[Federal Register Volume 82, Number 94 (Wednesday, May 17, 2017)]
[Notices]
[Pages 22687-22689]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-09933]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80665; File No. SR-NYSEArca-2017-51]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending NYSE Arca 
Equities Schedule of Fees and Charges for Exchange Services

May 11, 2017.
    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 May 1, 2017, 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 adopt a 
new pricing tier, Tape C Tier 3. The Exchange proposes to implement the 
fee changes effective May 1, 2017. 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, as described 
below, and implement the fee changes on May 1, 2017.
    The Exchange proposes to introduce a new pricing tier level--Tape C 
Tier 3--for securities with a per share price of $1.00 or above.
    As proposed, a new Tape C Tier 3 credit of $0.0002 per share \4\ 
for orders that provide liquidity in Tape C Securities would be 
applicable to ETP Holders and Market Makers, that, on a daily basis, 
measured monthly, (1) directly execute providing volume in Tape C 
Securities during the billing month (``Tape C Adding ADV'') that is 
equal to at least 0.40% of US Tape C CADV \5\ over the ETP Holder's or 
Market Maker's fourth quarter 2016 Tape C Adding ADV taken as a 
percentage of Tape C CADV (``Tape C Baseline % CADV''), and (2) execute 
providing volume in Tape B Securities during the billing month that is 
equal to at least 3.5% of Tape B CADV. For example, if an ETP Holder's 
Tape C Baseline % CADV was 0.500%, the ETP Holder would need a Tape C 
Adding ADV of at least 0.900% and a Tape B Adding ADV of at least 3.5% 
of Tape B CADV in order to qualify for the proposed Tape C Tier 3 
credit of $0.0002 per share (i.e., 0.500% Tape C Baseline % CADV plus 
0.400% of the US Tape C CADV for the billing month).\6\ The credit 
provided under the proposed Tape C Tier 3 would be in addition to the 
ETP Holder's Tiered or Basic Rate credit(s).
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    \4\ Under the Basic Rate, ETP Holders receive a credit of 
$0.0020 per share for Tape C orders that provide liquidity to the 
Book.
    \5\ The Exchange proposes to use the same definition of US CADV 
for purposes of the proposed Tape C Tier 3. Specifically, US 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 
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.
    \6\ The Exchange recognizes that a firm that becomes an ETP 
Holder or Market Maker after the Baseline Month would have a Tape C 
Baseline ADV of zero. In this regard, a new ETP Holder or Market 
Maker would need to have a Tape C Adding ADV during the billing 
month of no less than 0.400% of US Tape C CADV, in addition to the 
Tape B Adding ADV of at least 3.5% of Tape B CADV, for the $0.0002 
per share credit to apply.
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    Under the proposed new Tape C Tier 3, ETP Holders and Market Makers 
would also be charged a fee of $0.0029 per share for orders that take 
liquidity from the Book in Tape C Securities. For all other fees and 
credits, Tiered or Basic Rates apply based on a firm's qualifying 
levels.
    For ETP Holders that qualify for the proposed new Tape C Tier 3, 
Tiered or Basic Rates would apply to all other fees and credits, based 
on the 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 Tape C 
Tier 3 provides an incremental credit, similar to current Tape C Tier 1 
and Tape C Tier 2 pricing tiers, and therefore, the Exchange proposes 
to adopt rule text within each of the Tape C tiers to note that ETP 
Holders and Market Makers can only qualify for one of the Tape C 
incremental credits. ETP Holders and Market Makers that qualify, for 
example, for the proposed Tape C Tier 3 credit cannot also qualify for 
either the Tape C Tier 1 incremental credit or the Tape C Tier 2 
incremental credit. Using the above example, if an ETP Holder's Tape C 
Baseline % CADV was 0.500%, and the ETP Holder had a Tape C Adding ADV 
of at least 0.900% and a Tape B Adding ADV of at least 3.5% of Tape B 
CADV, the ETP Holder would meet the requirements of Tape C Tier 1, Tape 
C Tier 2 and the proposed Tape C Tier 3. As proposed, however, the ETP 
Holder would only receive the $0.0002 incremental credit for adding 
liquidity and the $0.0029 for taking liquidity associated with the 
proposed Tape C Tier 3 pricing tier; the ETP Holder would not be 
entitled to the Tape C Tier 1 and Tape C Tier 2 pricing tiers.
    Additionally, the Exchange recently adopted a Tape C Tier 2 pricing 
tier that references the applicability of a $0.0002 per share credit to 
ETP Holders and Market Makers that qualify for that

[[Page 22688]]

pricing tier.\7\ The $0.0002 per share incremental credit is in 
addition to a [sic] ETP Holder's or Market Maker's Tiered or Basic Rate 
credit(s) except that the combined credit is not to exceed $0.0033 per 
share. The reference to the $0.0033 per share cap is currently found in 
the Tape C Tier 1 pricing tier. The Exchange proposes to relocate the 
cap language from the Tape C Tier 1 pricing tier to the Tape C Tier 2 
pricing tier which the Exchange believes is a more appropriate place 
for it on the Fee Schedule. The proposed relocation of the rule text 
will not result in any change to the manner in which the credit is 
applied.
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    \7\ See Securities Exchange Act Release No. 80285 (March 21, 
2017), 82 FR 15249 (March 27, 2017) (SR-NYSEArca-2017-27).
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    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,\8\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\9\ 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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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes the proposed Tape C Tier 3 is reasonable and 
equitably allocated because it would apply to ETP Holders and Market 
Makers that provide liquidity in Tape C Securities to the Exchange and 
is designed to incentivize these market participants 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 the new Tape C Tier 3 is equitable 
because the proposed new tier would be available to all similarly 
situated ETP Holders and Market Makers on an equal basis and the 
proposed new tier provides a credit that is reasonably related to the 
value of an exchange's market quality associated with higher volumes. 
The Exchange further believes that the proposed Tape C Tier 3 is 
reasonable, equitable and not unfairly discriminatory because the 
Exchange has previously implemented pricing tiers that target a 
particular segment of securities, such as Tape A and Tape B Securities. 
The Exchange also believes that the requirement to execute providing 
volume in Tape B Securities during the billing month that is equal to 
at least 3.5% of Tape B CADV for the proposed Tape C Tier 3 is 
reasonable as it would provide incentives for adding liquidity in Tape 
B Securities and strengthen market quality in Tape B Securities. The 
Exchange further believes that the requirement to execute providing 
volume in Tape B Securities for the proposed Tape C Tier 3 is equitable 
and not unfairly discriminatory because it would apply uniformly to all 
similarly situated ETP Holders and Market Makers.
    The Exchange believes that it is reasonable, equitable and not 
unfairly discriminatory to permit ETP Holders and Market Makers to 
qualify for just one Tape C pricing tiers [sic]. As noted above, 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. This method of billing is reasonable because it results in the 
application of the most beneficial fees and credits for which an ETP 
[sic] qualifies when an ETP Holder qualifies for more than one pricing 
tier.
    The Exchange believes that the proposed rule change regarding Tape 
C credits would create an added incentive for ETP Holders and Market 
Makers to execute additional orders on the Exchange. The Exchange 
believes that the proposed change is equitable and not unfairly 
discriminatory because providing incentives for orders in exchange-
listed securities that are executed on a registered national securities 
exchange (rather than relying on certain available off-exchange 
execution methods) 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 relocating rule text related to the 
$0.0033 per share cap from the Tape C Tier 1 pricing tier to the Tape C 
Tier 2 pricing tier removes impediments to and perfects the mechanism 
of a free and open market by providing clarity and adding transparency 
to the Exchange's rules. The Exchange also believes that relocating the 
rule text 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. The Exchange believes 
the proposed amendment to the Fee Schedule 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's fees and credits would be assessed.
    Volume-based rebates and fees 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 introduction of Tape C Tier 3 will provide such enhancements 
in market quality on the Exchange's equity market by incentivizing 
increased participation.
    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,\10\ 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 addition 
of new Tape C credits 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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    \10\ 15 U.S.C. 78f(b)(8).
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    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

[[Page 22689]]

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) \11\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \12\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 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) \13\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \13\ 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-2017-51 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-2017-51. 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 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-2017-51, and should 
be submitted on or before June 7, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-09933 Filed 5-16-17; 8:45 am]
 BILLING CODE 8011-01-P