[Federal Register Volume 85, Number 10 (Wednesday, January 15, 2020)]
[Notices]
[Pages 2474-2480]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-00480]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-87917; File No. SR-NYSEArca-2019-93]
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 Modify the Annual Fees Applicable To
Exchange Traded Products and Managed Fund Shares and Managed Trust
Securities
January 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 December 31, 2019, 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
(1) modify the annual fees applicable to Exchange Traded Products
(``ETPs'') and Managed Fund Shares and Managed Trust Securities, (2)
introduce annual fee discounts for ETPs and Structured Products, and
(3) offer an alternate way for issuers of multiple series of securities
listed under Rule 5.2-E(j)(6) to qualify for the current discount. The
Exchange proposes to implement the fee changes effective January 1,
2020. The proposed rule change is available on the Exchange's website
at www.nyse.com, at the principal office of the Exchange, and at the
Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend its Schedule of Fees and Charges to
(1) modify the annual fee applicable to ETPs and Managed Fund Shares
and Managed Trust Securities, (2) introduce annual fee discounts for
ETPs and Structured Products, and (3) offer an alternate way for
issuers of multiple series of securities listed under Rule 5.2-E(j)(6)
to qualify for the current discount.
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. The Exchange's current annual
fees for ETPs are based on the
[[Page 2475]]
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
proposes a competitive pricing structure that combines higher minimum
annual fees for ETPs and Managed Fund Shares and Managed Trust
Securities with new discounts for issuers that list multiple ETPs and
Structured Products.\4\ The proposed changes are designed to
incentivize issuers to list new products, 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.
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\4\ ``Exchange Traded Products'' are defined in footnote 3 of
the current Schedule of Fees and Charges. ``Structured Products''
are defined in footnote 4 of the current Schedule of Fees and
Charges.
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The Exchange proposes to implement the fee changes effective
January 1, 2020.
Proposed Rule Change
The Exchange proposes increased annual fees for ETPs and Managed
Fund Shares and Managed Trust Securities. 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.
Annual ETP Fees
Currently, the Exchange charges the following annual fees for
listed ETPs (with the exception of Managed Fund Shares and Managed
Trust Securities) based on the number of shares outstanding for each
issue listed by the same issuer, as follows:
Number of shares outstanding (each issue) Annual fee
Less than 25 million.................................... $5,000
25 million up to 49,999,999............................. 7,500
50 million up to 99,999,999............................. 10,000
100 million up to 249,999,999........................... 15,000
250 million up to 499,999,999........................... 20,000
500 million and over.................................... 25,000
The Exchange proposes to increase annual fees for such listed ETPs
by $2,500 at the levels below 49,999,999 shares outstanding and by
$5,000 for each level at 50 million shares outstanding and above. The
Exchange proposes the following revised annual fees:
For issuers with less than 25 million shares outstanding for each
issue, the proposed annual fee would be $7,500.
For issuers with shares outstanding for each issue from 25
million up to 49,999,999, the proposed annual fee would be $10,000.
For issuers with shares outstanding for each issue from 50
million up to 99,999,999, the proposed annual fee would be $15,000.
For issuers with shares outstanding for each issue from
100 million up to 249,999,999, the proposed annual fee would be
$20,000.
For issuers with shares outstanding for each issue from
250 million up to 499,999,999, the proposed annual fee would be
$25,000.
For issuers with shares outstanding for each issue from
500 million and over, the proposed annual fee would be $30,000.
Annual Fees for Managed Fund Shares and Managed Trust Securities
Currently, the Exchange charges the following annual fees for
listed Managed Fund Shares and Managed Trust Securities based on the
number of shares outstanding for each issue:
Annual
Number of shares outstanding (each issue) fee
Less than 25 million......................................... $7,500
25 million up to 49,999,999.................................. 10,000
50 million up to 99,999,999.................................. 12,500
100 million up to 249,999,999................................ 20,000
250 million up to 499,999,999................................ 30,000
500 million and over......................................... 40,000
The Exchange proposes to increase annual fees for listed Managed
Fund Shares and Managed Trust Securities by $2,500 at the levels below
49,999,999 shares outstanding. For issuers with outstanding shares
between 50 million up to 99,999,999, the proposed fee would increase by
$7,500. For issuers with outstanding shares of 100 million up to
249,999,999 shares, the annual fee would increase by $5,000. Issuers
with shares outstanding of 250 million shares and over would be charged
$30,000, and the current rate of $40,000 for issuers with shares
outstanding of 500 million and over would be eliminated. The Exchange
proposes the following revised annual fees for listed Managed Fund
Shares and Managed Trust Securities:
For issuers with less than 25 million shares outstanding
for each issue, the proposed fee would be $10,000.
For issuers with shares outstanding for each issue from 25
million up to 49,999,999, the proposed fee would be $12,500.
For issuers with shares outstanding for each issue from 50
million up to 99,999,999, the proposed fee would be $20,000.
For issuers with shares outstanding for each issue from
100 million up to 249,999,999, the proposed fee would be $25,000.
For issuers with shares outstanding for each issue from
250 million and over, the proposed fee would be $30,000.
The proposed annual fee increases are intended to support the
ongoing costs of listing and trading ETPs and Managed Fund Shares and
Managed Trust Securities on the Exchange, including costs related to
issuer services, listing administration and product development. The
Exchange's comprehensive listing and trading program, including
utilization of Lead Market Makers (``LMM'') to foster liquidity
provision and stability in the marketplace, seeks to provide superior
market quality for securities listed on the Exchange. The Exchange
notes that annual fees for ETPs and Managed Fund Shares and Managed
Trust Securities have not increased since 2009.\5\ The Exchange
believes that the proposed fee increases are appropriate in that the
Exchange generally expends significant resources supporting the listing
and administration of ETPs and Managed Fund Shares and Managed Trust
Securities. The Exchange expects to increase spending to support the
listing and administration of these securities going forward.
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\5\ See Securities Exchange Act Release No. 61104 (December 3,
2009), 74 FR 65568 (December 10, 2009) (SR-NYSEArca-2009-106).
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The Exchange believes that the proposed fee increase of $2,500 for
ETPs with less than 50 million shares outstanding and proposed increase
of $5,000 for ETPs with 50 million shares or more outstanding could be
mitigated at least in part for those issuers that would qualify for the
proposed additional annual fee discounts the Exchange is proposing for
ETP issuers, described in more detail below. The largest proposed
annual fee increase of $7,500 would be for Managed Fund Shares and
Managed Trust Securities with between 50 million and 99,999,999 shares
outstanding. However, the current $40,000 fee for securities with 500
million shares outstanding or more would be eliminated, effectively
lowering the rate for issuers with securities in that category by
$10,000. Annual fees for Managed Fund Shares and Managed Trust
Securities would not exceed $30,000 for such securities at 250 million
shares outstanding and above.
[[Page 2476]]
Finally, the proposed fees are comparable to the annual fees
charged by competing exchanges on a per product basis. For example, a
new ETP listed on the Exchange with 1 million shares outstanding would
pay a $7,500 annual fee under the proposal. On The Nasdaq Stock Market
LLC (``Nasdaq''), the issuer of a series of ETPs with up to 1 million
shares outstanding currently pays an annual fee of $6,500.\6\ On Cboe
BZX Exchange, Inc. (``Cboe BZX''), when an ETP first lists or has been
listed for fewer than three calendar months on the ETP's first trading
day of the year, the ETP currently pays an annual listing fee of
$4,500. Other newly listed ETPs on Cboe BZX are subject to a volume-
based fee schedule, where annual fees range from $7,000 for
consolidated average daily volume (``CADV'') of 0-10,000 shares to
$5,000 for ETPs with a CADV greater than 1,000,000 shares.\7\ Moreover,
unlike these competing exchanges, the Exchange does not cap or waive
annual fees for ETPs and Structured Products once certain levels are
achieved. Nasdaq, for instance, caps the annual fee of an issuer of a
series of ETPs at $14,500 once the total shares outstanding exceed 16
million shares.\8\ On Cboe BZX, where the average daily auction volume
combined between the opening and closing auctions on the Exchange
across all of an issuer's ETPs listed on the Exchange exceeds 500,000
shares, there is no annual listing fee for any of the issuer's ETPs
listed on the Exchange.\9\
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\6\ See Nasdaq Rule 5940(b)(1). Nasdaq Rule 5940(b) applies to a
series of Portfolio Depository Receipts, Index Fund Shares, Managed
Fund Shares or other securities listed under the Nasdaq Rule 5700
Series where no other fee schedule is specifically applicable.
Nasdaq's annual listing fees are also based on the total number of
outstanding shares.
\7\ See Cboe BZX Rule 14.13(b)(2)(C)(ii) & (v). On Cboe BZX,
ETPs include all securities set forth in Cboe BZX Rule 14.11. See,
e.g., Cboe BZX Rule 14.13(b)(1)(C).
\8\ See Nasdaq Rule 5940(b)(1).
\9\ See Cboe BZX Rule 14.13(b)(2)(C)(iii).
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Additional Annual Fee Discounts
In addition to the proposed increases to the annual fees described
above, the Exchange proposes two new, non-mutually exclusive discounts
for ETPs and Structured Products that would be set forth in new Section
9 of the Schedule of Fees and Charges titled ``Additional Annual Fee
Discounts for ETPs and Structured Products (``Products'').''
Eligibility for the proposed discounts would be subject to certain
limitations, described more fully below.
First, the Exchange proposes to move the current discount for
multiple series listed under Rule 5.2-E(j)(6) to a new romanette (i)
under the proposed heading. The current text would be transposed
without change except for the addition of an alternate way for issuers
of multiple series of securities listed under Rule 5.2-E(j)(6) to
qualify for the current discount. Specifically, the Exchange would add
a clause providing that multiple series of securities listed under Rule
5.2-E(j)(6) that are issued by the same issuer that issues five or more
ETNs based on an identical reference asset would also be eligible to
receive the current 30% discount off the aggregate calculated annual
fee for such multiple series. The Exchange believes the proposed change
would facilitate the issuance of additional ETN series, which may
provide enhanced competition among ETN issuers while providing a
reduction in fees to certain issuers listing additional ETN series.
Second, the proposed new discounts for ``families'' of Products
would appear under new romanette (ii) titled ``Product Family
Discounts.''
As proposed, an issuer that lists multiple Products would be
eligible for the following discounts for those Products, which would be
a discount on the aggregate calculated annual fee for each Product from
such issuer.
A family consisting of between 5 and 9 listed Products
would be eligible for a 5% discount for each Product.
A family consisting of between 10 and 19 listed Products
would be eligible for a 7.5% discount for each Product.
A family consisting of between 20 and 39 listed Products
would be eligible for a 10% discount for each product.
A family consisting of between 40 and 89 listed Products
would be eligible for a 12.5% discount for each product.
A family consisting of between 90 and 249 listed Products
would be eligible for a 15% discount for each product.
A family consisting of 250 or more listed Products would
be eligible for a 17.5% discount for each product.
Third, the Exchange proposes new ``High Volume Products Discounts''
in romanette (iii). As proposed, an eligible Product would be
considered a ``High Volume Product'' if it has (1) 1,000,000 shares
CADV averaged over 12 months or, if the Product is listed less than 12
months, 1,000,000 shares CADV averaged since the date of listing, or
(2) 50,000 CADV executed in opening and closing auctions averaged over
12 months or, if the Product is listed less than 12 months, 1,000,000
shares CADV averaged since the date of listing. A Product transferred
to the Exchange after January 1, 2020, would automatically be
considered a High Volume Product eligible for the next highest High
Volume Products discount for the calendar year in which the transfer
occurred plus the following calendar year.
As proposed, an issuer that lists multiple High Volume Products as
defined above would be eligible for the following discounts, which will
be a discount on the aggregate calculated annual fee for each Product
from such issuer:
An issuer listing between 1 and 2 High Volume Products
would be eligible for a 7.5% discount for each Product.
An issuer listing between 3 and 9 High Volume Products
would be eligible for a 10% discount for each Product.
An issuer listing between 10 and 14 High Volume Products
would be eligible for a 12.5% discount for each Product.
An issuer listing between 15 and 34 High Volume Products
would be eligible for a 15% discount for each Product.
An issuer listing 35 or more High Volume Products would be
eligible for a 17.5% discount for each Product.
Finally, romanette (iv) would set forth the following proposed
limitations on discounts offered by the Exchange:
First, the Exchange proposes that the eligible discounts
for Product Family and High Volume Products can be combined. For
instance, an issuer with five listed Products, three of which qualify
as High Volume Products, would be eligible for a 5% Product Family
discount plus a 10% High Volume Products discount for a 15% total
discount for all five listed products.
Second, the Exchange proposes that an issuer that
transfers a Product off the Exchange (except for transfers to an
Exchange affiliate) in a trailing 12-month period beginning January 1,
2020 would become ineligible for either or both the Fund Family and the
High Volume Products discount for the following calendar year.
Finally, the Exchange proposes that issuers eligible for
the 30% discount for issuing more than five securities based on an
identical reference asset that also qualify for the Fund Family and/or
the High Volume Products discounts for those products would receive
either the Fund Family and/or the High Volume Products discount or the
30% discount, whichever is greater.
The purpose of the proposed changes is to provide an incentive for
issuers to develop and list additional Products on the Exchange. The
proposed discounts would encourage issuers to list additional Products
on the Exchange and maintain their listings on the
[[Page 2477]]
Exchange. By proposing to combine eligible discounts for Product Family
and High Volume Products, the proposal is designed to provide an
incentive to issuers to list additional series of securities on the
Exchange. Moreover, the proposal to automatically consider a High
Volume Product eligible for the next highest High Volume Products
discount for the calendar year in which the transfer occurred as well
as the following calendar year would provide an incentive to issuers to
transfer additional Products to the Exchange. In addition, proposing
that an issuer that transfers a Product off the Exchange (except for
transfers to an Exchange affiliate) in a trailing 12-month period
beginning January 1, 2020, would become ineligible for either or both
the Fund Family and the High Volume Products discount for the following
calendar year, would provide an incentive to issuers to maintain those
and other listings on the Exchange. Finally, proposing that issuers
eligible for the 30% discount for issuing more than five securities
based on an identical reference asset that also qualify for the Fund
Family and/or the High Volume Products discounts for those products
would receive the greater of the Fund Family and/or the High Volume
Products discount or the 30% discount would ensure that qualifying
issuers receive the maximum discount for which they are eligible.
Each of the proposed changes described above are 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,\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.
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\10\ 15 U.S.C. 78f(b).
\11\ 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.'' \12\
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\12\ 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.
Given this competitive environment, the proposal represents a
reasonable attempt to attract new issuers and retain listings on the
Exchange. Specifically, the Exchange believes that the proposed annual
fee increases for ETPs and Managed Fund Shares and Managed Trust
Securities--the first proposed annual fee increase since 2009--are
reasonable and necessary to support the ongoing Exchange costs
associated with listing and trading ETPs and Managed Fund Shares and
Managed Trust Securities on the Exchange, including costs related to
issuer services, listing administration and product development. The
Exchange's comprehensive listing and trading program, including
utilization of LMMs to foster liquidity provision and stability in the
marketplace, seeks to provide superior market quality for securities
listed on the Exchange. Moreover, as previously noted, the Exchange
believes that the proposed fee increases are reasonable because the
Exchange generally expends significant resources to provide services in
connection with the listing and administration of ETPs and Managed Fund
Shares and Managed Trust Securities. The Exchange expects to increase
spending to support the listing and administration of those securities
going forward.
The Exchange also believes that the proposed fee increases, which
range between $2,500 and $7,500, are modest and, that the proposed fee
increase of $2,500 for ETPs with less than 50 million shares
outstanding and proposed increase of $5,000 for ETPs with 50 million
shares or more outstanding could be mitigated at least in part for
those issuers that would qualify for the proposed additional annual fee
discounts the Exchange is proposing for ETP issuers.
The Exchange further believes the proposed fee increases are
reasonable because the current $40,000 fee for Managed Fund Shares and
Managed Trust Securities with outstanding shares of 500 million or more
would be eliminated, effectively lowering the rate for issuers in that
group by $10,000 and fixing the annual fee for Managed Fund Shares and
Managed Trust Securities with 250 million outstanding shares or above
at $30,000.
The Exchange also believes that the proposed fees are reasonable
because they are comparable to the annual fees charged by other
competing exchanges on a per product basis. For instance, as noted
above, a new ETP listed on the Exchange with 1 million shares
outstanding would pay a $7,500 annual fee under the proposal. On
Nasdaq, a new ETP with up to 1 million shares outstanding currently
pays an annual fee of $6,500.\13\ On Cboe BZX, an initially listed ETP
(or one listed for fewer than three calendar months on the ETP's first
trading day of the year) currently pays an annual listing fee of
$4,500; other newly issued ETPs on Cboe BZX are subject to a volume-
based fee schedule, where annual fees range from $7,000 to $5,000 from
lowest to highest CADV range.\14\ As noted above, the Exchange operates
in a highly competitive listings market in which issuers can readily
choose alternative listing venues. For instance, unlike competing
exchanges, the Exchange does not cap or waive annual fees for ETPs and
Structured Products once certain levels are achieved. Nasdaq, for
instance, caps the annual fee of an issuer of a series at $14,500 once
the total shares outstanding exceed 16 million shares.\15\ On Cboe BZX,
where the average daily auction volume combined between the opening and
closing auctions on the Exchange across
[[Page 2478]]
all of an issuer's ETPs listed on the Exchange exceeds 500,000 shares,
there is no annual listing fee for any of the issuer's ETPs listed on
the Exchange.\16\ Moreover, a competing market has the ability to defer
or waive all or any part of its annual fees for listings and that the
Exchange lacks similar discretionary authority.\17\ Given this
competitive environment, the Exchange believes that the proposal
represents a reasonable attempt to attract new issuers and retain
listings on the Exchange.
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\13\ See Nasdaq Rule 5940(b)(1). Nasdaq's annual listing fees
are, like the Exchange's, also based on the number of outstanding
shares.
\14\ See Cboe BZX Rule 14.13(b)(2)(C)(ii) & (v).
\15\ See Nasdaq Rule 5940(b)(1).
\16\ See Cboe BZX Rule 14.13(b)(2)(C)(iii).
\17\ See Cboe BZX Rule 14.13(b)(2)(D).
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The proposed discounts for Products are also reasonable because
they are designed to encourage issuers to add additional Products to
the Exchange. The proposed automatic application of the discounts to
High Volume Products transferred to the Exchange for the year in which
the transfer occurred as well as the following calendar year and the
penalties for transferring products off the Exchange in a trailing 12-
month period after January 1, 2020, are reasonable attempts to provide
incentives to issuers to transfer additional Products to, and maintain
listings on, the Exchange. The proposed penalty also constitutes a
reasonable attempt to discourage transfers to and from the Exchange
solely for the purpose of securing one or more of the proposed
discounts.
Finally, the Exchange believes that the proposal to also permit
issuers that issue five or more ETNs based on an identical reference
asset to qualify for the current 30% annual fee discount for multiple
series of securities listed under Rule 5.2-E(j)(6) is reasonable
because it would reduce the annual fee for related ETNs and would
facilitate the issuance of additional ETNs series, which may provide
enhanced competition among ETN issuers. The Exchange further believes
that the proposal is reasonable because the Exchange would incur cost
savings in connection with the listing and administration of such
additional related ETNs that are commensurate with the reduction in
annual fees.\18\
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\18\ For instance, the Exchange would benefit from efficiencies
relating to, among other things, listing review and ongoing
regulatory compliance in connection with the issuance of multiple
ETNs.
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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 proposed fee increases for ETPs and Managed Fund Shares and
Managed Trust Securities are equitable because the proposed increased
annual fees would apply uniformly to all issuers. Moreover, as
proposed, the fee structure would retain the same categories of number
of shares outstanding for ETPs and would retain all but the last of the
current categories for Managed Fund Shares and Managed Trust
Securities. The proposed fees would continue to be equitably allocated
among issuers because issuers would continue to qualify for an annual
fee based on the number of shares outstanding and under criteria
applied uniformly to all such issuers. The proposed discounts for ETPs
and Structured Products are also equitable because the propose
discounts would apply uniformly to all issuers and to all ETPs and
Structured Products that are listed on the Exchange either generically
or pursuant to a rule filing with the Commission.
The proposal neither targets nor will it have a disparate impact on
any particular category of market participant. The proposed annual fee
increases would be applicable to all existing and potential issuers of
ETPs and Managed Fund Shares and Managed Trust Securities uniformly.
Moreover, all issuers would be eligible for the proposed discounts for
ETPs and Structured Products, and all issuers would be subject to the
proposed benefits and penalties of the proposed discounts in equal
measure.
Finally, the Exchange believes that the proposed alternate way to
qualify for the current 30% annual fee discount for multiple series of
securities listed under Rule 5.2-E(j)(6) is an equitable allocation of
fees because the current discount would apply equally to all issuers
issuing five or more ETNs based on an identical reference asset. As
noted, the Exchange believes that the proposal would reduce the annual
fee for related ETNs and would facilitate the issuance of additional
ETNs series, which may provide enhanced competition among ETN issuers.
The Exchange further believes that the proposal is reasonable because
the Exchange would incur cost savings in connection with the listing
and administration of such additional related ETNs that are
commensurate with the reduction in annual fees.
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 provide
higher annual fees for ETPs and Managed Fund Shares and Managed Trust
Securities because the proposed fees would be provided on an equal
basis to all issuers listing those products on the Exchange during a
calendar year. Moreover, the proposed fee structure would retain the
same six categories of number of shares outstanding for ETPs and would
retain all but the last of the current six categories for Managed Fund
Shares and Managed Trust Securities. As a result, the proposal would
apply to issuers in the same manner as the current annual fees for ETPs
and Managed Fund Shares and Managed Trust Securities.
For the same reason, the Exchange believes it is not unfairly
discriminatory to offer combinable discounts for ETPs and Structured
Products because the discounts are available equally to all issuers
listing multiple products in those categories on the Exchange during a
calendar year. As noted, the Exchange believes that the proposed
discounts are designed to incentivize issuers to list new Products,
transfer existing Products to the Exchange, and maintain their listings
on the Exchange, which the Exchange believes will enhance competition
both among issuers and listing venues, to the benefit of investors.
The proposal does not unfairly discriminate between issuers by
offering a discount to issuers that transfer a High Volume Product
after January 1, 2020. Competing markets similarly offer incentives to
issuers to either maintain a listing or transfer additional listings.
For instance, Cboe BZX provides a more favorable annual fee to both
legacy listings and transfers by capping the annual fee it charges ETPs
listed prior to January 1, 2019 or that transferred from another
national securities exchange at $4,000.\19\ Moreover, the Exchange
notes that a competing market has the ability to defer or waive all or
any part of its annual fees for listings and that the Exchange lacks
similar discretionary authority.\20\
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\19\ See Cboe BZX Rule 14.13(b)(2)(C)(i).
\20\ See Cboe BZX Rule 14.13(b)(2)(D).
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The proposed Product Family Discounts are not unfairly
discriminatory. The Exchange proposes a discount proportionate to the
number of Products listed that increases by a uniform 2.5% in order to
attract new listings of ETPs and Structured Products to the Exchange.
Although the proposed
[[Page 2479]]
Product Family Discounts would not apply to issuers with less than 5
listed Products, it would provide an equal incentive for issuers to
list at least 5 Products on the Exchange in order to qualify for a
proposed discount.
Similarly, the proposed High Volume Products discounts are not
unfairly discriminatory. The High Volume Products discounts would offer
a discount proportionate to the number of Products listed that
increases by a uniform 2.5% in order to attract new listings of ETPs
and Structured Products to the Exchange. The proposed discounts
incentivize all issuers to list or transfer additional Products to the
Exchange in order to qualify for the proposed discounts. Any issuer can
qualify for the minimum 7.5% discount by listing a Product that meets
the proposed definition of a High Volume Product (which would apply to
all eligible Products despite length of time listed) or transferring a
Product to the Exchange after January 1, 2020.
The Exchange also believes that combining discounts for Product
Family Discounts and High Volume Products is not unfairly
discriminatory. As noted, both proposed discounts apply to all issuers
equally, and the proposal to combine them would not be unfairly
discriminatory since issuers of all sizes could qualify for, and
combine, discounts in both proposed categories.
The Exchange further believes that the proposed alternate way to
qualify for the current 30% annual fee discount for multiple series of
securities listed under Rule 5.2-E(j)(6) is not unfairly
discriminatory. As noted, the current discount would apply equally to
all similarly situated issuers. Any ETN issuer could qualify for the
current discount by issuing 5 or more ETNs. Although the current
discount would not apply to ETN issuers that issue less than 5 ETNs
based on the same reference asset, the proposal would provide an equal
incentive for ETN issuers to list at least 5 ETNs on the Exchange in
order to qualify for the current discount.
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,\21\ 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 will
increase fees for ETPs and Managed Fund Shares and Managed Trust
Securities and provide additional, cumulative discounts for ETPs and
Structured Products, designed to encourage issuers to develop and list
additional products on the Exchange, which 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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\21\ 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. The Exchange believes that
the proposed changes would continue to incentivize issuers to develop
and new products, transfer existing products to the Exchange, and
maintain listings on the Exchange. The proposed fees and discounts
would be available to all issuers, and, as such, the proposed change
would not impose a disparate burden on competition among market
participants on the Exchange. Although issuers that can list more
Products would qualify for relatively higher Product Family discounts,
such issuers would also pay substantially higher aggregate annual fees.
Moreover, the proposed discounts are relatively modest, ranging from 5%
to 17.5%. The relative benefit of higher Product Family discounts
potentially accruing to larger issuers are thus not sufficiently
disparate as to impose a burden on competition among Exchange issuers.
Similarly, the current discount for multiple series listed under Rule
5.2-E(j)(6) would apply equally to all similarly situated issuers, and,
as such, the proposed change would also 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 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. Moreover, the Exchange notes that a competing
market has the ability to defer or waive all or any part of its annual
fees for listings and that the Exchange lacks similar discretionary
authority.\22\ 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 on the Exchange.
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\22\ See Cboe BZX Rule 14.13(b)(2)(D).
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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) \23\ of the Act and subparagraph (f)(2) of Rule
19b-4 \24\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\23\ 15 U.S.C. 78s(b)(3)(A).
\24\ 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) \25\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\25\ 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
[[Page 2480]]
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-2019-93 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-2019-93. 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-2019-93 and should be submitted
on or before February 5, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\26\
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\26\ 17 CFR 200.30-3(a)(12).
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-00480 Filed 1-14-20; 8:45 am]
BILLING CODE 8011-01-P