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Federal Register / Vol. 86, No. 136 / Tuesday, July 20, 2021 / Notices A. Self-Regulatory Organizations Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
SECURITIES AND EXCHANGE
COMMISSION
Release No. 3492401; File No. SR
NYSENAT202114

1. Purpose
Self-Regulatory Organizations; NYSE
National, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Its Schedule of Fees and Rebates July 14, 2021.

Pursuant to Section 19b1 1 of the Securities Exchange Act of 1934 the Act,2 and Rule 19b4 thereunder,3
notice is hereby given that, on July 1, 2021, NYSE National, Inc. NYSE
National 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 selfregulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.
I. Self-Regulatory Organizations Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend its Schedule of Fees and Rebates Fee Schedule to modify the requirements to qualify for Adding Tier 2 and Removing Tier 1. The proposed rule change is available on the Exchanges website at www.nyse.com, at the principal office of the Exchange, and at the Commissions Public Reference Room.

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II. Self-Regulatory Organizations 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.

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The Exchange proposes to amend its Fee Schedule to modify the requirements to qualify for Adding Tier 2 and Removing Tier 1.
The proposed changes respond to the current competitive environment where order flow providers have a choice of where to direct liquidity-providing and liquidity-removing orders by offering further incentives for ETP Holders to send additional adding and removing liquidity to the Exchange.
The Exchange proposes to implement the rule change on July 1, 2021.
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. 4
As the Commission itself has recognized, the market for trading services in NMS stocks has become more fragmented and competitive. 5
Indeed, equity trading is currently dispersed across 16 exchanges,6 31
alternative trading systems,7 and numerous broker-dealer internalizers and wholesalers. Based on publiclyavailable information, no single exchange has more than 18% of the 4 See Securities Exchange Act Release No. 51808
June 9, 2005, 70 FR 37496, 37499 June 29, 2005
S71004 Final Rule Regulation NMS.
5 See Securities Exchange Act Release No. 51808, 84 FR 5202, 5253 February 20, 2019 File No. S7
0518 Transaction Fee Pilot for NMS Stocks Final Rule Transaction Fee Pilot.
6 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.
7 See FINRA ATS Transparency Data, available at https otctransparency.finra.org/otctransparency/
AtsIssueData. Although 54 alternative trading systems were registered with the Commission as of July 29, 2019, only 31 are currently trading. A list of alternative trading systems registered with the Commission is available at https www.sec.gov/
foia/docs/atslist.htm.

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market.8 Therefore, no exchange possesses significant pricing power in the execution of equity order flow. More specifically, the Exchanges share of executed volume of equity trades in Tapes A, B and C securities is less than 2%.9
The Exchange believes that the evershifting market share among the exchanges from month to month demonstrates that market participants can move order flow, or discontinue or reduce use of certain products, in response to fee changes. While it is not possible to know a firms reason for moving order flow, the Exchange believes that one such reason is because of fee changes at any of the registered exchanges or non-exchange trading venues to which a firm routes order flow. These fees can vary from month to month, and not all are publicly available. With respect to nonmarketable order flow that would provide liquidity on an exchange, ETP
Holders can choose from any one of the 16 currently operating registered exchanges to route such order flow.
Accordingly, competitive forces constrain the Exchanges transaction fees, and market participants can readily trade on competing venues if they deem pricing levels at those other venues to be more favorable.
The Exchange utilizes a takermaker or inverted fee model to attract orders that provide liquidity at the most competitive prices. Under the takermaker model, offering rebates for taking or removing liquidity increases the likelihood that market participants will send orders to the Exchange to trade with liquidity providers orders. This increased taker order flow provides an incentive for market participants to send orders that provide liquidity. The Exchange generally charges fees for order flow that provides liquidity. These fees are reasonable due to the additional marketable interest in part attracted by the Exchanges rebate to remove liquidity with which those order flow providers can trade.
Proposed Rule Change To respond to this competitive environment, the Exchange proposes the following changes to its Fee Schedule designed to provide order flow providers with additional incentives to route order flow to the Exchange. As described above, ETP Holders have a choice of where to send their order flow.
8 See Cboe Global Markets U.S. Equities Market Volume Summary, available at http
markets.cboe.com/us/equities/market_share/.
9 See id.

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