Document ID: SEC-2019-1086-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange, LLC
Posted Date: 2019-07-31T04:00Z

[Federal Register Volume 84, Number 147 (Wednesday, July 31, 2019)]
[Notices]
[Pages 37358-37362]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-16218]

[[Page 37358]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-86473; File No. SR-NYSE-2019-40]

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

July 25, 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 July 12, 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 amend its Price List to (1) revise the 
adding average daily share requirement for certain non-displayed orders 
that qualify for the Tier 3 Adding Credit in Tape A securities, and (2) 
adopt a new pricing tier, the Step Up Tier Adding Credit, in Tape A 
securities. The Exchange proposes to implement the fee changes 
effective July 12, 2019.\4\ 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.
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    \4\ The Exchange originally filed to amend the Fee Schedule on 
July 1, 2019 (SR-NYSE-2019-38). SR-NYSE-2019-38 was subsequently 
withdrawn and replaced by this filing.
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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 (1) revise the 
adding average daily share requirement for certain non-displayed orders 
that qualify for the Tier 3 Adding Credit in Tape A securities, and (2) 
adopt a new pricing tier, the Step Up Tier Adding Credit, in Tape A 
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 July 
12, 2019.
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.'' \5\
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    \5\ 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.'' 
\6\ Indeed, equity trading is currently dispersed across 13 
exchanges,\7\ 31 alternative trading systems,\8\ 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).\9\ Therefore, no exchange possesses significant pricing power 
in the execution of equity order flow. More specifically, in May 2019, 
the Exchange averaged less than 9.6% market share (excluding auctions) 
of executed volume of equity trades in all securities.\10\
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    \6\ 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'').
    \7\ See Cboe Global Markets, U.S. Equities Market Volume Summary 
(June 28, 2019), available at http://markets.cboe.com/us/equities/market_share/. See generally https://www.sec.gov/fast-answers/divisionsmarketregmrexchangesshtml.html.
    \8\ See FINRA ATS Transparency Data (June 3, 2019), available at 
https://otctransparency.finra.org/otctransparency/AtsIssueData. 
Although 54 alternative trading systems were registered with the 
Commission as of May 31, 2019, only 31 are currently trading. 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 
(May 31, 2019), 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, 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.
    In response to this competitive environment, the Exchange has 
established incentives for its member organizations who submit orders 
that provide liquidity on the Exchange. The Exchange's market share of 
intraday trading (i.e., excluding auctions) declined from 9.6% for the 
month of May 2019 to 9.2% for the month of June 2019.\11\ The proposed 
fee change is designed to attract additional order flow to the Exchange 
by making it easier to qualify for the Tier 3 Adding credit based on 
adding liquidity to the Exchange. The proposed fee change is also 
designed to attract additional order flow to the Exchange by offering a 
new pricing tier to incentivize member organizations to step up their 
liquidity-providing orders on the Exchange on all tapes.
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    \11\ See id.
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Proposed Rule Change
    The Exchange currently has several levels of credits for orders 
that provide displayed and non-displayed liquidity to the Exchange 
based on the amount of volume of orders that member organizations send 
to the Exchange. The tiered adding credits (Tier 1 Adding Credit, Tier 
2 Adding Credit, Tier 3 Adding Credit, and Tier 4 Adding Credit) range 
from $0.0022 to $0.0015.

[[Page 37359]]

    As described in greater detail below, the Exchange proposes the 
following changes:
     A reduction of the average daily volume (``ADV'') 
requirement in Mid-Point Passive Liquidity orders (``MPL Orders'') \12\ 
that encourages member organizations to qualify for the Tier 3 Adding 
Credit; and
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    \12\ An MPL Order is an undisplayed Limit Order that 
automatically executes at the mid-point of the protected best bid or 
offer (``PBBO''). See Rule 13(d)(1).
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     a new pricing tier to incentivize member organizations to 
step up their liquidity-providing order by providing a credit of 
$0.0019 per share where the member organization contributes certain 
amounts of adding ADV to the Exchange over that member organization's 
baseline of adding liquidity as measured in March 2019. The Exchange 
also proposes to offer an additional $0.00005 per share to member 
organizations meeting the requirements of the proposed step up tier 
that add a certain amount of displayed liquidity in Tapes B and C 
securities.\13\
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    \13\ The Exchange also proposes non-substantive changes to add 
punctuation to the Tier 1 Adding Credit, Tier 2 Adding Credit, Tier 
3 Adding Credit, and Tier 4 Adding Credit.
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Tier 3 Adding Credit
    Under current Tier 3, 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 $0.0018 if the criteria in A or B are 
satisfied, as follows:
    A.
    (i) The member organization has an Adding ADV \14\ equal to at 
least 0.40% of NYSE CADV, and
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    \14\ 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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    (ii) The member organization executes market at-the-close (``MOC'') 
and limit at-the-close (``LOC'') orders equal to at least 0.05% of NYSE 
CADV.
    B.
    (i) The member organization has an Adding ADV equal to at least 
0.35% of NYSE CADV,
    (ii) The member organization executes MOC and LOC orders equal to 
at least 0.05% of NYSE CADV, and
    (iii) The member organization has an Adding ADV in MPL orders of at 
least 400,000 shares.
    The Exchange proposes to amend the Adding ADV requirement in MPL 
Orders for the second of the two alternative methods described above to 
qualify for the credit by reducing the share requirement from 400,000 
to 200,000 shares. As proposed, the first method to qualify for the 
credit would not change and the amount of the credit would also not 
change.
    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, if it reduces the requirement to qualify for a 
tiered credit, more member organizations will choose to route their 
liquidity-providing orders to the Exchange to qualify for the credit. 
The Exchange cannot predict with certainty how many member 
organizations would avail themselves of this opportunity, but believes 
that at least 4 member organizations could qualify for the tier.\15\ 
Additional liquidity-providing orders benefits all market participants 
because it provides greater execution opportunities on the Exchange.
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    \15\ In the month of June 2019, 6 member organizations not 
meeting the current Tier 3 requirements were within 0.20% of the 
Adding ADV requirement.
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Step Up Tier Adding Credit
    The Exchange proposes to adopt a ``Step Up Tier Adding Credit'' 
that would offer a higher credit to member organizations that qualify 
for the tier. The proposed tier would also offer an additional credit 
for member organizations providing displayed liquidity in Tapes B and C 
securities.
    As proposed, a member organization that sends orders, except MPL 
and Non-Display Reserve orders, that add liquidity in Tape A securities 
would receive a credit of $0.0019 if:
     The member organization has Adding ADV, excluding any 
liquidity added by a Designated Market Maker (``DMM''), that is at 
least 0.45% of NYSE CADV, and
     the member organization has Adding ADV, excluding any 
liquidity added by a DMM, that is at least 0.20% of NYSE CADV for the 
billing month over the member organization's March 2019 Adding ADV as a 
percentage of NYSE CADV in March 2019.
    In addition, a member organization that meets these requirements, 
and thus qualifies for the $0.0019 credit in Tape A securities, would 
be eligible to receive an additional $0.00005 per share if trades in 
Tapes B and C securities against the member organization's orders that 
add liquidity, excluding orders as a Supplemental Liquidity Provider 
(``SLP''), equal to at least 0.20% of Tape B and Tape C CADV combined. 
The proposed additional credit mirrors the additional credits offered 
in current Tier 1, Tier 2, Tier 3 and Tier 4 for trades in Tapes B and 
C securities against a member organization's orders that add liquidity, 
excluding orders as an SLP, equal to at least a specified percentage of 
Tape B and Tape C CADV combined.
    For example, assume a member organization has:
     In March 2019, Adding ADV, excluding any liquidity added 
by a DMM, of 8.75 million shares when NYSE CADV was 3.5 billion shares, 
which is an Adding ADV of 0.25% of NYSE CADV.
     In the applicable billing month, the NYSE CADV remains at 
3.5 billion shares, and therefore 0.20% of that NYSE CADV is 7 million 
shares.
     For that billing month, that member organization, 
excluding any liquidity added by a DMM, has Adding ADV of 17.5 million 
shares when NYSE CADV was 3.5 billion shares, which is an Adding ADV of 
0.50% of NYSE CADV.
    The member organization in the example would qualify for the Step 
Up Tier Adding Credit in the billing month because it both (1) meets 
the Adding ADV requirement of 0.45% of NYSE CADV, and (2) meets the 
Adding ADV increase over that firm's March 2019 Adding ADV by at least 
0.20% (Adding ADV of 0.50% of NYSE CADV in the billing month minus the 
Adding ADV of 0.25% of NYSE CADV in the baseline month is a step up of 
0.25% Adding ADV of NYSE CADV).
    The purpose of this proposed change is to incentivize member 
organizations to increase the liquidity-providing orders in Tape A 
securities they send to the Exchange, which would support the quality 
of price discovery on the Exchange and provide additional price 
improvement opportunities for incoming orders. The Exchange believes 
that by correlating the amount of the credit to the level of orders 
sent by a member organization that add liquidity, the Exchange's fee 
structure would incentivize member organizations to submit more orders 
that add liquidity to the Exchange, thereby increasing the potential 
for price improvement to incoming marketable orders submitted to the 
Exchange.
    The Exchange proposes a higher credit compared with Adding Tier 3 
under the proposed Step Up Tier to provide an incentive for member 
organizations to send more orders because they would then qualify for 
the credit. As noted above, the Exchange operates in a competitive 
environment, particularly as it relates to attracting non-marketable 
orders, which add

[[Page 37360]]

liquidity to the Exchange. Because, as proposed, the tier requires a 
member organization to increase the volume of its trades against orders 
that add liquidity over that member organization's March 2019 baseline, 
the Exchange believes that the proposed higher credit would provide an 
incentive for member organizations to route additional liquidity to the 
Exchange in order to qualify for it.
    The Exchange does not know how much order flow member organizations 
choose to route to other exchanges or to off-exchange venues. There are 
currently no firms that could qualify for the proposed higher Step Up 
Tier Adding Credit based on their current trading profile on the 
Exchange, but believes that at least 6 member organizations could 
qualify for these tiers if they so choose.\16\ 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 this 
proposed rule change would result in any member organization directing 
orders to the Exchange in order to qualify for the new tier.
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    \16\ In the month of June 2019, 6 member organizations that did 
not meet the requirements of the Adding Tiers had an Adding ADV of 
NYSE CADV of at least 0.15%.
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    Each of 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,\17\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\18\ 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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    \17\ 15 U.S.C. 78f(b).
    \18\ 15 U.S.C. 78f(b)(4) & (5).
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The Proposed Change is Reasonable
    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. 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.'' \19\
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    \19\ See Regulation NMS, 70 FR at 37499.
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    As the Commission itself recognized, the market for trading 
services in NMS stocks has become ``more fragmented and competitive.'' 
\20\ Indeed, equity trading is currently dispersed across 13 
exchanges,\21\ 31 alternative trading systems,\22\ 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).\23\ Therefore, no exchange possesses significant pricing power 
in the execution of equity order flow. More specifically, in May 2019, 
the Exchange averaged less than 9.6% market share (excluding auctions) 
of executed volume of equity trades in all securities.\24\
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    \20\ See Transaction Fee Pilot, 84 FR at 5253.
    \21\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary (June 28, 2019), available at http://markets.cboe.com/us/equities/market_share/. See generally https://www.sec.gov/fast-answers/divisionsmarketregmrexchangesshtml.html.
    \22\ See FINRA ATS Transparency Data (June 3, 2019), available 
at https://otctransparency.finra.org/otctransparency/AtsIssueData. 
Although 54 alternative trading systems were registered with the 
Commission as of May 31, 2019, only 31 are currently trading. A list 
of alternative trading systems registered with the Commission is 
available at https://www.sec.gov/foia/docs/atslist.htm.
    \23\ See Cboe Global Markets U.S. Equities Market Volume Summary 
(June 28, 2019), available at http://markets.cboe.com/us/equities/market_share/.
    \24\ 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 
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) declined from 9.6% for the month of May 2019 to 9.2% for the 
month of June 2019.\25\
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    \25\ See id.
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    Specifically, the Exchange believes that the proposed revision to 
the adding average daily share requirement in order to qualify for the 
Tier 3 Adding Credit is reasonable because it would make it easier for 
member organizations to qualify for the credit, thereby encouraging the 
submission of additional liquidity to a national securities exchange. 
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 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 proposed Step Up Tier would provide an 
incentive for member organizations to route additional liquidity-
providing orders to the Exchange in Tape A 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. The Exchange believes it is reasonable to provide a higher 
credit for orders that provide additional liquidity. Similarly, the 
Exchange believes that it is reasonable to provide an incremental 
credit to member organizations that meet the requirements of the Step 
Up Tier that add additional liquidity in UTP securities on Pillar.
    Since the proposed Step Up Tier would be new with a requirement for 
increased Adding ADV over the baseline month, no member organization 
currently qualifies for the proposed pricing tier. As previously noted, 
there are a number of member organizations that could qualify for the 
proposed higher credit but without a view of member organization 
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 qualifying for the tier. The Exchange believes the 
proposed higher credit is reasonable as it would provide an additional 
incentive for member organizations to direct their order flow to the 
Exchange and provide meaningful added levels of liquidity in order to 
qualify for the higher credit, thereby

[[Page 37361]]

contributing to depth and market quality on the Exchange.
The Proposal is an Equitable Allocation of Fees
    The Exchange believes its proposal equitably allocates its fees 
among its market participants.
    First, the Exchange is not proposing to adjust the amount of the 
Tier 3 Adding Credit, which will remain at the current level for all 
market participants. Rather, the proposal would continue to encourage 
member organizations to send MPL Orders that add liquidity to the 
Exchange, thereby contributing to robust levels of liquidity, which 
benefits all market participants. The Exchange believes that, for the 
reasons discussed above, lowering the adding ADV in MPL Orders 
requirement would make it easier for liquidity providers to qualify for 
the Tier 3 Adding Credit, thereby encouraging submission of additional 
liquidity to the Exchange. 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.
    The Exchange notes that there are currently 5 firms qualifying for 
Tier 3 Adding Credit and that, based on current participation on the 
Exchange, no additional firms would initially qualify with the lower 
requirements. Without having a view of a member organization's activity 
on other exchanges and off-exchange venues, the Exchange believes the 
proposed lower of the adding ADV in MPL Orders requirement would 
provide an incentive for market participants to increase liquidity to 
meet the new lower requirement and submit additional adding liquidity 
to the Exchange. In addition, based on the profile of liquidity-
providing firms generally, the Exchange believes that 6 firms could 
qualify for these tiers if they choose to direct order flow to, and 
increase quoting on, the Exchange.
    Finally, the Exchange believes that the proposed Step Up Tier is 
equitable because the magnitude of the additional credit is not 
unreasonably high relative to the other adding tier credits, which 
noted above range from $0.0015 to $0.0022, in comparison to the credits 
paid by other exchanges for orders that provide additional step up 
liquidity.\26\ 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.
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    \26\ See Cboe BZX Fee Schedule, which has adding credits ranging 
from $0.0020 to $0.0032, at https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/.
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    Since the proposed Step Up Tier would be new, no member 
organization currently qualifies for it. As noted, there are currently 
no member organizations that could qualify for the proposed higher 
credit, but without a view of member organization activity on other 
exchanges and off-exchange venues, the Exchange has no way of knowing 
whether this proposed rule change would result in any member 
organization qualifying for the tier. The Exchange believes the 
proposed higher credit is reasonable as it would provide an additional 
incentive for member organizations to direct their order flow to the 
Exchange and provide meaningful added levels of liquidity in order to 
qualify for the higher credit, thereby contributing to depth and market 
quality on the Exchange.
    The proposal neither targets nor will it have a disparate impact on 
any particular category of market participant. Member organizations 
that add liquidity to the Exchange that equals at least 0.35% of NYSE 
CADV, trade against such member organization's MOC and LOC orders equal 
to at least 0.05% of NYSE CADV, and that have Adding ADV in MPL orders 
is at least 200,000 shares would be eligible for the Tier 3 Adding 
Credit by satisfying the lowered threshold, and because the lower 
threshold would apply equally to all similarly situated member 
organizations. Similarly, member organizations that currently qualify 
for adding liquidity credits will continue to receive credits when they 
provide liquidity to the Exchange.
    With the proposed new Step Up Tier, all member organizations would 
be eligible to qualify for the higher credit if they increase their 
Adding ADV over their own baseline of order flow. The Exchange believes 
that offering a higher step up credit for providing liquidity if the 
step up requirements for Tape A securities are met, will continue to 
attract order flow and liquidity to the Exchange, thereby providing 
additional price improvement opportunities on the Exchange and 
benefiting investors generally. As to those market participants that do 
not presently qualify for the adding liquidity credits, the proposal 
will not adversely impact their existing pricing or their ability to 
qualify for other credits provided by the Exchange.
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.
    The proposal to lower the adding ADV in MPL Orders requirement also 
neither targets nor will it have a disparate impact on any particular 
category of market participant. The proposal does not permit unfair 
discrimination because the 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.
    The Exchange believes it is not unfairly discriminatory to provide 
a higher per share step up credit, as the proposed credit would be 
provided on an equal basis to all member organizations that add 
liquidity by meeting the new proposed Step Up Tier's requirements. For 
the same reason, the Exchange believes it is not unfairly 
discriminatory to provide an additional incremental credit to member 
organizations that satisfy the Step Up Tier requirements and add 
liquidity in UTP securities. Further, the Exchange believes the 
proposed Step Up Tier credit would incentivize member organizations 
that meet the current tiered requirements to send more orders to the 
Exchange to qualify for higher credits. The Exchange also believes that 
the proposed change is not unfairly discriminatory because it is 
reasonably related to the value to the Exchange's market quality 
associated with higher volume. Finally, the submission of orders to the 
Exchange is optional for member organizations in that they could choose 
whether to submit orders to the Exchange and, if they do, the extent of 
its activity in this regard.
    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.

[[Page 37362]]

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

    In accordance with Section 6(b)(8) of the Act,\27\ the Exchange 
believes that the proposed rule change would not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. Instead, as discussed above, the Exchange believes 
that the proposed changes would encourage the submission of additional 
liquidity to a public exchange, thereby promoting market depth, price 
discovery and transparency and enhancing order execution opportunities 
for member organizations. As a result, the Exchange believes that the 
proposed change furthers the Commission's goal in adopting Regulation 
NMS of fostering integrated competition among orders, which promotes 
``more efficient pricing of individual stocks for all types of orders, 
large and small.'' \28\
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    \27\ 15 U.S.C. 78f(b)(8).
    \28\ 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 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.
    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. The 
Exchange notes that for the month of May 2019, the Exchange's market 
share of intraday trading (excluding auctions) was 9.6%.\29\ 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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    \29\ 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) \30\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \31\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \30\ 15 U.S.C. 78s(b)(3)(A).
    \31\ 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) \32\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \32\ 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:

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-2019-40 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-2019-40. 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-2019-40 and should be submitted on 
or before August 21, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\33\
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    \33\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-16218 Filed 7-30-19; 8:45 am]
 BILLING CODE 8011-01-P