[Federal Register Volume 81, Number 187 (Tuesday, September 27, 2016)]
[Notices]
[Pages 66315-66317]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-23222]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78892; File No. SR-NYSEArca-2016-128]


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

September 21, 2016.
    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 September 8, 2016, 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 Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the NYSE Arca Equities Schedule of 
Fees and Charges for Exchange Services (the ``Fee Schedule'') to adopt 
a new pricing tier and a new execution fee. The Exchange proposes to 
implement the fee changes effective September 8, 2016.\4\ 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.
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    \4\ The Exchange originally filed to amend the Fee Schedule on 
August 31, 2016 (SR-NYSEArca-2016-125) and withdrew such filing on 
September 8, 2016.
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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 amend the Fee Schedule to adopt a new 
pricing tier and a new execution fee. The Exchange proposes to 
implement the fee changes effective September 8, 2016.
Step Up Tier
    The Exchange proposes a new pricing tier--Step Up Tier--for 
securities with a per share price of $1.00 or above.
    As proposed, a new Step Up Tier credit of $0.0029 per share for 
providing liquidity in Tape A and Tape C Securities and $0.0028 per 
share for providing liquidity in Tape B Securities would apply to ETP 
Holders and Market Makers that, on a daily basis, measured monthly
    (i) directly execute providing average daily volume (``ADV'') on 
NYSE Arca in an amount that is an increase of no less than 0.15% of 
United States consolidated average daily volume (``US CADV'') \5\ in 
Tape A, Tape B and Tape C Securities for that month over the ETP 
Holder's or Market Maker's providing ADV in July 2016 (``Baseline 
Month''), and
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    \5\ The Exchange proposes to use the same definition of US CADV 
for purposes of the proposed Step Up pricing tier. Specifically, US 
CADV would mean the 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 and on the date of the annual reconstitution of the Russell 
Investments Indexes. Transactions that are not reported to the 
Consolidated Tape are not included in US CADV. See Fee Schedule, 
footnote 3.
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    (ii) set a new Best Bid or Offer (``BBO'') on the Exchange with at 
least 40% of the ETP Holder's or Market Maker's providing ADV.
    For example, an ETP Holder who has a providing ADV of 15 million 
shares in the Baseline Month would be required to execute, at a 
minimum, an additional 9.75 million shares of providing ADV if CADV is 
6.5 billion shares in the billing month, or 0.15% over the Baseline 
Month, for a total providing ADV of 24.75 million shares for the 
billing month. Further, of the 24.75 million shares, at least 9.9 
million shares, or 40% of providing ADV of 24.75 million shares, would 
need to set a new BBO on the Exchange.
    As an incentive for ETP Holders and Market Makers to direct their 
order flow to the Exchange, for the months of September 2016 and 
October 2016 only, the Exchange proposes adopting lower providing ADV 
criteria for ETP Holders and Market Makers to qualify for the proposed 
credit. For the billing month of September 2016 only, the proposed Step 
Up credit would apply to ETP Holders and Market Makers that, on a daily 
basis, measured monthly
    (i) directly execute providing ADV on NYSE Arca in an amount that 
is an increase of no less than 0.045% of US CADV in Tape A, Tape B and 
Tape C Securities for that month over the ETP Holder's or Market 
Maker's providing ADV in the Baseline Month, and
    (ii) set a new BBO on the Exchange with at least 40% of the ETP 
Holder's or Market Maker's providing ADV.
    For example, using the previous example, an ETP Holder who has a 
providing ADV of 15 million shares in the Baseline Month would be 
required to execute, at a minimum, an additional 2.925 million shares 
of providing ADV if CADV is 6.5 billion shares in the billing month, or 
0.045% over the Baseline Month, for a total providing ADV of 17.925 
million shares for the billing month. Further, of the 17.925 million 
shares, at least 7.170 million shares, or 40% of providing ADV of 
17.925 million shares, would need to set a new BBO on the Exchange.
    For the billing month of October 2016 only, the proposed Step Up 
credit would be applicable to ETP Holders and Market Makers that, on a 
daily basis, measured monthly
    (i) directly execute providing ADV on NYSE Arca in an amount that 
is an increase of no less than 0.09% of US CADV in Tape A, Tape B and 
Tape C Securities for that month over the ETP Holder's or Market 
Maker's providing ADV in the Baseline Month, and
    (ii) set a new BBO on the Exchange with at least 40% of the ETP 
Holder's and Market Maker's providing ADV.
    Using the previous example again, an ETP Holder who has a providing 
ADV of 15 million shares in the Baseline Month would be required to 
execute, at a minimum, an additional 5.85 million shares of providing 
ADV if CADV is 6.5 billion shares in the billing month, or 0.09% over 
the Baseline Month, for a total providing ADV of 20.850 million shares 
for the billing month. Further, of the 20.850 million shares, at least 
8.340 million shares, or 40% of providing ADV of 20.850 million shares, 
would need to set a new BBO on the Exchange.
    The Exchange notes that if an ETP Holder or Market Maker qualifies 
for more than one tier in the Fee Schedule, the Exchange would apply 
the most favorable rate available under such tiers.
    The goal of the Step-Up Tier is to incentivize ETP Holders and 
Market Makers to increase the orders sent

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directly to NYSE Arca and therefore provide liquidity that supports the 
quality of price discovery and promotes market transparency. The 
Exchange notes that Step Up pricing tiers are not novel. Bats BZX 
Exchange (``BZX'') currently provides Step-Up credits to participants 
on that exchange as an incentive to attract order flow to that 
exchange.\6\
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    \6\ See Step-Up Tiers and Cross-Asset Step-Up Tiers on the BZX 
Fee Schedule at https://www.batstrading.com/support/fee_schedule/bzx/.
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Execution Fee
    The Exchange proposes a new execution fee for participation in an 
Early Open Auction, Core Open Auction, Trading Halt Auction and Closing 
Auction. The proposed fee would apply to securities with a per share 
price of $1.00 or above.
    The Exchange's Fee Schedule currently includes fees applicable to 
executions that result from Market Orders, Auction-Only Orders, Market-
On-Close Orders and Limit-On-Close Orders (``Auction Orders''). All 
other executions (``Non-Auction Orders'') executed in an Early Open 
Auction, Core Open Auction, Trading Halt Auction and Closing Auction 
are not currently charged a fee by the Exchange. The Exchange proposes 
to add a fee of $0.0006 per share that would apply to Non-Auction 
Orders executed in an Early Open Auction, Core Open Auction, Trading 
Halt Auction and Closing Auction.
    The Exchange notes the proposed fee is similar to the fee charged 
by the NASDAQ Stock Market LLC (``NASDAQ'') for Continuous Book \7\ 
orders executed on NASDAQ for the NASDAQ Opening Cross and the NASDAQ 
Closing Cross. NASDAQ currently charges a fee of $0.00085 per share for 
Continuous Book orders in both Opening and Closing Crosses.\8\
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    \7\ Continuous Book includes all quotes and extended hours 
orders eligible to participate in the NASDAQ Opening Cross and 
NASDAQ Closing Cross. See NASDAQ Crossing Network at http://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2.
    \8\ Id.
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    The proposed changes are not otherwise intended to address any 
other problem, and the Exchange is not aware of any significant problem 
that the affected 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,\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. The Exchange believes 
that the proposal does not constitute an inequitable allocation of 
fees, as all similarly situated market participants will be subject to 
the same fees and credits and access to the Exchange's market is 
offered on fair and non-discriminatory terms.
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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 Step-Up Tier is equitable 
because it is open to all ETP Holders and Market Makers on an equal 
basis and provides credits that are reasonably related to the value to 
an exchange's market quality associated with higher volumes. As stated 
above, the Exchange believes that the Step-Up Tier may incentivize 
market participants to increase the orders sent directly to NYSE Arca 
and therefore provide liquidity that supports the quality of price 
discovery and promotes market transparency. Moreover, the addition of 
the Step-Up Tier would benefit market participants whose increased 
order flow provides meaningful added levels of liquidity thereby 
contributing to the depth and market quality on the Exchange. In 
addition, by offering a Step-Up Tier the Exchange believes more market 
participants may provide increased order flow and more market 
participants would be eligible to receive the proposed credits for 
their orders.
    Further, the Exchange believes that the proposal is reasonable and 
would create an added incentive for ETP Holders and Market Makers to 
execute additional orders on the Exchange. The Exchange believes it is 
reasonable to require that at least 40% of the ETP Holders and Market 
Makers providing ADV set a new BBO on the Exchange as it would create 
an incentive for ETP Holders and Market Makers to improve displayed 
quotes on the Exchange, which would benefit all market participants. 
The Exchange believes that the proposed change is equitable and not 
unfairly discriminatory because providing incentives for orders that 
are executed on a registered national securities exchange would 
contribute to investors' confidence in the fairness of their 
transactions and would benefit all investors by deepening the 
Exchange's liquidity pool, supporting the quality of price discovery, 
promoting market transparency and improving investor protection.
    The Exchange believes that adopting lower providing ADV criteria 
for September 2016 and October 2016 is reasonable because it may allow 
a greater number of ETP Holders and Market Makers to qualify for the 
proposed credits while also providing ETP Holders and Market Makers the 
opportunity to gradually increase their activity in order to qualify 
for the proposed credits. The Exchange believes that adopting lower 
providing ADV criteria for September 2016 and October 2016 is also 
equitable and not unfairly discriminatory because the lower criteria 
would apply uniformly to all ETP Holders and Market Makers during 
September 2016 and October 2016.
    Volume-based rebates such as the ones currently in place on the 
Exchange, and as proposed herein, have been widely adopted in the cash 
equities markets and are equitable because they are open to all ETP 
Holders and Market Makers on an equal basis and provide additional 
benefits or discounts that are reasonably related to the value to an 
exchange's market quality associated with higher levels of market 
activity, such as higher levels of liquidity provision and/or growth 
patterns, and introduction of higher volumes of orders into the price 
and volume discovery processes.
    The Exchange believes that the proposed execution fee for Non-
Auction Orders participating in an Early Open Auction, Core Open 
Auction, Trading Halt Auction and Closing Auction is consistent with an 
equitable allocation of a reasonable fee and not unfairly 
discriminatory. As noted above, Non-Auction Orders executed in an Early 
Open Auction, Core Open Auction, Trading Halt Auction and Closing 
Auction are not currently charged a fee by the Exchange. The Exchange 
believes the proposed fee is reasonable because Non-Auction Orders 
receive a substantial benefit from executions within the various 
auctions on the Exchange. For example, the Exchange's closing auction 
is a recognized industry benchmark.\11\ Moreover, the proposed fee is 
equitably allocated because the fee would apply to all market 
participants that benefit from such orders participating in the 
auctions. Similarly, the proposed fee is not unfairly discriminatory 
because it would apply to all Non-Auction Orders executed in the 
auctions resulting in a benefit to market quality that such orders 
would

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provide. The Exchange believes the proposal to adopt a fee for Non-
Auction Orders executed in an Early Open Auction, Core Open Auction, 
Trading Halt Auction and Closing Auction is reasonable, equitably 
allocated and not unfairly discriminatory because the proposed fee 
would apply to all market participants that participate in the auctions 
and receive an execution. Moreover, the Exchange does not believe that 
the proposed fee would negatively impact participation in the auctions. 
ETP Holders and Market Makers that do not want to be subject to the 
proposed fee would simply cancel their orders and thus can elect to not 
participate in the auctions.
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    \11\ For example, the pricing and valuation of certain indices, 
funds, and derivative products require primary market prints.
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    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,\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 proposal 
to add a new pricing tier 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. Further, the proposed new fee for executions in 
an Early Open Auction, Core Open Auction, Trading Halt Auction and 
Closing Auction is reflective of the value of executions that take 
place within the various auctions on the Exchange on a daily basis.
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    \12\ 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 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) \13\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \14\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 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) \15\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \15\ 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-2016-128 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEArca-2016-128. 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 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-2016-128 and should 
be submitted on or before October 18, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-23222 Filed 9-26-16; 8:45 am]
 BILLING CODE 8011-01-P