Document ID: SEC-2019-1331-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange, LLC
Posted Date: 2019-09-17T04:00Z

[Federal Register Volume 84, Number 180 (Tuesday, September 17, 2019)]
[Notices]
[Pages 48965-48968]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-20012]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-86930; File No. SR-NYSE-2019-48]

Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Modify Quoting Thresholds Applicable in Relation to an Issue 
Experienced by the Consolidated Tape Association on August 12, 2019

September 11, 2019.
    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 August 30, 2019, 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 modify the manner in which it calculates 
certain quoting thresholds applicable to billing on the Exchange in 
relation to an issue experienced by the Consolidated Tape Association 
(``CTA'') securities information processor on August 12, 2019. The 
proposed rule change is

[[Page 48966]]

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 modify the manner in which it calculates 
certain quoting thresholds applicable to billing on the Exchange in 
relation to an issue experienced by the CTA securities information 
processor (the ``SIP'') on August 12, 2019 (``SIP Processing Issue''). 
Specifically, the Exchange proposes to exclude August 12, 2019 from any 
monthly calculations of quoting thresholds for the month of August, as 
described further below.
    The SIP processes, consolidates, and disseminates real-time last-
sale and quote information from every trading venue. According to CTA, 
on Monday, August 12, 2019, beginning at approximately 2:48 p.m. E.T., 
the SIP experienced issues with its Consolidated Quote System (``CQS'') 
output lines, and beginning at 3:12 p.m. E.T., began experiencing 
disruptions to connectivity to its Consolidated Tape System (``CTS'') 
lines, and that these issues continued into the after-hours trading 
sessions. Because of the SIP Processing Issue, the SIP advised that 
there may be gaps in the intra-day trades, quotes and other messages 
that were attempted to be sent to it during the impacted time 
period.\4\ As a result of the SIP Processing Issue, the Exchange's 
determination of the NBBO for a period of that day was likely impacted.
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    \4\ See CTA Notice of ``CTA Processing Issue on August 12, 2019: 
Post-Mortem,'' which is available here: https://www.ctaplan.com/alerts#110000144324.
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    As provided for in the Exchange's Price List, many of the 
Exchange's transaction fees and credits are based on trading, quoting 
and liquidity thresholds that member organizations must satisfy in 
order to qualify for particular rates. In particular, for Tape A 
securities, certain Designated Market Maker (``DMM'') rates are 
determined based on whether a DMM quotes at the National Best Bid or 
Offer (``NBBO'') in an applicable security for a specified percentage 
of time in the applicable month. In addition, credits paid to 
Supplemental Liquidity Providers (``SLP'') are also based on whether an 
SLP has met a specified percentage of quoting requirements calculated 
for an applicable month.
    The Exchange believes that because the SIP Processing Issue 
potentially impacted the ability for the Exchange and other market 
participants to determine the NBBO in securities during the trading 
day, this day--August 12, 2019--should be excluded from any monthly 
calculations relating to NBBO as specified on the Price List. The 
Exchange believes that excluding August 12, 2019 from the calculation 
of meeting quoting thresholds for DMMs and SLPs for the month of August 
would reasonably ensure that a member organization that would otherwise 
qualify for a particular threshold during August 2019, and the 
corresponding transaction rate, would not be negatively impacted by the 
SIP Processing Issue on August 12, 2019.\5\
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    \5\ The exclusion would not apply to Retail Liquidity Providers 
as there were no registered RLPs on the Exchange on August 12, 2019.
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    The Exchange notes that the proposed exclusions would be similar to 
the current provision in the Price List whereby, for purposes of 
transaction fees and SLP credits, ADV calculations exclude early 
closing days \6\ or if the Exchange experiences a system disruption 
that lasts for more than 60 minutes.\7\ Here, the system disruption was 
at the SIP, not the Exchange, but nonetheless impacted the Exchange's 
ability to determine the NBBO during the August 12th trading day.
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    \6\ For example, the Exchange closes early on the Friday 
immediately following Thanksgiving Day (e.g., Friday, November 29, 
2019).
    \7\ See footnote 4 in the Price List.
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    The proposed change is not otherwise intended to address any other 
issues surrounding billing for activity on the Exchange and the 
Exchange is not aware of any negative impact on member organizations 
that would result from the proposed change.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\8\ in general, and furthers the 
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\9\ 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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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(4) & (5).
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The Proposed Change Is Reasonable
    The Exchange believes that excluding August 12, 2019 for purposes 
of determining transaction fees and credits that are based on whether a 
member organization quoted at the NBBO for a specified percentage of 
time over the applicable month is reasonable because the SIP Processing 
Issue impacted the ability of the Exchange to determine the NBBO in 
securities during the August 12th trading day. The proposed change to 
exclude this trading day is reasonable because, without the proposed 
exclusion, both the numerator and the denominator for August 12, 2019 
would be impacted and not calculable for the full trading day. As a 
result, without the proposed exclusion, a member organization that 
would otherwise qualify for a particular threshold for August 2019, and 
the corresponding transaction rate, may be negatively impacted by the 
SIP Processing Issue. Finally, the Exchange believes that the proposed 
rule change is reasonable because the SIP Processing Issue was not 
within the Exchange's control nor can the Exchange correct or otherwise 
remediate the issue.
The Proposal Is an Equitable Allocation of Fees
    The Exchange believes that excluding activity on August 12, 2019 
for purposes of determining transaction fees and credits based on 
whether a member organization quoted at the NBBO for a percentage of 
time during the billing month is equitable because it would apply 
equally to all market participants on the Exchange and to all credits 
based on such quoting requirements. In this regard, excluding August 
12, 2019 from such calculations would reasonably ensure that a member 
organization that would otherwise qualify for a particular threshold 
for August 2019, and the corresponding transaction rate, would not be 
negatively impacted by the SIP Processing Issue. This is equitable 
because DMMs and SLPs have specific performance metrics that must be 
satisfied for assigned securities in order

[[Page 48967]]

to qualify for the particular rates in the Price List.
The Proposal Is Not Unfairly Discriminatory
    The Exchange believes that the proposal is not unfairly 
discriminatory because the exclusion would apply equally to all member 
organizations that are subject to transaction rates based on quoting at 
the NBBO for a specified percentage of the billing month. Moreover, the 
proposal neither targets nor will it have a disparate impact on any 
particular category of market participant. Rather, as discussed above, 
the Exchange believes that the proposed exclusion would reasonably 
ensure that a member organization that would otherwise qualify for a 
particular threshold for August 2019, and the corresponding transaction 
rate, would not be negatively impacted by the SIP Processing Issue. 
This is not unfairly discriminatory because DMMs and SLPs have specific 
performance metrics that must be satisfied for assigned securities in 
order to qualify for the particular rates in the Price List.
    The Exchange also believes that the proposed rule change furthers 
the objectives of Section 6(b)(5) of the Act,\10\ in particular, 
because it is designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, to remove impediments to, and 
perfect the mechanisms of, a free and open market and a national market 
system and, in general, to protect investors and the public interest 
and because it is not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \10\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed exclusion of August 12, 
2019 would remove impediments to and perfect the mechanism of a free 
and open market and a national market system because they would 
reasonably ensure that a member organization that would otherwise 
qualify for a particular threshold during the month, and the 
corresponding transaction rate, would not be negatively impacted by the 
SIP Processing Issue. The Exchange further believes that the proposed 
exclusions remove impediments to and perfect the mechanism of a free 
and open market and a national market system because they provide 
transparency for member organizations and the public regarding the 
manner in which the Exchange will calculate certain quoting thresholds 
related to billing for activity on the Exchange on August 12, 2019 and 
for the month of August 2019. In this regard, the Exchange believes 
that the proposed exclusions are consistent with the Act because they 
address inquiries from member organizations regarding how the Exchange 
will treat August 12, 2019 for purposes of billing.
    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.

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

    In accordance with Section 6(b)(8) of the Act,\11\ the Exchange 
believes that the proposed rule change would not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. The proposed rule change would treat all market 
participants on the Exchange equally by excluding August 12, 2019 from 
quoting level calculations described in the Price List. Moreover, the 
Exchange believes that the proposed change would enhance competition 
between competing marketplaces by enabling the Exchange to exclude 
August 12, 2019 for the purposes of determining transaction fees and 
credits based on quoting levels as set forth in the Price List. The 
proposed exclusion 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. In addition, the Exchange believes that the proposed change 
would enhance competition between competing marketplaces by enabling 
the Exchange to fairly assess its member organizations fees and to 
apply credits in light of the SIP Processing Issue, which was beyond 
the control of the Exchange.
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    \11\ 15 U.S.C. 78f(b)(8).
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    Intramarket Competition. The proposed change is designed to 
eliminate a trading day that would almost certainly affect the ability 
of member organizations to meet certain of these thresholds for August 
2019. The proposed exclusion 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. In such an 
environment, the Exchange must continually adjust its fees and rebates 
to remain competitive with other exchanges and with off-exchange 
venues. By providing member organizations with a greater level of 
certainty for August 2019 by reasonably ensuring that member 
organizations that would otherwise qualify for a particular threshold 
for August 2019, and the corresponding transaction rate, would not be 
negatively impacted by the SIP Processing Issue, the Exchange believes 
that the proposed change could promote competition between the Exchange 
and other execution venues by encouraging member organizations to 
continue their participation on the Exchange.

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) \12\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \13\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 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) \14\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \14\ 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. Comments may be submitted by any of 
the following methods:

[[Page 48968]]

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-2019-48 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-2019-48. 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-2019-48 and should be submitted on 
or before October 8, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-20012 Filed 9-16-19; 8:45 am]
 BILLING CODE 8011-01-P