[Federal Register Volume 85, Number 81 (Monday, April 27, 2020)]
[Notices]
[Pages 23418-23421]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-08809]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88709; File No. SR-NYSEARCA-2020-33]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend the NYSE
Arca Equities Fees and Charges
April 21, 2020.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on April 14, 2020, NYSE Arca, Inc. (``NYSE Arca'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend the NYSE Arca Equities Fees and
Charges (``Fee Schedule'') to (1) eliminate an alternative method to
qualify for Tier 2, (2) eliminate the incremental credit applicable
under Tape B Tier 2, and (3) eliminate the Cross-Asset Tier 1 and Tape
C Tier 3 pricing tiers. The Exchange proposes to implement the fee
changes effective May 1, 2020. The proposed rule change is available on
the Exchange's website at www.nyse.com, at the principal office of the
Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change
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and discussed any comments it received on the proposed rule change. The
text of those statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant parts of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend the Fee Schedule to (1) eliminate an
alternative method to qualify for Tier 2, (2) eliminate the incremental
credit applicable under Tape B Tier 2, and (3) eliminate the Cross-
Asset Tier 1 and Tape C Tier 3 pricing tiers. The Exchange proposes to
implement the fee changes effective May 1, 2020.
ETP Holders \4\ currently qualify for Tier 2 fees and credits by
providing liquidity an average daily share volume per month of 0.30% or
more, but less than 0.70% of US consolidated average daily volume (``US
CADV'').\5\ In June 2016, the Exchange adopted an alternative way for
ETP Holders to qualify for Tier 2 fees and credits. Pursuant to the
alternative method, an ETP Holder could also qualify for Tier 2 fees
and credits if the ETP Holder provides liquidity of 0.10% or more of
the US CADV per month, and is affiliated with an OTP Holder or OTP Firm
that provides an ADV of electronic posted Customer and Professional
Customer executions in all issues on NYSE Arca Options (excluding mini
options) of at least 1.50% of total Customer equity and ETF option ADV
as reported by The Options Clearing Corporation (``OCC'').\6\ The
Exchange proposes to eliminate the alternative method for ETP Holders
to qualify for Tier 2 fees and credits and remove it from the Fee
Schedule. The Exchange has observed that historically, few ETP Holders
have qualified under the alternative method, with little associated
volume, and the alternative method has not served to meaningfully
increase activity on the Exchange or improve the quality of the market.
Since July 2019, no ETP Holder affiliated with an OTP Holder or OTP
Firm has qualified for Tier 2 fees and credits under the alternative
method.\7\ The Exchange is not proposing any other change to the fees
and credits applicable under Tier 2.
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\4\ All references to ETP Holders in connection with this
proposed fee change include Market Makers.
\5\ US CADV means United States Consolidated Average Daily
Volume for transactions reported to the Consolidated Tape, excluding
odd lots through January 31, 2014 (except for purposes of Lead
Market Maker pricing), and excludes volume on days when the market
closes early and on the date of the annual reconstitution of the
Russell Investments Indexes. Transactions that are not reported to
the Consolidated Tape are not included in US CADV.
\6\ See Securities Exchange Act Release No. 78065 (June 14,
2016), 81 FR 39976 (June 20, 2016) (SR-NYSEArca-2016-85).
\7\ There are currently 53 firms that are both ETP Holders and
OTP Holders.
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Additionally, in June 2018, the Exchange adopted an incremental
credit under Tape B Tier 2 pricing tier pursuant to which ETP Holders
can receive an incremental credit of $0.0001 per share for orders that
provide liquidity to the order book in Tape B securities when such ETP
Holder meets the requirements of Tape B Tier 2 and executes adding ADV
in Tape B securities during a billing month equal to at least 0.40% of
Tape B CADV over the ETP Holder's Q1 2018 Tape B adding ADV taken as a
percentage of Tape B CADV.\8\ The Exchange proposes to eliminate the
incremental credit applicable under Tape B Tier 2 and remove it from
the Fee Schedule. Since July 2019, no ETP Holder has qualified for the
incremental credit under Tape B Tier 2.\9\ The Exchange is not
proposing any other change to the fees and credits applicable under
Tape B Tier 2.
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\8\ See Securities Exchange Act Release No. 83418 (June 12,
2018), 83 FR 28282 (June 18, 2018) (SR-NYSEArca-2018-41).
\9\ There are currently 5 ETP Holders that could qualify for the
incremental credit under Tape B Tier 2.
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Finally, the Exchange proposes to eliminate the Cross-Asset Tier 1
and the Tape C Tier 3 pricing tiers.
Under Cross-Asset Tier 1, ETP Holders can receive a per share
credit of $0.0030 per share in Tape A, Tape B and Tape C securities
when an ETP Holder (1) provides liquidity of 0.30% or more of the US
CADV per month, (2) is affiliated with an OTP Holder or OTP Firm that
provides an ADV of electronic posted Customer executions in all issues
on NYSE Arca Options (excluding mini options) of at least 0.80% of
total Customer equity and ETF option ADV as reported by OCC, and (3)
executes an ADV of Retail Orders \10\ that provide liquidity during the
month that is 0.10% or more of the US CADV.\11\
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\10\ A Retail Order is an agency order that originates from a
natural person and is submitted to the Exchange by an ETP Holder,
provided that no change is made to the terms of the order to price
or side of market and the order does not originate from a trading
algorithm or any other computerized methodology. See Securities
Exchange Act Release No. 67540 (July 30, 2012), 77 FR 46539 (August
3, 2012) (SR-NYSEArca-2012-77).
\11\ See Securities Exchange Act Release No. 76084 (October 6,
2015), 80 FR 61529 (October 13, 2015) (SR-NYSEArca-2015-87).
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Under Tape C Tier 3, ETP Holders can receive a credit of $0.0002
per share in Tape C securities when an ETP Holder (1) directly executes
providing volume in Tape C securities during the billing month that is
equal to at least 0.40% of US Tape C CADV[thinsp]over the ETP Holder's
fourth quarter 2016 Tape C Adding ADV taken as a percentage of Tape C
CADV, and (2) executes providing volume in Tape B securities during the
billing month that is equal to at least 3.5% of Tape B CADV. Under the
Tape C Tier 3 pricing tier, ETP Holders are also charged a fee of
$0.0029 per share for orders that take liquidity from the Book in Tape
C securities.\12\
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\12\ See Securities Exchange Act Release No. 80665 (May 11,
2017), 82 FR 22687 (May 17, 2017) (SR-NYSEArca-2017-51).
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The Exchange proposes to eliminate each of the Cross-Asset Tier 1
and Tape C Tier 3 pricing tiers and remove it from the Fee Schedule
because each of the pricing tiers have been underutilized by ETP
Holders. The Exchange has observed that historically, few ETP Holders
have qualified for the fees and credits under each of these pricing
tiers. These pricing tiers have not served to meaningfully increase
activity on the Exchange or improve the quality of the market. Since
July 2019, not a single ETP Holder has qualified under any of the two
pricing tiers that the Exchange proposes to eliminate.\13\
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\13\ As noted above, there are currently 53 firms that are both
ETP Holders and OTP Holders that could qualify for the Cross-Asset
Tier 1 pricing tier and 2 ETP Holders that could qualify for the
Tape C Tier 3 pricing tier.
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With the proposed elimination of Cross-Asset Tier 1, the Exchange
proposes to rename current Cross-Asset Tier 2 as Cross-Asset Tier 1 and
rename current Cross-Asset Tier 3 as Cross-Asset Tier 2.
The proposed changes are not otherwise intended to address any
other issues, and the Exchange is not aware of any significant problems
that market participants would have in complying with the proposed
changes.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\14\ in general, and furthers the
objectives of Sections 6(b)(4) and(5) of the Act,\15\ in particular,
because it provides for the equitable allocation of reasonable dues,
fees, and other charges among its members,
[[Page 23420]]
issuers and other persons using its facilities and does not unfairly
discriminate between customers, issuers, brokers or dealers.
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\14\ 15 U.S.C. 78f(b).
\15\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange believes that the proposed rule change to eliminate
the alternative method to qualify for Tier 2, eliminate the incremental
credit under Tape B Tier 2, and eliminate the Cross-Asset Tier 1 and
Tape C Tier 3 pricing tiers is reasonable because each of the pricing
tiers that are the subject of this proposed rule change have been
underutilized and have generally not incentivized ETP Holders to bring
liquidity and increase trading on the Exchange. Since July 2019, no ETP
Holder has availed itself of any of the pricing tiers that the Exchange
is proposing to eliminate. The Exchange does not anticipate any ETP
Holder in the near future to qualify for any of the tiers that are the
subject of this proposed rule change. The Exchange believes it is
reasonable to eliminate requirements and credits, and even entire
pricing tiers when such incentives become underutilized. The Exchange
believes eliminating underutilized incentive programs would also
simplify the Fee Schedule. The Exchange further believes that removing
reference to the pricing tiers that the Exchange proposes to eliminate
from the Fee Schedule would also add clarity to the Fee Schedule. The
Exchange believes that eliminating requirements and credits, and even
entire pricing tiers from the Fee Schedule when such incentives become
ineffective is equitable and not unfairly discriminatory because the
requirements, and credits, and even entire pricing tiers would be
eliminated in their entirety and would no longer be available to any
ETP Holder.
For the foregoing reasons, the Exchange believes that the proposal
is consistent with the Act.
B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with Section 6(b)(8) of the Act,\16\ the Exchange
believes that the proposed rule change would not impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act.
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\16\ 15 U.S.C. 78f(b)(8).
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Intramarket Competition. The Exchange's proposal to eliminate
certain requirements and credits, and pricing tiers in their entirety,
will not place any undue burden on intramarket competition that is not
necessary or appropriate in furtherance of the purposes of the Act
given that, since July 2019, not a single ETP Holder has qualified for
any of the fees and credits under any of the pricing tiers that are the
subject of this proposed rule change. To the extent the proposed rule
change places a burden on competition, any such burden would be
outweighed by the fact that none of the pricing tiers proposed for
deletion have served their intended purpose of incentivizing ETP
Holders to more broadly participate on the Exchange. Moreover, ETP
Holders can choose to trade on other venues to the extent they believe
that the credits provided are too low or the qualification criteria are
not attractive.
Intermarket Competition. The Exchange believes the proposed rule
change does not impose any burden on intermarket competition that is
not necessary or appropriate in furtherance of the purposes of the Act.
The Exchange operates in a highly competitive market in which market
participants can readily choose to send their orders to other exchanges
and off-exchange venues if they deem fee levels at those other venues
to be more favorable. Market share statistics provide ample evidence
that price competition between exchanges is fierce, with liquidity and
market share moving freely from one execution venue to another in
reaction to pricing changes. In such an environment, the Exchange must
continually adjust its fees and rebates to remain competitive with
other exchanges and with off-exchange venues. Because competitors are
free to modify their own fees and credits in response, and because
market participants may readily adjust their order routing practices,
the Exchange does not believe this proposed fee change would impose any
burden on intermarket competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change is effective upon filing pursuant to
Section 19(b)(3)(A) \17\ of the Act and subparagraph (f)(2) of Rule
19b-4 \18\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\17\ 15 U.S.C. 78s(b)(3)(A).
\18\ 17 CFR 240.19b-4(f)(2).
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At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \19\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\19\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NYSEARCA-2020-33 on the subject line.
Paper Comments
Send paper comments in triplicate to: Secretary,
Securities and Exchange Commission, 100 F Street NE, Washington, DC
20549-1090.
All submissions should refer to File Number SR-NYSEARCA-2020-33. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change.
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Persons submitting comments are cautioned that we do not redact or edit
personal identifying information from comment submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSEARCA-2020-33 and should
be submitted on or before May 18, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-08809 Filed 4-24-20; 8:45 am]
BILLING CODE 8011-01-P