental Liquidity Providers (``SLPs'') under 
SLP Provide Tier 1 for adding liquidity to the Exchange in Tapes B and 
C securities. 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) eliminate the 
alternative $10,000 monthly fee cap for executions at the open; (2) 
eliminate the separate fee for verbal executions by Floor brokers at 
the close and clarify that Floor broker executions swept into the close 
include verbal interest; (3) adopt

[[Page 3441]]

an alternate way to qualify for the Tier 4 Adding Credit in Tape A 
securities; (4) eliminate the NYSE Crossing Session II (``NYSE CSII'') 
fee cap; and (5) revise the requirements for the credits available to 
SLPs under SLP Provide Tier 1 for adding liquidity to the Exchange in 
Tapes B and C securities.
    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 
January 2, 2020.
Competitive Environment
    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 37495, 37499 (June 29, 2005) (S7-10-04) (Final Rule) 
(``Regulation NMS'').
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    As the Commission itself recognized, the market for trading 
services in NMS stocks has become ``more fragmented and competitive.'' 
\5\ Indeed, equity trading is currently dispersed across 13 
exchanges,\6\ 31 alternative trading systems,\7\ and numerous broker-
dealer internalizers and wholesalers, all competing for order flow. 
Based on publicly-available information, no single exchange has more 
than 18% market share (whether including or excluding auction 
volume).\8\ Therefore, no exchange possesses significant pricing power 
in the execution of equity order flow. More specifically, for the month 
of November 2019, the Exchange's market share of intraday trading 
(i.e., excluding auctions) in Tapes A, B and C securities combined was 
only 9.4%.\9\
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    \5\ See Securities Exchange Act Release No. 51808, 84 FR 5202, 
5253 (February 20, 2019) (File No. S7-05-18) (Transaction Fee Pilot 
for NMS Stocks Final Rule) (``Transaction Fee Pilot'').
    \6\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, available at http://markets.cboe.com/us/equities/market_share/. See generally https://www.sec.gov/fast-answers/divisionsmarketregmrexchangesshtml.html.
    \7\ See FINRA ATS Transparency Data, available at https://otctransparency.finra.org/otctransparency/AtsIssueData. A list of 
alternative trading systems registered with the Commission is 
available at https://www.sec.gov/foia/docs/atslist.htm.
    \8\ See Cboe Global Markets U.S. Equities Market Volume Summary, 
available at http://markets.cboe.com/us/equities/market_share/.
    \9\ See id.
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    The Exchange believes that the ever-shifting market share among the 
exchanges from month to month demonstrates that market participants can 
move order flow, or discontinue or reduce use of certain categories of 
products, in response to fee changes. With respect to non-marketable 
order flow that would provide displayed liquidity on an Exchange, 
member organizations can choose from any one of the 13 currently 
operating registered exchanges to route such order flow. Accordingly, 
competitive forces constrain exchange transaction fees that relate to 
orders that would provide liquidity on an exchange.
    To respond to this competitive environment, the Exchange has 
established incentives for its member organizations to send orders for 
execution at the open and close and to utilize the Exchange's after-
hours crossing session.\10\ In addition, the Exchange has established 
incentives for its member organizations who submit orders that provide 
and remove liquidity on the Exchange, including cross-tape incentives 
for member organizations and SLPs based on submission of orders that 
provide displayed and non-displayed liquidity in Tapes B and C 
securities. The proposed fee change is designed to eliminate certain 
incentives that have not encouraged member organizations to increase 
their activity on the Exchange and to revise certain other incentives 
in order to attract additional order flow to the Exchange, as described 
below.
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    \10\ CSII runs on the Exchange from 4:00 p.m. to 6:30 p.m. 
Eastern Time and handles member organization crosses of baskets of 
securities of aggregate-priced buy and sell orders. See NYSE Rules 
900-907.
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Proposed Rule Change
Executions at the Open
    For securities priced $1.00 or more, the Exchange currently charges 
fees of $0.0010 per share for executions at open, and $0.0003 per share 
for Floor broker executions at the open, subject to $30,000 cap per 
month per member organization, provided the member organization 
executes an average daily trading volume (``ADV'') that adds liquidity 
to the Exchange during the billing month (``Adding ADV''),\11\ 
excluding liquidity added by a Designated Market Maker (``DMM''), of at 
least five million shares, unless the lower $10,000 cap per month per 
member organization applies. The lower fee cap applies to member 
organizations that execute an ADV that takes liquidity from the NYSE 
during the billing month (``Taking ADV''), excluding liquidity taken by 
a DMM, of at least 1.20% of NYSE consolidated average daily volume 
(``CADV'') and an ADV of orders for execution at the open (``Open 
ADV'') of at least 8 million shares.
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    \11\ Footnote 2 to the Price List defines ADV as ``average daily 
volume'' and ``Adding ADV'' as ADV that adds liquidity to the 
Exchange during the billing month. The Exchange is not proposing to 
change these definitions.
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    The Exchange proposes to eliminate the alternative $10,000 cap. As 
proposed, the fees of $0.0010 per share for executions at open, and 
$0.0003 per share for Floor broker executions at the open, would remain 
subject to the $30,000 cap per month per member organization. The 
requirements for qualifying for the $30,000 cap would remain unchanged.
    The Exchange is eliminating the lower alternative cap because it 
has not encouraged member organizations to increase their activity in 
order to qualify for the lower fee cap as significantly as the Exchange 
had anticipated. The Exchange does not know how much order flow member 
organizations choose to route to other exchanges or to off-exchange 
venues. There is currently only 1 member organization that qualifies 
for the alternative fee cap.
Verbal Interest at the Close
    Currently, the Exchange charges a fee of $0.0010 per share for 
verbal executions by Floor brokers at the close.
    The Exchange does not currently charge member organizations for the 
first 750,000 ADV of the aggregate of executions at the close for d-
Quote, Floor broker executions swept into the close, excluding verbal 
interest, and executions at the close, excluding market at-the-close 
(``MOC'') Orders, limit at-the-close (``LOC'') Orders and Closing 
Offset (``CO'') Orders. After the first 750,000 ADV of the aggregate of 
executions at the close by a member organization, d-Quotes are charged 
fees differentiated by time of entry (or last modification).\12\ All 
other orders from

[[Page 3442]]

continuous trading swept into the close are charged $0.0007.
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    \12\ d-Quotes last modified by the member organization earlier 
than 25 minutes before the scheduled close of trading are eligible 
for a $ 0.0003 per share fee. d-Quotes last modified from 25 minutes 
up to but not including 3 minutes before the scheduled close of 
trading are eligible for a $0.0007 per share fee. d-Quotes last 
modified in the last 3 minutes before the scheduled close of trading 
for firms in MOC/LOC Tiers 1 and 2 are eligible for a $0.0008 per 
share fee; all other firms are eligible for $0.0010 per share. As 
set forth in footnote 10 to the Price List, the phrase ``last 
modified'' means the later of the order's entry time or the final 
modification or cancellation time for any d-Quote order with the 
same broker badge, entering firm mnemonic, symbol, and side.
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    The Exchange proposes to eliminate the separate $0.0010 charge per 
share for verbal executions and clarify that verbal interest at the 
close would be counted for purposes of Floor Broker executions swept 
into the close that are subject to a charge of $0.0007 per share for 
shares executed in excess of an ADV of 750,000 shares. To effectuate 
this change, the Exchange would replace ``excluding'' with 
``including'' before ``verbal interest.''
    The purpose of this proposed change is to incentivize member 
organizations to send additional orders to the Exchange for execution 
at the close by lowering the fee for verbal interest at the close. As 
proposed, verbal interest swept into close would not be charged for the 
first 750,000 ADV of the aggregate of executions at the close by a 
member organization, and would be charged at the lower rate of $0.0007 
per share for shares executed in excess of an ADV of 750,000 shares.
Tier 4 Adding Credit
    Under current Tier 4, a member organization that adds liquidity to 
the Exchange in securities with a share price of $1.00 or more would be 
entitled to a per share credit of $0.0015 if the member organization 
(i) has Adding ADV in MPL orders that is at least 4 million shares ADV, 
excluding any liquidity added by a DMM, and (ii) executes MOC and LOC 
orders of at least 0.10% of NYSE CADV.
    The Exchange proposes to add an alternative way for member 
organizations to qualify for the Tier 4 Adding Credit. As proposed, 
member organizations that do not meet the current requirements and have
    (i) An Adding ADV that is at least 0.175% of NYSE CADV,
    (ii) ADV of the member organization's total close activity (MOC/LOC 
and other executions at the close) on the NYSE of at least 0.05% of 
NYSE CADV, and
    (iii) an Adding ADV 25,000 shares in Orders designated as 
``retail'' (i.e., orders that satisfy the Retail Modifier requirements 
of Rule 13) that add liquidity to the NYSE would qualify for the 
current per share credit of $0.0015.
    For example, in a month where NYSE CADV is 3.5 billion shares, 
Member Organization A has and Adding ADV of 7 million shares, a total 
close ADV of 3.5 million shares, and an Adding ADV of 30,000 shares in 
retail orders that add liquidity to the Exchange. Member Organization A 
would have previously received a credit of $0.0012 per share for adding 
liquidity as it falls short of the requirements for Adding Tiers 1, 2, 
3, and 4. The proposed change would qualify Member Organization A for a 
$0.0015 credit because Member Organization A has an Adding ADV of 0.20% 
of NYSE CADV, a total close ADV that is 0.10% of NYSE CADV, and an 
Adding ADV in retail orders of 30,000 shares, all of which meet the 
proposed requirements.
    The purpose of the proposed change is to increase the incentive for 
order flow providers to send liquidity-providing orders to the 
Exchange. As described above, member organizations with liquidity-
providing orders have a choice of where to send those orders. The 
Exchange believes that offering an alternate way for member 
organizations to qualify for a tiered credit, more member organizations 
will be able to choose to route their liquidity-providing orders to the 
Exchange to qualify for the credit. There are no member firms that 
currently qualifies for both the current and proposed requirements for 
Tier 4. The Exchange cannot predict with certainty how many member 
organizations would avail themselves of this opportunity, but believes 
that at least 7 member organizations could qualify for the tier. 
Additional liquidity-providing orders benefits all market participants 
because it provides greater execution opportunities on the Exchange.
CSII Fee Cap
    Currently, the Exchange charges a fee of $0.0004 per share (both 
sides) for executions in NYSE CSII.\13\ Fees for executions in CSII are 
capped at $200,000 per month per member organization unless an 
alternative, lower cap of $15,000 per month per member organization 
applies for member organizations that execute a Taking ADV, excluding 
liquidity taken by a DMM, of at least 1.20% of NYSE CADV and Open ADV 
of at least 8 million shares.
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    \13\ See note 10, supra.
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    The Exchange proposes to eliminate the alternative lower $15,000 
cap. The $0.0004 per share fee for executions in NYSE CSII would remain 
unchanged, and would be subject to a $200,000 cap per month per member 
organization.
    The Exchange is eliminating the lower alternative cap because it 
has not encouraged member organizations to increase their activity in 
order to qualify for the lower fee cap as significantly as the Exchange 
had anticipated. The Exchange does not know how much order flow member 
organizations choose to route to other exchanges or to off-exchange 
venues in the after-hours market. There is currently only 1 member 
organization that qualifies for the alternative fee cap.
SLP Provide Tier 1
    Under current SLP Provide Tier 1, SLPs that add displayed liquidity 
to the Exchange in securities with a per share price at or above $1.00 
and that:
     Add liquidity for all assigned Tape B securities of a CADV 
of at least 0.10% for Tape B or for all assigned Tape C Securities of a 
CADV of at least 0.075% for Tape C, and
     meet the 10% average or more quoting requirement in 400 or 
more assigned securities in Tapes B and C combined pursuant to Rule 
107B are eligible for a $0.0033 per share credit per tape in an 
assigned Tape B or C security where the SLP meets the additional 
requirement of adding liquidity for all assigned securities of at least 
0.30% of Tape B and Tape C CADV combined.
    The Exchange proposes to lower the Tape B and C CADV requirement to 
0.25% of Tape B and Tape C CADV combined. The other requirements to 
qualify for the SLP Provide Tier 1 credit would remain unchanged.
    The proposed fee change is designed to attract additional order 
flow to the Exchange by making it easier to qualify for the higher SLP 
Provide Tier 1 Credit based on adding liquidity to the Exchange in Tape 
B and C Securities. There are currently 2 SLPs that qualify for the 
$0.0033 SLP Provide Tier 1 per share credit based on their current 
trading profile on the Exchange, but the Exchange believes that at 
least 3 more SLPs could qualify for the tier if they so choose. 
However, without having a view of SLP'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 SLP directing orders to the 
Exchange in order to qualify for this 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,\14\ in general, and furthers the 
objectives of Sections

[[Page 3443]]

6(b)(4) and (5) of the Act,\15\ in particular, because it provides for 
the equitable allocation of reasonable dues, fees, and other charges 
among its members, issuers and other persons using its facilities and 
does not unfairly discriminate between customers, issuers, brokers or 
dealers.
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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(4) & (5).
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The Proposed Change Is Reasonable
    As discussed above, the Exchange operates in a highly fragmented 
and competitive market. The Commission has repeatedly expressed its 
preference for competition over regulatory intervention in determining 
prices, products, and services in the securities markets. Specifically, 
in Regulation NMS, the Commission highlighted the importance of market 
forces in determining prices and SRO revenues and, also, recognized 
that current regulation of the market system ``has been remarkably 
successful in promoting market competition in its broader forms that 
are most important to investors and listed companies.'' \16\
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    \16\ See Regulation NMS, 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 
move order flow, or discontinue or reduce use of certain categories of 
products, in response to fee changes. With respect to non-marketable 
orders which provide liquidity on an Exchange, member organizations can 
choose from any one of the 13 currently operating registered exchanges 
to route such order flow. Accordingly, competitive forces constrain 
exchange transaction fees that relate to orders that would provide 
displayed liquidity on an exchange. Stated otherwise, changes to 
exchange transaction fees can have a direct effect on the ability of an 
exchange to compete for order flow.
    Given this competitive environment, the proposal represents a 
reasonable attempt to attract additional order flow to the Exchange. As 
noted, the Exchange's market share of intraday trading (i.e., excluding 
auctions) for the month of November 2019, in Tapes A, B and C 
securities was only 9.4%.\17\
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    \17\ See note 9 supra.
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Tier 4 Adding Credit
    Specifically, the Exchange believes that proposing an alternative 
way for member organizations to qualify for the Tier 4 Adding Credit is 
reasonable because it would incentivize member organizations to send 
additional liquidity-providing orders to the Exchange in Tape A 
securities, thereby promoting price discovery and transparency and 
enhancing order execution opportunities for member organizations. As 
noted above, the Exchange operates in a highly competitive environment, 
particularly for attracting non-marketable order flow that provides 
liquidity on an exchange. The Exchange believes that requiring member 
organizations to alternatively have an Adding ADV that is at least 
0.175% of NYSE CADV, an ADV of the member organization's total close 
activity (MOC/LOC and other executions at the close) on the NYSE of at 
least 0.05% of NYSE CADV, and an Adding ADV 25,000 shares in Orders 
designated as ``retail'' (i.e., orders that satisfy the Retail Modifier 
requirements of Rule 13) that add liquidity to the NYSE in order to 
qualify for the Tier 4 Adding Credit is reasonable because it would 
encourage additional displayed liquidity on the Exchange and because 
market participants benefit from the greater amounts of displayed 
liquidity present on the Exchange.
    Without having a view of a member organization's activity on other 
markets and off-exchange venues, the Exchange believes the proposed 
revised Tier 4 Adding Credit would provide an incentive for member 
organizations to send liquidity-providing orders to the Exchange. As 
described above, member organizations with liquidity-providing orders 
have a choice of where to send those orders. The Exchange believes that 
offering an alternate way for member organizations to qualify for a 
tiered credit, more member organizations will be able to choose to 
route their liquidity-providing orders to the Exchange to qualify for 
the credit. As previously noted, no member organizations are qualifying 
for the Tier 4 Adding Credit. Based on the profile of liquidity-
providing member organizations generally, the Exchange believes 
additional member organizations could qualify for the Tier 4 Adding 
Credit if they choose to direct order flow to, and increase quoting on, 
the Exchange. Additional liquidity-providing orders benefits all market 
participants because it provides greater execution opportunities on the 
Exchange.
SLP Provide Tier 1
    Similarly, the Exchange believes lowering the Tape B and C CADV 
requirement to 0.25% of Tape B and Tape C CADV combined in order for 
member organizations that are SLPs to qualify for the current $0.0033 
credit per share per tape is reasonable because it would provide 
further incentives for such member organizations to provide additional 
liquidity to a public exchange in Tape B and C securities to reach the 
proposed Adding ADV requirement of 0.30%, thereby promoting price 
discovery and transparency and enhancing order execution opportunities 
for member organizations. All member organizations would benefit from 
the greater amounts of liquidity that will be present on the Exchange, 
which would provide greater execution opportunities. The Exchange 
believes the proposal would provide an incentive for member 
organizations that are SLPs to route additional liquidity-providing 
orders to the Exchange in Tape B and C securities. As noted above, the 
Exchange operates in a highly competitive environment, particularly for 
attracting non-marketable order flow that provides liquidity on an 
exchange.
    Without having a view of a member organization's activity on other 
markets and off-exchange venues, the Exchange believes the proposed 
additional requirement to qualify for the SLP credit would provide an 
incentive for member organizations who are SLPs to submit additional 
adding liquidity to the Exchange in Tape B and C securities. As 
previously noted, a number of SLPs are qualifying for the SLP Provide 
Tier 1 credit. Based on the profile of liquidity-providing SLPs 
generally, the Exchange believes additional SLPs could qualify for the 
displayed and non-displayed SLP Provide Tier 1credits if they choose to 
direct order flow to, and increase quoting on, the Exchange.
Elimination of Obsolete Pricing
    The Exchange believes that eliminating the alternative $10,000 cap 
for executions at the open for member organizations, and the 
alternative $15,000 cap for executions in NYSE CSII are reasonable 
because member organizations have not increased their activity 
significantly as the Exchange anticipated they would in order to 
qualify for the respective cap.
Verbal Interest at the Close
    The Exchange believes that eliminating the separate $0.0010 charge 
per share for verbal executions and clarifying that verbal interest at 
the close would be counted for purposes of Floor Broker executions 
swept into the close that are subject to a charge of $0.0007 per share 
for shares executed in excess of an ADV of 750,000 shares is reasonable 
as it conforms the treatment of verbal executions swept into the close 
with that afforded to all other orders from member organizations 
(except Designated Market Makers and Supplemental Liquidity Providers) 
swept into the close. The Exchange

[[Page 3444]]

believes it is reasonable to reduce the fee for verbal executions. The 
Exchange's Closing Auction is a recognized industry reference 
point,\18\ and member organizations receive a substantial benefit from 
the Exchange in obtaining high levels of executions at the Exchange's 
closing price on a daily basis.
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    \18\ For example, the pricing and valuation of certain indices, 
funds, and derivative products require primary market prints.
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The Proposal is an Equitable Allocation of Fees
    The Exchange believes the proposal equitably allocates its fees 
among its market participants. The Exchange believes its proposal 
equitably allocates its fees among its market participants by fostering 
liquidity provision and stability in the marketplace.
Tier 4 Adding Credit
    The Exchange believes its proposal to offer an alternative way for 
member organizations to qualify for the Tier 4 Adding Credit equitably 
allocates its fees among its market participants.
    The Exchange is not proposing to adjust the amount of the Tier 4 
Adding Credit, which will remain at the current level for all market 
participants. Rather, by providing an alternative way for member 
organizations to qualify for the Tier 4 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.
    The Exchange believes that offering an alternate way for member 
organizations to qualify for a tiered credit, more member organizations 
will be able to choose to route their liquidity-providing orders to the 
Exchange to qualify for the credit. As previously noted, a number of 
member organizations are qualifying for the Tier 4 Adding Credit. Based 
on the profile of liquidity-providing member organizations generally, 
the Exchange believes additional member organizations could qualify for 
the Tier 4 Adding Credit if they choose to direct order flow to, and 
increase quoting on, the Exchange. Additional liquidity-providing 
orders benefits all market participants because it provides greater 
execution opportunities on the Exchange.
SLP Provide Tier 1
    The Exchange believes that lowering the Tape B and C CADV 
requirement in order to qualify for the SLP Provide Tier 1 credit 
equitably allocates its fees among its market participants.
    The Exchange is not proposing to adjust the amount of the SLP 
Provide Tier 1 credit, which will remain at the current level for all 
market participants. For the reasons discussed above, the Exchange 
believes that the proposed change to the SLP Provide Tier 1 
requirements would encourage the SLPs to add liquidity to the market in 
Tape B and C securities, thereby providing customers with a higher 
quality venue for price discovery, liquidity, competitive quotes and 
price improvement. The proposed change will thereby encourage the 
submission of additional liquidity to a national securities exchange, 
thus promoting price discovery and transparency and enhancing 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. As the Exchange previously noted that, a number of the 
current SLP firms are qualifying for the SLP Provide Tier 1credit based 
on adding displayed liquidity and adding non-displayed liquidity. Based 
on the profile of liquidity-providing SLPs generally, the Exchange 
believes that additional SLPs could qualify for the displayed and non-
displayed SLP Provide Tier 1credits if they choose to direct order flow 
to, and increase quoting on, the Exchange.
Elimination of Obsolete Pricing
    The Exchange believes that eliminating the alternative $10,000 cap 
for executions at the open and the alternative $15,000 cap for 
executions in NYSE CSII constitutes an equitable allocation of fees 
because it would encourage the execution of additional liquidity on a 
public exchange, thereby promoting price discovery and transparency. 
Further, the Exchange believes that eliminating these caps is equitable 
because it would apply equally to all member organizations that submit 
orders to the NYSE open and that participate in CSII, and that 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.
Verbal Interest at the Close
    The Exchange believes that eliminating the separate $0.0010 charge 
per share for verbal executions and clarifying that verbal interest at 
the close would be counted for purposes of Floor Broker executions 
swept into the close in excess of an ADV of 750,000 shares equitably 
allocates its fees among its market participants.
    The Exchange believes the proposed change is equitable because it 
would continue to encourage member organizations to send orders to the 
close, thereby contributing to robust levels of liquidity, which 
benefits all market participants. The proposal would encourage the 
submission of additional liquidity to a national securities exchange, 
thereby promoting price discovery and transparency and enhancing order 
execution opportunities for member organizations from the substantial 
amounts of liquidity that are present on the Exchange during the close. 
Moreover, the Exchange believes that the proposal is also equitable 
because it would apply equally to all similarly situated member 
organizations.
The Proposal is Not Unfairly Discriminatory
    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.
Tier 4 Adding Credit
    The Exchange believes its proposal to offer an alternative way for 
member organizations to qualify for the Tier 4 Adding Credit is not 
unfairly discriminatory because the proposal would be provided on an 
equal basis to all member organizations that add liquidity by meeting 
the new proposed alternative requirements, who would all be eligible 
for the same credit 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.

[[Page 3445]]

SLP Provide Tier 1
    The Exchange believes that lowering the Tape B and C CADV 
requirement in order to qualify for the SLP Provide Tier 1 credit is 
not unfairly discriminatory because the lower requirement to achieve 
the fee would be applied to all similarly situated member 
organizations, who would all be eligible for the same credit based on 
the revised requirement on an equal basis. The proposal to lower the 
Tape B and C CADV requirement 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 lower 
threshold would be applied to all similarly situated member 
organizations and other market participants, who would all be eligible 
for the same credit on an equal basis. Accordingly, no member 
organization already operating on the Exchange would be disadvantaged 
by this allocation of fees.
Elimination of Obsolete Pricing
    The proposal to eliminate obsolete caps for executions at the open 
and in NYSE CSII are not unfairly discriminatory because the proposal 
neither targets nor will it have a disparate impact on any particular 
category of market participant. The proposal does not permit unfair 
discrimination because elimination of the caps would apply to all 
similarly situated member organizations and other market participants, 
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 the proposed allocation of fees.
Verbal Interest at the Close
    The proposal to eliminate the separate $0.0010 charge per share for 
verbal executions and clarify that verbal interest at the close would 
be counted for purposes of Floor Broker executions swept into the close 
that are subject to a charge of $0.0007 per share for shares executed 
in excess of an ADV of 750,000 shares is not unfairly discriminatory 
because it will apply uniformly to all Floor brokers, who are the only 
market participants that can enter verbal interest at the close. 
Accordingly, no member organization already operating on the Exchange 
would be disadvantaged by the proposed allocation of fees.
    Finally, 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,\19\ 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.'' \20\
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    \19\ 15 U.S.C. 78f(b)(8).
    \20\ Regulation NMS, 70 FR at 37498-99.
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    Intramarket Competition. The proposed changes are designed to 
attract additional order flow to the Exchange. The Exchange believes 
that the proposed changes would continue to incentivize market 
participants to direct displayed 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 current 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.
    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, 
the Exchange's market share of intraday trading (i.e., excluding 
auctions) for the month of November 2019, in Tapes A, B and C 
securities combined was only 9.4%.\21\ 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.
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    \21\ See note 9 supra.
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    The Exchange believes that the proposed change 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. The Exchange also believes that the proposed 
change is designed to provide the public and investors with a Price 
List that is clear and consistent, thereby reducing burdens on the 
marketplace and facilitating investor protection.

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 is effective upon filing pursuant to 
Section 19(b)(3)(A) \22\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \23\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \22\ 15 U.S.C. 78s(b)(3)(A).
    \23\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of such 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. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \24\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \24\ 15 U.S.C. 78s(b)(2)(B).
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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.

[[Page 3446]]

Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSE-2020-02 on the subject line.

Paper Comments

     Send paper comments in triplicate to: Secretary, 
Securities and Exchange Commission, 100 F Street NE, Washington, DC 
20549-1090.

All submissions should refer to File Number SR-NYSE-2020-02. 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 (http://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 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NYSE-2020-02 and should be submitted on 
or before February 11, 2020.
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    \25\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-00801 Filed 1-17-20; 8:45 am]
 BILLING CODE 8011-01-P