[Federal Register Volume 85, Number 136 (Wednesday, July 15, 2020)]
[Notices]
[Pages 42922-42925]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-15211]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-89274; File No. SR-NYSEArca-2020-62]
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 Adopt Listing and Annual Fees for
Actively Managed Proxy Shares Listed Under Rule 8.601-E and Managed
Portfolio Shares Listed Under Rule 8.900-E
July 9, 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 June 30, 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 Actively Managed Proxy Shares listed
under Rule 8.601-E and Managed Portfolio Shares listed under Rule
8.900-E. 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 its Schedule of Fees and Charges to
adopt listing and annual fees for Actively Managed Proxy Shares listed
under recently adopted Rule 8.601-E and Managed Portfolio Shares listed
under Rule 8.900-E (collectively, ``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 Actively Managed Proxy Shares
listed under Rule 8.601-E and Managed Portfolio Shares listed under
Rule 8.900-E.
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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 June
30, 2020.
Proposed Rule Change
On June 29, 2020, the Commission approved Rule 8.601-E regarding
Exchange listing and trading of Active Proxy Portfolio Shares.\5\ On
April 15, 2020, the Commission issued a notice of filing and immediate
effectiveness of the Exchange's proposed rule change to adopt NYSE Arca
Rule 8.900-E regarding Exchange listing and trading of Managed
Portfolio Shares.\6\ In order
[[Page 42923]]
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. 89185 (June 29,
2020) (SR-NYSEArca-2019-95).
\6\ See Securities Exchange Act Release No. 88648 (April 15,
2020), 85 FR 22200 (April 21, 2020) (SR-NYSEArca-2020-32).
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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,'' 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.\7\
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\7\ The Schedule of Fees and Charges refers to these as
``Generically-Listed Exchange Traded Products.'' ``Generically-
Listed Exchange Traded Products'' currently include Investment
Company Units, Portfolio Depositary Receipts, Managed Fund Shares,
Exchange-Traded Fund Shares listed under Rule 5.2-E(j)(8), 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
``Exchange Traded Products'' in footnote 3 of the Schedule of Fees and
Charges and as referenced in section 5.a thereto. Accordingly, because
Fund Shares are not subject to Exchange listing pursuant to Rule 19b-
4(e) under the Act and are not Generically-Listed Exchange Traded
Products, Fund Shares will be subject to a listing fee of $7,500.
The Exchange believes that, for purposes of listing fees, it would
be appropriate to treat Fund Shares like other Exchange Traded Products
that are not ``Generically-Listed Exchange Traded Products'' and charge
a listing fee of $7,500 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, Commentary .01
to Rule 8.601-E and Rule 8.900-E(b)(1) require that the Exchange file
separate proposals under Section 19(b) of the Act before listing and
trading a series of Active Proxy Portfolio Shares or Managed Portfolio
Shares, respectively. As such, Fund Shares will require additional time
and resources 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 (including Exchange-Traded Fund Shares listed under Rule
5.2-E(j)(8) that track an Index), 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.
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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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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,
Managed Trust Securities and Exchange-Traded Fund Shares listed under
Rule 5.2-E(j)(8) that do not track an Index:
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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 for Managed Fund
Shares, Managed Trust Securities and Exchange-Traded Fund Shares listed
under Rule 5.2-E(j)(8) that do not track an Index. Accordingly, because
Fund Shares, under the current Exchange listing rules, are more akin to
Managed Fund Shares and Exchange-Traded Fund Shares that do not track
an Index, 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 charging Fund Shares the same current
annual fees applicable to Managed Fund Shares, Managed Trust Securities
and Exchange-Traded Fund Shares that do not track an Index would be
appropriate because those relatively higher annual fees (compared to
``Generically-Listed Exchange Traded Products'') better correlate with
higher Exchange costs associated with similar actively managed products
such as Managed Fund Shares, Managed Trust Securities, and Exchange-
Traded Fund Shares that do not track an Index, including costs related
to issuer services, listing administration, 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 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,\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
[[Page 42924]]
forces constrain exchange listing and annual fees. Stated otherwise,
changes to exchange listing and annual 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 Rule
8.601-E and Rule 8.900-E.
The Exchange currently does not charge listing fees for ETPs that
satisfy generic listing criteria set forth in its rules. Products that
list without a rule filing do not entail the additional time and
resources required for ETPs that require a rule filing. However, as
noted above, Commentary .01 to Rule 8.601-E and Rule 8.900-E (b)(1)
require that the Exchange file separate proposals under Section 19(b)
of the Act before listing and trading a series of Active Proxy
Portfolio Shares or Managed Portfolio Shares, respectively. As such, in
contrast to ETPs for which the Exchange is not required to file a
proposal under Section 19(b) of the Act, the listing and trading of
Fund Shares will require additional time and resources by Exchange
staff to prepare and review rule filings and to communicate with
issuers and Commission staff in connection therewith necessary for Fund
Shares listed and traded pursuant to a rule change. Accordingly, the
Exchange believes the $7,500 listing fee proposed for Fund Shares is
reasonable in that it is the same as the listing fee for other ETPs
that are not ``Generically-Listed Exchange Traded Products.''
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 the current annual fees
applicable to Managed Fund Shares and Managed Trust Securities, which
are also actively managed products, as well as Exchange-Traded Fund
Shares that do not track an index, would be reasonable because those
annual fees better correlate with the higher Exchange costs for listing
and trading Fund Shares, 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 Exchange believes that, for purposes of listing fees, it would
be appropriate to treat Fund Shares like other Exchange Traded Products
that are not ``Generically-Listed Exchange Traded Products'' and charge
a listing fee of $7,500 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. Fund Shares will incur
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.
The proposed 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 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 listing and
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 apply to
Fund Shares the same fees applicable to Managed Fund Shares, Managed
Trust Securities and Exchange-Traded Fund Shares that do not track an
index because the proposed fees would be offered on an equal basis to
all issuers listing Fund Shares on the Exchange. Moreover, the proposed
listing and annual fees for Fund Shares would apply to issuers in the
same manner as the current listing and annual fees for ETPs, including
Managed Fund Shares, Managed Trust Securities and Exchange-Traded Fund
Shares that do not 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,\12\ 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 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 ETPs listed under new rules. 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 would apply to all
issuers equally, 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
[[Page 42925]]
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-2020-62 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-2020-62. 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-2020-62 and should be submitted
on or before August 5, 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. 2020-15211 Filed 7-14-20; 8:45 am]
BILLING CODE 8011-01-P