[Federal Register Volume 79, Number 29 (Wednesday, February 12, 2014)]
[Notices]
[Pages 8524-8527]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-03008]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71503; File No. SR-NYSEArca-2014-13]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending the NYSE 
Arca Equities Schedule of Fees and Charges for Exchange Services To Add 
a New Pricing Tier Applicable to Orders That Add Liquidity on the 
Exchange

February 6, 2014.
    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 January 28, 2014, NYSE Arca, Inc. (the ``Exchange'' or 
``NYSE Arca'') 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 the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend the NYSE Arca Equities Schedule of 
Fees and Charges for Exchange Services (``Fee Schedule'') to add a new 
pricing tier applicable to orders that add liquidity on the Exchange. 
The Exchange proposes to implement the fee change on February 1, 2014. 
The text of the proposed rule change is available on the Exchange's Web 
site 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend the Fee Schedule to add a new 
pricing tier applicable to orders that add liquidity on the Exchange. 
The Exchange proposes to implement the fee change effective February 1, 
2014.
    The Exchange proposes to add a new ``Step Up Tier 3'' applicable to 
an ETP Holder, including a Market Maker, that on a daily basis, 
measured monthly, directly executes providing volume (``Adding ADV'') 
during the billing month that is both (i) at least 0.20% of U.S. 
consolidated average daily volume (``U.S. CADV'') for the billing month 
and (ii) at least 0.125% taken as a percentage of U.S. CADV for the 
billing month over the ETP Holder's December 2013 Adding ADV taken as a 
percentage of U.S. CADV in December 2013 (``Baseline % CADV'').\4\ For 
example, if U.S. CADV during the billing month is 7 billion shares, an 
ETP Holder's Adding ADV during the billing month would first need to be 
at least 14 million shares (i.e., at least 0.20% of U.S. CADV for the 
billing month). If U.S. CADV in December 2013 was 6 billion shares and 
an ETP Holder's December 2013 Adding ADV was 6 million shares, the ETP 
Holder's Baseline % CADV would be 0.10% (i.e., the ETP Holder's 
December 2013 Adding ADV taken as a percentage

[[Page 8525]]

of U.S. CADV in December 2013). The ETP Holder's Adding ADV during the 
billing month would therefore need to be at least 0.225% of U.S. CADV 
for the billing month (i.e., Baseline % CADV of 0.10% plus at least 
0.125%), which would equate to at least 15.75 million shares of Adding 
ADV and would therefore be a ``step up'' of 9.75 million shares.
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    \4\ U.S. CADV means United States Consolidated Average Daily 
Volume for transactions reported to the Consolidated Tape, excluding 
odd lots through January 31, 2014 (except for purposes of Lead 
Market Maker pricing), and excludes volume on days when the market 
closes early. Transactions that are not reported to the Consolidated 
Tape are not included in U.S. CADV. An ETP Holder with zero Adding 
ADV in December 2013 (e.g., a firm that became an ETP Holder after 
December 2013) would be treated as having Baseline % CADV of zero 
for purposes of the proposed Step Up Tier 3.
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    A qualifying ETP Holder would receive a credit of $0.0004 per share 
for (i) Adding ADV in Tape A securities during the billing month taken 
as a percentage of U.S. CADV in Tape A securities in the billing month 
in excess of the Baseline % CADV in Tape A securities and (ii) Adding 
ADV in Tape C securities during the billing month taken as a percentage 
of U.S. CADV in Tape C securities in the billing month in excess of the 
Baseline % CADV in Tape C securities.\5\ Continuing with the example 
above, if the ETP Holder's Adding ADV during the billing month was the 
minimum of 15.75 million shares identified above, and if 8 million 
shares consisted of Tape A securities, and further if 3.2 billion of 
the 7 billion shares of overall U.S. CADV during the billing month were 
in Tape A securities, then the ETP Holder's Adding ADV in Tape A 
securities taken as a percentage of U.S. CADV in Tape A securities 
during the billing month would be 0.25% (i.e., 8 million divided by 3.2 
billion). Also, assume that in December 2013 4.5 million shares of the 
ETP Holder's Baseline % CADV consisted of Tape A securities and that 3 
billion of the 6 billion shares of overall U.S. CADV in December 2013 
were in Tape A securities. The ETP Holder's Baseline % CADV in Tape A 
securities would be 0.15% (i.e., 4.5 million divided by 3 billion). The 
excess in the billing month over December 2013 would be 0.10% (i.e., 
0.25% minus 0.15%). 0.10% of U.S. CADV in Tape A securities for the 
billing month would be 3.2 million shares (i.e., 0.01 multiplied by 3.2 
billion shares U.S. CADV in Tape A securities). Therefore, an average 
daily credit of $1,280 would apply under proposed Step Up Tier 3 for 
the ETP Holder's Tape A securities during the billing month (i.e., 
$0.0004 multiplied by 3.2 million), which would be a monthly credit of 
$26,880 (with 21 trading days in the month). The same analysis would be 
performed with respect to the ETP Holder's Tape C securities.
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    \5\ Orders that provide liquidity in Tape B securities would 
count toward the ETP Holder's qualification for the proposed Step Up 
Tier 3, but such orders would not be eligible for a credit under the 
proposed Step Up Tier 3. The Exchange's Fee Schedule currently 
already includes a ``Tape B Step Up Tier'' that provides for a 
similar credit of $0.0004 per share only for orders in Tape B 
securities that provide liquidity.
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    The credits provided under the proposed Step Up Tier 3 would be in 
addition to the ETP Holder's Tiered or Basic Rate credit(s); provided, 
however, that such combined credit would not be permitted to exceed 
$0.0034 per share. For example, an ETP Holder that qualifies for 
Investor Tier 3 receives a credit of $0.0032 under Investor Tier 3.\6\ 
If this same ETP Holder also qualifies for the proposed Step Up Tier 3, 
its orders (i) in Tape A securities that are eligible for the Step Up 
Tier 3 credit would receive an additional credit of $0.0002 (i.e., 
$0.0032 under Investor Tier 3 plus a remaining $0.0002 under proposed 
Step Up Tier 3), and (ii) in Tape C securities that are eligible for 
the Step Up Tier 3 credit would receive an additional credit of $0.0002 
(i.e., $0.0032 under Investor Tier 3 plus a remaining $0.0002 under 
proposed Step Up Tier 3).
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    \6\ Investor Tier 3 requires that an ETP Holder (1) provide 
liquidity of 0.60% or more of the U.S. CADV per month, (2) maintain 
a ratio of cancelled orders to total orders less than 30%, excluding 
Immediate-or-Cancel orders, and (3) maintain a ratio of executed 
liquidity adding volume-to-total volume of greater than 50%.
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    Lead Market Makers (``LMMs'') on the Exchange could not qualify for 
the proposed new Step Up Tier 3, nor would LMM provide volume apply to 
the applicable volume requirements proposed for the new Step Up Tier 
3.\7\ Retail Order Tier and Retail Order Cross-Asset Tier ETP Holders 
and Market Makers also could not qualify for the proposed new Step Up 
Tier 3, nor would Retail Order provide volume apply to the applicable 
volume requirements.\8\
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    \7\ The Exchange's Fee Schedule currently already includes 
separate pricing applicable only to LMMs.
    \8\ The Retail Order Tier and Retail Order Cross Asset Tier 
currently already provide for credits applicable only to Retail 
Orders.
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    Finally, for ETP Holders that qualify for the proposed new Step Up 
Tier 3, Tiered or Basic Rates would apply to all other fees and 
credits, based on a firm's qualifying levels, and if an ETP Holder 
qualifies for more than one tier in the Fee Schedule, the Exchange 
would apply the most favorable rate available under such tiers.
    The proposed change is not otherwise intended to address any other 
issues, and the Exchange is not aware of any problems that ETP Holders 
would have in complying with the proposed change.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\9\ in general, and furthers the 
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\10\ 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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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed change is reasonable 
because the proposed Step Up Tier 3 credit would encourage ETP Holders 
to send additional orders to the Exchange across all Tapes for 
execution in order to qualify for an incrementally higher credit for 
such executions in Tape A and Tape C securities that add liquidity on 
the Exchange. In this regard, the Exchange believes that this may 
incentivize ETP Holders to increase the orders sent directly to the 
Exchange and therefore provide liquidity that supports the quality of 
price discovery and promotes market transparency. The Exchange believes 
that the rate proposed for the Step Up Tier 3 credit is reasonable 
because it is directly related to an ETP Holder's level of executions 
in Tape A and Tape C Securities during the month. This rate is also 
within the range of other credits available to ETP Holders that execute 
providing volume during a billing month that is greater than during a 
particular ``baseline'' month.\11\
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    \11\ See, e.g., the ``Tape B Step Up Tier,'' for which a 
corresponding credit of $0.0004 applies.
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    The Exchange believes that the proposed Step Up Tier 3 credit is 
also equitable and not unfairly discriminatory because it would 
incentivize ETP Holders to submit orders in securities across all Tapes 
to the Exchange and would result in a credit that is reasonably related 
to an exchange's market quality that is associated with higher volumes. 
Moreover, like existing pricing on the Exchange that is tied to ETP 
Holder volume levels, the Exchange believes that the proposed Step Up 
Tier 3 credit is equitable and not unfairly discriminatory because it 
would be available for all ETP Holders, including Market Makers, on an 
equal and non-discriminatory basis. The Exchange also believes that it 
is equitable and not unfairly discriminatory that orders that provide 
liquidity in Tape B securities would not be eligible for a credit under 
the proposed Step Up Tier 3 because the Exchange's Fee Schedule 
currently already includes a ``Tape B Step Up Tier'' that provides for 
a similar credit

[[Page 8526]]

of $0.0004 per share only for orders in Tape B securities that provide 
liquidity.
    The Exchange also believes that it is equitable and not unfairly 
discriminatory that the proposed $0.0004 credit under the Step Up Tier 
3 would not be permitted to exceed $0.0034 per share when combined with 
other credits available to ETP Holders under other tiers specified in 
the Fee Schedule because the ETP Holders that qualify for these 
specified tiers would already receive a higher credit for such 
executions.
    Similarly, the Exchange believes that it is equitable and not 
unfairly discriminatory to prohibit LMMs on the Exchange from 
qualifying for the proposed new Step Up Tier 3 and to exclude LMM 
provide volume from applying to the applicable volume requirements 
proposed for the new Step Up Tier 3. This is because, like ETP Holders 
that qualify for other tiers in the Fee Schedule that provide for 
incrementally higher credits, LMMs are already eligible for increased 
credits that range from $0.0035 per share to $0.0045 per share for 
executions of transactions that add liquidity to the Exchange.
    The Exchange also believes that it is equitable and not unfairly 
discriminatory to prohibit Retail Order Tier and Retail Order Cross-
Asset Tier ETP Holders from qualifying for the proposed new Step Up 
Tier 3 and to exclude Retail Orders from applying to the applicable 
volume requirements proposed for the new Step Up Tier 3. This is 
because Retail Orders, and the ETP Holders that submit them, are 
already eligible for increased credits that range from $0.0033 to 
$0.0034 per share for executions of transactions that add liquidity to 
the Exchange.
    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 these 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,\12\ 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, the Exchange believes that the proposed 
change will encourage competition, including by attracting additional 
liquidity to the Exchange, which will make the Exchange a more 
competitive venue for, among other things, order execution and price 
discovery. In general, ETP Holders impacted by the proposed change may 
readily adjust their trading behavior to maintain or increase their 
credits or decrease their fees in a favorable manner, and will 
therefore not be disadvantaged in their ability to compete. More 
specifically, an ETP Holder could qualify for the proposed new Step Up 
Tier 3 by providing sufficient adding liquidity to satisfy the 
applicable proposed volume requirements. The Exchange also notes that 
the proposed Step Up Tier 3 would be similar to existing pricing tiers 
and applicable credits on the Exchange.\13\
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    \12\ 15 U.S.C. 78f(b)(8).
    \13\ See supra note 11.
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    Also, the Exchange does not believe that the proposed change will 
impair the ability of ETP Holders or competing order execution venues 
to maintain their competitive standing in the financial markets. In 
this regard, the Exchange notes that existing pricing tiers of other 
exchanges similarly provide for credits for market participants that 
provide certain levels of liquidity on those exchanges.\14\
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    \14\ See, e.g., the ``Investor Support Program'' under NASDAQ 
Stock Market, LLC (``NASDAQ'') Rule 7014.
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    Finally, the Exchange notes that it operates in a highly 
competitive market 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 
with alternative trading systems that have been exempted from 
compliance with the statutory standards applicable to exchanges. 
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 believes that the degree to which 
fee changes in this market may impose any burden on competition is 
extremely limited. As a result of all of these considerations, the 
Exchange does not believe that the proposed changes will impair the 
ability of member organizations or competing order execution venues to 
maintain their competitive standing in the financial markets.

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) \15\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \16\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 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)\17\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \17\ 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 [email protected]. Please include 
File Number SR-NYSEArca-2014-13 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEArca-2014-13. 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

[[Page 8527]]

the Commission's Internet Web site (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 Web site viewing and printing in 
the Commission's Public Reference Room on official business days 
between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing 
also will be available for inspection and copying at the principal 
offices of NYSE. All comments received will be posted without change; 
the Commission does not edit personal identifying information from 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-
NYSEArca-2014-13, and should be submitted on or before March 5, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-03008 Filed 2-11-14; 8:45 am]
BILLING CODE 8011-01-P