Document ID: SEC-2016-0950-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange, LLC
Posted Date: 2016-06-02T04:00Z

[Federal Register Volume 81, Number 106 (Thursday, June 2, 2016)]
[Notices]
[Pages 35406-35409]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-12876]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77929; File No. SR-NYSE-2016-36]

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

May 26, 2016.
    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 May 11, 2016, 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 for equity 
transactions in stocks with a per share stock price more than $1.00 to: 
(1) Add a new fee for verbal executions by Floor brokers at the close; 
(2) revise the fees for Midpoint Passive Liquidity (``MPL'') orders 
that remove liquidity from the Exchange and that are not designated 
with a ``retail''

[[Page 35407]]

modifier as defined in Rule 13; (3) revise the requirements and credits 
for MPL orders that provide liquidity to the Exchange; and (4) make 
certain changes in the footnotes and tiers applicable to Supplemental 
Liquidity Providers (``SLPs'') on the Exchange. The Exchange proposes 
to implement these changes to its Price List effective May 11, 2016.\4\ 
The proposed rule change is available on the Exchange's Web site 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 
May 2, 2016 (SR-NYSE-2016-32) and withdrew such filing on May 11, 
2016.
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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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its Price List to: (1) Add a new fee 
for verbal interest by Floor brokers at the close; (2) revise the fees 
for MPL orders that remove liquidity from the Exchange and that are not 
designated with a ``retail'' modifier as defined in Rule 13; (3) revise 
the requirements and credits for MPL orders that provide liquidity to 
the Exchange; and (4) make certain changes in the footnotes and tiers 
applicable to SLPs.
    The proposed changes would only apply to credits in transactions in 
securities priced $1.00 or more.
    The Exchange proposes to implement these changes effective May 11, 
2016.
Verbal Interest at the Close
    Currently, the Exchange does not charge a fee for verbal executions 
by Floor brokers at the close.\5\ The Exchange proposes a fee of 
$0.0010 per share for verbal executions by Floor brokers at the close. 
The Exchange notes that the proposed fee is the same as the current fee 
(charged to both sides) for MOC and LOC orders (the Non-Tier MOC/LOC 
fee).\6\
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    \5\ The Exchange charges member organizations a fee for market 
at-the-close (``MOC'') and limit at-the-close (``LOC'') orders at 
the close and for Floor broker executions swept into the close. 
Member organizations that execute during the billing month average 
daily volume (``ADV'') in excess of 750,000 shares through orders 
executed at the close (except MOC and LOC orders) and Floor broker 
orders swept into the close, are charged $0.00035 per share per 
transaction (charged to both sides). Such executions are not charged 
if the member organization executes an ADV on the Exchange during 
the billing month of fewer than 750,000 shares ADV.
    \6\ See note 5, supra.
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    The Exchange would also add the phrase ``excluding verbal 
interest'' to clarify that verbal interest at the close would not be 
counted for purposes of Floor Broker executions swept into the close 
that are subject to a charge of $0.00035 per share for shares executed 
in excess of an ADV \7\ of 750,000 shares.
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    \7\ The defined term, ``ADV,'' is used here as defined in 
footnote 2 to the Price List.
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MPL Orders
    An MPL Order is defined in Rule 13 as an undisplayed limit order 
that automatically executes at the mid-point of the best protected bid 
(``PBB'') or [sic] best protected offer (``PBO''), as such terms are 
defined in Regulation NMS Rule 600(b)(57) (together, ``PBBO'').\8\
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    \8\ See Rule 14. See also 17 CFR 242.600(b)(57).
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MPL Orders That Remove Liquidity
    The Exchange currently charges a fee of $0.00275 per share per 
transaction for MPL Orders that remove liquidity from the NYSE and that 
are not designated with a ``retail'' modifier as defined in Rule 13.\9\ 
Floor brokers are currently charged the same price for MPL Orders that 
remove liquidity from the Exchange. The Exchange proposes to revise the 
fee for all MPL Orders that remove liquidity from the Exchange and that 
are not designated with a ``retail'' modifier as defined in Rule 13, 
including MPL Orders entered by Floor brokers, from $0.00275 to 
$0.0030. The Exchange will continue not to charge a fee for MPL Orders 
that remove liquidity from the Exchange and that are designated with a 
``retail'' modifier as defined in Rule 13.
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    \9\ MPL Orders that take liquidity do not count toward a 
member's or member organization's overall level of providing volume 
for purposes of other pricing on the Exchange that is based on such 
levels (e.g., the Tier 1, Tier 2 and Tier 3 Adding Credits).
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MPL Orders That Add Liquidity
    The Exchange currently provides a credit of $0.0030 per share 
credit for MPL Orders that provide liquidity from a member organization 
that has Adding ADV \10\ in MPL Orders that is at least 1.5 million 
shares, excluding any liquidity added by a Designated Market Maker 
(``DMM''). The Exchange provides a $0.0015 per share transaction credit 
for MPL Orders that provide liquidity from a member organization that 
does not meet the Adding ADV threshold.
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    \10\ ``Adding ADV'' is when a member organization has ADV that 
adds liquidity to the Exchange during the billing month. Adding ADV 
excludes any liquidity added by a Designated Market Maker.
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    The Exchange proposes that member organizations qualifying for the 
$0.0030 credit have an Adding ADV in MPL orders of at least 0.04% of 
NYSE consolidated ADV (``CADV''),\11\ excluding liquidity added by a 
DMM. The Exchange also proposes to reduce the credit from $0.0030 to 
$0.00275.
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    \11\ NYSE CADV is defined in the Price List as the consolidated 
average daily volume of NYSE-listed securities.
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Changes to Footnotes and Tiers Applicable to SLPs
    Current footnote 8 applies to SLP Tiers 1, 1A, 2 and 3 and provides 
that in its first calendar month as an SLP, an SLP qualifies for the 
relevant credit regardless of whether it meets the requirement to 
provide liquidity with an ADV of more than the applicable threshold 
percentage of NYSE CADV in the applicable month. The Exchange proposes 
to delete footnote 8 and move the text of the footnote into the body of 
the Price List for SLP Tier 3, where an SLP is eligible for a credit of 
$0.0023 per share traded if the SLP (1) meets the 10% average or more 
quoting requirement in assigned securities pursuant to Rule 107B, and 
(2) adds liquidity for assigned SLP securities in the aggregate of an 
ADV of more than 0.20% of NYSE CADV or, with respect to an SLP that is 
also a DMM and subject to Rule 107B(i)(2)(a),\12\ more than the current 
0.20% requirement after a discount of the percentage for the prior 
quarter of NYSE CADV in DMM assigned securities as of the last business 
day of the prior month. The Exchange does not propose to move the text 
of current footnote 8 into the body of the Price List for SLP Tier 2, 
SLP Tier 1 or SLP Tier 1A. Current footnote 8 would thus no longer 
apply to those tiers.
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    \12\ Rule 107B(i)(2)(A) prohibits a DMM from acting as a SLP in 
the same securities in which it is a DMM.
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    The Exchange also proposes that current footnote ** would become 
new footnote 8. Accordingly, each reference in the Price List to 
footnote ** would be replaced with a reference to footnote 8. The 
substance of footnote ** would remain unchanged. The Exchange

[[Page 35408]]

believes that this change will add greater specificity and clarity to 
the Exchange's Price List.
* * * * *
    The proposed changes are not otherwise intended to address any 
other issues, and the Exchange is not aware of any problems that member 
organizations would have in complying with the proposed change.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\13\ in general, and furthers the 
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\14\ in 
particular, because it provides for the equitable allocation of 
reasonable dues, fees, and other charges among its members, issuers and 
other persons using its facilities and does not unfairly discriminate 
between customers, issuers, brokers or dealers.
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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(4) & (5).
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Verbal Interest at the Close
    The Exchange believes that charging a fee for verbal executions at 
the close is reasonable. The Exchange's closing auction is a recognized 
industry benchmark,\15\ 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. The proposed fee is also 
reasonable, equitable and not unfairly discriminatory because it would 
be the same as the current fee (charged to both sides) for MOC and LOC 
orders (the Non-Tier MOC/LOC fee). Further, the proposed fee change is 
also equitable and 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.
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    \15\ For example, the pricing and valuation of certain indices, 
funds, and derivative products require primary market prints.
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MPL Orders
    The Exchange believes that (1) increasing the fee for MPL Orders 
that remove liquidity from the Exchange and that are not designated as 
``retail,'' and (2) requiring Adding ADV in MPL orders of at least 
0.04% of NYSE CADV rather than a fixed share number and offering a 
credit of $0.00275 for MPL Orders that add liquidity to the NYSE is 
reasonable. MPL Orders provide opportunities for market participants to 
interact with orders priced at the midpoint of the PBBO, thus providing 
price improving liquidity to market participants and increasing the 
quality of order execution on the Exchange's market, which benefits all 
market participants.
    The new credit is also reasonable because it would be similar or 
higher than the rates on the NASDAQ Stock Market, LLC (``NASDAQ''). For 
example, on NASDAQ, firms that average 1 million or more shares of 
midpoint liquidity receive a credit of $0.0010 per share in Tape C 
securities and $0.0018 in Tape A and B securities to execute against 
resting midpoint liquidity, which is lower than the proposed $0.00275 
per share rate for MPL orders that is at least 0.04% of NYSE CADV, 
excluding any liquidity added by a DMM.\16\
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    \16\ See NASDAQ Price List, available at http://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2.
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    The proposed change is equitable and not unfairly discriminatory 
because MPL Orders increase the quality of order execution on the 
Exchange's market, which benefits all market participants. The Exchange 
also believes that the proposed changes are equitable and not unfairly 
discriminatory because all market participants--customers, Floor 
brokers, DMMs, and SLPs--may use MPL Orders on the Exchange and because 
all market participants that use MPL Orders may receive credits for MPL 
Orders, as is currently the case.
Changes to Footnotes Applicable to SLPs
    The Exchange believes it is reasonable to (1) eliminate current 
footnote 8 and the related Tier 1, Tier 1A, and Tier 2 credits for SLPs 
during their first calendar month as a SLP irrespective of whether the 
SLP meets the requirement to provide liquidity with an ADV of more than 
the applicable threshold percentage of NYSE CADV, and (2) retain the 
Tier 3 credit for SLPs during their first calendar month irrespective 
of whether the the [sic] SLP meets the requirement to provide liquidity 
with an ADV of more than the applicable threshold percentage of NYSE 
CADV by moving the text of current footnote 8 to the body of the Price 
List in Tier 3. The Exchange believes that eliminating the higher tiers 
during a SLP's first calendar month without regard to the applicable 
requirement is reasonable because SLPs have not increased their 
activity to qualify for these tiers as significantly as the Exchange 
anticipated that they would. The Exchange notes that new SLPs can still 
qualify for the higher rates during their first calendar month of 
operation as a SLP by meeting the applicable tier volume requirements. 
The Exchange also believes that retaining the $0.0023 credit for SLP 
Tier 3 for SLPs in their first calendar month as an SLP is reasonable 
because the $0.0023 credit is equal to or higher than the applicable 
non-Tier Adding Credit, Tier 3 Adding Credit, Tier 2 Adding Credit or 
Tier 1 Adding Credit for SLPs that don't meet the requirements of SLP 
Tier 3. The Exchange believes that the proposed changes are equitable 
and not unfairly discriminatory because they would apply uniformly to 
all SLPs during their first calendar month. The Exchange notes that 
there are currently no SLPs in the first calendar month of operation.
    Further, the Exchange believes that the proposed change to its 
Price List whereby current footnote ** would become new footnote 8 is 
reasonable because it is designed to provide greater specificity and 
clarity to the Price List, thereby removing impediments to and 
perfecting the mechanism of a free and open market and a national 
market system, and, in general, protecting investors and the public 
interest.
    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,\17\ 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, the Exchange believes that the proposed 
changes would encourage the submission of additional liquidity to a 
public exchange, thereby promoting price discovery and transparency and 
enhancing order execution opportunities for member organizations. The 
Exchange believes that this 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. 
Further, the Exchange believes that the proposed non-substantive change 
relating to footnote ** applicable to SLPs would not affect intermarket 
nor intramarket competition because the proposed change is not designed 
to amend any fee or rebate or alter the manner in which

[[Page 35409]]

the Exchange assesses fees or calculates rebates. Instead, this change 
is intended to provide greater specificity and clarity to the 
Exchange's Price List for the benefit of member organizations and 
investors.
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    \17\ 15 U.S.C. 78f(b)(8).
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    Finally, the Exchange notes that it operates in a highly 
competitive market in which market participants can readily favor 
competing venues if they deem fee levels at a particular venue to be 
excessive or rebate opportunities available at 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 alternative trading systems that have been exempted from 
compliance with the statutory standards applicable to exchanges. 
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 believes that the degree to which 
fee changes in this market may impose any burden on competition is 
extremely limited. As a result of all of these considerations, the 
Exchange does not believe that the proposed changes will impair the 
ability of member organizations or competing order execution venues to 
maintain their competitive standing in the financial markets.

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) \18\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \19\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \18\ 15 U.S.C. 78s(b)(3)(A).
    \19\ 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) \20\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \20\ 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-2016-36 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSE-2016-36. 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 Web site (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 Web site 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; the Commission does 
not edit personal identifying information from submissions.
    You should submit only information that you wish to make available 
publicly. All submissions should refer to File Number SR-NYSE-2016-36 
and should be submitted on or before June 23, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2016-12876 Filed 6-1-16; 8:45 am]
 BILLING CODE 8011-01-P