[Federal Register Volume 85, Number 72 (Tuesday, April 14, 2020)]
[Notices]
[Pages 20730-20735]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-07779]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88602; File No. SR-NYSE-2020-27]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend its Price List To Respond to the Current Volatile Market
Environment That Has Resulted in Unprecedented Average Daily Volumes
and the Temporary Closure of the Trading Floor
April 8, 2020.
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 April 1, 2020, New York Stock Exchange LLC (``NYSE'' or
``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) clarify for
purposes of certain rebates applicable to Designated Market Makers
(``DMM'') that in a month where the average monthly NYSE consolidated
average daily volume (``CADV'') equals or exceeds a certain threshold,
the Exchange will use the most recent month where the average monthly
NYSE CADV is less than that threshold to calculate ``Security CADV'';
(2) revise the providing liquidity requirement for certain DMM rebates
in a month where the average monthly NYSE CADV equals or exceeds a
certain threshold; (3) cap the maximum average number of shares per day
for the billing month for purposes of calculating NYSE CADV for the
Supplemental Liquidity Provider (``SLP'') Tape A adding tiers; (4)
introduce maximum average share caps applicable to SLPs for adding
displayed and non-displayed liquidity in Tape B and C securities; and
(5) waive equipment and related service charges and trading license
fees for NYSE Trading Floor-based member organizations for April 2020
in connection with the recent temporary closing of the Trading Floor.
The proposed rule change is available on the Exchange's website at
www.nyse.com, at the principal office of the Exchange, and at the
Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend its Price List to (1) clarify for
purposes of certain rebates applicable to DMMs that in a month where
the average monthly NYSE CADV equals or exceeds a certain threshold,
the Exchange will use the most recent month where the average monthly
NYSE CADV is less than that threshold to calculate ``Security CADV'';
(2) revise the providing liquidity requirement for certain DMM rebates
in a month where the average monthly NYSE CADV equals or exceeds a
certain threshold; (3) cap the maximum average number of shares per day
for the billing month for purposes of calculating NYSE CADV for the SLP
Tape A adding tiers; (4) introduce maximum average share caps
applicable to SLPs for adding displayed and non-displayed liquidity to
the Exchange in Tape B and C securities; and (5) waive equipment and
related service charges and trading license fees for NYSE Trading
Floor-based member organizations for April 2020 in connection with the
recent temporary closing of the Trading Floor.
The proposed changes respond to the current volatile market
environment that has resulted in unprecedented average daily volumes
and the temporary closure of the Trading Floor, which are both related
to the ongoing spread of the novel coronavirus (``COVID-19''), by
providing a degree of certainty to DMMs and SLPs adding liquidity to
the Exchange by adjusting the threshold requirements for specified fees
and credits to account for the unprecedented volume and to Trading
Floor-based member organizations impacted by the temporary closing of
the Trading Floor by waiving specified Floor-based fees for the month
of April 2020.
Specifically, the Exchange proposes the following:
For purposes of DMM rebates that are based on whether the
DMM meets either the More Active Securities Quoting Requirement or the
Less Active Securities Quoting Requirement, as those terms are defined
in the Price List, which thresholds are based the average daily
consolidated volume of securities (``Security ADV''), specify that in a
month where NYSE CADV equals or is greater than 5.5 billion shares, the
NYSE will use the most recent month where the average monthly NYSE CADV
is less than 5.5 billion shares to calculate the Security CADV.
[[Page 20731]]
In order for DMMs to qualify for rebates when adding
liquidity in More Active Securities, in a month where the average
monthly NYSE CADV is equal to or greater than 5.5 billion shares, lower
the DMM providing requirements as a percent of the NYSE's total
intraday adding liquidity.
For purposes of calculating NYSE CADV for SLP Tiers 1, 1A,
2, 3, 4, SLP Step Up Tier and Incremental SLP Step Up Tier adding
credits, establish a monthly maximum average cap of 5.5 billion shares
per day for NYSE CADV.
For purposes of calculating Tier 1 and Tier 2 SLP credits
for adding displayed and non-displayed liquidity to the Exchange in
Tape B and C securities, establish a monthly maximum average cap of
2.75 billion shares per day for Tape B, 3.25 billion shares for Tape C,
and 6.0 billion shares for Tape B and C combined.
Waive booth telephone and related service charges and
trading license fees for the billing month of April 2020 for (1) member
organizations with at least one trading license, a physical Trading
Floor presence, and Floor broker executions accounting for 40% or more
of the member organization's combined adding, taking and auction
volumes during March 1 to March 20, 2020, and (2) member organizations
with at least one trading license that are DMMs with 30 or fewer
assigned securities for the billing month of March 2020.
The Exchange proposes to implement the fee changes effective April
1, 2020.
Current Market and Competitive Environment
Since March 9, 2020, markets worldwide have been experiencing
unprecedented market-wide declines and volatility because of the
ongoing spread of COVID-19. Trading volumes on the Exchange have
surged. For instance, between March 1 and March 30, 2020, NYSE CADV was
7.4 billion shares, 95% higher than the average NYSE CADV between 2018
and 2020.
Beginning on March 16, 2020, to slow the spread of COVID-19 through
social distancing measures, significant limitations were placed on
large gatherings throughout the country. As a result, on March 18,
2020, the Exchange determined that beginning March 23, 2020, the
physical Trading Floor facilities located at 11 Wall Street in New York
City would close and that the Exchange would move, on a temporary
basis, to fully electronic trading.\4\
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\4\ See Press Release, dated March 18, 2020, available here:
https://ir.theice.com/press/press-releases/allcategories/2020/03-18-2020-204202110.
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Moreover, 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. 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 20% 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, the
Exchange's market share of trading in Tape A, B and C securities
combined is less than 13%.
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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, 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, available at https://otctransparency.finra.org/otctransparency/AtsIssueData. A list of
alternative trading systems registered with the Commission is
available at https://www.sec.gov/foia/docs/atslist.htm.
\9\ See Cboe Global Markets U.S. Equities Market Volume Summary,
available at http://markets.cboe.com/us/equities/market_share/.
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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.
The proposed rule change accordingly responds to these
unprecedented events and the current competitive landscape where market
participants can and do move order flow, or discontinue or reduce use
of certain categories of products, in response to fee changes.
Proposed Rule Change
DMM Rebates Based on Calculation of Security CADV
The section of the Exchange's Price List entitled ``Fees and
Credits Applicable to DMMs'' sets out different monthly rebate amounts
to DMMs depending on the CADV of the security and the DMM quoting
percentage and size in any month in which the DMM meets the More Active
Securities Quoting Requirement \10\ and the Less Active Securities
Quoting Requirement,\11\ as well as DMM providing as a percent of the
NYSE's total intraday adding liquidity, as those terms are defined in
the Price List. Specifically, the monthly rebates offered by the
Exchange for DMMs meeting the More Active Securities Quoting
Requirement and the Less Active Securities Quoting Requirement are
determined based on securities with a Security CADV (i.e., the average
daily consolidated volume for the applicable security) equal to or
greater than 1,000,000 shares per month, respectively, in the previous
month. The Exchange also provides monthly rebates to DMMs depending on
the Security CADV and the DMM quoting percentage. Finally, the Exchange
allocates market data quote revenue (``Quoting Share'') received by the
Exchange from the Consolidated Tape Association under the Revenue
Allocation Formula of Regulation to DMMs for securities with a Security
CADV of less than 1,500,000 shares in the previous month (regardless of
whether the stock price exceeds $1.00) based on the DMM meeting
specified quoting percentage requirements at the NBBO.\12\
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\10\ The ``More Active Securities Quoting Requirement'' is met
if the More Active Security has a stock price of $1.00 or more and
the DMM quotes at the NBBO in the applicable security at least 10%
of the time in the applicable month.
\11\ The ``Less Active Securities Quoting Requirement'' is met
when a security has a consolidated ADV of less than 1,000,000 shares
per month in the previous month and a stock price of $1.00 or more,
and the DMM quotes at the NBBO in the applicable security at least
15% of the time in the applicable month.
\12\ See NYSE Price List, at 8-13, available at https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf.
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For each of these calculations based on Security CADV, the Exchange
proposes to add a footnote following
[[Page 20732]]
each use of ``previous month'' in the DMM section of the Price List
providing that in a month where NYSE CADV equals or is greater than 5.5
billion shares, the Exchange will use the most recent month where NYSE
CADV is less than 5.5 billion shares to calculate the Security CADV.
For example, assume the relevant billing month is April 2020.
Assume NYSE CADV in the preceding month of March 2020 was equal to or
greater than 5.5 billion shares and that the most recent month where
NYSE CADV was less than 5.5 billion shares was February 2020. In this
example, the Exchange would use trading volumes from February 2020 to
calculate Security CADV and, as long as NYSE CADV was under 5.5 billion
shares, the Security CADV for each security would be based on that
symbol's CADV in the month of February. In the event that NYSE CADV in
February 2020 was also equal to or greater than 5.5 billion shares, the
Exchange would use the next most recent month prior to February where
NYSE CADV was under 5.5 billion shares.
DMM Adding Liquidity Credits in More Active Securities
Currently, DMMs earn a rebate of $0.0031 per share when adding
liquidity, other than MPL Orders, in More Active Securities if the More
Active Security has a stock price of $1.00 or more and the DMM meets
the More Active Securities Quoting Requirement \13\ and the DMM (1) has
a DMM Quoted Size \14\ for an applicable month that is at least 10% of
the NYSE Quoted Size, and (2) quotes at the National Best Bid or Offer
(``NBBO'') in the applicable security at least 20% of the time in the
applicable month, and (3) has providing liquidity that is more than 5%
of the NYSE's total intraday adding liquidity in each such security for
that month.
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\13\ See note 10, supra.
\14\ The ``NYSE Quoted Size'' is calculated by multiplying the
average number of shares quoted on the NYSE at the NBBO by the
percentage of time the NYSE had a quote posted at the NBBO. The
``DMM Quoted Size'' is calculated by multiplying the average number
of shares of the applicable security quoted at the NBBO by the DMM
by the percentage of time during which the DMM quoted at the NBBO.
See NYSE Price List, n. 7.
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DMMs electing the optional monthly rebate per security (``Rebate
per Security'') instead receive a lower monthly rebate per share
(``Optional Credit'') of $0.0030 per share if the quoting and providing
requirements are met. A DMM that meets (1) these requirements, and (2)
the DMM Additional Quoting Requirement \15\ would receive an
incremental credit of $0.0003 per share in each eligible assigned More
Active Security.
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\15\ The ``DMM Additional Quoting Requirement'' is defined as
the DMM increasing their quoting at the NBBO by at least 5% over
their quoting at the NBBO in September 2019, in at least 300
assigned securities.
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The Exchange proposes that in a month where NYSE CADV is equal to
or greater than 5.5 billion shares, the DMM providing liquidity
requirement would instead be 2.5% of the NYSE's total intraday adding
liquidity in each such security for that month. The other current
requirements and credits would otherwise remain unchanged.
Similarly, DMMs currently earn a rebate of $0.0034 per share when
adding liquidity with orders, other than MPL Orders, in More Active
Securities if the More Active Security has a stock price of $1.00 or
more and the DMM meets the More Active Securities Quoting Requirement
and (1) has a DMM Quoted Size for an applicable month that is at least
15% of the NYSE Quoted Size, (2) for providing liquidity that is more
than 15% of the NYSE's total intraday adding liquidity in each such
security for that month, and (3) quotes at the NBBO in the applicable
security at least 30% of the time in the applicable month. DMMs
electing the optional Rebate per Security instead receive an Optional
Credit of $0.0033 per share if the quoting and providing requirements
are met. A DMM that meets (1) these current requirements, and (2) the
DMM Additional Quoting Requirement receives an incremental credit of
$0.0001 per share in each eligible assigned More Active Security.
The Exchange proposes that in a month where NYSE CADV is equal to
or greater than 5.5 billion shares, the DMM providing liquidity
requirement would instead be more than 7.5% of the NYSE's total
intraday adding liquidity in each such security for that month. The
other current requirements and credits would otherwise remain
unchanged.
Finally, DMMs currently earn a rebate of $0.0035 per share when
adding liquidity with orders, other than MPL Orders, in More Active
Securities if the More Active Security has a stock price of $1.00 or
more and the DMM meets the More Active Securities Quoting Requirement
and (1) has a DMM Quoted Size for an applicable month that is at least
25% of the NYSE Quoted Size, (2) for providing liquidity that is more
than 15% of the NYSE's total intraday adding liquidity in each such
security for that month, and (3) quotes at the NBBO in the applicable
security at least 50% of the time in the applicable month. DMMs
electing the optional Rebate per Security instead receive an Optional
Credit of $0.0034 per share if the quoting and providing requirements
are met.
The Exchange proposes that in a month where NYSE CADV is equal to
or greater than 5.5 billion shares, the DMM providing liquidity
requirement would instead be more than 7.5% of the NYSE's total
intraday adding liquidity in each such security for that month. The
other current requirements and credits would otherwise remain
unchanged.
NYSE CADV Cap for SLP Tape A Tiers
The Exchange currently offers tiered and non-tiered credits in Tape
A securities to SLPs that meet certain quoting obligations in assigned
securities based upon the total percent of NYSE CADV executed. For
purposes of calculating NYSE CADV as currently used in SLP Tiers 1, 1A,
2, 3, 4, the SLP Step Up Tier and the Incremental SLP Step Up Tier, the
Exchange proposes to establish a monthly maximum average cap of 5.5
billion shares per day for NYSE CADV in the billing month. To
effectuate this change, the Exchange would add a footnote ** after
``NYSE CADV'' where the term appears in each tier specifying that, in a
month where NYSE CADV equals or exceeds 5.5 billion shares per day for
the billing month, NYSE CADV for that month will be subject to a cap of
5.5 billion shares per day for the billing month. Because SLP Tiers 1,
1A, 2, 4, and the SLP Step Up Tier contain cross-tier incentives based
on adding liquidity as a percentage of Tape B and C CADV combined, the
proposed footnote would also reference the proposed cap for Tape B and
C securities combined discussed below applicable to CADV calculations
for SLP Tiers 1 and 2 in Tape B and C securities. The Exchange would
also add proposed footnote ** after ``Tape B and Tape C CADV'' in the
SLP Tape A tiers referenced above.
For example, assume in the billing month that an SLP has an average
daily adding volume of 5.5 million shares. Further assume that NYSE
CADV was 7.5 billion shares during that month. To calculate the SLP
adding ADV as a percent of NYSE CADV, the Exchange would use the NYSE
CADV cap of 5.5 billion shares, yielding an adding percent of NYSE CADV
of 0.10% rather than 0.07% if the Exchange had used 7.5 billion shares.
SLP CADV Caps for SLP Tiers in Tape B and C Securities
For Tape B and C securities, the Exchange currently offers several
levels
[[Page 20733]]
of credits for SLP orders that provide displayed and non-displayed
liquidity to the Exchange in Tape B and C securities priced at or above
$1.00 based on the volume of orders as a percentage of CADV that member
organizations send to the Exchange. The SLP Provide Tier credits (Non
Tier, Tier 2, Tier 1 and Tape A Tier) range from $0.00005 to $0.0033.
As described below, the Exchange proposes to cap the SLP provide
percentage CADV for Tape B, Tape C and for Tape B and C combined.
Under current SLP Tier 1, in order for SLPs to qualify for the
current $0.0031 per share credit per tape and the current $0.0033 per
share credit per tape in an assigned Tape B or C security, an SLP must,
among other things, add liquidity for all assigned Tape B securities of
a CADV of at least 0.10% for Tape B and a CADV of at least 0.075% for
Tape C. The requirements for the $0.0033 per share credit also provide
that an SLP add liquidity for all assigned securities of at least 0.25%
of Tape B and Tape C CADV combined. Under current SLP Provide Tier 2,
SLPs are eligible for a $0.0029 per share credit per tape in an
assigned Tape B or C security when adding displayed liquidity to the
Exchange if the SLP, among other things, adds liquidity for all
assigned Tape B and C securities in the aggregate of a CADV of at least
0.03% per tape.
The Exchange proposes to add footnote # specifying that the
calculation of the relevant SLP provide percentage tape CADV would be
subject to a maximum average for the billing month of 2.75 billion
shares per day for Tape B, 3.25 billion shares for Tape C, and 6.0
billion shares for Tape B and C combined. The proposed caps would apply
to all CADV calculations for SLP Tiers 1 and 2.
Fee Waivers for Trading Floor-Based Member Organizations
The Exchange charges certain equipment fees for the booth telephone
system on the Trading Floor and associated service charges.
Specifically, the Exchange charges an Annual Telephone Line Charge of
$400 per phone number and $129 for a single line phone, jack, and data
jack. The Exchange also assesses related service charges, as follows:
$161.25 to install single jack (voice or data); $107.50 to relocate a
jack; $53.75 to remove a jack; $107.50 to install voice or data line;
$53.75 to disconnect data line; $53.75 to change a phone line
subscriber; and miscellaneous telephone charges billed at $106 per hour
in 15 minute increments.\16\
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\16\ The Service Charges also include an Internet Equipment
Monthly Hosting Fee that the Exchange does not propose to waive for
April 2020.
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Because, as described above, the Trading Floor at 11 Wall Street is
temporarily closed, the Exchange proposes to waive these Trading Floor-
based fees for April 2020 for member organizations with at least one
trading license, a physical Trading Floor presence, and Floor broker
executions accounting for 40% or more of the member organization's
combined adding, taking, and auction volumes during March 1 to March
20, 2020. The Exchange also proposes to waive these fees for April 2020
for member organizations with at least one trading license that are
Designated Market Makers with 30 or fewer assigned securities for the
billing month of March 2020.
To effectuate this change, the Exchange proposes a new footnote 11
following ``Equipment Fee.'' \17\
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\17\ The Exchange proposes to delete current footnote 11, which
provides that the Annual Telephone Line Charge will be waived on a
prorated basis for Floor brokers for January, February and March
2013, as obsolete. There is no footnote 12 so the Exchange proposes
to renumber current footnotes 13 and 14.
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The proposed change is designed to reduce monthly costs for member
organizations with a Trading Floor presence that are unable to use the
services associated with the fees while the Trading Floor is
temporarily closed. The Exchange believes that this fee waiver would
ease the financial burden associated with the temporary Trading Floor
closure.
In order to further reduce costs for member organizations with a
Trading Floor presence, the Exchange also proposes to waive trading
license fees for April 2020. The Exchange currently offers tiered
trading license fees, as follows.
For all member organizations, including Floor brokers with more
than ten trading licenses but excluding Regulated Only Members as
defined in Rule 2(b)(ii), the trading license fee is $50,000 for the
first license held by the member organization unless one of the other
rates is deemed applicable. For member organizations with 3-9 trading
licenses, the Exchange charges $35,000 for the first license held by a
member organization that has Floor broker executions accounting for 40%
or more of the member organization's combined adding and taking volumes
during the billing month. For Floor brokers with 1-2 trading licenses,
the Exchange charges $25,000 for the first license held by a member
organization that has Floor broker executions accounting for 40% or
more of the member organization's combined adding and taking volumes
during the billing month. Regulated Only Members are charged an annual
administrative fee of $25,000.
The Exchange proposes to waive the April 2020 monthly portion of
all applicable annual fees for member organizations with at least one
trading license, a physical Trading Floor presence and Floor broker
executions accounting for 40% or more of the member organization's
combined adding, taking, and auction volumes during March 1 to March
20, 2020. The indicated annual trading license fees will also be waived
for April 2020 for member organizations with at least one trading
license that are DMMs with 30 or fewer assigned securities for the
billing month of March 2020.
To effectuate this change, the Exchange proposes to add text
describing the waiver to current footnote 15.
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,\18\ in general, and furthers the
objectives of Sections 6(b)(4) and (5) of the Act,\19\ 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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\18\ 15 U.S.C. 78f(b).
\19\ 15 U.S.C. 78f(b)(4) & (5).
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The Proposed Change Is Reasonable
As discussed above, beginning March 2020, markets worldwide have
experienced unprecedented declines and volatility because of the
ongoing spread of COVID-19 that has also resulted in the temporary
closure of the NYSE Trading Floor. As a result of this volatility, the
equity markets have experienced unprecedented trading volumes.
Moreover, as also discussed above, the Exchange operates in a highly
fragmented and competitive market. In view of these unprecedented
events, and the current competitive landscape where market participants
can and do move order flow, or discontinue or reduce use of certain
categories of
[[Page 20734]]
products, in response to fee changes, the Exchange believes that the
proposed rule change is reasonable.
Specifically, the Exchange believes that using the most recent
month where NYSE CADV is less than 5.5 billion shares to calculate the
Security CADV for DMM monthly rebates for the More Active Securities
Quoting Requirement and the Less Active Securities Quoting Requirement,
is reasonable because significantly fewer symbols would qualify as Less
Active Securities when NYSE CADV is equal to or exceeds 5.5 billion
shares.
Similarly, lowering the DMM providing requirements as a percent of
the NYSE's total intraday adding liquidity in a month where NYSE CADV
is equal to or greater than 5.5 billion shares in order for DMMs to
qualify for rebates when adding liquidity in More Active Securities is
reasonable because such extraordinarily high market volumes would make
is significantly harder for DMMs to meet the DMM providing
requirements.
Further, capping the Tape A monthly CADV at a maximum of 5.5
billion shares when calculating all Tape A SLP tiers and the Tape B
CADV, Tape C CADV and Tape B and C combined CADV when calculating all
Tape B and C SLP tiers is reasonable because such extraordinarily high
market volumes would make it significantly harder for SLPs, whose
adding volume is limited to proprietary adding liquidity, to meet the
adding requirements for the aforementioned SLP tiers.
Finally, the proposed waiver of equipment and related service fees
and the applicable monthly trading license fee for Trading Floor-based
member organizations is reasonable in light of the temporary closure of
the NYSE Trading Floor. The proposed change is designed to reduce costs
for Floor participants for the month of April 2020 that are unable to
conduct Floor operations while the Trading Floor remains temporarily
closed. The Exchange believes that this fee waiver would ease the
financial burden faced by member organizations that conduct business on
the Trading Floor and benefit all such member organizations.
The Proposal Is an Equitable Allocation of Fees
The Exchange believes the proposal equitably allocates its fees
among its market participants by fostering liquidity provision and
stability in the marketplace.
The Exchange believes that the proposed use of a lower threshold to
calculate Security CADV for DMM rebates and lowering the DMM providing
requirements as a percent of the NYSE's total intraday adding liquidity
in a month where NYSE CADV is equal to or greater than 5.5 billion
shares is an equitable allocation of fees because the proposed changes
would apply to all similarly situated member organizations that are
DMMs on the Exchange, and that all such member organizations would
continue to be subject to the same fee structure, and access to the
Exchange's market would continue to be offered on fair and
nondiscriminatory terms.
For the same reasons, the proposed caps for calculating all Tape A
SLP tiers and CADV for SLP credits for adding displayed and non-
displayed liquidity to the Exchange in Tape B and C securities also
constitute an equitable allocation of fees. The proposed caps for
calculating SLP CADV across all tapes would apply equally to all
similarly situated member organizations that are SLPs, all of whom
would continue to be subject to the same fee structure, and access to
the Exchange's market would continue to be offered on fair and
nondiscriminatory terms.
Finally, the proposed waiver of equipment and related service fees
and the applicable monthly trading license fee for Trading Floor-based
member organizations during April 2020 are also an equitable allocation
of fees. The proposed waivers apply to all Trading Floor-based firms
meeting specific requirements during the period that the Trading Floor
is temporarily closed. The proposed change is equitable as it is
designed to reduce monthly costs for Trading Floor-based member
organizations that are unable to conduct Floor operations.
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 is not unfairly discriminatory because it neither
targets nor will it have a disparate impact on any particular category
of market participant. The proposed use of a lower threshold to
calculate Security CADV for DMM rebates and lowering the DMM providing
requirements as a percent of the NYSE's total intraday adding liquidity
in a month where NYSE CADV is equal to or greater than 5.5 billion
shares does not permit unfair discrimination because the proposed
changes would apply to all similarly situated member organizations that
are DMMs, who would benefit from use of the lower volume threshold to
calculate Security CADV on an equal basis.
The proposed caps for calculating all Tape A SLP tiers and CADV for
SLP credits for adding displayed and non-displayed liquidity to the
Exchange in Tape B and C securities also does not permit unfair
discrimination because the proposed changes would apply to all
similarly situated member organizations that are SLPs, who would all
benefit from use of the lower volume threshold to calculate SLP adding
tier CADV across tapes on an equal basis.
The proposed waiver of equipment and related service fees and the
applicable monthly trading license fee for Trading Floor-based member
organizations during April 2020 is not unfairly discriminatory because
the proposed waivers would benefit all similarly-situated market
participants on an equal and non-discriminatory basis. The Exchange is
not proposing to waive the Floor-related fixed indefinitely, but rather
during the period that the Trading Floor is temporarily closed. The
proposed fee change is designed to ease the financial burden on Trading
Floor-based member organizations that cannot conduct Floor operations
while the Trading Floor remains closed.
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,\20\ 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 continued participation
of member organizations on the Exchange by providing certainty and fee
relief during the unprecedented volatility and market declines caused
by the continued spread of COVID-19. 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
[[Page 20735]]
individual stocks for all types of orders, large and small.'' \21\
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\20\ 15 U.S.C. 78f(b)(8).
\21\ Regulation NMS, 70 FR at 37498-99.
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Intramarket Competition. The Exchange believes that the use of a
lower threshold to calculate Security CADV for DMM rebates and lowering
the DMM providing requirements as a percent of the NYSE's total
intraday adding liquidity in a month where NYSE CADV is equal to or
greater than 5.5 billion shares, the proposed caps for calculating all
Tape A SLP tiers and CADV for SLP credits for adding displayed and non-
displayed liquidity to the Exchange in Tape B and C securities, and the
proposed waiver of equipment and related service fees and the
applicable monthly trading license fee for Trading Floor-based member
organizations during April 2020 are designed to provide a degree of
certainty to DMMs and SLPs adding liquidity to the Exchange during high
volatility and to ease the financial burden on Trading Floor-based
member organizations impacted by the temporary closing of the Trading
Floor. As noted, the proposal would apply to all similarly situated
member organizations on the same and equal terms, who would benefit
from the changes on the same basis. Accordingly, the proposed change
would not impose a disparate burden on competition among market
participants on the Exchange.
Intermarket Competition. The Exchange operates in a highly
competitive market in which market participants can readily choose to
send their orders to other exchange and off-exchange venues if they
deem fee levels at those other venues to be more favorable. As
previously noted, the Exchange's market share of trading in Tape A, B
and C securities combined is less than 13%. 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. The Exchange believes
that the proposed rule change reflects this competitive environment
because it modifies the Exchange's fees in a manner designed to provide
a degree of certainty and ease the financial burdens of the current
unsettled market environment, and permit affected member organizations
to continue to conduct market-making operations on the Exchange and
avoid unintended costs of doing business on the Exchange while the
Trading Floor is inoperative, which could make the Exchange a less
competitive venue on which to trade as compared to other options
exchanges.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change is effective upon filing pursuant to
Section 19(b)(3)(A) \22\ of the Act and subparagraph (f)(2) of Rule
19b-4 \23\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\22\ 15 U.S.C. 78s(b)(3)(A).
\23\ 17 CFR 240.19b-4(f)(2).
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At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \24\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\24\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-NYSE-2020-27 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSE-2020-27. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NYSE-2020-27 and should be submitted on
or before May 5, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\25\
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\25\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-07779 Filed 4-13-20; 8:45 am]
BILLING CODE 8011-01-P