[Federal Register Volume 82, Number 179 (Monday, September 18, 2017)]
[Notices]
[Pages 43633-43636]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-19810]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81601; File No. SR-NYSEARCA-2017-104]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the NYSE 
Arca Equities Fees and Charges

September 13, 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 September 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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 Fees and 
Charges (the ``Fee Schedule'') to (i) adopt an additional tiered credit 
applicable to Lead Market Makers (``LMMs'') \4\ and to ETP Holders and 
Market Makers affiliated with the LMM that provide displayed liquidity 
to the NYSE Arca Book in Tape B Securities; and (ii) add a second way 
by which an ETP Holder or Market Maker could qualify for the Step Up 
Tier. The Exchange proposes to implement the proposed fee change on 
September 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.
---------------------------------------------------------------------------

    \4\ The term ``Lead Market Maker'' is defined in Rule 1.1(w) to 
mean a registered Market Maker that is the exclusive Designated 
Market Maker in listings for which the Exchange is the primary 
market.
---------------------------------------------------------------------------

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 an 
additional tiered credit applicable to LMMs and to ETP Holders and 
Market Makers affiliated with the LMM that provide displayed liquidity 
to the NYSE Arca Book in Tape B Securities; and (ii) add a second way 
by which an ETP Holder or Market Maker could qualify for the Step Up 
Tier. The Exchange proposes to implement the proposed fee changes on 
September 1, 2017.
LMM Transaction Fees and Credits
    The Exchange proposes to amend the Fee Schedule to adopt an 
additional tiered credit applicable to LMMs and to ETP Holders and 
Market Makers affiliated with the LMM that provide displayed liquidity 
to the NYSE Arca Book in Tape B Securities. The Exchange currently 
provides tier-based incremental credits for orders that provide 
displayed liquidity to the NYSE Arca Book in Tape B Securities. 
Specifically, LMMs that are registered as the LMM in Tape B Securities 
that have a consolidated average daily volume (``CADV'') in the 
previous month of less than 100,000 shares, or 0.0070% of Consolidated 
Tape B ADV, whichever is greater (``Less Active ETP Securities''), and 
the ETP Holders and Market Makers affiliated with such LMMs, currently 
receive an additional credit for orders that provide displayed 
liquidity to the Book in any Tape B Securities that trade on the 
Exchange.\5\ The current incremental credits and volume thresholds are 
as follows:
---------------------------------------------------------------------------

    \5\ The Exchange defines ``affiliate'' to ``mean any ETP Holder 
under 75% common ownership or control of that ETP Holder.'' See Fee 
Schedule, NYSE Arca Marketplace: General.
---------------------------------------------------------------------------

     An additional credit of $0.0004 per share if an LMM is 
registered as the LMM in at least 300 Less Active ETP Securities
     An additional credit of $0.0003 per share if an LMM is 
registered as the LMM in at least 200 but less than 300 Less Active ETP 
Securities
     An additional credit of $0.0002 per share if an LMM is 
registered as the LMM in at least 100 but less than 200 Less Active ETP 
Securities
    The number of Less Active ETP Securities for the billing month is 
based on the number of Less Active ETP Securities in which an LMM is 
registered as the LMM on the last business day of the previous month. 
The incremental credits also apply to ETP Holders and Market Makers 
affiliated with the LMM whose orders in Tape B Securities provide 
displayed liquidity to the NYSE Arca Book.
    The Exchange proposes to adopt an additional tier pursuant to which 
LMMs and ETP Holders and Market Makers affiliated with the LMM that 
provide displayed liquidity to the NYSE Arca Book in Tape B Securities 
would receive an additional credit of $0.0001 per share if the LMM is 
registered as the LMM in at least 75 but less than 100 Less Active ETP 
Securities.
    For example, currently, a LMM that provides liquidity to the NYSE 
Arca Book in a security for which the LMM is registered as the LMM 
which has a CADV in the previous month of at least 5,000,000 shares 
would receive a credit of $0.0033 per share. If that LMM is also 
registered as an LMM in 80 Less Active ETP Securities, the LMM would 
receive an incremental credit of $0.0001 per share under the proposed 
new rebate structure, for a total credit of $0.0034 per share. 
Additionally, if the affiliated ETP Holders and Market Makers of such 
LMM that provide displayed liquidity in Tape B Securities are a Tier 1 
firm, they would receive a total credit of $0.0024 per share, i.e., 
$0.0023 per share Tier 1 credit for orders that provide liquidity to 
the NYSE Arca Book plus $0.0001 per share for being registered as a LMM 
in 80 Less Active ETP Securities.
    With the proposed additional tier, the Exchange hopes to provide 
incentives for increased trading in Less Active ETP Securities for the 
benefit of all market participants.
Step-Up Tier
    The Exchange proposes to add a second way by which an ETP Holder or 
Market Maker could qualify for the existing Step Up Tier. Currently, to 
qualify for the Step Up Tier, ETP

[[Page 43634]]

Holders and Market Makers, on a daily basis, measured monthly must:
    (i) Directly execute providing average daily volume that is an 
increase of no less than 0.15% of US CADV\6\ for that month over the 
ETP Holder's or Market Maker's providing average daily volume in July 
2016, and
---------------------------------------------------------------------------

    \6\ 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.
---------------------------------------------------------------------------

    (ii) sets a new NYSE Arca Best Bid or Offer with at least 25% in 
each of the ETP Holder's or Market Maker's Tape A, Tape B and Tape C 
providing ADV.
    ETP Holders and Market Makers that qualify for the Step Up Tier 
receive a $0.0029 per share credit for orders that provide liquidity to 
the Book for Tape A and Tape C Securities and $0.0028 per share credit 
for orders that provide liquidity to the Book for Tape B Securities.
    As proposed, the Exchange would keep these qualifying requirements, 
and add a second way by which an ETP Holder or Market Maker could 
qualify for the Step Up Tier. As proposed, an ETP Holder or Market 
Maker could also qualify for the Step Up Tier if such ETP Holder or 
Market Maker, on a daily basis, measured monthly:
    (i) Directly execute providing average daily volume that is an 
increase of no less than 0.15% of US CADV\3\ for that month over the 
ETP Holder's or Market Maker's providing average daily volume in July 
2016, and
    (ii) sets a new NYSE Arca Best Bid or Offer with at least 20% in 
the ETP Holder's or Market Maker's Tape A providing ADV, at least 25% 
in the ETP Holder's or Market Maker's Tape B providing ADV, and at 
least 30% in the ETP Holder's or Market Maker's Tape C providing ADV, 
and
    (iii) directly execute taking average daily volume of at least 15 
million shares.
    For example, an ETP Holder that 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, assume 10.75 
million shares are in Tape A Securities, and 7 million shares are each 
in Tape B and Tape C Securities. The ETP Holder would be required to 
have a providing ADV that sets a new BBO on the Exchange of at least 
2.15 million shares in Tape A Securities, of at least 1.750 million 
shares in Tape B Securities, and of at least 2.1 million shares in Tape 
C Securities.
    The Exchange believes that combining the existing providing average 
daily volume requirement with both specified setting Exchange Best Bid 
or Offer requirements, depending on whether the securities are Tape A, 
B, or C, and a requirement to meet certain volume of executing taking 
volume on the Exchange would encourage ETP Holders or Market Makers 
that are active traders on the Exchange to step up their provide volume 
to qualify for the Step Up Tier.
    As an incentive for ETP Holders and Market Makers to direct their 
order flow to the Exchange, for the months of September 2017 and 
October 2017 only, the Exchange proposes adopting lower providing ADV 
criteria for ETP Holders and Market Makers to qualify for the Step Up 
Tier. For the month of September 2017 only, the ETP Holder or Market 
Maker would need to directly execute providing average daily volume 
that is an increase of no less than 0.05% of US CADV for that month 
over the ETP Holder's or Market Maker's providing average daily volume 
in July 2016.
    Using the previous example, that ETP Holder would be required to 
execute, at a minimum, an additional 3.25 million shares of providing 
ADV, or 0.05% over the Baseline Month, for a total providing ADV of 
18.25 million shares for that billing month. Further, of the 18.25 
million shares, assume 10 million shares are in Tape A Securities, 5 
million shares are in Tape B Securities and 3.25 million shares are in 
Tape C Securities. The ETP Holder would be required to have a providing 
ADV that sets a new BBO on the Exchange of at least 2 million shares in 
Tape A Securities, of at least 1.250 million shares in Tape B 
Securities, and of at least 0.975 million shares in Tape C Securities.
    For the month of October 2017 only, the ETP Holder or Market Maker 
would need to directly execute providing average daily volume that is 
an increase of no less than 0.10% of US CADV for that month over the 
ETP Holder's or Market Maker's providing average daily volume in July 
2016. For the months on and after November 2017, ETP Holders and Market 
Makers would need to meet the new proposed qualifying requirement of 
0.15% of CADV.
    Using the previous example, that ETP Holder would be required to 
execute, at a minimum, an additional 6.5 million shares of providing 
ADV, or 0.10% over the Baseline Month, for a total providing ADV of 
21.5 million shares for the billing month. Further, of the 21.5 million 
shares, assume 12 million shares are in Tape A Securities, 7 million 
shares are in Tape B Securities and 2.5 million shares are in Tape C 
Securities. The ETP Holder would be required to have a providing ADV 
that sets a new BBO on the Exchange of at least 2.4 million shares in 
Tape A Securities, of at least 1.75 million shares in Tape B 
Securities, and of at least 0.75 million shares in Tape C Securities.
    Because the goal of the Step-Up Tier is to incentivize ETP Holders 
and Market Makers to increase the orders sent directly to NYSE Arca and 
therefore provide liquidity that supports the quality of price 
discovery and promotes market transparency, the Exchange believes that 
the proposed new qualifying requirement for the Step Up Tier will 
provide an additional incentive for ETP Holders or Market Makers that 
are active traders on the Exchange to increase the orders sent to the 
Exchange that would provide liquidity.
* * * * *
    The proposed changes are not otherwise intended to address any 
other issues, and the Exchange is not aware of any problems that member 
organizations 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,\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.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed additional tier for Less 
Active ETP Securities is reasonable because the proposed credit of 
$0.0001 per share that would apply if an LMM is registered as the LMM 
in at least 75 but less than 100 Less Active ETP Securities would 
relate to displayed liquidity to the NYSE Arca Book in Tape B 
Securities, which would be identical to the type of volume to which the 
credit would apply.
    The Exchange believes it is equitable and not unfairly 
discriminatory to establish an additional tier applicable to

[[Page 43635]]

LMMs and to ETP Holders and Market Makers affiliated with the LMM, as 
all LMMs have the ability to qualify for the proposed rebate, and 
rebates would be provided equally to qualifying participants.
    The proposed fee change is intended to encourage LMMs to promote 
price discovery and market quality in Less Active ETP Securities for 
the benefit of all market participants. The Exchange believes the 
proposed additional tier to the current rebate structure would allow 
LMMs that are registered as the LMM in a fewer number of Less Active 
ETP Securities to qualify for a rebate. The Exchange believes the 
proposed credit is reasonable and appropriate in that it is based on 
the amount of business transacted on the Exchange. The Exchange 
believes that providing the proposed additional credit to ETP Holders 
and Market Makers that are affiliated with a LMM that add liquidity in 
Tape B Securities to the Exchange is reasonable because the Exchange 
believes that by providing increased rebates to affiliated ETP Holders 
and Market Makers of a LMM, more LMMs will register to quote and trade 
in Less Active ETP Securities. The Exchange further believes the 
proposed incremental credit for adding liquidity is also reasonable 
because it will encourage liquidity and competition in Tape B 
Securities quoted and traded on the Exchange. Moreover, the Exchange 
believes that the proposed fee change will incentivize LMMs to register 
as an LMM in Less Active ETP Securities and thus, add more liquidity in 
these and other Tape B Securities to the benefit of all market 
participants. The Exchange also believes the lower requirement of the 
additional tier is reasonable because it may allow a greater number of 
LMMs and their affiliated ETP Holders and Market Makers to qualify for 
the proposed additional credit.
    The Exchange believes the proposed incremental credit is equitable 
and not unfairly discriminatory because it is open to all ETP Holders 
and Market Makers affiliated with a LMM on an equal basis and provides 
a discount that is reasonably related to the value to the Exchange's 
market quality associated with higher volumes. The Exchange further 
believes that the proposed incremental rebate is not unfairly 
discriminatory because it is consistent with the market quality and 
competitiveness of benefits associated with the proposed fee program 
and because the magnitude of the additional rebate is not unreasonably 
high in comparison to the rebate paid with respect to other displayed 
liquidity-providing orders. The Exchange does not believe that it is 
unfairly discriminatory to offer increased rebates to LMMs as LMMs are 
subject to additional requirements and obligations (such as quoting 
requirements) that other market participants are not.
    The Exchange also believes that allowing ETP Holders to receive 
enhanced credits based on activities of their affiliates is reasonable, 
equitable and not unfairly discriminatory because the Exchange believes 
that ETP Holders affiliated with LMMs may qualify to earn enhanced 
credits in recognition of their shared economic interest, which 
includes the heightened obligations and costs imposed on LMMs. ETP 
Holders unaffiliated with LMMs do not share the same type of economic 
interests. Further, ETP Holders not affiliated with a LMM have an 
opportunity to establish such affiliation by several means, including 
but not limited to, a business combination or the establishment of 
their own market making operation, which each unaffiliated firm has the 
potential to establish.
    The Exchange believes that the proposed second way to qualify for 
the Step-Up Tier is equitable because it is open to all market 
participants 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 incentivizes market participants to increase the orders sent 
directly to NYSE Arca that would provide liquidity. Additional order 
flow that provides liquidity supports the quality of price discovery 
and promotes market transparency. The Exchange believes that adding a 
second way to qualify for the Step Up Tier would benefit market 
participants that already are active traders on the Exchange and 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 second way to qualify for the Step-Up Tier, 
the Exchange believes more market participants that are active traders 
on the Exchange may provide increased liquidity-providing 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 ETP Holders and Market Makers' providing ADV set 
a new BBO on the Exchange of at least 20% of their Tape A providing 
ADV, at least 25% of their Tape B providing ADV, and at least 30% of 
their Tape C providing ADV 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 further believes it is reasonable to 
require ETP Holders or Maker Makers to also directly execute taking 
average daily volume of at least 15 million shares because it would 
provide an incentive for market participants that are active traders on 
the Exchange to increase orders that provide liquidity on the Exchange, 
thereby further promoting price discovery on the Exchange.
    The Exchange believes that adopting lower providing ADV criteria 
for September 2017 and October 2017 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 Step Up Tier. The Exchange believes that adopting lower 
providing ADV criteria for September 2017 and October 2017 is also 
equitable and not unfairly discriminatory because the lower criteria 
would apply uniformly to all ETP Holders and Market Makers during 
September 2017 and October 2017.
    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,\9\ 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 
fee change would encourage increased

[[Page 43636]]

participation by LMMs in the trading of ETP securities generally and 
Less Active ETP Securities, in particular. The proposed change would 
also 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.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    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. For the reasons described above, the Exchange believes that 
this proposal promotes a 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

    The foregoing rule change is effective upon filing pursuant to 
Section 19(b)(3)(A) \10\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \11\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    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) \12\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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-2017-104 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-2017-104. 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-2017-104 and should 
be submitted on or before October 10, 2017.
---------------------------------------------------------------------------

    \13\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-19810 Filed 9-15-17; 8:45 am]
 BILLING CODE 8011-01-P