[Federal Register Volume 85, Number 86 (Monday, May 4, 2020)]
[Notices]
[Pages 26510-26513]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-09375]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88764; File No. SR-NYSEARCA-2020-35]


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

April 28, 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 17, 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 its Schedule of Fees and Charges to 
adopt listing and annual fees for Exchange-Traded Fund Shares listed 
under recently adopted Rule 5.2-E(j)(8). 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,

[[Page 26511]]

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 its Schedule of Fees and Charges to 
adopt listing fees and annual fees for Exchange-Traded Fund Shares 
listed under recently adopted Rule 5.2-E(j)(8) (``Fund Shares'').
    The proposed changes respond to the current extremely competitive 
environment for ETP listings in which issuers can readily favor 
competing venues or transfer their listings if they deem fee levels at 
a particular venue to be excessive, or discount opportunities available 
at other venues to be more favorable. As described below, the Exchange 
does not propose different pricing for Fund Shares. Rather, the 
Exchange proposes to incorporate Fund Shares into the existing listing 
and annual fees charged by the Exchange for Exchange Traded Products 
(``ETPs'').\4\
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    \4\ ``Exchange Traded Products'' are defined in footnote 3 of 
the current Schedule of Fees and Charges. The Exchange proposes to 
modify the definition to include Fund Shares.
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    The proposed changes are designed to incentivize issuers to list 
new Fund Shares, transfer existing products to the Exchange, and 
maintain listings on the Exchange, which the Exchange believes will 
enhance competition both among issuers and listing venues, to the 
benefit of investors.
    The Exchange proposes to implement the fee changes effective April 
17, 2020.
Proposed Rule Change
    On April 13, 2020, the Commission approved Rule 5.2-E(j)(8).\5\ 
Rule 5.2-E(j)(8) establishes generic listing standards for Fund Shares, 
which are Derivative Securities Products permitted to operate in 
reliance on Rule 6c-11 under the Investment Company Act of 1940.\6\ In 
order to specify pricing for Fund Shares, the Exchange proposes the 
following changes to the Schedule of Fees and Charges.
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    \5\ See Securities Exchange Act Release No. 88625 (April 13, 
2020) (SR-NYSEArca-2019-81).
    \6\ 15 U.S.C. 80a-1.
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Listing Fees
    Listing fees for ETPs are set forth in section 5.a. of the Schedule 
of Fees and Charges. Currently, with the exception of various products 
defined as ``Generically-Listed Exchange Traded Products,'' \7\ the 
Exchange charges a $7,500 listing fee. The Exchange currently does not 
charge a listing fee for listing products pursuant to Rule 19b-4(e) 
under the Act if they satisfy all criteria--referred to as ``generic'' 
listing criteria--in the applicable Exchange ETP rule. The Schedule of 
Fees and Charges refers to these as ``Generically-Listed Exchange 
Traded Products.''
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    \7\ ``Generically-Listed Exchange Traded Products'' currently 
include Investment Company Units, Portfolio Depositary Receipts, 
Managed Fund Shares, and Currency Trust Shares that are listed on 
the Exchange pursuant to Rule 19b-4(e) under the Act, and for which 
a proposed rule change pursuant to Section 19(b) of the Act is not 
required to be filed with the Commission.
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    The Exchange proposes to include Fund Shares in the definition of 
``Generically-Listed Exchange Traded Products'' in section 5.a. of the 
Schedule of Fees and Charges and, accordingly, not charge a listing fee 
for Fund Shares.
    The Exchange believes that, for purposes of listing fees, it would 
be appropriate to treat Fund Shares like other ``Generically-Listed 
Exchange Traded Products'' and not charge a listing fee because doing 
so would correlate the listing fee applicable to an issuer of ETPs to 
the resources required to list and maintain those ETPs on the Exchange. 
Specifically, since Fund Shares are eligible to list under the listing 
standards for ETFs that are permitted to operate in reliance on Rule 
6c-11 pursuant to Rule 5.2-E(j)(8), Fund Shares would not require a 
separate proposed rule change pursuant to Rule 19b-4 before listing and 
trading on the Exchange. As such, Fund Shares will not incur the 
additional time and resources required by Exchange staff to prepare and 
review rule filings and to communicate with issuers and Commission 
staff in connection therewith necessary for ETPs listed and traded 
pursuant to a rule change.
Annual Fees
    Annual fees for ETPs are based on the number of shares outstanding 
per issuer.\8\ Currently, as set forth in section 6.a. of the Schedule 
of Fees and Charges, the Exchange charges the following annual fees for 
listed ETPs, with the exception of Managed Fund Shares and Managed 
Trust Securities:
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    \8\ Annual fees are assessed each January in the first full 
calendar year following the year of listing. The aggregate total 
shares outstanding is calculated based on the total shares 
outstanding as reported by the Fund issuer or Fund ``family'' in its 
most recent periodic filing with the Commission or other publicly 
available information. Annual fees apply regardless of whether any 
of these Funds are listed elsewhere.

------------------------------------------------------------------------
       Number of shares  outstanding  (each issue)          Annual fee
------------------------------------------------------------------------
Less than 25 million....................................          $7,500
25 million up to 49,999,999.............................          10,000
50 million up to 99,999,999.............................          15,000
100 million up to 249,999,999...........................          20,000
250 million up to 499,999,999...........................          25,000
500 million and over....................................          30,000
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    As set forth in section 6.b. of the Schedule of Fees and Charges, 
the Exchange charges the following annual fees for Managed Fund Shares 
and Managed Trust Securities

------------------------------------------------------------------------
       Number of shares  outstanding  (each issue)          Annual fee
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Less than 25 million....................................         $10,000
25 million up to 49,999,999.............................          12,500
50 million up to 99,999,999.............................          20,000
100 million up to 249,999,999...........................          25,000
250 million and over....................................          30,000
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    The Exchange proposes to charge annual fees for Fund Shares that 
track how the Exchange currently charges annual fees. Accordingly, for 
Fund Shares that track an index, the Exchange proposes to charge the 
annual fees set forth in section 6.a. of the Schedule of Fees and 
Charges. For Fund Shares that do not track an index, and are more akin 
to Managed Fund Shares under the current listing rules, the Exchange 
proposes to charge the annual fees set forth in section 6.b. of the 
Schedule of Fees and Charges.
    The Exchange believes that it is appropriate to charge Fund Shares 
that track an index the annual fees set forth in section 6.a of the 
Schedule of Fees and Charges. The relatively lower annual fees charged 
for ETPs that are not Managed Fund Shares and Managed Trust Securities 
better correlate with the ongoing Exchange costs associated with 
listing and trading Fund Shares that track an index and are not 
actively managed, including costs related to issuer services, listing 
administration, product development and regulatory oversight.
    For similar reasons, the Exchange believes that charging Fund 
Shares that do not track an index the current annual fees applicable to 
Managed Fund Shares and Managed Trust Securities would be appropriate 
because those annual fees better correlate with higher Exchange costs 
associated with similar actively managed products such as Managed Fund 
Shares and Managed Trust Securities, including costs related to issuer 
services, listing administration,

[[Page 26512]]

product development and regulatory oversight.
    Finally, as noted above, the Exchange proposes to add Fund Shares 
to current footnote 3 which defines the term ``Exchange Traded 
Products'' for purposes of the Schedule of Fees and Charges.
    Each of the proposed changes described above are not otherwise 
intended to address 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,\9\ in general, and furthers the 
objectives of Sections 6(b)(4) and (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.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4) & (5).
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The Proposed Change Is Reasonable
    As discussed above, the Exchange operates in a highly competitive 
market for the listing of ETPs. Specifically, ETP issuers can readily 
favor competing venues or transfer listings if they deem fee levels at 
a particular venue to be excessive, or discount opportunities available 
at other venues to be more favorable. The Commission has repeatedly 
expressed its preference for competition over regulatory intervention 
in determining prices, products, and services in the securities 
markets. Specifically, in Regulation NMS, the Commission highlighted 
the importance of market forces in determining prices and SRO revenues 
and, also, recognized that current regulation of the market system 
``has been remarkably successful in promoting market competition in its 
broader forms that are most important to investors and listed 
companies.'' \11\
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    \11\ See Regulation NMS, 70 FR at 37499.
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    The Exchange believes that the ongoing competition among the 
exchanges with respect to new listings and the transfer of existing 
listings among competitor exchanges demonstrates that issuers can 
choose different listing markets in response to fee changes. 
Accordingly, competitive forces constrain exchange listing fees. Stated 
otherwise, changes to exchange listing fees can have a direct effect on 
the ability of an exchange to compete for new listings.
    Given this competitive environment, the proposal represents a 
reasonable attempt to establish pricing for ETPs listed under recently 
adopted Rule 5.2-E(j)(8).
    The Exchange currently does not charge listing fees for ETPs that 
satisfy generic listing criteria set forth in its rules. The Exchange 
believes that it is reasonable to also not charge a listing fee to Fund 
Shares that meet the listing criteria set forth in Rule 5.2-E(j)(8). As 
noted, not charging a listing fee to another type of ETP that can list 
without a rule filing pursuant to Rule 19b-4 would correlate the 
listing fee to the Exchange resources required to list and maintain 
such ETPs. Products that list without a rule filing do not entail the 
additional time and resources required for ETPs that require a rule 
filing.
    Annual fees for ETPs are based on the number of shares outstanding 
per issuer, and then are further differentiated based on whether the 
ETP is index based or not, with higher annual fees for ETPs that are 
not based on an index. The Exchange believes that it is reasonable to 
charge annual fees for Fund Shares based on that same differentiation. 
The Exchange believes that charging Fund Shares that track an index the 
same annual fees the Exchange currently charges other ETPs that are not 
Managed Fund Shares and Managed Trust Securities would be reasonable 
because those relatively lower annual fees better correlate with the 
ongoing Exchange costs associated with listing and trading an ETP that 
tracks an index, including costs related to issuer services, listing 
administration and product development. Further, the Exchange believes 
that charging Fund Shares that do not track an index the current annual 
fees applicable to Managed Fund Shares and Managed Trust Securities, 
which are also actively managed products, would be reasonable because 
those annual fees better correlate with the higher Exchange costs for 
listing and trading active Fund Shares that track an index, including 
costs related to issuer services, listing administration, product 
development and regulatory oversight.
The Proposal Is an Equitable Allocation of Fees
    The Exchange believes its proposal equitably allocates its fees 
among its market participants. In the prevailing competitive 
environment, issuers can readily favor competing venues or transfer 
listings if they deem fee levels at a particular venue to be excessive, 
or discount opportunities available at other venues to be more 
favorable.
    The proposed listing and annual fees for Fund Shares are equitable 
because the proposed increased annual fees would apply uniformly to all 
issuers. Moreover, the proposed fees would be equitably allocated among 
issuers because issuers would continue to qualify for the listed fee 
based on issuing ETPs that are Fund Shares and for the annual fee based 
on the number of shares outstanding and under criteria applied 
uniformly to all such issuers.
    The proposal neither targets nor will it have a disparate impact on 
any particular category of market participant. The proposed annual fees 
would be applicable to all existing and potential issuers of Fund 
Shares uniformly and in equal measure.
The Proposal Is Not Unfairly Discriminatory
    The Exchange believes that the proposal is not unfairly 
discriminatory. In the prevailing competitive environment, issuers are 
free to list elsewhere if they believe that alternative venues offer 
them better value.
    The Exchange believes it is not unfairly discriminatory to offer 
the same listing fee for Fund Shares as are currently applicable to 
products listed under the Exchange's other generic listing standards. 
As noted, products that list without a rule filing are not charged a 
listing fee.
    Further, the Exchange believes it is not unfairly discriminatory to 
apply the same fees applicable to ETPs with the exception of Managed 
Fund Shares and Managed Trust Securities to Fund Shares that track and 
index, and to apply the same fees applicable to Managed Fund Shares and 
Managed Trust Securities to Fund Shares that do not track and index, 
because the proposed fees would be offered on an equal basis to all 
issuers listing Fund Shares on the Exchange. Moreover, the proposed 
annual fees for Fund Shares would apply to issuers in the same manner 
as the current annual fees for ETPs and Managed Fund Shares and Managed 
Trust Securities.
    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,\12\ the Exchange 
believes that the

[[Page 26513]]

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, as discussed above, the Exchange believes that the proposed 
changes would encourage competition because it would establish listing 
and annual fees for Fund Shares, thereby encouraging issuers to develop 
and list additional products on the Exchange that the Exchange believes 
will enhance competition both among issuers and listing venues, to the 
benefit of investors. The proposal also ensures that the fees charged 
by the Exchange accurately reflect the services provided and benefits 
realized by listed issuers. The market for listing services is 
extremely competitive. Issuers have the option to list their securities 
on these alternative venues based on the fees charged and the value 
provided by each listing exchange. Because issuers have a choice to 
list their securities on a different national securities exchange, the 
Exchange does not believe that the proposed fee changes impose a burden 
on competition.
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    \12\ 15 U.S.C. 78f(b)(8).
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    Intramarket Competition. The proposed changes are designed to 
attract additional listings to the Exchange by establishing listing and 
annual fees for an ETPs listed under a new rule. The Exchange believes 
that the proposed changes would continue to incentivize issuers to 
develop and list new products, transfer existing products to the 
Exchange, and maintain listings on the Exchange. The proposed fees and 
discounts would be available to all issuers, and, as such, the proposed 
change would not impose a disparate burden on competition among market 
participants on the Exchange.
    Intermarket Competition. The Exchange operates in a highly 
competitive listings market in which issuers can readily choose 
alternative listing venues. In such an environment, the Exchange must 
adjust its fees and discounts to remain competitive with other 
exchanges competing for the same listings. Because competitors are free 
to modify their own fees and discounts in response, and because issuers 
may readily adjust their listing decisions and practices, the Exchange 
does not believe its proposed fee change can impose any burden on 
intermarket competition. As such, the proposal is a competitive 
proposal designed to enhance pricing competition among listing venues 
and implement pricing for Fund Shares to reflect the revenue and 
expenses associated with listing on the Exchange.

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-2020-35 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-2020-35. 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-2020-35, and should be 
submitted on or before May 26, 2020.

    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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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-09375 Filed 5-1-20; 8:45 am]
BILLING CODE 8011-01-P