2022-22730. Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Its Price List

October 14, 2022.

Pursuant to FR 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 September 30, 2022, 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.

I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

The Exchange proposes to amend it Price List to increase the cap for the maximum average number of shares per day for the billing month in calculating the average monthly consolidated average daily volume (“CADV”) for purposes of Step Up Adding Tier 3. The Exchange proposes to implement the fee changes effective October 3, 2022. 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 it Price List to increase the cap for the maximum average number of shares per day for the billing month in calculating the average monthly CADV for purposes of Step Up Adding Tier 3.

The proposed change would bring the current CADV cap in line with the tier's June 2020 baseline month CADV, which is above 13.0 billion shares. Increasing the CADV cap in line with higher volume for the baseline month CADV would continue to provide a degree of certainty to member organizations adding liquidity to the Exchange.

The Exchange proposes to implement the fee changes effective October 3, 2022.

Competitive Environment

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.” ^[4]

While Regulation NMS has enhanced competition, it has also fostered a “fragmented” market structure where trading in a single stock can occur across multiple trading centers. When multiple trading centers compete for order flow in the same stock, the Commission has recognized that “such competition can lead to the fragmentation of order flow in that stock.” ^[5] Indeed, cash equity trading is currently dispersed across 16 exchanges,^[6] numerous alternative trading systems,^[7] and broker-dealer internalizers and wholesalers, all competing for order flow. Based on publicly-available information, no single exchange currently has more than 20% market share.^[8] Therefore, no exchange possesses significant pricing power in the execution of cash equity order flow. More specifically, the Exchange's share of executed volume of equity trades in Tapes A, B and C securities is less than 12%.^[9]

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. With respect to non-marketable order flow that would provide displayed liquidity on an Exchange, member organizations can choose from any one of the 16 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 adjustment of the cap to 13.0 billion shares would bring the current CADV cap in line with the tier's June 2020 baseline month CADV, which is above 13.0 billion shares.^[10] Increasing the CADV cap in line with higher volume for the baseline month CADV would continue to provide a degree of certainty to member organizations adding liquidity to the Exchange.

Proposed Rule Change

Under the current Step Up Adding Tier 3, the Exchange provides an incremental $0.0006 credit in Tapes A, B and C securities for all orders from a qualifying member organization market participant identifier (“MPID”) or mnemonic that sets the NBBO ^[11] or a new BBO ^[12] if the MPID or mnemonic:

• has adding ADV in Tapes A, B and C Securities as a percentage of Tapes A, B and C CADV,^[13] excluding any liquidity added by a DMM, that is at least 50% more than the MPID's or mnemonic's Adding ADV in Tapes A, B and C securities in June 2020 as a percentage of Tapes A, B and C CADV, and

• is affiliated with a Supplemental Liquidity Provider (“SLP”) that has an Adding ADV in Tape A securities at least 0.10% of NYSE CADV, and
• has Adding ADV in Tape A securities as a percentage of NYSE CADV, excluding any liquidity added by a DMM, that is at least 0.20%.

The credit is in addition to the MPID's or mnemonic's current credit for adding liquidity and also does not count toward the combined limit on SLP credits of $0.0032 per share provided for in the Incremental Credit per Share for affiliated SLPs whereby SLPs can qualify for incremental credits of $0.0001, $0.0002 or $0.0003.

For purposes of calculating Tapes A, B and C CADV for Step Up Adding Tier 3, the Exchange established a monthly maximum average cap of 11.5 billion shares per day for Tapes A, B and C CADV in the billing month for MPIDs or mnemonics of qualifying member organizations that are SLPs.^[14] The Exchange proposes to increase this cap to 13.0 billion shares.

For example, assume in the billing month that a member organization that is an SLP has an average daily adding volume of 11.5 million shares. Further assume that Tapes A, B and C CADV was 14.0 billion shares during that month. To calculate the adding ADV as a percent of Tapes A, B and C CADV, the Exchange would use the CADV cap of 13.0 billion shares, yielding an adding percent of Tapes A, B and C CADV of 0.088% rather than 0.10% if the Exchange had used 11.5 billion shares.

The Exchange does not propose to change the requirements to qualify for or the credits associated with Step Up Adding Tier 3 or the associated credits.

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 FR 6(b) of the Act,^[15] in general, and furthers the objectives of FRs 6(b)(4) and (5) of the Act,^[16] 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, is designed to prevent fraudulent and manipulative acts and practices and to promote just and equitable principles of trade, and does not unfairly discriminate between customers, issuers, brokers or dealers.

The Proposed Fee Change Is Reasonable

As discussed above, the Exchange operates in a highly fragmented and competitive market. As also noted above, Step Up Adding Tier 3's June 2020 baseline month CADV is above 13.0 billion shares. In view of these facts, 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, the Exchange believes that the proposed rule change is reasonable. Specifically, the Exchange believes that capping the monthly Tape A, B and C CADV at a maximum of 13.0 billion shares for Step Up Adding Tier 3 for MPIDs or mnemonics of qualifying member organizations that are SLPs is reasonable the proposed change would bring the cap into line with the baseline month CADV. Without the proposed cap on CADV, higher market volumes reflected in the increased baseline month CADV would make it significantly harder for member organizations that are SLPs, whose adding volume is limited to proprietary adding liquidity, to meet the adding requirements for the tier. The Exchanges notes that the other CADV share volumes cap levels, which are not being changed, are the same levels as the current CADV caps for SLP tiers in the fee schedule.

The Proposed Change Is an Equitable Allocation of Fees and Credits

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 13.0 billion cap for calculating CADV for Step Up Adding Tier 3 credits in a month where Tape A, B and C CADV is equal to or greater than 13.0 billion share constitutes an equitable allocation of fees because the proposed change would apply 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.

The Proposed Fee Change 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 cap for calculating monthly combined CADV for Step Up Adding Tier 3 credits for adding liquidity to the Exchange 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 the relevant adding tier CADV across tapes on an equal basis.

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 FR 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, 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.” ^[18]

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 current 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. As noted, the proposal would apply to all similarly situated member organizations on the same and equal terms, who would benefit from the proposed change 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. 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.

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 FR 19(b)(3)(A) ^[19] of the Act and subparagraph (f)(2) of Rule 19b-4 ^[20] thereunder, because it establishes a due, fee, or other charge imposed by the Exchange.

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 FR 19(b)(2)(B) ^[21] of the Act to determine whether the proposed rule change should be approved or disapproved.

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 [e-mail]. Please include File Number SR-NYSE-2022-46 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-2022-46. 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-2022-46 and should be submitted on or before November 10, 2022.

For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.^[22]

J. Matthew DeLesDernier,

Deputy Secretary.

Footnotes

1.  15 U.S.C. 78s(b)(1).

2.  15 U.S.C. 78a.

3.  17 CFR 240.19b-4.

4.   See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005) (File No. S7-10-04) (Final Rule) (“Regulation NMS”).

5.   See Securities Exchange Act Release No. 61358, 75 FR 3594, 3597 (January 21, 2010) (File No. S7-02-10) (Concept Release on Equity Market Structure).

6.   See Cboe U.S Equities Market Volume Summary, available at https://markets.cboe.com/​us/​equities/​market_​share. See generallyhttps://www.sec.gov/​fast-answers/​divisionsmarketregmrexchangesshtml.html.

7.   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.

8.   See Cboe Global Markets U.S. Equities Market Volume Summary, available at http://markets.cboe.com/​us/​equities/​market_​share/​.

9.   See id.

10.   See Cboe U.S Equities Market Volume Summary, available at https://markets.cboe.com/​us/​equities/​market_​share.

11.   See Rule 1.1(q) (defining “NBBO” to mean the national best bid or offer).

12.   See Rule 1.1(c) (defining “BBO” to mean the best bid or offer on the Exchange).

13.  The terms “ADV” and “CADV” are defined in footnote * of the Price List.

14.  Similarly, for purposes of calculating NYSE CADV as currently used in Step Up Adding Tier 3, the Exchange also has a monthly maximum average cap of 5.5 billion shares per day for NYSE CADV in the billing month for MPIDs or mnemonics of qualifying member organizations that are SLPs.

15.  15 U.S.C. 78f(b).

16.  15 U.S.C. 78f(b)(4) and (5).

17.  15 U.S.C. 78f(b)(8).

18.  Regulation NMS, 70 FR at 37498-99.

19.  15 U.S.C. 78s(b)(3)(A).

20.  17 CFR 240.19b-4(f)(2).

21.  15 U.S.C. 78s(b)(2)(B).

22.  17 CFR 200.30-3(a)(12).