[Federal Register Volume 86, Number 241 (Monday, December 20, 2021)]
[Notices]
[Pages 72012-72016]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-27419]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-34-93770; File No. SR-NYSEArca-2021-103]


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

December 14, 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 December 1, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C.78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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 amend the criteria to qualify for the 
MPID Adding Tier pricing tier and adopt a per share credit for orders 
that provide liquidity in Tape B securities under the MPID Adding Tier. 
The Exchange proposes to implement the fee changes effective December 
1, 2021.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 amend the 
criteria to qualify for the MPID Adding Tier pricing tier and adopt a 
per share credit for orders that provide liquidity in Tape B securities 
under the MPID Adding Tier.
    The Exchange proposes to implement the fee changes effective 
December 1, 2021.
Background
    The Exchange operates in a highly competitive market. The 
Commission has repeatedly expressed its preference for competition over 
regulatory intervention in determining prices, products, and services 
in the securities markets. 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.'' \4\
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005) (File No. S7-10-04) (Final 
Rule) (``Regulation NMS'').
---------------------------------------------------------------------------

    While Regulation NMS has enhanced competition, it has also fostered 
a ``fragmented'' market structure where trading in a single stock can 
occur across multiple trading centers. When multiple trading centers 
compete for order flow in the same stock, the Commission has recognized 
that ``such competition can lead to the fragmentation of order flow in 
that stock.'' \5\ Indeed, equity trading is currently dispersed across 
16 exchanges,\6\ numerous alternative trading systems,\7\ and broker-
dealer internalizers and wholesalers, all competing for order flow. 
Based on publicly available information, no single exchange currently 
has more than 18%

[[Page 72013]]

market share.\8\ Therefore, no exchange possesses significant pricing 
power in the execution of equity order flow. More specifically, the 
Exchange currently has less than 12% market share of executed volume of 
equities trading.\9\
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 61358, 75 FR 3594, 
3597 (January 21, 2010) (File No. S7-02-10) (Concept Release on 
Equity Market Structure).
    \6\ See Cboe U.S Equities Market Volume Summary, available at 
https://markets.cboe.com/us/equities/market_share. See generally 
https://www.sec.gov/fast-answers/divisionsmarketregmrexchangesshtml.html.
    \7\ See FINRA ATS Transparency Data, available at https://otctransparency.finra.org/otctransparency/AtsIssueData. A list of 
alternative trading systems registered with the Commission is 
available at https://www.sec.gov/foia/docs/atslist.htm.
    \8\ See Cboe Global Markets U.S. Equities Market Volume Summary, 
available at http://markets.cboe.com/us/equities/market_share/.
    \9\ See id.
---------------------------------------------------------------------------

    The Exchange believes that the ever-shifting market share among the 
exchanges from month to month demonstrates that market participants can 
move order flow, or discontinue or reduce use of certain categories of 
products. While it is not possible to know a firm's reason for shifting 
order flow, the Exchange believes that one such reason is because of 
fee changes at any of the registered exchanges or non-exchange venues 
to which a firm routes order flow. With respect to non-marketable order 
flow that would provide liquidity on an Exchange against which market 
makers can quote, ETP Holders can choose from any one of the 16 
currently operating registered exchanges to route such order flow. 
Accordingly, competitive forces constrain exchange transaction fees 
that relate to orders that would provide liquidity on an exchange.
Proposed Rule Change
    Pursuant to the MPID Adding Tier pricing tier, the Exchange 
currently provides a per share credit for orders that provide liquidity 
in Tape A and Tape C securities. Specifically, to qualify for the 
pricing tier, an MPID is required to execute providing ADV in all 
securities that is at least 2 times more than its providing ADV in 2Q 
2021, as a percentage of CADV. A qualifying MPID receives a credit for 
providing liquidity in Tape A and Tape C securities of $0.0028 per 
share if the MPID has at least 4 million shares of providing ADV during 
the billing month, or $0.0029 per share if the MPID has at least 9 
million shares of providing ADV during the billing month. The Exchange 
currently does not provide any credit under the MPID Adding Tier for 
orders that provide liquidity in Tape B securities.
    With this proposed rule change, the Exchange proposes to adopt a 
per share credit for orders that provide liquidity in Tape B securities 
when an MPID executes providing ADV in all securities that is at least 
2 times more than its providing ADV in 2Q 2021, as a percentage of 
CADV. As proposed, a qualifying MPID would receive a credit for 
providing liquidity in Tape B securities of $0.0022 per share if the 
MPID has at least 4 million shares of providing ADV during the billing 
month. An MPID that has at least 9 million shares of providing ADV 
during the billing month would also receive a similar credit of $0.0022 
per share for providing liquidity in Tape B securities.
    Additionally, the Exchange proposes to rename the current MPID 
Adding Tier that offers a credit of $0.0028 per share in Tape A and 
Tape C securities and $0.0022 per share in Tape B securities as MPID 
Adding Tier 2, and proposes to rename the current MPID Adding Tier that 
offers a credit of $0.0029 per share in Tape A and Tape C securities 
and $0.0022 per share in Tape B securities as MPID Adding Tier 1.
    Finally, the Exchange proposes to adopt an alternative method to 
qualify for the renamed MPID Adding Tier 2. As proposed, to qualify for 
the renamed MPID Adding Tier 2 credit of $0.0028 per share for 
providing liquidity in Tape A and Tape C securities and $0.0022 per 
share for providing liquidity in Tape B securities, an MPID would be 
required to execute providing ADV in all securities that is at least 2 
times more than its providing ADV in 2Q 2021, as a percentage of CADV, 
and have at least 4 million shares of providing ADV during the billing 
month, or 2 million shares of providing ADV during the billing month in 
Tape B securities.
    The proposed rule change to adopt a new credit and an alternative 
method to qualify for the existing credits is designed to incentivize 
ETP Holders to increase liquidity-providing orders in Tape B securities 
they send to the Exchange, which would support the quality of price 
discovery on the Exchange and provide additional liquidity for incoming 
orders.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\10\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\11\ 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.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    As discussed above, the Exchange operates in a highly fragmented 
and competitive market. 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.'' \12\
---------------------------------------------------------------------------

    \12\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
---------------------------------------------------------------------------

    The Exchange believes that the ever-shifting market share among the 
exchanges from month to month demonstrates that market participants can 
shift order flow, or discontinue to reduce use of certain categories of 
products, in response to fee changes. With respect to non-marketable 
orders which provide liquidity on an Exchange, ETP Holders can choose 
from any one of the 16 currently operating registered exchanges to 
route such order flow. Accordingly, competitive forces reasonably 
constrain exchange transaction fees that relate to orders that would 
provide displayed liquidity on an exchange. Stated otherwise, changes 
to exchange transaction fees can have a direct effect on the ability of 
an exchange to compete for order flow.
    In particular, the Exchange believes the proposed rule change is 
reasonable because it provides an additional opportunity and amends an 
existing opportunity for ETP Holders to receive an enhanced rebate on 
qualifying orders in a manner that incentivizes increased order flow on 
the Exchange's equities platform. The Exchange believes the proposed 
new credit of $0.0022 per share for orders that provide liquidity in 
Tape B securities under the MPID Adding Tier pricing tier is a 
reasonable means to encourage ETP Holders to increase their liquidity 
providing orders in Tape B securities each month over a predetermined 
baseline by offering liquidity providers an opportunity to receive an 
enhanced rebate. The Exchange believes the proposed change to adopt an 
alternative method to qualify for the renamed MPID Adding Tier 2 is 
reasonable because it provides ETP Holders with an additional way to 
qualify for the pricing tier's credits by providing liquidity in Tape B 
securities. The Exchange believes that the proposed alternative to 
qualify for the pricing tier utilizing a lower volume requirement of 
liquidity providing orders in Tape B securities is reasonable because 
the proposal provides firms with greater flexibility to reach the 
proposed volume tier across all Tape A, Tape B and Tape C securities, 
thereby creating an added incentive for

[[Page 72014]]

additional ETP Holders to bring increased order flow to a public 
exchange.
    The Exchange believes it is reasonable to provide the proposed 
credit to a qualifying MPID if it meets the tier's criteria because 
this would encourage individual MPIDs to send orders that provide 
liquidity to the Exchange, thereby contributing to robust levels of 
liquidity, which would benefit all market participants, and would 
promote price discovery and transparency. The Exchange believes the 
proposed change to adopt a new credit and an alternative method to 
qualify for existing credits is reasonable as these changes would 
provide an incentive for an ETP Holder's MPID to direct its order flow 
to the Exchange and provide meaningful added levels of liquidity in 
order to qualify for the new and existing credits, thereby contributing 
to depth and market quality on the Exchange.
    As noted above, the Exchange operates in a highly competitive 
environment, particularly for attracting order flow that provides 
displayed liquidity on an exchange. More specifically, the Exchange 
notes that greater add volume order flow may provide for deeper, more 
liquid markets and execution opportunities at improved prices, which 
the Exchange believes would incentivize liquidity providers to submit 
additional liquidity and enhance execution opportunities. The Exchange 
notes that other markets with which the Exchange competes currently 
offer its members an opportunity to earn rebates based on the activity 
of the member's MPID.\13\ The Exchange believes the proposed changes to 
the MPID Adding Tier continues to be a reasonable means to encourage 
ETP Holders to increase their liquidity on the Exchange.
---------------------------------------------------------------------------

    \13\ See BZX Fee Schedule, Footnote 2, Step Up Tiers, and 
Footnote 4, Single Investor MPID Tiers, at https://www.cboe.com/us/equities/membership/fee_schedule/bzx/.
---------------------------------------------------------------------------

    The Exchange notes that volume-based incentives and discounts have 
been widely adopted by exchanges, including the Exchange, and are 
reasonable, equitable and not unfairly discriminatory because they are 
available to all ETP Holders on an equal basis. They also provide 
additional benefits or discounts that are reasonably related to the 
value of the Exchange's market quality and associated higher levels of 
market activity, such as higher levels of liquidity provision and/or 
growth patterns. Additionally, the Exchange is one of many venues and 
off-exchange venues to which market participants may direct their order 
flow, and it represents a small percentage of the overall market. 
Competing exchanges offer similar tiered pricing structures to that of 
the Exchange, including schedules of rebates and fees that apply based 
on members achieving certain volume thresholds.
    The Exchange believes its proposal equitably allocates its fees 
among its market participants.
    The Exchange believes that the proposal represents an equitable 
allocation of fees and is not unfairly discriminatory because it would 
apply uniformly to all ETP Holders, in that all ETP Holders will be 
eligible for the proposed new credit and have the opportunity to meet 
the tier's criteria and receive the applicable rebate if such criteria 
is met. The enhanced rebate (proposed and existing) would apply 
automatically and uniformly to all ETP Holders that achieve the 
corresponding criteria. The proposed change is designed as an incentive 
to any and all liquidity providers interested in meeting the tier 
criteria to submit additional order flow to the Exchange and each will 
receive the associated rebate if the tier criteria is met. While the 
Exchange has no way of knowing whether this proposed rule change would 
definitively result in any particular ETP Holder qualifying for the 
proposed new credit, the Exchange anticipates a number of ETP Holders 
would be able to meet, or will reasonably be able to meet, the proposed 
criteria. However, without having a view of activity on other markets 
and off-exchange venues, the Exchange has no way of knowing whether 
this proposed rule change would result in any ETP Holder meeting the 
alternative method and/or qualifying for the proposed rebate. As 
stated, the proposed new credit and the proposed alternative method to 
qualify for existing credits are designed to provide an incentive for 
ETP Holders to submit additional liquidity across all Tapes to qualify 
for the corresponding rebates.
    The Exchange believes that the proposal is not unfairly 
discriminatory. The Exchange believes it is not unfairly discriminatory 
to provide the proposed credit as the credit would be provided on an 
equal basis to all ETP Holders that add liquidity in Tape B securities 
and meet the MPID Adding Tier's requirements. The Exchange also 
believes that the proposed rule change is not unfairly discriminatory 
because it is reasonably related to the value to the Exchange's market 
quality associated with higher volume. The proposed changes to the MPID 
Adding Tier are designed as an incentive to any and all ETP Holders 
interested in meeting the tier criteria to submit additional order flow 
to the Exchange and each will receive the corresponding new and 
existing rebate if the tier criteria are met. The Exchange also notes 
that the proposed rule change will not adversely impact any ETP 
Holder's pricing or their ability to qualify for other tiers. Rather, 
should an ETP Holder not meet the criteria of the MPID Adding Tier 
pricing tier, the ETP Holder will merely not receive the corresponding 
rebate.
    The Exchange believes it is not unfairly discriminatory to provide 
an alternative way to qualify for the per share credit under the MPID 
Adding Tier pricing tier, as the credit would be provided on an equal 
basis to all ETP Holders that meet the proposed alternative requirement 
under the renamed MPID Adding Tier 2. Further, the Exchange believes 
the proposed alternative requirement would incentivize ETP Holders to 
send their liquidity providing orders in Tape B securities to the 
Exchange to qualify for the enhanced rebate.
    In the prevailing competitive environment, ETP Holders are free to 
disfavor the Exchange's pricing if they believe that alternatives offer 
them better value. Moreover, this proposed rule change neither targets 
nor will it have a disparate impact on any particular category of 
market participant. The Exchange believes that this proposal does not 
permit unfair discrimination because the changes described in this 
proposal would be applied to all similarly situated ETP Holders and all 
ETP Holders would be subject to the same requirements. Accordingly, no 
ETP Holder already operating on the Exchange would be disadvantaged by 
the proposed allocation of fees. The Exchange further believes that the 
proposed changes would not permit unfair discrimination among ETP 
Holders because the MPID Adding Tier credits would be available equally 
to all ETP Holders.
    Finally, the submission of orders to the Exchange is optional for 
ETP Holders in that they could choose whether to submit orders to the 
Exchange and, if they do, the extent of its activity in this regard. 
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.

[[Page 72015]]

B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act,\14\ 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 changes would encourage the submission of additional 
liquidity to a public exchange, thereby promoting market depth, price 
discovery and transparency and enhancing order execution opportunities 
for ETP Holders. As a result, the Exchange believes that the proposed 
change furthers the Commission's goal in adopting Regulation NMS of 
fostering integrated competition among orders, which promotes ``more 
efficient pricing of individual stocks for all types of orders, large 
and small.'' \15\
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78f(b)(8).
    \15\ See Securities Exchange Act Release No. 51808, 70 FR 37495, 
37498-99 (June 29, 2005) (S7-10-04) (Final Rule).
---------------------------------------------------------------------------

    Intramarket Competition. The Exchange believes the proposed 
amendments to its Fee Schedule would not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. The Exchange does not believe that the proposed 
changes represent a significant departure from previous pricing offered 
by the Exchange or its competitors. The proposed changes are designed 
to attract additional order flow to the Exchange, in particular with 
respect to Tape B securities. The Exchange believes that the proposed 
adoption of a new credit and the amendment to the volume requirement to 
qualify for an established tier under the MPID Adding Tier pricing tier 
would incentivize market participants to direct liquidity adding order 
flow to the Exchange, bringing with it additional execution 
opportunities for market participants and improved price transparency. 
Greater overall order flow, trading opportunities, and pricing 
transparency benefits all market participants on the Exchange by 
enhancing market quality and continuing to encourage ETP Holders to 
send orders to the Exchange, thereby contributing towards a robust and 
well-balanced market ecosystem.
    Intermarket Competition. The Exchange operates in a highly 
competitive market in which market participants can readily choose to 
send their orders to other exchange and off-exchange venues if they 
deem fee levels at those other venues to be more favorable. As noted 
above, the Exchange's market share of intraday trading (i.e., excluding 
auctions) is currently less than 12%. 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 its proposed fee change can 
impose any burden on intermarket competition.
    The Exchange believes that the proposed change 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.

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.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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-2021-103 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-2021-103. 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; the Commission does not edit 
personal identifying information from submissions. 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-2021-103 and should 
be submitted on or before January 10, 2022.


[[Page 72016]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
---------------------------------------------------------------------------

    \19\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-27419 Filed 12-17-21; 8:45 am]
BILLING CODE 8011-01-P