Document ID: SEC-2019-0348-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange, LLC
Posted Date: 2019-03-27T04:00Z

[Federal Register Volume 84, Number 59 (Wednesday, March 27, 2019)]
[Notices]
[Pages 11586-11589]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-05811]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85390; File No. SR-NYSE-2019-13]

Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Its Price List To Permit Affiliated Member Organizations That Are 
Supplemental Liquidity Providers on the Exchange To Obtain the Most 
Favorable Rate in Securities Traded Pursuant to Unlisted Trading 
Privileges

March 21, 2019.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act''),\2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that on March 19, 2019, New York Stock Exchange LLC (``NYSE'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``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) permit 
affiliated member organizations that are Supplemental Liquidity 
Providers (``SLPs'') on the Exchange to obtain the most favorable rate 
in securities traded pursuant to Unlisted Trading Privileges (``UTP'') 
(Tapes B and C) when (a) at least one affiliate satisfies the quoting 
requirements for SLPs in assigned securities, and (b) the combined 
SLPs' aggregate volumes satisfy the adding liquidity volume 
requirements for SLP tiered rates; (2) modify the quoting requirements 
for SLP tiered rates for displayed and non-displayed orders in UTP 
securities; and (3) clarify that the combined SLP quoting requirement 
for SLP Tier 2, Tier 1 and the Tape A Tier in UTP securities includes 
shares and assigned securities of both an SLP-Prop and an SLMM of the 
same or an affiliated member organization. The Exchange proposes to 
implement these changes to its Price List effective March 19, 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 Price List on 
February 28, 2019 (SR-NYSE-2019-10). On March 11, 2019, SR-NYSE-
2019-10 was withdrawn and replaced by SR-NYSE-2019-12. SR-NYSE-2019-
12 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) permit 
affiliated member organizations that are SLPs on the Exchange to obtain 
the most favorable rate in UTP securities when (a) at least one 
affiliate satisfies the

[[Page 11587]]

quoting requirements for SLPs in assigned securities, and (b) the 
combined SLPs' aggregate volumes satisfy the adding liquidity volume 
requirements for SLP tiered rates; (2) modify the quoting requirements 
for SLP tiered rates for displayed and non-displayed orders in UTP 
securities; and (3) clarify that the combined SLP quoting requirement 
for SLP Tier 2, Tier 1 and the Tape A Tier in UTP securities includes 
shares and assigned securities of both an SLP-Prop and an SLMM of the 
same or an affiliated member organization.
    The Exchange proposes to implement these changes to its Price List 
effective March 19, 2019
Proposed Rule Change
Background
    SLPs in UTP securities are eligible for certain credits and fees 
for displayed and non-displayed orders that add liquidity to the 
Exchange in UTP Securities priced at or above $1.00. The amount of the 
credit is currently determined by the ``tier'' for which the SLP 
qualifies, which is based on the SLP's level of quoting and ADV of 
liquidity added by the SLP in assigned UTP securities.
    Currently, for displayed orders in UTP Securities that add 
liquidity to the Exchange, the Exchange offers a non-tiered credit of 
$0.0026 per share per tape in an assigned UTP Security where the SLP 
meets the 10% average or more quoting requirement in an assigned 
security pursuant to Rule 107B.\5\ For non-displayed orders in UTP 
Securities that add liquidity to the Exchange, the Exchange offers a 
non-tiered credit of $0.0008 per share per tape in an assigned UTP 
Security if the SLP meets the 10% average or more quoting requirement 
in an assigned security pursuant to Rule 107B.
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    \5\ Under Rule 107B, an SLP can be either a proprietary trading 
unit of a member organization (``SLP-Prop'') or a registered market 
maker at the Exchange (``SLMM'').
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    Current Tier 2 provides a $0.0029 per share credit per tape in an 
assigned UTP Security for SLPs adding displayed liquidity to the 
Exchange if the SLP (1) adds liquidity for all assigned UTP Securities 
in the aggregate of an CADV of at least 0.03% per tape, and quotes on 
an average daily basis, calculated monthly, in excess of the 10% 
average quoting requirement in 200 or more assigned UTP Securities in 
Tapes B and C combined pursuant to Rule 107B, and (2) meets the 10% 
average or more quoting requirement in an assigned UTP Security 
pursuant to Rule 107B. Tier 2 also provides a $0.0011 per share credit 
per tape in assigned UTP securities for SLPs adding non-displayed 
liquidity to the Exchange if the SLP meets the 10% average or more 
quoting requirement in an assigned UTP Security pursuant to Rule 107B.
    Current Tier 1 provides a $0.0032 per share credit per tape in an 
assigned UTP Security for SLPs adding displayed liquidity to the 
Exchange if the SLP (1) adds liquidity for all assigned UTP Securities 
in the aggregate of an CADV of at least 0.10% for Tape B and 0.075% for 
Tape C, and (2) quotes on an average daily basis, calculated monthly, 
in excess of the 10% average quoting requirement in 400 or more 
assigned UTP Securities in Tapes B and C combined pursuant to Rule 
107B, and (3) meets the 10% average or more quoting requirement in an 
assigned UTP Security pursuant to Rule 107B. Tier 1 also provides a 
$0.0014 per share credit per tape for SLPs adding non-displayed 
liquidity to the Exchange, and a $0.0025 per share credit for MPL 
Orders adding liquidity, in an assigned UTP Security if the SLP meets 
the 10% average or more quoting requirement in an assigned UTP Security 
pursuant to Rule 107B.
    Finally, the current Tape A Tier provides a $0.00005 per share in 
assigned UTP securities in addition to the Tape A SLP credit in Tape A 
assigned securities for SLPs adding displayed liquidity to the Exchange 
if the SLP (1) qualifies for the SLP Tier 1 provide rate in both Tape B 
and C or quotes on an average daily basis, calculated monthly, in 
excess of the 10% average quoting requirement in 300 or more assigned 
securities separately in Tapes B and Tape C pursuant to Rule 107B, and 
(2) where the SLP meets the 10% average quoting requirement pursuant to 
Rule 107B.
Most Favorable Rate for Affiliated SLPs
    The Exchange proposes to amend the Price List to permit affiliated 
member organizations that are SLPs to obtain the most favorable rate in 
UTP securities when (1) at least one affiliate satisfies the quoting 
requirements for SLPs in assigned securities, and (2) the combined 
SLPs' aggregate volumes satisfy the adding liquidity volume 
requirements for SLP tiered rates (i.e., SLP Provide Tier 2 and SLP 
Provide Tier 1).
    To effect this change, the Exchange proposes to add a footnote 
stating that affiliated member organizations that are SLPs would be 
eligible for the most favorable rate for any such security traded in an 
applicable month provided that one or both affiliated member 
organizations request and are approved for aggregation of eligible 
activity pursuant to the requirements set forth in the Price List when 
(1) at least one affiliate satisfies the quoting requirements for SLPs 
in assigned securities, and (2) the combined SLPs' aggregate volumes 
satisfy the adding liquidity volume requirements for SLP tiered rates 
(i.e., SLP Provide Tier 2 and SLP Provide Tier 1).
    In order to qualify as affiliates for purposes of obtaining the 
more favorable rate and aggregating the adding liquidity of an ADV 
volumes for UTP securities, one or both member organizations that are 
SLPs would be required to follow the procedures set forth in the Price 
List for requesting that the Exchange aggregate its eligible activity 
with the eligible activity of its affiliates.\6\
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    \6\ For purposes of applying any provision of the Exchange's 
Price List where the charge assessed, or credit provided, by the 
Exchange depends on the volume of a member organization's activity, 
a member organization may request that the Exchange aggregate its 
eligible activity with activity of such member organization's 
affiliates. A member organization requesting aggregation of eligible 
affiliate activity is required to (1) certify to the Exchange the 
affiliate status of member organizations whose activity it seeks to 
aggregate prior to receiving approval for aggregation, and (2) 
inform the Exchange immediately of any event that causes an entity 
to cease being an affiliate.
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    For example, assume a member organization with a SLP (SLP1) is 
affiliated with another member organization that also has a SLP (SLP2). 
Both SLP1 and SLP2 meet the quoting requirement in 500 securities each. 
If the adding liquidity for all for assigned Tape B SLP securities is 
0.08% of Tape B CADV for SLP1 in the billing month and 0.06% of Tape B 
CADV for SLP2 in the billing month, the combined adding liquidity for 
SLP1 and SLP2 would be 0.14% of Tape B CADV, and both SLP1 and SLP2 
would meet the 0.10% Tape B CADV adding requirement for Tape B Tier 1.
    If in that same billing month, SLP1 has 8.0% quoting in SLP symbol 
XYZ and SLP2 has 12.0% quoting in that same symbol XYZ, both SLP1 and 
SLP2 would qualify for the SLP Tier 1 credit of $0.0032 in symbol XYZ 
because of SLP2's 12.0% quoting and the combined adding liquidity of 
SLP1 and SLP 2 of 0.14% of Tape B CADV. If SLP2 did not quote in symbol 
XYZ at least 10%, then SLP1 would not qualify for the SLP Tier 2 credit 
because the 8.0% quoting was below the 10% requirement, and SLP1 and 
SLP2 would instead receive the applicable non-tier, Non-SLP Tier 1 
adding credit, or non-SLP Tier 2 adding credit.

[[Page 11588]]

Quoting Requirement for SLP Tiered Credits
    As noted above, the quoting requirement for SLP tiered credits 
(Tier 2, Tier 1 and Tape A Tier) is on an average daily basis, 
calculated monthly. In each case, the Exchange proposes to clarify that 
the quoting requirement would not be on an average daily basis, 
calculated monthly. To effectuate this change, the Exchange proposes to 
delete the phrase ``, on an average daily basis,'' after ``quotes'' in 
Tier 2, Tier 1 and the Tape A Tier.
    For example, if a SLP quotes 6.0% quoting in SLP symbol XYZ, a Tape 
B or Tape C security, on day 1 of the billing month, 12.0% on day 2, 
and 18.0% on day 3, that SLP would have an average quoting of 12.0% for 
the month after day 3 in symbol XYZ. Further assume that the SLP 
averaged the same quoting in at least 399 other Tape B and Tape C 
securities for that month. As a result, the SLP would have met the 400 
symbol quoting requirement for SLP Tier 1 in Tape B and Tape C 
combined.
Combined Quoting Requirement for SLP Tier 2, Tier 1 and the Tape A Tier 
in UTP Securities
    As noted above, current Tier 2, Tier 1 and the Tape A Tier require 
SLPs adding displayed liquidity to the Exchange to quote on an average 
daily basis, calculated monthly, in excess of the 10% average quoting 
requirement for a specified number of assigned UTP Securities in Tapes 
B and C combined pursuant to Rule 107B.
    The Exchange proposes to add a footnote after the word ``combined'' 
in Tier 2 and Tier 1 that would clarify that the combined SLP quoting 
requirement for those two tiers includes shares and assigned securities 
of both an SLP-Prop and an SLMM of the same or an affiliated member 
organization. The footnote would also clarify that individual 
securities quoted by both an SLP-Prop and an SLMM are only counted 
once. In the above example, for instance, further assume an SLP meets 
the 10% quoting requirement in 350 securities in Tape B and Tape C and 
an affiliated SLP meets the requirement in 100 securities in Tape B and 
Tape C, 25 of which are the same as the first SLP. The total combined 
unique securities across the affiliated SLPs would be 425, or 350 plus 
75, meeting the securities quoting for SLP Tier 1 in Tape B and Tape C 
combined for both affiliated SLPs.
    Finally, the Exchange proposes to add the word ``combined'' 
following ``Tapes B and C'' and before ``pursuant to Rule 107B'' in the 
Tape A Tier which was inadvertently omitted and add the same footnote 
to the Tape A Tier.
    The Exchange believes that these changes 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,\7\ in general, and furthers the 
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\8\ 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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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(4) & (5).
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Most Favorable Rate for Affiliated SLPs
    The Exchange believes that the proposed rule change is reasonable 
because the SLP Provide Tier rates for UTP securities, established in 
previous rule filings, would remain the same.\9\ The Exchange further 
believes that the proposed rule change is equitable because it 
establishes a manner for the Exchange to treat affiliated member 
organizations that are approved as SLPs for purposes of assessing 
charges or credits that are based on volume. The provision is also 
equitable because all member organizations seeking to aggregate their 
activity are subject to the same parameters, in accordance with 
established procedures set forth on the Price List regarding 
aggregation across affiliated member organizations. The Exchange 
further believes that the proposal is not unfairly discriminatory 
because it would serve to reduce disparity of treatment between member 
organizations with regard to the pricing of different services and 
reduce any potential for confusion on how SLP activity can be 
aggregated. The Exchange believes that the proposed rule change avoids 
disparate treatment of member organizations that have divided their 
various business activities between separate corporate entities as 
compared to member organizations that operate those business activities 
within a single corporate entity. The Exchange further believes that 
the proposed rule change is designed to remove impediments to and 
perfect the mechanism of a free and open market because it aligns how 
affiliated member organizations that are approved as SLPs may aggregate 
volume in the same manner that affiliated member organizations 
currently aggregate non-SLP trading volume.
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    \9\ See, e.g., Securities Exchange Act Release No. 84583 
(November 14, 2018), 83 FR 58637 (November 20, 2018) (SR-NYSE-2018-
53), for the most recent pricing changes applicable to SLPs in UTP 
securities.
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Quoting Requirement for SLP Tiered Credits
    The Exchange believes that removing language that specifies that 
the quoting requirement for SLP tiered credits (Tier 2, Tier 1 and Tape 
A Tier) are on an average daily basis calculated monthly would provide 
for a simpler approach to calculating the quoting requirement and 
provide greater 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.
Combined Quoting Requirement for SLP Tier 2, Tier 1 and the Tape A Tier 
in UTP Securities
    The Exchange believes that adding the inadvertently omitted word 
``combined'' to SLP Tier A and a footnote to SLP Tier 2, Tier 1 and the 
Tape A Tier clarifying that the combined SLP quoting requirement for 
those tiers in UTP securities includes shares and assigned securities 
of both an SLP-Prop and an SLMM of the same or an affiliated member 
organization and that individual securities quoted by both an SLP-Prop 
and an SLMM are only counted once would provide greater 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. Adding the 
proposed clarity to the Price List also reduces potential confusion and 
adds transparency to the Exchange's rules, thereby ensuring that 
members, regulators, and the public can more easily navigate and 
understand the Exchange's rulebook.
    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 11589]]

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

    In accordance with Section 6(b)(8) of the Act,\10\ 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 
change is designed to 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 comparable transaction pricing, by 
encouraging additional orders to be sent to the Exchange for execution. 
Further, the Exchange does not believe that the proposal to permit 
affiliated member organizations that are SLPs on the Exchange to obtain 
the most favorable rate in UTP securities would impose an undue burden 
on intra-market competition because all member organizations may 
qualify as an SLP. The Exchange notes that the Price List permits 
aggregation of activity for eligible affiliates of any member 
organization. Further, the Exchange believes that permitting member 
organizations that divided their various business activities between 
separate corporate entities to qualify for aggregation and receive the 
same treatment as a member organization that operates its business 
activities within a single corporate entity would encourage competition 
and the submission of additional liquidity to a public exchange. The 
Exchange also believes that the proposed rule 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.
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    \10\ 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)(ii) of the Act,\11\ and subparagraph (f)(2) of Rule 
19b-4 \12\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \11\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \12\ 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) \13\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \13\ 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-2019-13 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-2019-13. 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-2019-13 and should be submitted on 
or before April 17, 2019.
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    \14\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-05811 Filed 3-26-19; 8:45 am]
 BILLING CODE 8011-01-P