[Federal Register Volume 85, Number 179 (Tuesday, September 15, 2020)]
[Notices]
[Pages 57274-57276]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-20257]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89797; File No. SR-NYSEArca-2020-81]


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 9, 2020.
    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 September 1, 2020, NYSE Arca, Inc. (``NYSE Arca'' or ``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 (1) eliminate an alternative method to 
qualify for the Tape B Tier 1 pricing tier, and (2) eliminate the 
Retail Order Step-Up Tier 1 pricing tier. The Exchange proposes to 
implement the fee changes effective September 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 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 to (1) eliminate an 
alternative method to qualify for the Tape B Tier 1 pricing tier, and 
(2) eliminate the Retail Order Step-Up Tier 1 pricing tier. The 
Exchange proposes to implement the fee changes effective September 1, 
2020.
    ETP Holders \3\ currently qualify for a Tape B Tier 1 credit of 
$0.0030 \4\ per share when, on a daily basis, measured monthly, they 
directly execute providing volume in Tape B securities that is equal to 
at least 1.50% of Tape B US consolidated average daily volume (``US 
CADV'') \5\ for the billing month.\6\ In February 2020, the Exchange 
adopted an alternative method for ETP Holders to qualify for the Tape B 
Tier 1 credit.\7\ In March 2020, the Exchange amended the percentage 
CADV requirement applicable under the alternative method.\8\ Pursuant 
to the alternative method, an ETP Holder could qualify for the Tape B 
Tier 1 credit if the ETP Holder is affiliated with an OTP Holder or OTP 
Firm that provides an ADV of electronic posted executions for the 
account of a market maker in all issues on NYSE Arca Options (excluding 
mini options) of at least 0.55% of total Customer equity and ETF option 
ADV as reported by The Options Clearing Corporation (``OCC'') and the 
ETP Holder directly executes providing volume in Tape B securities 
during the billing month that is equal to
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    \3\ All references to ETP Holders in connection with this 
proposed fee change include Market Makers.
    \4\ Under the Basic Rate, ETP Holders receive a credit of 
$0.0020 per share for Tape B orders that provide liquidity to the 
Book.
    \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. See Fee Schedule, 
footnote 3.
    \6\ See Securities Exchange Act Release No. 76084 (October 6, 
2015), 80 FR 61529 (October 13, 2015) (SR-NYSEArca-2015-87).
    \7\ See Securities Exchange Act Release No. 88194 (February 13, 
2020), 85 FR 9820 (February 20, 2020) (SR-NYSEArca-2020-12).
    \8\ See Securities Exchange Act Release No. 88436 (March 20, 
2020), 85 FR 17112 (March 26, 2020) (SR-NYSEArca-2020-21).
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     at least 1.00% of US Tape B CADV for the billing month of 
March, April and May 2020

[[Page 57275]]

     at least 1.15% of US Tape B CADV for the billing month of 
June, July and August 2020
     at least 1.25% of US Tape B CADV for the billing month of 
September 2020 and each billing month thereafter.
    The Exchange proposes to eliminate the alternative method for ETP 
Holders to qualify for the Tape B Tier 1 credit and remove it from the 
Fee Schedule. The Exchange has observed that just one ETP Holder has 
qualified under the alternative method since it was adopted. Further, 
since March 2020, no ETP Holder affiliated with an OTP Holder or OTP 
Firm has qualified for the Tape B Tier 1 credit under the alternative 
method.\9\ Given that the alternative method has not served to 
meaningfully increase activity on the Exchange or improve the quality 
of the market, the Exchange has determined to eliminate it from the Fee 
Schedule. The Exchange is not proposing any other change to Tape B Tier 
1 pricing tier.
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    \9\ There are currently 53 firms that are both ETP Holders and 
OTP Holders.
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    Additionally, the Exchange proposes to eliminate the Retail Order 
Step-Up Tier 1 pricing tier.
    Currently, to qualify for the Retail Order Step-Up Tier 1 credit, 
an ETP Holder must execute an average daily volume (ADV) per month of 
Retail Orders \10\ with a time-in-force of Day that add or remove 
liquidity that is an increase of 0.12% or more of the US CADV above its 
April 2018 ADV taken as a percentage of US CADV.\11\ If an ETP Holder 
meets the Retail Order Step-Up Tier 1 requirement, such ETP Holder is 
eligible to earn a credit of $0.0033 per share for Retail Orders that 
provide displayed liquidity to the Book in Tape A, Tape B and Tape C 
securities, and is not charged a fee for Retail Orders with a time-in-
force of Day that remove liquidity.
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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. 83268 (May 17, 
2018), 83 FR 23983 (May 23, 2018) (SR-NYSEArca-2018-34).
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    The Exchange proposes to eliminate the Retail Order Step-Up Tier 1 
pricing tier and remove it from the Fee Schedule because the pricing 
tier has been underutilized by ETP Holders. The Exchange notes that 
another current pricing tier, Retail Order Step-Up Tier 3, has a lower 
requirement and provides a higher credit than Retail Order Step-Up Tier 
1.\12\ As a result, no ETP Holders have qualified for the credit under 
the Retail Order Step-Up Tier 1 pricing tier since the Exchange adopted 
the Retail Order Step-Up Tier 3. Therefore, the Exchange has determined 
to eliminate the Retail Order Step-Up Tier 1 from the Fee Schedule.
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    \12\ See Securities Exchange Act Release No. 87994 (January 16, 
2020), 85 FR 3955 (January 23, 2020) (SR-NYSEArca-2020-05).
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    With the proposed elimination of Retail Order Step-Up Tier 1, the 
Exchange proposes to rename current Retail Order Step-Up Tier 2 as 
Retail Order Step-Up Tier 1, rename current Retail Order Step-Up Tier 3 
as Retail Order Step-Up Tier 2, and rename current Retail Order Step-Up 
Tier 4 as Retail Order Step-Up Tier 3.
    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,\13\ in general, and furthers the 
objectives of Sections 6(b)(4) and(5) of the Act,\14\ 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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    \13\ 15 U.S.C. 78f(b).
    \14\ 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 the Tape B Tier 1 pricing tier, 
and eliminate the Retail Order Step-Up Tier 1 pricing tier 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 March 2020, no ETP Holder has availed itself of the 
alternative method to qualify for the Tape B Tier 1 pricing tier. 
Similarly, no ETP Holder has qualified for Retail Order Step-Up Tier 1 
since the Exchange adopted the Retail Order Step-Up Tier 3 in January 
2020, which provides a higher credit and has a lesser requirement to 
qualify. 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,\15\ 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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    \15\ 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 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 for a number of months. 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

[[Page 57276]]

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) \16\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \17\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 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) \18\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \18\ 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-2020-81 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-2020-81. 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 offices 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-2020-81, and should be 
submitted on or before October 6, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-20257 Filed 9-14-20; 8:45 am]
BILLING CODE 8011-01-P