U.S. Markets

NYSE Chicago lowers fees, eliminates rebates

NEW YORK (Reuters) - New York Stock Exchange affiliate NYSE Chicago has lowered its transaction fees and eliminated rebate payments following the exchange’s transition to a new technology platform, according to a regulatory filing.

The move puts NYSE Chicago’s pricing structure more in line with that of a contentious plan by the U.S. Securities and Exchange Commission called the transaction fee pilot. The NYSE is suing the regulator to prevent that from taking place.

NYSE Chicago, one of five NYSE-branded stock exchanges owned by Intercontinental Exchange Inc ICE.N, said in a Nov. 12 regulatory filing it would begin charging 10 cents per 100 shares for transactions on the exchange.

That is down from 30 cents per 100 shares for orders that are immediately executed, and it eliminates a rebate payment from the exchange of 20 cents per 100 shares for orders that rest on the exchange for others to trade against.

The SEC’s transaction fee pilot, recommended by an SEC-appointed committee of market experts and also by the U.S. Treasury in a 2017 report, would test lowering transaction fees to 10 cents per 100 shares. It would also ban rebates for some stocks to help the SEC better understand how the incentives affect brokers’ behavior.

In February, NYSE, Nasdaq Inc NDAQ.O, and Cboe Global Markets CBOE.Z, which run 12 of the 13 U.S. stock exchanges currently operating, filed lawsuits against the SEC over the plan, calling it an exercise in government price-setting that would harm competition.

Rebates help attract liquidity, while also compensating market makers for taking the risk of providing two-sided bid and ask prices for others to trade against, the exchanges said.

Without the incentives, which collectively added up to around $2.5 billion last year, bid-ask spreads will widen out, making it more costly to trade, they added.

Trade groups representing institutional investors managing tens of trillions of dollars worth of assets have supported the SEC plan, saying rebates can give brokers an incentive to send customer orders to the exchanges that pay the most, even if those customer orders might get better results elsewhere.

The exchanges are now required to collect data on how brokers route orders to them, but the pilot program is otherwise on hold until the lawsuits have been resolved.

Reporting by John McCrank; Editing by David Gregorio