[Federal Register Volume 87, Number 64 (Monday, April 4, 2022)]
[Notices]
[Pages 19542-19549]
[FR Doc No: 2022-06980]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94543; File No. SR-NYSE-2022-16]

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

March 29, 2022.
    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 March 25, 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.
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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) align the
charges for market at-the-close (``MOC'') and limit at-the close
(``LOC'') orders on MOC/LOC Tiers 1, 2 and 3, revise the requirements
for MOC/LOC Tier 3, introduce incremental per share discounts on MOC
orders under MOC/LOC Tier 1, 2 and 3, and revise the rate for all other
orders swept into the close; (2) introduce new credits for removing
liquidity from the Exchange in Tape C securities; and (3) introduce new
Tier 1 Adding Credits in Tape C securities, revise the requirements for
Adding Tier 2 in Tape B and C securities, and introduce a new Adding
Tier in Tape C securities. The Exchange proposes to implement the rule
change on March 25, 2022.\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
January 27, 2022 (SR-NYSE-2022-06). On February 9, 2002, SR-NYSE-
2022-06 was withdrawn and replaced by SR-NYSE-2022-07. SR-NYSE-2022-
07 was subsequently withdrawn and replaced by this filing. On
February 17, 2022, MEMX LLC (``MEMX'') submitted a comment letter in
connection with SR-NYSE-2022-07. The Exchange responded to MEMX on
March 2, 2022. See Letter from David De Gregorio, Associate General
Counsel, NYSE, to Vanessa Countryman, Secretary, Securities and
Exchange Commission, dated March 2, 2022.
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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) align the
charges for MOC and LOC orders on MOC/LOC Tier 1, 2 and 3 revise the
requirements for MOC/LOC Tier 3, introduce incremental per share
discounts on MOC orders under MOC/LOC Tier 1, 2 and 3, and revise the
rate for all other orders swept into the close; (2) introduce new
credits for removing liquidity from the Exchange in Tape C securities;
and (3) introduce new Tier 1 Adding Credits in Tape C securities,
revise the requirements for Adding Tier 2 in Tape B and C securities,
and introduce a new Adding Tier in Tape C securities.
    The proposed changes responds to the current competitive
environment where order flow providers have a choice of where to direct
not only liquidity-providing and liquidity-removing orders but also MOC
orders in NYSE-listed securities by aligning incentives for member
organizations to send additional adding and removing liquidity to the
Exchange.
    The Exchange proposes to implement the rule change on March 25,
2022.
Current Market and 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. Specifically, in Regulation NMS, the
Commission highlighted the importance of market forces in determining
prices and SRO revenues and, also, recognized that current regulation
of the market system ``has been remarkably successful in promoting
market competition in its broader forms that are most important to
investors and listed companies.'' \5\
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    \5\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005) (S7-10-04) (Final Rule)
(``Regulation NMS'').
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    As the Commission itself has recognized, the market for trading
services in NMS stocks has become ``more fragmented and competitive.''
\6\ Indeed, equity trading is currently dispersed across 16
exchanges,\7\ 31 alternative trading systems,\8\ and numerous broker-
dealer internalizers and wholesalers. Based on publicly-available
information, no single exchange has more than 20% of the market.\9\
Therefore, no exchange possesses significant pricing power in the
execution of 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%.\10\
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    \6\ See Securities Exchange Act Release No. 51808, 84FR 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/.
    \10\ See id.
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    In addition, in light of this crowded competitive landscape for
order flow, including at the close, the Exchange does not have a
monopoly over where MOC orders in NYSE-listed securities are executed.
Indeed, competition with respect to MOC Orders in NYSE-listed
securities is fierce, not only because of the availability of the Cboe
Exchange, Inc. (``Cboe'') Market Close, but also, and more relevant,
because of the internalization of MOC order flow by some of the largest
broker-dealers.\11\ In the currently highly competitive national market
system, numerous exchanges and other order execution venues compete for
order flow intraday as well as at the close, and competition for
closing orders is robust. For example, in 2021, 25.2% of volume at the
NYSE closing price in NYSE-listed

securities was executed off-exchange. During January and February 2022,
the percentage increased to 26.5% and was as high as 38% on a single
day.\12\
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    \11\ In addition, there are at least seven broker-dealer
sponsored products competing for volume at the close, including
Credit Suisse's CLOSEX; Instinet's Market-on-Close Cross; Morgan
Stanley's Market-on-Close Aggregator (MOCHA); Bank of America's
Instinct X[supreg] and Global Conditional Cross; JP Morgan's JPB-X;
Piper Sandler's On-Close Match Book; and Goldman Sachs' One Delta
Close Facility (ODCF).
    \12\ See note 15, infra.
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    The Exchange believes that the ever-shifting market share among
trading venues 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. While it is
not possible to know a firm's reason for shifting order flow, the
Exchange believes that one such reason is because of fee changes at any
of the registered exchanges or non-exchange venues to which the firm
routes order flow. These fees vary month to month, and not all are
publicly available. With respect to non-marketable order flow that
would provide liquidity on an exchange, member organizations can choose
from any one of the 16 currently operating registered exchanges to
route such order flow. With respect to MOC Order flow, member
organizations can choose among multiple options of where to execute
such orders. Accordingly, competitive forces constrain the Exchange's
transaction fees, and market participants can readily trade on
competing venues if they deem pricing levels at those other venues to
be more favorable.
    In response to this competitive environment, the Exchange has
established incentives for member organizations who submit orders that
provide liquidity on the Exchange. The Exchange has also established
incentives for member organizations to remove liquidity from the
Exchange. As detailed below, the proposed higher fees and credits are
intended to align incentives for trading both on the close and
intraday, which the Exchange believes will increase the quality of
order execution on the Exchange's market, which benefits all market
participants.
Proposed Rule Change
    The Exchange proposes changes to credits and fees for certain
executions at the close as well as for adding and removing liquidity in
Tape C securities in order to attract liquidity to the Exchange. The
Exchange believes that the proposed changes, taken together, will
incentivize submission of additional liquidity in Tape A, B and Tape C
securities to a public exchange, thereby promoting price discovery and
transparency and enhancing order execution opportunities for member
organizations.
Align MOC and LOC Orders in MOC/LOC Tiers 1, 2 and 3
    The Exchange currently charges different fees for MOC and LOC
orders in MOC/LOC Tiers 1, 2 and 3. The Exchange proposes to align the
fees for MOC and LOC orders by raising the rates for MOC orders to
parity with the rates for LOC orders, as follows.
    Currently, for MOC/LOC Tier 1, the Exchange charges $0.0004 per
share for MOC orders and $0.0007 per share for LOC orders from any
member organization in the prior three billing months executing (1) an
average daily trading volume (``ADV'') of MOC activity on the NYSE of
at least 0.45% of NYSE consolidated ADV (``CADV''),\13\ (2) an ADV of
total close activity (MOC/LOC and executions at the close) on the NYSE
of at least 0.7% of NYSE CADV, and (3) whose MOC activity comprised at
least 35% of the member organization's total close activity (MOC/LOC
and other executions at the close). The Exchange proposed to charge
$0.0007 per share for MOC orders meeting the requirements of MOC/LOC
Tier 1. The requirements of MOC/LOC Tier 1 would remain the same.
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    \13\ ADV and CADV are defined in footnote * of the Price List.
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    For MOC/LOC Tier 2, the Exchange currently charges $0.0005 per
share for MOC orders and $0.0008 per share for LOC orders from any
member organization in the prior three billing months executing (1) an
ADV of MOC activity on the NYSE of at least 0.35% of NYSE CADV, (2) an
ADV of total close activity (MOC/LOC and other executions at the close)
on the NYSE of at least 0.525% of NYSE CADV, and (3) whose MOC activity
comprised at least 35% of the member organization's total close
activity (MOC/LOC and other executions at the close). The Exchange
proposes to charge $0.0008 per share for MOC orders meeting the
requirements of MOC/LOC Tier 2. The tier requirements would remain
unchanged.
    For MOC/LOC Tier 3, the Exchange currently charges $0.0008 per
share for MOC orders and $0.0009 per share for LOC orders from any
member organization executing in the current billing month (1) an ADV
of MOC activity on the NYSE of at least 0.25% of NYSE (Tape A) CADV,
(2) an ADV of the member organization's total close activity (MOC/LOC
and other executions at the close) on the NYSE of at least 0.35% of
NYSE (Tape A) CADV, and (3) whose MOC activity comprised at least 35%
of the member organization's total close activity (MOC/LOC and other
executions at the close). The Exchange proposes to charge $0.0009 per
share for MOC orders meeting the revised requirements for MOC/LOC Tier
3. Specifically, member organization executing in the current billing
month would need (1) an ADV of MOC activity on the NYSE of at least
0.20% of NYSE (Tape A) CADV and (2) an ADV of the member organization's
total close activity (MOC/LOC and other executions at the close) on the
NYSE of at least 0.30% of NYSE (Tape A) CADV. The third requirement for
MOC/LOC Tier 3, that member organizations MOC activity comprise at
least 35% of the member organization's total close activity (MOC/LOC
and other executions at the close), would remain unchanged.
    MOC/LOC Tier 1 and 2 pricing on the Exchange has remained unchanged
since 2018.\14\ The MOC/LOC Tier 3 rate has also remained unchanged
since its adoption in 2018.\15\ The revised tiered rates in 2018 were
designed in part to address a competitive landscape that included the
availability of the Cboe Market Close and greater broker-dealer
internalization of order flow. However, the 2018 fee changes did not
have a material impact on the competitive landscape with respect to
internalized MOC order flow, which has continued to grow steadily.\16\
The proposed change to the rate for Tier 1 and 2 MOC orders would
revert to the rates to those in effect prior to the 2018 MOC/LOC Tier
fee changes.\17\ However, as described below, the Exchange will provide
member organizations an opportunity to qualify for incremental per
share discounts that would allow a member organization to qualify for
MOC/LOC Tier pricing that would be in line with the current tier
pricing for MOC Orders. But even without the discounts described below,
the proposed rates for MOC orders under Tier 1 and Tier 2, would be
lower than or equal to the best applicable rate on other primary
listing exchanges.\18\
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    \14\ See Securities Exchange Act Release No. 82563 (January 22,
2018), 83 FR 3799 (January 26, 2018) (SR-NYSE-2018-03).
    \15\ See Securities Exchange Act Release No. 82706 (February 13,
2018), 83 FR 7282 (February 20, 2018) (SR-NYSE-2018-08).
    \16\ In 2018, the percentage of volume at the NYSE closing price
in NYSE-listed securities executed off-exchange was 21.3%. In 2019,
the percentage increased to 23.5%. After dipping briefly to 22.1% in
2020, the percentage resumed its upward trend and increased to 25.2%
in 2021. During January and February 2022, the percentage increased
to 26.5% and was as high as 38% on a single day.
    \17\ See Securities Exchange Act Release No. 78233 (July 6,
2016), 81 FR 45190 (July 12, 2016) (SR-NYSE-2016-47) (setting the
MOC/LOC Tier 1 fee to $0.0007 per share and the MOC/LOC Tier 2 fee
to $0.0008).
    \18\ For example, the best applicable fee on the NASDAQ Stock
Market, LLC (``NASDAQ'') is $0.0016 per executed share, with the
lowest possible rate available on Nasdaq of $0.0008 per executed
share, which is available only if a firm adds liquidity in all Tapes
above 1.75.% of Consolidated Volume or MOC/LOC volume above 0.50% of
Consolidated Volume. See NASDAQ Price List, available at https://www.nasdaqtrader.com/Trader.aspx?id=PriceListTrading2. The highest
rate for LOC orders in Tier 3 would also be lower than the NASDAQ
fee. The closing auction fee on Cboe BZX for listed securities is
$0.00100. See Cboe BZX Fee Schedule, available at https://www.cboe.com/us/equities/membership/fee_schedule/bzx/. The Exchange
notes that the NASDAQ requirements for MOC/LOC volume is a
percentage of all Tapes CADV, whereas the NYSE requirement is all
close (MOC/LOC and other orders at the close) as a percentage of
just Tape A CADV.

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Incremental Per Share Discounts on MOC Orders
    As a way of offsetting the proposed higher fees for tiered MOC
orders, the Exchange proposes incremental discounts per share on MOC
orders for member organizations that meet the requirements of the MOC/
LOC Tiers 1-3 in the billing month. These proposed discounts are
designed to align incentives among both trading on the close and
intraday trading on the Exchange.
    As proposed, member organizations that have an Adding ADV \19\ in
Tapes A, B and C Securities as a percentage of Tapes A, B and C CADV,
excluding any liquidity added by a Designated Market Maker (``DMM''),
that is at least 0.50%, would be eligible for an incremental discount
per share of $0.0001. Alternatively, a member organization has an
Adding ADV in Tapes A, B and C Securities as a percentage of Tapes A, B
and C CADV, excluding any liquidity added by a DMM, that is at least
1.00% would instead be eligible for a $0.0002 incremental discount per
share. Finally, member organizations with an ADV of at least 250,000
shares entered and executed by its affiliated Floor broker would also
be eligible for an incremental per share discount of $0.0001. This last
discount would be in addition to either of the first two discounts. For
purposes of the proposed discount, an affiliated Floor broker eligible
for the discount would be a Floor broker under 75% common ownership or
control of the member organization.\20\
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    \19\ Footnote 2 to the Price List defines ADV as ``average daily
volume'' and ``Adding ADV'' as ADV that adds liquidity to the
Exchange during the billing month.
    \20\ The Price List defines ``affiliate'' as any member
organization under 75% common ownership or control of that member
organization. See Price List, General, Section I (Billing Disputes).
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    For example, assume Member Organization A in the billing month has
an ADV of at least:
     0.45% of Adding as a percentage of Tape A, B and C CADV;
     0.20% of MOC as a percentage of Tape A CADV;
     0.30% of total close as a percentage of Tape A CADV; and
     35% of MOC as a percentage of that member organization's
total close ADV.
    Based on the foregoing, under the proposed change, Member
Organization A would qualify for per share fees for MOC and LOC orders
of $0.0009 under MOC/LOC Tier 3. Without the proposed change, Member
Organization A would not qualify under the current higher requirements
of 0.25% of MOC and 0.35% of total close as a percentage of Tape A
CADV, and would be charged the non-tier rate of $0.0010 per share.
Accordingly, the proposed change could result in a fee reduction for
member organizations that would currently only be eligible for the
higher non-tier rate.
    Assume instead that Member Organization A had an Adding ADV of
0.55% of Tape A, B, and C CADV. In that case, Member Organization A
would qualify for a MOC per share discount of $0.0001 and a combined
MOC order fee of $0.0008. If Member Organization A had a trading Floor
ADV of at least 250,000 shares, including adding, removing, open and
close ADV, executed by that member organization's affiliated Floor
broker, Member Organization A would then qualify for an additional
$0.0001 per share discount, for a combined MOC order fee of $0.0007.
    Assume Member Organization A had an Adding ADV of at least 1.00%
rather than 0.55%. In that case, Member Organization A would qualify
for a $0.0002 per share discount, instead of $0.0001 as in the previous
example, for combined discount of $0.0003 and a combined MOC order fee
of $0.0006 (including the additional $0.0001 per share Floor broker
discount), which would be lower than the current MOC/LOC Tier 3 rate of
$0.0008 per share. Member Organization A's fee for LOC orders would
remain at the MOC/LOC Tier 3 fee of $0.0009.
    As the example shows, the discounts provide for several ways for
member organizations to lower their effective MOC fee to levels that
are comparable and even below the current rates for MOC orders on MOC/
LOC Tier 3 and equal to the current MOC/LOC Tier 1 and 2 today. In
addition, because the discounts are structured such that they are
available based on higher adding volumes or sending orders to
affiliated Floor brokers, the discounts also enhance liquidity
provision on the Exchange and/or support the maintenance and potential
expansion of a trading Floor presence by member organizations. The
Exchange believes that expanding the trading Floor presence by member
organizations would benefit investors by increasing the amount of order
flow to and execution opportunities on a public exchange, thereby
encouraging greater participation and liquidity. Moreover, it should be
noted that member organizations have alternative ways to participate in
lower MOC rates at the closing auction. MOC orders executed by a Floor
broker are eligible for a $0.0005 standard rate unless a lower tiered
fee applies. Member organizations also have the option of utilizing D
Orders last modified (as defined in the Price List) earlier than 25
minutes before the scheduled close of trading, which would give the
member organization a $0.0003 rate, which is lower than the lowest
proposed MOC/LOC Tier 1 rate. D Orders entered and last modified from
25 minutes up to 3 minutes before the scheduled close are also charged
a $0.0007 fee, which is in line with MOC/LOC Tier 1 and lower than the
other two MOC/LOC Tiers. The Exchange notes that these discounts also
provide member organizations with flexibility to qualify for discounts,
either through Adding ADV or through their affiliated Floor broker. In
addition, the first 750,000 ADV of D Orders are free. Finally, member
organizations can also get free execution at the Close using closing
offset orders.
    Since the proposed incremental discounts are new, the Exchange does
not know how many member organizations could qualify for the new
discounts based on their current trading profile and if they choose to
direct order flow to the Exchange. Based on the profile of liquidity-
adding firms generally, the Exchange believes that additional member
organizations could qualify for the discounts if they choose to direct
order flow to the Exchange. However, without having a view of member
organization's activity on other exchanges and off-exchange venues, the
Exchange has no way of knowing whether this proposed rule change would
result in any member organization directing orders to the Exchange in
order to qualify for the discounts.
Orders at the Close
    Currently, the Exchange does not charge member organizations for
the first 750,000 ADV of the aggregate of executions at the close for
d-Quote, Floor broker executions swept into the close, excluding verbal
interest, and executions at the close, excluding MOC orders, LOC orders
and CO orders. As set forth in the Price List, the Exchange charges
certain fees differentiated by

time of entry (or last modification) for D Orders at the close after
the first 750,000 ADV of the aggregate of executions at the close by a
member organization. All other orders from continuous trading swept
into the close are charged $0.0007. The Exchange proposes to charge all
other orders from continuous trading swept into the close $0.0008,
which is in line with the applicable fee on other marketplaces.\21\
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    \21\ For example, the NASDAQ's Continuous Book fee is $0.00085.
See NASDAQ Price List, available at https://www.nasdaqtrader.com/Trader.aspx?id=PriceListTrading2.
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Credits for Removing Liquidity in Tape C Securities
    For Tape B and C securities, the Exchange currently offers a Remove
Tier for securities at or above $1.00 for member organizations that
have a minimum amount of Adding ADV. The Exchange also charges a lower
remove fee of $0.00285 in Tapes B and C for member organization with an
Adding ADV, excluding liquidity added by a DMM, that is at least
250,000 ADV on the NYSE in Tape A.
    The Exchange proposes two new credits for member organizations
removing liquidity in Tape C securities. First, the Exchange proposes a
$0.0026 per share fee for removing in Tape C securities if the member
organizations achieves a 0.25% Adding Tape C percentage of Tape C CADV.
Second, the Exchange proposes a $0.0027 per share fee for removing in
Tape C securities if the member organization achieves a 0.10% Adding
Tape C percentage of Tape C CADV.
    Since the proposed credits are new, the Exchange does not know how
many member organizations could qualify for the new credits based on
their current trading profile and if they choose to direct order flow
to the Exchange. Based on the profile of liquidity-adding firms
generally, the Exchange believes that additional member organizations
could qualify for the tier if they choose to direct order flow to the
Exchange. However, without having a view of member organization's
activity on other exchanges and off-exchange venues, the Exchange has
no way of knowing whether this proposed rule change would result in any
member organization directing orders to the Exchange in order to
qualify for either of the new credits.

Tiered Adding Credits in Tape B and C Securities

    The current Tier 1 Adding Credit in Tape B and C Securities offers
a credit of $0.0026 per share on a per tape basis for transactions in
stocks with a per share price of $1.00 or more when adding liquidity to
the Exchange if the member organization has at least 0.10% of Adding
CADV in Tape B or C on a per tape basis. For purposes of qualifying for
this tier, the 0.10% of Adding CADV could include shares of both an
SLP-Prop and an SLMM of the same or an affiliated member
organization.\22\ The Exchange proposes that member organizations
meeting the adding liquidity requirements for Tier 1, which would
remain unchanged, would be eligible for a $0.0029 per share credit
instead for Tape C securities. Member organizations meeting the adding
liquidity requirements for Tier 1 would continue to be eligible for the
existing $0.0026 per share credit for Tape B securities.
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    \22\ Under Rule 107B, a SLP can be either a proprietary trading
unit of a member organization (``SLP-Prop'') or a registered market
maker at the Exchange (``SLMM''). For purposes of the 10% average or
more quoting requirement in assigned securities pursuant to Rule
107B, quotes of an SLP-Prop and an SLMM of the same member
organization are not aggregated. However, for purposes of adding
liquidity for assigned SLP securities in the aggregate, shares of
both an SLP-Prop and an SLMM of the same member organization are
included.
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    Similarly, the current Tier 2 Adding Credit offers a per tape
credit of $0.0023 per share for transactions in stocks with a per share
price of $1.00 or more when adding liquidity to the Exchange if the
member organization has at least 0.03% of Adding CADV in Tape B or C on
a per tape basis. For purposes of qualifying for this tier, the 0.03%
of Adding CADV could include shares of both an SLP-Prop and an SLMM of
the same or an affiliated member organization. The Exchange proposes to
require at least 0.05% of Adding CADV in Tape B or C in order to
qualify for this credit. The current credit would remain unchanged.
    Finally, the Exchange proposes a new Tape C Adding Tier credit that
would offer a per tape credit of $0.0031 per share for transactions in
stocks with a per share price of $1.00 or more when adding liquidity to
the Exchange if the member organization has at least 0.25% of Adding
CADV in Tape C securities. The Exchange believes that the proposed Tape
C Adding Tier would further contribute to incenting member
organizations to provide additional amounts of liquidity on the
Exchange. As noted above, the Exchange operates in a competitive
environment, particularly as it relates to attracting non-marketable
orders, which add liquidity to the Exchange. The Exchange does not know
how much order flow in Tape C securities that member organizations
choose to route to other exchanges or to off-exchange venues. Because
the proposed Tape C Adding Tier would be new, the Exchange does not
know how many member organizations could qualify for the new credit
based on their current trading profile and if they choose to direct
order flow to the Exchange. Based on the profile of liquidity-adding
firms generally, the Exchange believes that additional member
organizations could qualify for the tier if they choose to direct order
flow to the Exchange. However, without having a view of member
organization's activity on other exchanges and off-exchange venues, the
Exchange has no way of knowing whether this proposed rule change would
result in any member organization directing orders to the Exchange.\23\
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    \23\ The Exchange proposes the non-substantive change of
relocating the phrase ``(including shares of both an SLP-Prop and an
SLMM of the same or an affiliated member organization)'' without
change from Tier 1 and Tier 2 to the first column of the chart
following ``Per-Tape Requirement (Non-SLP and Floor broker Adding %
Tape CADV)'' in order to avoid duplication. Further, the Exchange
proposes the non-substantive change of deleting ``per share on a per
Tape basis'' in Tier 1 and ``per share'' in Tier 2 and adding ``per
share'' following ``Display Adding Rate'' in the first column to
similarly to similarly avoid duplication.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\24\ in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\25\ 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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    \24\ 15 U.S.C. 78f(b).
    \25\ 15 U.S.C. 78f(b)(4) & (5).
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The Proposed Change Is Reasonable
    In light of the competitive environment in which the Exchange
currently operates, the proposed rule change is a reasonable attempt to
increase liquidity on the Exchange and improve the Exchange's market
share relative to its competitors. The Exchange believes the proposed
change is also reasonable because it is designed to attract higher
volumes of orders transacted on the Exchange by member organizations by
aligning incentives for trading both on the close and intraday, which
would benefit all market participants by offering greater price
discovery and an increased opportunity to trade on the Exchange, both
intraday and during the closing auction.

Orders at the Close
    The Exchange believes that the proposed fee change for certain
executions at the close are reasonable. The Exchange's closing auction
is a recognized industry benchmark,\26\ 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.
---------------------------------------------------------------------------

    \26\ For example, the pricing and valuation of certain indices,
funds, and derivative products require primary market prints.
---------------------------------------------------------------------------

    The Exchange believes that the proposed increased fees and
incentives for fee discounts for MOC orders are a reasonable way to
encourage greater liquidity and achieving the proposed discounts. MOC
orders are always marketable and therefore have a higher likelihood of
execution at the close which have value. MOC orders also contribute
meaningfully to the price and size discovery, which is the hallmark of
the closing auction process. Higher volumes of MOC orders contribute to
the quality of the Exchange's closing auction and provide market
participants whose orders are swept into the close with a greater
opportunity for execution. Further, as noted above, in the currently
highly competitive national market system, competition for closing
orders among exchanges, ATSs and other market execution venues is
robust.
    In addition, the Exchange believes that lowering the required ADV
of MOC activity on the NYSE as a percentage of Tape A CADV and total
close activity (MOC/LOC and other executions at the close) on the NYSE
as a percentage of Tape A CADV in order to qualify for MOC/LOC Tier 3
is reasonable because, coupled with the increased fee, the Exchange
believes the change would encourage greater participation which leads
to greater marketable and other liquidity at the closing auction. As
noted, higher volumes of MOC orders contribute to the quality of the
Exchange's closing auction and provide market participants whose orders
are executed at the close with a greater opportunity for execution,
which benefits all participants As noted above, the rate for MOC orders
has remained unchanged since 2018, and the proposed change to the rate
for Tier 1 and 2 MOC orders would revert to the rates to those in
effect prior to the changes made in 2018 to lower the MOC/LOC Tier 1
and 2 rates. Moreover, even without the proposed incremental discounts,
the proposed rates for MOC orders, including the highest proposed rate,
would be lower than or in line with the applicable rate on other
marketplaces.\27\ The Exchanges offers other ways for member
organizations to achieve lower fees in the close, including MOC orders
through their Floor broker or D Orders last modified earlier than 25
minutes before the scheduled close of trading.
---------------------------------------------------------------------------

    \27\ See note 17, supra.
---------------------------------------------------------------------------

    Further, the Exchange believes that offering proposed incremental
per share discounts on MOC orders is a reasonable way to lower a member
organization's effective fee for MOC orders. The proposed discounts
based on increased Adding ADV in Tapes A, B and C Securities as a
percentage of Tapes A, B and C CADV and/or through entry by an
affiliated Floor broker is also a reasonable way to encourage
submission of additional liquidity to a public exchange and the
submission of additional marketable liquidity to the Exchange's closing
auction. Member organizations can also achieve discounts by using their
affiliated Floor broker to achieve the ADV requirement, which combined
with the above discount gives member organizations flexibility in
achieve lower fees for MOC orders. As noted, members and member
organizations benefit from the substantial amounts of liquidity that
are present on the Exchange during such time.
    The Exchange notes that other marketplaces provide discounts based
on intraday adding volume, and that aligning incentives for lower
pricing at the close with additional intraday volume is thus neither
novel nor an unreasonable stance in a competitive marketplace. For
example, NASDAQ offers six MOC/LOC tiers with fees ranging from $0.0008
to $0.00145 and a non-tier rate of $0.0016 based on adding volume or
MOC/LOC volume per MPID as a percentage of Tapes A, B and C. The
proposed requirements to achieve the proposed discounts are lower than
NASDAQ's current requirements and, as noted, even without the
discounts, the proposed rates are lower than or in line with NASDAQ's
discounted rates.\28\ Similarly, on NYSE Arca, Inc. (``NYSE Arca''),
ETP Holders that qualify for Tier 1, Tier 2, or Tier 3 Adding Tiers,
which are based on intraday adding volume, are also eligible for
discounted rates for Closing orders.\29\ In the prevailing competitive
marketplace, there is nothing unreasonable in raising base rates and
offering incentives to members who support the venue. Similarly, in
this competitive marketplace, there is nothing unreasonable in
establishing incentives for one type of activity on the Exchange that
considers other facets of Exchange participation. For example, under
the ``Liquidity Removal Tier'' offered by MEMX, qualifying members that
post orders on its venue are charged a discounted fee for taking
liquidity (including when accessing MEMX's protected quote).\30\
Finally, the Exchange believes that increasing the fee for all other
orders from continuous trading swept into the close is also reasonable
because it remains in line or better when compared with other
exchanges.\31\
---------------------------------------------------------------------------

    \28\ See note 17, supra.
    \29\ See NYSE Arca Equities Fees and Charges, available at
https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf.
    \30\ See MEMX Fee Schedule, available at https://info.memxtrading.com/fee-schedule/.
    \31\ For example, the NASDAQ's Continuous Book fee is $0.00085.
See NASDAQ Price List, available at https://www.nasdaqtrader.com/Trader.aspx?id=PriceListTrading2.
---------------------------------------------------------------------------

Tape C Incentives
    The Exchange believes that the proposed incentives relating to
adding and removing liquidity in Tape C securities are a reasonable way
to incentivize member organizations to add and remove liquidity on a
public exchange.
    Specifically, the proposal to introduce new credits for member
organizations removing liquidity in Tape C securities of $0.0026 and
$0.0027 would incentivize member organizations to remove additional
liquidity from the Exchange, thereby increasing the number of orders
adding liquidity that are executed on the Exchange to achieve the tier
requirements which improves overall liquidity on a public exchange and
resulting in lower costs for member organizations that qualify for the
rate. Without having a view of a member organization's activity on
other markets and off-exchange venues, the Exchange believes the
proposed credits would provide an incentive for member organizations to
remove additional liquidity from the Exchange in Tape C securities. The
Exchange notes that the proposed fees are in line with or better than
the applicable rate on other marketplaces.\32\
---------------------------------------------------------------------------

    \32\ See note 17, supra.
---------------------------------------------------------------------------

    The proposed changes to the Tier 1 and Tier 2 Adding Credits in
Tape B and C Securities and the introduction of a Tier 3 Adding Credit
in Tape C securities are also reasonable. The proposed $0.0029 per
share credit for Tape C securities for member organizations meeting the
adding liquidity requirements of Tier 1 and requiring a higher Adding
CADV in Tape B or C in order to qualify for the Tape 2 Adding Credit
are reasonable because the changes would further

contribute to incenting member organizations to provide additional
amounts of liquidity on the Exchange in Tape C securities, and all
member organizations would benefit from such increased levels of
liquidity.
    Finally, the proposed new Tape C Tier Adding credit of $0.0031 per
share when adding liquidity to the Exchange if the member organization
has at least 0.25% of Adding CADV in Tape C securities is reasonable
because it would also further contribute to incenting member
organizations to provide additional amounts of liquidity on the
Exchange. As noted above, the Exchange operates in a competitive
environment, particularly as it relates to attracting non-marketable
orders, which add liquidity to the Exchange. The Exchange does not know
how much order flow member organizations choose to route to other
exchanges or to off-exchange venues. The Exchange believes that the
higher adding requirement to qualify for adding credits in Tape C
securities would provide greater incentives for member organizations to
add more liquidity to the Exchange. The Exchange does not know how much
order flow member organizations choose to route to other exchanges or
to off-exchange venues. Based on the profile of liquidity-adding firms
generally, the Exchange believes that additional member organizations
could qualify for the proposed tiered credit if they choose to direct
order flow to the Exchange. However, without having a view of member
organizations' activity on other exchanges and off-exchange venues, the
Exchange has no way of knowing whether this proposed rule change would
result in any additional member organizations directing orders to the
Exchange in order to qualify for the proposed Tape C Tier.
The Proposal Is an Equitable Allocation of Fees
    The Exchange believes the proposal equitably allocates fees and
credits among market participants because all member organizations that
participate on the Exchange may qualify for the proposed credits and
fees on an equal basis. The Exchange believes its proposal equitably
allocates its fees and credits among its market participants by
fostering liquidity provision and stability in the marketplace.
Orders at the Close
    The Exchange believes that the proposed fees for MOC orders and
associated discounts are an equitable allocation of fees because the
proposed changes, taken together, will incentivize member organizations
to send additional adding liquidity to achieve lower fees and encourage
greater marketable and other liquidity at the closing auction. Higher
volumes of MOC orders contribute to the quality of the Exchange's
closing auction and provide market participants whose orders are swept
into the close with a greater opportunity for execution of orders on
the Exchange, thereby promoting price discovery and transparency and
enhancing order execution opportunities and improving overall liquidity
on a public exchange. The Exchange also believes that the proposed
change is equitable because it would apply to all similarly situated
member organizations that utilize MOC orders on the Exchange. The
proposed change also is equitable because the proposed fees, including
the highest proposed fee, would be lower than or in line with the
applicable rate on other marketplaces.\33\
---------------------------------------------------------------------------

    \33\ See note 17, supra.
---------------------------------------------------------------------------

    The Exchange believes that the proposed incremental per share
discounts on MOC orders are equitable because the discounts would be
available on an equal basis to all similarly situated member
organizations that utilize MOC orders on the Exchange. In this regard,
the proposed discounts are equitable because any member organization
can choose to increase their adding ADV volume in order to qualify for
the proposed discounts and any member organization can choose to have
an affiliated Floor broker in order to qualify for the additional
proposed discount. Moreover, as noted above, alternative ways to
achieve lower MOC fees are also available to all similarly situated
member organizations that utilize MOC orders on the Exchange on an
equal basis.
Tape C Incentives
    The Tape C incentives for removing and adding liquidity equitably
allocate fees and credits among the Exchange's market participants
because all member organizations that participate on the Exchange may
receive the proposed credits for removing liquidity in Tape C
securities and the proposed credits for adding liquidity in if they
elect to send their orders to the Exchange and meet the corresponding
requirements, including the enhanced requirement for the Tier 2 Adding
Credit, in order to qualify for the credits. Without having a view of
member organization's activity on other markets and off-exchange
venues, the Exchange has no way of knowing whether this proposed rule
change would result in any member organizations sending more of their
orders to the Exchange. The Exchange cannot predict with certainty how
many member organizations would avail themselves of this opportunity,
but additional orders would benefit all market participants because it
would provide greater execution opportunities on the Exchange.
    The Exchange also believes that the proposed change is equitable
because it would apply to all similarly situated member organizations
that remove and add liquidity in Tape C securities. The proposal
neither targets nor will it have a disparate impact on any particular
category of market participant. Specifically, the Exchange believes
that the proposal constitutes an equitable allocation of fees because
all similarly situated member organizations would be eligible for the
same credits if they meet the corresponding requirements for the fee or
credit. As to those member organizations that do not presently qualify
for the adding liquidity credit, the proposal will not adversely impact
their existing pricing or their ability to qualify for other credits
provided by the Exchange. The proposed change also is equitable because
it would be consistent with the applicable rate on other marketplaces.
For example, the Cboe BZX fee for removing is $0.0030 and the
requirement to achieve a credit for removing of $0.0031 is an adding
ADV of 1.00% of CADV or 100 million shares ADV.\34\
---------------------------------------------------------------------------

    \34\ See Cboe BZX Fee Schedule, available at https://www.cboe.com/us/equities/membership/fee_schedule/bzx/.
---------------------------------------------------------------------------

    As previously noted, the Exchange operates in a competitive
environment, particularly as it relates to attracting non-marketable
orders, which add liquidity to the Exchange. The Exchange does not know
how much order flow member organizations choose to route to other
exchanges or to off-exchange venues. Because the proposed Tape C
incentive involves the introduction of new credits and/or new
requirements, the Exchange does not know how many member organizations
could qualify for the new remove and add fees based on their current
trading profile and if they choose to direct order flow to the
Exchange. However, without having a view of member organization's
activity on other exchanges and off-exchange venues, the Exchange has
no way of knowing whether this proposed rule change would result in any
member organization directing orders to the Exchange.

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.
Orders at the Close
    The proposed increased fees for MOC orders and associated discounts
are not unfairly discriminatory because the proposed fees would be
applied to all similarly situated member organizations and other market
participants, who would all be subject to the same fees, requirements
and discounts on an equal basis. For the same reason, the proposal
neither targets nor will it have a disparate impact on any particular
category of market participant. Accordingly, no member organization
already operating on the Exchange would be disadvantaged by this
allocation of fees. Further, the Exchange believes the proposal would
incentivize member organizations to send more orders to the Exchange to
qualify for higher credits. Finally, the submission of orders to the
Exchange is optional for member organizations in that they could choose
whether to submit orders to the Exchange and, if they do, the extent of
its activity in this regard.
    Further, the Exchange believes that the proposed incremental per
share discounts on MOC orders is not unfairly discriminatory because
the discounts would be available on an equal basis to all similarly
situated member organizations. As noted above, additional ways to
achieve lower MOC fees are also available to all similarly situated
member organizations that utilize MOC orders on the Exchange on an
equal basis.
Tape C Incentives
    The Exchange believes it is not unfairly discriminatory to provide
additional credits and fees for adding liquidity to the Exchange in
Tape C securities because the credits and fees would be provided on an
equal basis to all member organizations that add liquidity by meeting
the new proposed adding tier requirements. 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 Exchange believes it is not unfairly discriminatory to
provide additional credits and revised requirements to encourage
liquidity in Tape C securities as the proposed credits and requirements
would be provided on an equal basis to all member organizations.
Further, the Exchange believes the proposed credits would incentivize
member organizations that meet the new requirements to send more orders
to the Exchange. Since the proposed credits would be new, no member
organization currently qualifies for them. As noted, without a view of
member organization activity on other exchanges and off-exchange
venues, the Exchange has no way of knowing whether this proposed rule
change would result in any member organization qualifying for the tier.
The Exchange believes the proposed credits provide a reasonable
incentive for member organizations to direct their order flow to the
Exchange and provide meaningful added levels of liquidity in order to
qualify for the credits, thereby contributing to depth and market
quality on the Exchange.
    In addition, the Exchange believes that the proposal is not
unfairly discriminatory because it neither targets nor will it have a
disparate impact on any particular category of market participant. All
member organizations that provide liquidity could be eligible to
qualify for the proposed credits in Tape C securities if they meet the
proposed requirements. The Exchange believes that offering credits for
providing liquidity will continue to attract order flow and liquidity
to the Exchange, thereby providing additional price improvement
opportunities on the Exchange and benefiting investors generally. As to
those market participants that do not presently qualify for the adding
liquidity credits, the proposal will not adversely impact their ability
to qualify for other credits provided by the Exchange. Finally, as
noted, the submission of orders is optional for member organizations in
that they could choose whether to submit orders to the Exchange and, if
they do, they can choose the extent of their activity in this regard.
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,\35\ 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 proposal 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 organization. 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.'' \36\
---------------------------------------------------------------------------

    \35\ 15 U.S.C. 78f(b)(8).
    \36\ Regulation NMS, 70 FR at 37498-99.
---------------------------------------------------------------------------

    Intramarket Competition. The proposed change is designed to attract
additional order flow to the Exchange. As described above, the Exchange
believes that the proposed change would provide additional incentives
for market participants to route liquidity-removing and liquidity-
providing orders 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. Greater overall order flow, trading
opportunities, and pricing transparency benefit all market participants
on the Exchange by enhancing market quality and continuing to encourage
member organizations to send orders, thereby contributing towards a
robust and well-balanced market ecosystem. The current and proposed
credits would be available to all similarly-situated market
participants, and, as such, the proposed change would not impose a
disparate burden on competition among market participants on the
Exchange.
    Intermarket Competition. The Exchange operates in a highly
competitive market in which market participants can readily choose to
send their orders to other exchanges and off-exchange venues if they
deem fee levels at those other venues to be more favorable. As noted
above, the Exchange currently has less than 12% market share of
executed volume of equities trading. In such an environment, the
Exchange must continually adjust its fees and rebates to remain
competitive with other exchanges and 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.
    Finally, as previously noted, the Exchange operates in a highly
competitive market for MOC Orders 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 non-exchange trading venues that are not subject to
the same transparency or statutory standards applicable to exchanges
relating to setting fees. Because competitors are free to modify their
own fees and credits in response, some without the requirement of
making a filing with the Commission, and because market participants
may readily adjust their order routing practices, the Exchange believes
that any degree to which fee changes in this market may impose any
burden on competition would be extremely limited.
    The Exchange believes that the proposed change could promote
competition between the Exchange and other execution venues, including
those that currently offer similar order types and comparable
transaction pricing, by encouraging additional orders to be sent to the
Exchange for execution.

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) \37\ of the Act and subparagraph (f)(2) of Rule
19b-4 \38\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
---------------------------------------------------------------------------

    \37\ 15 U.S.C. 78s(b)(3)(A).
    \38\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    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) \39\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \39\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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 [email protected]. Please include
File Number SR-NYSE-2022-16 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-2022-16. 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-2022-16 and should be submitted on
or before April 25, 2022.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\40\
---------------------------------------------------------------------------

    \40\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-06980 Filed 4-1-22; 8:45 am]
BILLING CODE 8011-01-P