[Federal Register Volume 85, Number 81 (Monday, April 27, 2020)]
[Notices]
[Pages 23418-23421]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-08809]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88709; File No. SR-NYSEARCA-2020-33]


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

April 21, 2020.
    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 April 14, 2020, NYSE Arca, Inc. (``NYSE Arca'' or the 
``Exchange'') 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 Fees and 
Charges (``Fee Schedule'') to (1) eliminate an alternative method to 
qualify for Tier 2, (2) eliminate the incremental credit applicable 
under Tape B Tier 2, and (3) eliminate the Cross-Asset Tier 1 and Tape 
C Tier 3 pricing tiers. The Exchange proposes to implement the fee 
changes effective May 1, 2020. 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

[[Page 23419]]

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 (1) eliminate an 
alternative method to qualify for Tier 2, (2) eliminate the incremental 
credit applicable under Tape B Tier 2, and (3) eliminate the Cross-
Asset Tier 1 and Tape C Tier 3 pricing tiers. The Exchange proposes to 
implement the fee changes effective May 1, 2020.
    ETP Holders \4\ currently qualify for Tier 2 fees and credits by 
providing liquidity an average daily share volume per month of 0.30% or 
more, but less than 0.70% of US consolidated average daily volume (``US 
CADV'').\5\ In June 2016, the Exchange adopted an alternative way for 
ETP Holders to qualify for Tier 2 fees and credits. Pursuant to the 
alternative method, an ETP Holder could also qualify for Tier 2 fees 
and credits if the ETP Holder provides liquidity of 0.10% or more of 
the US CADV per month, and is affiliated with an OTP Holder or OTP Firm 
that provides an ADV of electronic posted Customer and Professional 
Customer executions in all issues on NYSE Arca Options (excluding mini 
options) of at least 1.50% of total Customer equity and ETF option ADV 
as reported by The Options Clearing Corporation (``OCC'').\6\ The 
Exchange proposes to eliminate the alternative method for ETP Holders 
to qualify for Tier 2 fees and credits and remove it from the Fee 
Schedule. The Exchange has observed that historically, few ETP Holders 
have qualified under the alternative method, with little associated 
volume, and the alternative method has not served to meaningfully 
increase activity on the Exchange or improve the quality of the market. 
Since July 2019, no ETP Holder affiliated with an OTP Holder or OTP 
Firm has qualified for Tier 2 fees and credits under the alternative 
method.\7\ The Exchange is not proposing any other change to the fees 
and credits applicable under Tier 2.
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    \4\ All references to ETP Holders in connection with this 
proposed fee change include Market Makers.
    \5\ 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.
    \6\ See Securities Exchange Act Release No. 78065 (June 14, 
2016), 81 FR 39976 (June 20, 2016) (SR-NYSEArca-2016-85).
    \7\ There are currently 53 firms that are both ETP Holders and 
OTP Holders.
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    Additionally, in June 2018, the Exchange adopted an incremental 
credit under Tape B Tier 2 pricing tier pursuant to which ETP Holders 
can receive an incremental credit of $0.0001 per share for orders that 
provide liquidity to the order book in Tape B securities when such ETP 
Holder meets the requirements of Tape B Tier 2 and executes adding ADV 
in Tape B securities during a billing month equal to at least 0.40% of 
Tape B CADV over the ETP Holder's Q1 2018 Tape B adding ADV taken as a 
percentage of Tape B CADV.\8\ The Exchange proposes to eliminate the 
incremental credit applicable under Tape B Tier 2 and remove it from 
the Fee Schedule. Since July 2019, no ETP Holder has qualified for the 
incremental credit under Tape B Tier 2.\9\ The Exchange is not 
proposing any other change to the fees and credits applicable under 
Tape B Tier 2.
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    \8\ See Securities Exchange Act Release No. 83418 (June 12, 
2018), 83 FR 28282 (June 18, 2018) (SR-NYSEArca-2018-41).
    \9\ There are currently 5 ETP Holders that could qualify for the 
incremental credit under Tape B Tier 2.
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    Finally, the Exchange proposes to eliminate the Cross-Asset Tier 1 
and the Tape C Tier 3 pricing tiers.
    Under Cross-Asset Tier 1, ETP Holders can receive a per share 
credit of $0.0030 per share in Tape A, Tape B and Tape C securities 
when an ETP Holder (1) provides liquidity of 0.30% or more of the US 
CADV per month, (2) is affiliated with an OTP Holder or OTP Firm that 
provides an ADV of electronic posted Customer executions in all issues 
on NYSE Arca Options (excluding mini options) of at least 0.80% of 
total Customer equity and ETF option ADV as reported by OCC, and (3) 
executes an ADV of Retail Orders \10\ that provide liquidity during the 
month that is 0.10% or more of the US CADV.\11\
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    \10\ A Retail Order is an agency order that originates from a 
natural person and is submitted to the Exchange by an ETP Holder, 
provided that no change is made to the terms of the order to price 
or side of market and the order does not originate from a trading 
algorithm or any other computerized methodology. See Securities 
Exchange Act Release No. 67540 (July 30, 2012), 77 FR 46539 (August 
3, 2012) (SR-NYSEArca-2012-77).
    \11\ See Securities Exchange Act Release No. 76084 (October 6, 
2015), 80 FR 61529 (October 13, 2015) (SR-NYSEArca-2015-87).
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    Under Tape C Tier 3, ETP Holders can receive a credit of $0.0002 
per share in Tape C securities when an ETP Holder (1) directly executes 
providing volume in Tape C securities during the billing month that is 
equal to at least 0.40% of US Tape C CADV[thinsp]over the ETP Holder's 
fourth quarter 2016 Tape C Adding ADV taken as a percentage of Tape C 
CADV, and (2) executes providing volume in Tape B securities during the 
billing month that is equal to at least 3.5% of Tape B CADV. Under the 
Tape C Tier 3 pricing tier, ETP Holders are also charged a fee of 
$0.0029 per share for orders that take liquidity from the Book in Tape 
C securities.\12\
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    \12\ See Securities Exchange Act Release No. 80665 (May 11, 
2017), 82 FR 22687 (May 17, 2017) (SR-NYSEArca-2017-51).
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    The Exchange proposes to eliminate each of the Cross-Asset Tier 1 
and Tape C Tier 3 pricing tiers and remove it from the Fee Schedule 
because each of the pricing tiers have been underutilized by ETP 
Holders. The Exchange has observed that historically, few ETP Holders 
have qualified for the fees and credits under each of these pricing 
tiers. These pricing tiers have not served to meaningfully increase 
activity on the Exchange or improve the quality of the market. Since 
July 2019, not a single ETP Holder has qualified under any of the two 
pricing tiers that the Exchange proposes to eliminate.\13\
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    \13\ As noted above, there are currently 53 firms that are both 
ETP Holders and OTP Holders that could qualify for the Cross-Asset 
Tier 1 pricing tier and 2 ETP Holders that could qualify for the 
Tape C Tier 3 pricing tier.
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    With the proposed elimination of Cross-Asset Tier 1, the Exchange 
proposes to rename current Cross-Asset Tier 2 as Cross-Asset Tier 1 and 
rename current Cross-Asset Tier 3 as 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,\14\ in general, and furthers the 
objectives of Sections 6(b)(4) and(5) of the Act,\15\ in particular, 
because it provides for the equitable allocation of reasonable dues, 
fees, and other charges among its members,

[[Page 23420]]

issuers and other persons using its facilities and does not unfairly 
discriminate between customers, issuers, brokers or dealers.
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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed rule change to eliminate 
the alternative method to qualify for Tier 2, eliminate the incremental 
credit under Tape B Tier 2, and eliminate the Cross-Asset Tier 1 and 
Tape C Tier 3 pricing tiers is reasonable because each of the pricing 
tiers that are the subject of this proposed rule change have been 
underutilized and have generally not incentivized ETP Holders to bring 
liquidity and increase trading on the Exchange. Since July 2019, no ETP 
Holder has availed itself of any of the pricing tiers that the Exchange 
is proposing to eliminate. The Exchange does not anticipate any ETP 
Holder in the near future to qualify for any of the tiers that are the 
subject of this proposed rule change. The Exchange believes it is 
reasonable to eliminate requirements and credits, and even entire 
pricing tiers when such incentives become underutilized. The Exchange 
believes eliminating underutilized incentive programs would also 
simplify the Fee Schedule. The Exchange further believes that removing 
reference to the pricing tiers that the Exchange proposes to eliminate 
from the Fee Schedule would also add clarity to the Fee Schedule. The 
Exchange believes that eliminating requirements and credits, and even 
entire pricing tiers from the Fee Schedule when such incentives become 
ineffective is equitable and not unfairly discriminatory because the 
requirements, and credits, and even entire pricing tiers would be 
eliminated in their entirety and would no longer be available to any 
ETP Holder.
    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,\16\ 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.
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    \16\ 15 U.S.C. 78f(b)(8).
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    Intramarket Competition. The Exchange's proposal to eliminate 
certain requirements and credits, and pricing tiers in their entirety, 
will not place any undue burden on intramarket competition that is not 
necessary or appropriate in furtherance of the purposes of the Act 
given that, since July 2019, not a single ETP Holder has qualified for 
any of the fees and credits under any of the pricing tiers that are the 
subject of this proposed rule change. To the extent the proposed rule 
change places a burden on competition, any such burden would be 
outweighed by the fact that none of the pricing tiers proposed for 
deletion have served their intended purpose of incentivizing ETP 
Holders to more broadly participate on the Exchange. Moreover, ETP 
Holders can choose to trade on other venues to the extent they believe 
that the credits provided are too low or the qualification criteria are 
not attractive.
    Intermarket Competition. The Exchange believes the proposed rule 
change does not impose any burden on intermarket competition that is 
not necessary or appropriate in furtherance of the purposes of the Act. 
The Exchange operates in a highly competitive market in which market 
participants can readily choose to send their orders to other exchanges 
and off-exchange venues if they deem fee levels at those other venues 
to be more favorable. Market share statistics provide ample evidence 
that price competition between exchanges is fierce, with liquidity and 
market share moving freely from one execution venue to another in 
reaction to pricing changes. In such an environment, the Exchange must 
continually adjust its fees and rebates to remain competitive with 
other exchanges and with off-exchange venues. 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 does not believe this proposed fee change would impose any 
burden on intermarket competition.

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) \17\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \18\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 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) \19\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \19\ 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-2020-33 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-2020-33. 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.

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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-2020-33 and should 
be submitted on or before May 18, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-08809 Filed 4-24-20; 8:45 am]
 BILLING CODE 8011-01-P