[Federal Register Volume 86, Number 19 (Monday, February 1, 2021)]
[Notices]
[Pages 7754-7757]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-02003]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90988; File No. SR-NYSEArca-2021-04]


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

January 26, 2021.
    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 January 12, 2021, 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 
establish annual fees for Exchange Traded Products that have a maturity 
date and for products that are based on an expected return over a 
specific outcome period. The Exchange proposes to implement the fee 
changes effective January 12, 2021.\4\ 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.
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    \4\ The Exchange originally filed to amend the Schedule of Fees 
and Charges on December 23, 2020 (SR-NYSEArca-2020-117). SR-
NYSEArca-2020-117 was withdrawn and replaced by SR-NYSEArca-2020-
118. SR-NYSEArca-2020-117 was subsequently withdrawn and replaced by 
this filing.
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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 its Schedule of Fees and Charges to 
establish annual fees for Exchange Traded Products (``ETPs'') \5\ that 
have a maturity date and ETPs that are based on an expected return over 
a specific outcome period. As proposed, these types of ETPs would be 
eligible for the current annual fees for products that track an index.
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    \5\ ``Exchange Traded Products'' is defined in footnote 3 of the 
current Schedule of Fees and Charges.
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    The proposed change responds to the current extremely competitive 
environment for ETPs 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. The Exchange's current annual 
fees for ETPs is based on the number of shares outstanding per issuer 
and provide incentives for issuers to list multiple series of certain 
securities on the Exchange. In response to the competitive environment 
for listings, the Exchange adopted a competitive pricing structure that 
combines higher minimum annual fees for certain securities with 
discounts for issuers that list multiple ETPs. The proposed change is 
designed to offer annual listing fees for ETPs that have a maturity 
date and ETPs that provide an expected return over a specific outcome 
period based on the annual fees for ETPs that track an index.
    The Exchange proposes to implement the fee changes effective 
January 12, 2021.
Proposed Rule Change
    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.
    The Exchange proposes to offer annual listing fees for two types of 
ETPs: (1) ETPs that have a specific maturity date, such as a fixed 
income ETP that primarily holds a diversified portfolio of fixed income 
bonds that provides regular interest payments and distributes a final 
payout in its stated maturity year; and (2) ETPs that provide an 
expected return over a specific outcome period, which are designed to 
provide a particular set of returns over a specific period based on the 
performance of an underlying instrument during the ETP's outcome 
period. Such ETPs include a buffer strategy that seeks to provide 
investment returns that match the gains of a particular index(s) up to 
a maximum annual return, or cap level, while guarding against declines 
in the same underlying index(s), a buffer level, over a particular time 
period. Currently, both types of ETPs are eligible for the annual fees 
set forth in section 6.b. of the Schedule of Fees and Charges, which 
are applicable to Managed Fund Shares, Managed Trust Securities, Active 
Proxy Portfolio Shares, Managed Portfolio Shares and Exchange-Traded 
Fund Shares listed under Rule 5.2-E(j)(8) that do not track an index. 
Generally, the products eligible for fees under section 6.b. of the 
Schedule of Fees and Charges entail more active issuer management and 
therefore incur higher Exchange costs, including costs related to 
issuer services, listing administration, product development and 
regulatory oversight.
    The Exchange proposes that ETPs that have a maturity date and ETPs 
that provide an expected return over a specific outcome period would be 
eligible for the lower fees set forth in section 6.a. of the Schedule 
of Fees and

[[Page 7755]]

Charges for products that track an index, as follows:

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        Number of shares outstanding (each issue)           Annual fee
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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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    An ETP designed to provide a particular set of returns over a 
specific outcome period utilizing a buffer strategy as described above 
is designed to provide investment returns that match the gains of a 
particular index(s) up to a maximum cap level while guarding against 
declines in the same underlying index(s) below a certain buffer level 
over a specified time period, which is very similar to how a fund based 
on an index operates. Moreover, an ETP with a maturity date designed to 
end on a specific date would not require the same open-ended commitment 
of Exchange resources as the more traditional types of actively managed 
products eligible for fees under section 6.b. of the Schedule of Fees 
and Charges that do not have a specified end date. Accordingly, the 
Exchange believes that the proposed lower fees are appropriate because 
ETPS that have a maturity date and that provide an expected return over 
a specific outcome period, like products that track an index, generally 
require the expenditure of less Exchange resources to support listing 
and administration. Charging lower fees for such products would thus 
more closely correlate the listing fee applicable to the issuer of ETPs 
to the costs associated with listing and trading such products, 
including costs related to issuer services, listing administration, 
product development and regulatory oversight. Structured products would 
continue to be charged annual fees under section 7 of the Schedule of 
Fees and Charges.
    The proposed change described above is 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,\6\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\7\ 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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    \6\ 15 U.S.C. 78f(b).
    \7\ 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 Exchange's current annual 
fees for ETPs are based on the number of shares outstanding per issuer 
and provide incentives for issuers to list multiple series of certain 
securities on the Exchange. 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.'' \8\
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    \8\ 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 and retain 
existing listings.
    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 lower annual fees for ETPs that are 
based on an index. As discussed above, the Exchange believes that it is 
reasonable to charge annual fees for ETPs that have a maturity date and 
ETPs that provide an expected return over a specific outcome period 
based on that same differentiation. The Exchange believes that, given 
the characteristics of such ETPs, charging the same, lower fees as the 
Exchange currently charges ETPs that track an index would be reasonable 
because those relatively lower annual fees better correlate with the 
generally lesser Exchange costs associated with listing and trading 
ETPs that track an index, including costs related to issuer services, 
listing administration and product development. Given the current 
competitive environment, the Exchange believes that the proposed change 
is a reasonable attempt to establish listing fees for products that, 
like products that track an index, require a decreased expenditure of 
Exchange resources to support listing and administration, thereby 
enhancing competition among issuers and listing venues. The Exchange 
also believes that lower annual fees may reduce the barriers to entry 
and incentivize enhanced competition among issuers of ETPs that have a 
maturity date and ETPs that provide an expected return over a specific 
outcome period. The proposed rule change reflects a competitive pricing 
structure designed to incentivize issuers to list new products and 
transfer existing products to the Exchange, which the Exchange believes 
will enhance competition both among ETP issuers and listing venues, to 
the benefit of investors.
The Proposal Is An Equitable Allocation of Fees
    The Exchange believes the 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 fees for ETPs that have a maturity date and 
ETPs that provide an expected return over a specific outcome period are 
equitable because the proposed 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 annual 
listing fee based on issuing ETPs that have a maturity date and that 
provide an expected return over a specific outcome period and for the 
annual fee based on the number of shares outstanding and under criteria 
applied uniformly to all such issuers. For the same reasons, the 
proposal neither targets nor will it have a disparate impact on any 
particular category of market participant.
The Proposal Is Not Unfairly Discriminatory
    The Exchange believes that the proposal is not unfairly 
discriminatory.

[[Page 7756]]

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 lower annual fees for products tracking an index to ETPs that have 
a maturity date and that provide an expected return over a specific 
outcome period because the proposed fees would apply to and potentially 
benefit all issuers equally. Further, the Exchange believes it is not 
unfairly discriminatory to apply the same fees applicable to ETPs that 
track an index to ETPs that have a maturity date and that provide an 
expected return over a specific outcome period because the proposed 
fees would be offered on an equal basis to all issuers listing such 
products on the Exchange. Moreover, the proposed annual fees would 
apply to issuers in the same manner as the current annual fees for ETPs 
that track an index.
    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, as discussed above, the Exchange believes 
that the proposed change would encourage competition by offering lower 
annual fees for ETPs that have a maturity date and that provide an 
expected return over a specific outcome period, thereby incentivizing 
issuers to list such products on the Exchange, thereby enhancing 
competition among issuers and listing venues, to the benefit of 
investors. The Exchange believes that lower annual fees may reduce the 
barriers to entry and incentivize enhanced competition among issuers of 
ETPs that have a maturity date and that provide an expected return over 
a specific outcome period. The proposed rule changes reflect a 
competitive pricing structure designed to incentivize issuers to list 
and transfer new products on the Exchange, which the Exchange believes 
will enhance competition both among ETP issuers and listing venues, to 
the benefit of investors. As noted, 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 change imposes a burden on 
competition.
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    \9\ 15 U.S.C. 78f(b)(8).
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    Intramarket Competition. The proposed change is a competitive 
pricing structure designed to encourage issuers to list and transfer 
ETPs that have a maturity date and ETPs that provide an expected return 
over a specific outcome period on the Exchange. The Exchange believes 
the proposal will enhance competition among ETP issuers, to the benefit 
of investors. The Exchange does not believe the proposed change would 
burden intramarket competition as it would apply to and potentially 
benefit all issuers equally and uniformly 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. The Exchange believes that 
such proposal will directly enhance competition among ETP listing 
venues by reducing the costs associated with listing on the Exchange 
for ETPs that have a maturity date and that provide an expected return 
over a specific outcome period, to the benefit of investors. As such, 
the proposal is a competitive proposal designed to enhance pricing 
competition among listing venues and implement pricing for listings 
that better reflects the revenue and expenses associated with listing 
these types of ETPs on the Exchange. 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 change can 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) \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-2021-04 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-2021-04. 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

[[Page 7757]]

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-2021-04 and should be submitted on or before February 22, 
2021.

    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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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-02003 Filed 1-29-21; 8:45 am]
BILLING CODE 8011-01-P