[Federal Register Volume 81, Number 23 (Thursday, February 4, 2016)]
[Notices]
[Pages 6085-6088]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-02063]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77000; File No. SR-NYSEARCA-2016-22]


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

January 29, 2016.
    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 January 28, 2016, NYSE Arca, Inc. (the ``Exchange'' or ``NYSE 
Arca'') filed with the Securities and Exchange Commission 
(``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 the NYSE Arca Equities Schedule of 
Fees and Charges for Exchange Services. 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 change the fees and credits for Cross 
Asset Tier 2 in the Fee Schedule. Specifically, for securities with a 
per share price $1.00 or above, the Exchange proposes to: (1) Replace 
the numeric benchmark needed to be eligible for the tier with a 
benchmark based on a percentage of options contract volume, and (2) 
provide a second way to qualify for the Cross Asset Tier 2 credits for 
orders that provide liquidity to the Exchange. The Exchange proposes to 
implement the fee changes effective January 28, 2016.\4\
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    \4\ The Exchange originally filed to amend the Fee Schedule on 
January 4, 2016 (SR-NYSEArca-2016-05) and withdrew such filing on 
January 14, 2016. The Exchange subsequently filed to amend the Fee 
Schedule on January 14, 2016 (SR-NYSEArca-2016-12) and withdrew such 
filing on January 28, 2016.
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    Currently, Cross Asset Tier 2 fees and credits apply to ETP Holders 
and Market Makers that (a) provide liquidity an average daily volume 
share per month of 0.30% or more of the US Consolidated Average Daily 
Volume (``CADV''), and (b) are affiliated with an OTP Holder or OTP 
Firm that provides an ADV of electronic posted executions for the 
account of a market maker in Penny Pilot issues on NYSE Arca Options 
(excluding mini options) of at least 90,000 contracts. Such ETP Holders 
and Market Makers receive a credit of $0.0031 per share for orders that 
provide liquidity to the order book in Tape A Securities; a credit of 
$0.0030 per share for providing liquidity to the order book and a fee 
of $0.0028 per share for taking liquidity from the order book in Tape B 
Securities; and a credit of $0.0033 per share for providing liquidity 
to the order book and a fee of $0.0029 per share for taking liquidity 
from the order book in Tape C Securities.
    The Exchange proposes to replace the current fixed 90,000 contract 
requirement with a variable requirement of at least 0.75% of total 
Customer equity and exchange-traded fund (``ETF'') option ADV, as 
reported by the Options Clearing Corporation (``OCC'').\5\

[[Page 6086]]

The Exchange is proposing these changes to the Cross-Asset Tier 2 in 
order to make the eligibility requirement consistent with the 
Exchange's other variable eligibility requirements that are based on 
percentage of volume. The Exchange believes that using an eligibility 
requirement based on percentage of volume would better reflect 
fluctuations in trading volumes. The proposed change would thus 
eliminate the need to modify a fixed number requirement because a 
threshold based on volume would automatically make the necessary 
adjustments.
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    \5\ The OCC provides volume information in two product 
categories: Equity and ETF volume and index volume, and the 
information can be filtered to show only Customer, firm, or market 
maker account type. Equity and ETF Customer volume numbers are 
available directly from the OCC each morning, or may be transmitted, 
upon request, free of charge from the Exchange. Total Industry 
Customer equity and ETF option ADV is comprised of those equity and 
ETF option contracts that clear in the customer account type at OCC, 
including Exchange-Traded Fund Shares, Trust Issued Receipts, 
Partnership Units, and Index-Linked Securities such as Exchange-
Traded Notes (see NYSE Arca Options Rule 5.3(g)-(j)), and does not 
include contracts that clear in either the firm or market maker 
account type at OCC or contracts overlying a security other than an 
equity or ETF security. The Exchange currently makes this data 
publicly available on a T+1 basis from a link at http://www.nyxdata.com/factbook.
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    The Exchange proposes to make a clarifying amendment to the text of 
the Fee Schedule to more accurately reflect the application of the 
Cross Asset Tier 2. Specifically, the Exchange proposes to delete the 
potentially confusing phrase ``(including all account types)'' 
following ``electronic posted executions'' and before ``in Penny Pilot 
issues on NYSE Arca Options'' in current clause (b) of the Fee Schedule 
consistent with the filing adopting the Cross Asset Tier 2.\6\ The 
Exchange also proposes to move the phrase ``for the account of a market 
maker'' from the end of current clause (b) to after ``electronic posted 
executions'' to add greater clarity to the Fee Schedule.
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    \6\ See Securities Exchange Act Release No. 76084 (October 6, 
2015), 80 FR 61529, 61531 (October 13, 2015) (SR-NYSEArca-2015-87) 
(the Cross Asset Tier 2 applies to ``ETP Holders and Market Makers 
that (a) provide liquidity an average daily volume share per month 
of 0.30% or more of the US CADV and (b) are affiliated with an OTP 
Holder or OTP Firm that provides an ADV of electronic posted 
executions for the account of a market maker in Penny Pilot issues 
on NYSE Arca Options (excluding mini options) of at least 90,000 
contracts.'').
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    The Exchange also proposes to permit ETP Holders, including Market 
Makers, to alternatively qualify for the Cross Asset Tier 2 credits if 
they (1) provide liquidity an ADV share per month of 0.40% or more of 
the CADV, and (2) are affiliated with an OTP Holder or OTP Firm that 
provides an ADV of electronic posted executions for the account of a 
market maker in Penny Pilot issues on NYSE Arca Options (again, 
excluding mini options) of at least 0.65% of total Customer equity and 
ETF option ADV, as reported by OCC.
    The Exchange does not propose any other changes to the fees and 
credits currently applicable to Cross Asset Tier 2.
    The proposed changes are not otherwise intended to address any 
other issues, and the Exchange is not aware of any significant problems 
that market participants would have in complying with the proposed 
changes.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\7\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\8\ 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. In addition, the Exchange 
believes the proposal is consistent with the requirement under Section 
6(b)(5) \9\ that an exchange have rules that are designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to remove impediments to, and perfect 
the mechanism of a free and open market and, in general, to protect 
investors and the public interest.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(4) and (5).
    \9\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes the proposal to amend Cross Asset Tier 2 to 
replace the current fixed benchmark needed to be eligible for the tier 
with a variable benchmark based on a percentage of volume is reasonable 
because it would make the eligibility requirement consistent with the 
Exchange's other variable eligibility requirements that also are based 
on percentage of volume. In addition, the Exchange believes that 
expanding the basis for the Cross-Asset Tier 2 to include all Customer 
equity and ETF options ADV would better reflect the correlation between 
options trading and the underlying securities, which trade at the 
Exchange, including ETFs. In this respect, the Exchange notes that 
Equity and ETF Customer volume is a widely followed benchmark of 
industry volume and is indicative of industry market share.\10\ The 
Exchange further believes that the proposed amendment is equitable and 
not unfairly discriminatory because it would be available to all 
similarly situated ETP Holders and Market Makers on an equal basis and 
would provide credits that are reasonably related to the value of an 
exchange's market quality associated with higher volumes.
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    \10\ See note 5, supra.
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    The Exchange believes that the proposal to amend Cross Asset Tier 2 
is reasonable because it provides ETP Holders and Market Makers 
affiliated with an NYSE Arca Options OTP Holder or OTP Firm with an 
additional way to qualify for the Cross Asset Tier 2 rebates through 
equity and option orders. The Exchange believes that the proposed 
alternative to qualify for the tier utilizing a higher equity volume 
requirement (0.40%) and a lower options volume requirement (0.65%) is 
reasonable because the proposal provides firms with greater flexibility 
to reach volume tiers across asset classes, thereby creating an added 
incentive for ETP Holders to bring additional order flow to a public 
market.
    The Exchange believes that the proposal is equitable and not 
unfairly discriminatory because all ETP Holders would be subject to the 
same fee structure and be offered the same alternative to qualifying 
for the Cross-Asset Tier 2 credit. Moreover, the Cross-Asset Tier 2 
credit is available for all ETP Holders to satisfy, except for those 
ETP Holders that are not affiliated with an NYSE Arca Options OTP 
Holder or OTP Firm. ETP Holders that are not affiliated with an NYSE 
Arca Options OTP Holder or OTP Firm are still eligible for fees and 
credits by means other than the Cross Asset Tier. NASDAQ similarly 
charges certain fees based on both equity and options volume.\11\
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    \11\ See NASDAQ Rule 7018.
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    Further, the Exchange believes that the proposal is reasonable and 
would continue to directly relate to the activity of an ETP Holder and 
the activity of an affiliated OTP Holder or OTP Firm on NYSE Arca 
Options, thereby encouraging increased trading activity on both the 
NYSE Arca equity and option markets. In this regard, the proposal is 
designed to bring additional posted order flow to NYSE Arca Options, so 
as to provide additional opportunities for all OTP Holders and OTP 
Firms to trade on NYSE Arca Options. Furthermore, similar to the 
revised Cross Asset Tier, the NYSE Arca Options Fee Schedule includes a 
credit for OTP Holders and OTP Firms that is based on both equity and 
options volume.
    The Exchange believes that deleting the phrase ``(including all 
account types)'' in current clause (b) of the Fee Schedule consistent 
with the filing

[[Page 6087]]

adopting the Cross Asset Tier 2 \12\ removes impediments to and 
perfects the mechanism of a free and open market by reducing potential 
confusion that may result from having extraneous material in the 
Exchange's rulebook, thereby adding transparency and clarity to the 
Exchange's rules. The Exchange also believes that eliminating this 
extraneous material would not be inconsistent with the public interest 
and the protection of investors because investors will not be harmed 
and in fact would benefit from increased transparency, thereby reducing 
potential confusion. The Exchange also believes that moving the phrase 
``for the account of a market maker'' from the end of current clause 
(b) to after ``electronic posted executions'' removes impediments to 
and perfects the mechanism of a free and open market by adding clarity 
to the Exchange's rules. The Exchange believes its proposal to amend 
the text of the Fee Schedule to clarify the applicability of the Cross 
Asset Tier 2 is both reasonable and equitable because ETP Holders and 
Market Makers would benefit from clear guidance in the rule text 
describing the manner in which the Exchange would assess Cross Asset 
Tier 2 fees and rebates.
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    \12\ See note 6, supra.
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    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 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,\13\ 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 would encourage the submission of additional liquidity to a 
public exchange, thereby promoting price discovery and transparency and 
enhancing order execution opportunities for ETP Holders and Market 
Makers. The Exchange believes that this 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.
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    \13\ 15 U.S.C. 78f(b)(8).
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    Further, the proposal to amend the requirements to qualify for 
Cross Asset Tier 2 and add another way to qualify for the Cross-Asset 
Tier 2 credits will not place an undue burden on competition because 
the tier would remain available for all ETP Holders to satisfy except 
those ETP Holders that are not affiliated with an NYSE Arca Options OTP 
Holder or OTP Firm. ETP Holders that are not affiliated with an NYSE 
Arca Options OTP Holder or OTP Firm are eligible for fees and credits 
by other means than the Cross Asset Tier 2. ETP Holders would be 
subject to the same fee structure and be offered the same alternatives 
to qualifying for the Cross-Asset Tier 2 credit.
    The Exchange notes that it operates in a highly competitive market 
in which market participants can readily favor competing venues. In 
such an environment, the Exchange must continually review, and consider 
adjusting, its fees and credits to remain competitive with other 
exchanges.
    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 ETP Holders 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) \14\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \15\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 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) \16\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \16\ 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-2016-22 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-2016-22. 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

[[Page 6088]]

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 
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; 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-2016-22 and should be submitted on or before 
February 25, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-02063 Filed 2-3-16; 8:45 am]
BILLING CODE 8011-01-P