[Federal Register Volume 79, Number 174 (Tuesday, September 9, 2014)]
[Notices]
[Pages 53492-53494]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-21357]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72963; File No. SR-NYSEArca-2014-99]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Extend the 
Operation of the NYSE Arca ETP Incentive Program, Currently Scheduled 
To Expire on September 3, 2014, for an Additional Year

September 3, 2014.
    Pursuant to Section 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 August 28, 2014, NYSE Arca, Inc. (``Exchange'' or ``NYSE 
Arca'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the Exchange. 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 extend the operation of the NYSE Arca ETP 
Incentive Program, currently scheduled to expire on September 3, 2014, 
for an additional year. 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to extend the operation of the NYSE Arca ETP 
Incentive Program (``Incentive Program''),\4\ a one-year pilot program 
for issuers of certain exchange-traded products (``ETPs'') listed on 
the Exchange, for an additional year. The Incentive Program is 
currently scheduled to expire on September 3, 2014. As proposed, the 
pilot program would be set to end on September 4, 2015.
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    \4\ See Rule 8.800 and Securities Exchange Act Release No. 34-
69706 (June 6, 2013), 78 FR 35340 (June 12, 2013) (SR-NYSEArca-2013-
34) (order establishing the Incentive Program).
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    NYSE Arca established the Incentive Program to enhance the market 
quality for ETPs by incentivizing Market Makers \5\ to take Lead Market 
Maker (``LMM'') assignments in certain lower volume ETPs by offering an 
alternative fee structure for such LMMs. The Incentive Program is 
designed to improve the quality of market for lower-volume ETPs, 
thereby incentivizing them to list on the Exchange. Moreover, the 
Exchange believes that the Incentive Program, which is entirely 
voluntary, encourages competition among markets for issuers' listings 
and among Market Makers for LMM assignments.
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    \5\ A Market Maker is an Equity Trading Permit Holder (``ETP 
Holder'') that acts as a Market Maker pursuant to NYSE Arca Equities 
Rule 7. See NYSE Arca Equities Rule 1.1(v). An ETP Holder is a sole 
proprietorship, partnership, corporation, limited liability company, 
or other organization in good standing that has been issued an 
Equity Trading Permit. See NYSE Arca Equities Rule 1.1(n).
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    This filing seeks to extend the current operation of the Incentive 
Program for an additional year to allow the Commission, the Exchange, 
LMMs, and issuers to further assess the impact of the Incentive Program 
before making it available to other securities and implementing the 
program on a permanent basis.\6\ During the initial one-year pilot 
period, because no ETP issuers signed up for the Incentive Program, the 
Exchange does not have any data to assess the impact of the Incentive 
Program on ETP market quality or whether any provisions of the 
Incentive Program should be modified.\7\

[[Page 53493]]

The Exchange believes that extending the pilot period for an additional 
year will provide additional time for issuers to participate in the 
Incentive Program so that the Commission, the Exchange, LMMs, and 
issuers may assess the impact of the Incentive Program before making it 
available to other securities or implementing it on a permanent 
basis.\8\
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    \6\ The Exchange notes that any proposed further continuance of 
the Incentive Program or proposal to make the Inventive Program 
permanent would require a rule filing with the Commission pursuant 
to Section 19(b) of the Act and Rule 19b-4 thereunder.
    \7\ See Securities Exchange Act Release No. 34-69706 (June 6, 
2013), 78 FR 35340 (June 12, 2013) (SR-NYSEArca-2013-34) (order 
approving Rule 8.800 and specifying the requirement for the Exchange 
to assess the impact of the Incentive Program).
    \8\ The Exchange notes that if the Incentive Program in its 
current form continues to go unused, the Exchange will not seek an 
additional extension of the pilot period.
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    This filing is not otherwise intended to address any other issues 
and does not propose any substantive changes to the Incentive Program. 
The Exchange is not aware of any problems that ETP Holders or issuers 
would have in complying with the proposed extension.
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)(5) of the Act,\10\ in particular, because 
it is designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities, to remove impediments to, and perfect the 
mechanisms of, a free and open market and a national market system. The 
Exchange believes that the proposed rule change would remove 
impediments to and perfect the mechanism of a free and open market and 
national market system because it provides a venue to enhance quote 
competition, improve liquidity, support the quality of price discovery, 
promote market transparency, and increase competition for listings and 
trade executions while reducing spreads and transaction costs. 
Moreover, requesting an extension of the Incentive Plan will permit 
additional time for the Commission, the Exchange, LMMs, and issuers to 
assess the impact of the Incentive Program before making it available 
to other securities. 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.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act,\11\ 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. The Exchange believes that extending the operation 
of the Incentive Program will enhance competition among liquidity 
providers and thereby improve execution quality on the Exchange. The 
Exchange will continue to monitor the efficacy of the program during 
the proposed extended pilot period.
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    \11\ 15 U.S.C. 78f(b)(8).
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    Finally, the Exchange notes that it operates in a highly 
competitive market in which issuers and market participants can readily 
favor competing venues. In such an environment, the Exchange must 
continually review and consider adjusting the services it offers and 
the requirements it imposes in order to remain competitive with other 
U.S. equity exchanges. Moreover, the competition for listings among the 
exchanges is fierce. The Exchange notes that BATS Exchange, Inc. 
(``BATS'') has already implemented a program similar to the Exchange's 
proposed Incentive Program,\12\ and NASDAQ has received approval to do 
so as well.\13\
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    \12\ See Interpretation and Policy .02 of BATS Rule 11.8. See 
also Securities Exchange Act Release Nos. 66307 (February 2, 2012), 
77 FR 6608 (February 8, 2012) (SR-BATS-2011-051) and 66427 (February 
21, 2012), 77 FR 11608 (February 27, 2012) (SR-BATS-2012-011).
    \13\ See Securities Exchange Act Release No. 69195 (March 20, 
2013), 78 FR 18393 (March 26, 2013) (SR-NASDAQ-2012-137).
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    For the reasons described above, the Exchange believes that the 
proposed rule change reflects this competitive environment.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, if consistent with 
the protection of investors and the public interest, the proposed rule 
change has become effective pursuant to Section 19(b)(3)(A) of the Act 
\14\ and Rule 19b-4(f)(6) thereunder.\15\
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days after the date of filing. However, 
Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter 
time if such action is consistent with the protection of investors and 
the public interest. The Exchange requests that the Commission waive 
the 30-day operative delay to allow the Incentive Program to continue 
without interruption after September 3, 2014, and therefore be 
available should an issuer be interested in participating during 
September 2014. The Commission believes that waiving the 30-day 
operative delay is consistent with the protection of investors and the 
public interest.\16\ As stated in the proposal, the Exchange seeks to 
extend the current operation of the Incentive Program for an additional 
year and does not propose any substantive changes to the Incentive 
Program. The Exchange states that during the initial one-year pilot 
period, no ETP issuers signed up for the Incentive Program, and 
therefore, the Exchange has no data to assess the impact of the 
Incentive Program on ETP market quality or whether any provisions of 
the Incentive Program should be modified.\17\ The Exchange believes 
that extending the pilot period for an additional year will provide 
additional time for issuers to participate in the Incentive Program so 
that the Commission, the Exchange, LMMs, and issuers may assess the 
impact of the Incentive Program. The Commission notes that if the 
Incentive Program in its current form continues to go unused, the 
Exchange will not seek an additional extension of the pilot period. 
Because the proposed change does not alter the substantive terms of the 
Incentive Program and does not raise any novel or unique regulatory 
issues, the

[[Page 53494]]

Commission designates the proposed rule change as operative upon 
filing.
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    \16\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
    \17\ See supra note 6. The Commission notes that any proposed 
modification of any provision of the Incentive Program would also 
require a rule filing with the Commission pursuant to Section 19(b) 
of the Act and Rule 19b-4 thereunder.
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    At any time within 60 days of the filing of the 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.

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-2014-99 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-NYSEArca-2014-99. 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 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, 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 such filing will also be available 
for inspection and copying at the principal office of the Exchange. 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-2014-99 and should 
be submitted on or before September 30, 2014.
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    \18\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-21357 Filed 9-8-14; 8:45 am]
BILLING CODE 8011-01-P