[Federal Register Volume 84, Number 54 (Wednesday, March 20, 2019)]
[Notices]
[Pages 10348-10350]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-05210]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85311; File No. SR-NYSEARCA-2019-10]


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 To Introduce a New Pricing Tier, Step Up 
Tier 4

March 14, 2019.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on March 1, 2019, NYSE Arca, Inc. (``NYSE Arca'' or the ``Exchange'') 
filed with the Securities and Exchange Commission (``SEC'' or 
``Commission'') the proposed rule change as described in Items I, II, 
and III 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\ 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 Fees and 
Charges (``Fee Schedule'') to introduce a new pricing tier, Step Up 
Tier 4. The Exchange proposes to implement the fee change effective 
March 1, 2019. The proposed rule change is available on the Exchange's 
website 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 amend the Fee Schedule to introduce a new 
pricing tier, Step Up Tier 4. The Exchange proposes to implement the 
fee change effective March 1, 2019.
    The Exchange currently has a Step Up Tier pursuant to which 
qualifying ETP Holders and Market Makers receive a credit of $0.0030 
per share for orders that provide displayed liquidity to the Book in 
Tape A Securities, $0.0023 per share for orders that provide displayed 
liquidity to the Book in Tape B Securities, and $0.0031 per share for 
orders that provide displayed liquidity to the Book in Tape C 
Securities if such ETP Holders and Market Makers directly execute 
providing average daily volume (``ADV'') per month of 0.50% or more, 
but less than 0.70% of the US CADV and directly execute providing ADV 
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 ADV in Q1 2018.\3\
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    \3\ See Securities Exchange Act Release No. 83032 (April 11, 
2018), 83 FR 16909 (April 17, 2018) (SR-NYSEArca-2018-20).
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    The Exchange also has a Step Up Tier 2 pricing tier pursuant to 
which ETP Holders and Market Makers receive a credit of $0.0028 per 
share for orders that provide displayed liquidity to the Book in Tape A 
and Tape C Securities, and $0.0022 per share for orders that provide 
displayed liquidity to the Book in Tape B Securities if such ETP 
Holders and Market Makers directly execute providing ADV per month of 
0.22% or more, but less than 0.30% of the US CADV and directly execute 
providing ADV that is an increase of no less than 0.06% of US CADV for 
that month over the ETP Holder's or Market Maker's providing ADV in May 
2018.\4\
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    \4\ See Securities Exchange Act Release No. 83418 (June 12, 
2018), 83 FR 28282 (June 18, 2018) (SR-NYSEArca-2018-41).
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    More recently, the Exchange adopted the Step Up Tier 3 pricing tier 
pursuant to which ETP Holders and Market Makers receive a credit of 
$0.0025 per share for orders that provide displayed liquidity to the 
Book in Tape A and Tape C Securities, and $0.0022 per share for orders 
that provide displayed liquidity to the Book in Tape B Securities if 
such ETP Holders and Market Makers directly execute providing ADV per 
month of 0.15% or more, but less than 0.20% of the US CADV and directly 
execute providing ADV that is an increase of no less than 0.075% of US 
CADV for that month over the ETP Holder's or Market Maker's providing 
ADV in May 2018.\5\
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    \5\ See Securities Exchange Act Release No. 84103 (September 12, 
2018), 83 FR 47216 (September 18, 2019) (SR-NYSEArca-2018-66).
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    The Exchange proposes a new pricing tier--Step Up Tier 4--for 
securities with a per share price of $1.00 or above. As proposed, ETP 
Holders and Market Makers would qualify for the new Step Up Tier 4 if 
they directly execute providing ADV per month that is an increase of no 
less than 0.70% of US CADV for that month over the ETP Holder's or 
Market Maker's providing ADV in January 2019, taken as a percentage of 
US CADV. ETP Holders and Market Makers that qualify for Step Up Tier 4 
would receive a credit of $0.0031 per share for orders that provide 
displayed liquidity to the Book in Tape A Securities and a credit of 
$0.0032 per share for orders that provide displayed liquidity to the 
Book in Tape B and Tape C Securities. ETP Holders and Market Makers 
that qualify for the Step Up Tier 4 credit in Tape C Securities shall 
not receive any additional incremental Tape C Tier credits for 
providing displayed liquidity under Tape C Tiers.\6\
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    \6\ ETP Holders and Market Makers that meet the requirements 
would continue to qualify for the $0.0029 per share (fee) for orders 
that take liquidity from the Book in Tape C Securities pursuant to 
Tape C Tier 2 and Tape C Tier 3, if they meet the requirements of 
those tiers.
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    For all other fees and credits, tiered or basic rates apply based 
on a firm's qualifying levels.
    For example, assume an ETP Holder or Market Maker has an adding ADV 
of 0.10% of US CADV in all securities in the baseline month of January 
2019 and Tape C adding ADV of 0.05% of the US Tape C CADV in Tape C 
Securities. Further assume that the same ETP

[[Page 10349]]

Holder or Market Maker has an adding ADV of 1.10% of US CADV in all 
securities and Tape C adding ADV of 0.30% of the US Tape C CADV in the 
billing month. The ETP Holder or Market Marker in the above example 
would qualify for the proposed Step Up Tier 4 with an adding ADV step 
up of 1.00% of US CADV (i.e., 1.10% US CADV minus the 0.10% adding of 
US CADV baseline) and would therefore receive the proposed $0.0032 per 
share credit in Tape B and Tape C Securities and $0.0031 per share 
credit in Tape A Securities. Further, since the ETP Holder or Market 
Maker in the above example also meets the qualifications of the current 
Tape C Tier 2 pricing tier with an adding ADV of 0.25% of Tape C CADV 
above the 0.05% adding Tape C CADV baseline, meeting the Tape C Tier 2 
step up requirement of 0.20%, the ETP Holder or Market Maker in the 
above example would be charged a lower $0.0029 per share fee for orders 
that take liquidity from the Book in Tape C Securities (instead of the 
$0.0030 per share fee as provided in the Basic Rates section) but would 
not receive the additional $0.0002 per share credit for orders that 
provide liquidity to the Book in Tape C Securities.
    The goal of the proposed Step Up Tier 4 pricing tier is to 
incentivize ETP Holders and Market Makers 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 
proposed pricing tier, which adopts a higher threshold than the 
existing Step Up pricing tiers, i.e., Step Up Tier 1, Step Up Tier 2 
and Step Up Tier 3, is intended to allow ETP Holders and Market Makers 
to achieve rebates that are not currently available, e.g, the proposed 
$0.0032 per share credit in Tape B Securities. Since the proposed new 
pricing tier has a singular requirement for ETP Holders and Market 
Makers, i.e., providing an increased ADV over the ETP Holder's or 
Market Maker's baseline ADV, the Exchange believes that the proposed 
new pricing tier would provide an incentive for ETP Holders and Market 
Makers to meet this higher step up tier requirement by directing more 
of their order flow to the Exchange in order to receive the higher 
credit.
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.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes the Step Up Tier 4 pricing tier will serve as 
an incentive to 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. The 
Exchange believes the proposed pricing tier, which adopts a higher 
threshold, is reasonable and equitable because it would allow ETP 
Holders and Market Makers that directly execute providing ADV per month 
that is an increase of no less than 0.70% of US CADV to receive 
increased credits that were not previously available. Moreover, the 
addition of the Step Up Tier 4 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. 
The Exchange believes that the proposed new Step Up Tier 4 is not 
unfairly discriminatory because it is open to all ETP Holders and 
Market Makers, on an equal basis, that add liquidity at or below the 
proposed Step Up Tier 4 requirement. Further, the Exchange believes the 
proposed pricing tier would incentivize ETP Holders and Market Makers 
that meet the current Tier 1 requirement of 0.70% of US CADV to send 
more of their orders to the Exchange to qualify for increased credits 
under the proposed new Step Up Tier 4 pricing tier. The proposed 
pricing tier would also serve as an incentive to ETP Holders and Market 
Makers that do not currently meet the requirement of other pricing 
tiers on the Exchange to increase the level of orders sent directly to 
NYSE Arca in order to qualify for the proposed new pricing tier and 
receive the higher credits associated with Step Up Tier 4. The proposed 
pricing tier would apply equally to all ETP Holders and Market Makers 
as each would be required to execute providing ADV per month that is an 
increase of no less than 0.70% of US CADV over their January baseline 
taken as a percentage of US CADV, regardless of whether an ETP Holder 
or Market Maker currently meets the requirement of another pricing 
tier.
    The Exchange believes that the proposed fee 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.
    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,\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 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.
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    \9\ 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

[[Page 10350]]

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) \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.
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 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) \12\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \12\ 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-2019-10 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-2019-10. 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 website (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 website 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. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NYSEARCA-2019-10, and should be 
submitted on or before April 10, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-05210 Filed 3-19-19; 8:45 am]
 BILLING CODE 8011-01-P