81 FR 39976 - Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending the NYSE Arca Equities Schedule of Fees and Charges for Exchange Services

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 118 (June 20, 2016)

[Federal Register Volume 81, Number 118 (Monday, June 20, 2016)]
[Notices]
[Pages 39976-39978]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-14449]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78065; File No. SR-NYSEArca-2016-85]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending the NYSE 
Arca Equities Schedule of Fees and Charges for Exchange Services

June 14, 2016.
    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 1, 2016, NYSE Arca, Inc. (the ``Exchange'' or 
``NYSE Arca'') 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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[[Page 39977]]

I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend the NYSE Arca Equities Schedule of 
Fees and Charges for Exchange Services (the ``Fee Schedule'') to 
provide a second way to qualify for Tier 2 fees and credits for orders 
executed on the Exchange. The Exchange proposes to implement the fee 
change effective June 1, 2016. The proposed rule change is available on 
the Exchange's Web site 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend the Fee Schedule to provide a second 
way to qualify for Tier 2 fees and credits for orders executed on the 
Exchange.\4\ The Exchange proposes to implement the fee change 
effective June 1, 2016.
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    \4\ The Tier 2 fees and credits are available for round lots and 
odd lots with a per share price [sic] $1.00 or above.
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    Currently, ETP Holders and Market Makers 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 United States 
consolidated average daily volume (``US CADV'').\5\
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    \5\ The Exchange proposes to use the same definition [sic] US 
CADV for purposes of the proposed alternative to qualifying for Tier 
2. Specifically, US CADV would mean the 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. See Fee Schedule, footnote 3.
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    The Exchange proposes to permit ETP Holders and Market Makers to 
alternatively qualify for Tier 2 fees and credits if they provide 
liquidity of 0.10% or more of the US CADV per month, and are 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 is not proposing to change the 
level of fees and credits applicable to Tier 2. The purpose of the 
proposed rule change is to adopt an alternative method for ETP Holders 
and Market Makers to qualify for Tier 2 fees and credits. The Exchange 
believes that the proposal would create an added incentive for ETP 
Holders and Market Makers to bring additional order flow to a public 
market while also providing an alternative method for ETP Holders and 
Market Makers to qualify for Tier 2 fees and credits. The Exchange 
notes that Bats BZX Exchange (``BZX'') also provides pricing that 
combines a participant's equities and options trading on that 
exchange.\7\
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    \6\ The proposed change is similar to pricing tiers currently in 
place on the Exchange. The Exchange's Cross Asset Tier 1 and Cross 
Asset Tier 2 already provide for fees and credits based on liquidity 
provided by an affiliated OTP Holder or OTP Firm. See Fee Schedule.
    \7\ See BZX Fee Schedule at http://www.bats.com/us/equities/membership/fee_schedule/bzx/.
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    The proposed changes are not otherwise intended to address any 
other problem, and the Exchange is not aware of any significant problem 
that the affected 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,\8\ in general, and furthers the 
objectives of sections 6(b)(4) and 6(b)(5) of the Act,\9\ 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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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposal to amend Tier 2 is 
reasonable because it provides ETP Holders affiliated with an NYSE Arca 
Options OTP Holder or OTP Firm with an additional way to qualify for 
Tier 2 fees and credits. The Exchange believes that the proposal to 
utilize a lower requirement of an ETP Holder or Market Maker providing 
liquidity of 0.10% or more of US CADV, rather than 0.30% or more of US 
CADV, is reasonable because to qualify for the proposed alternative an 
ETP Holder or Market Maker would also be required to be affiliated with 
an OTP Holder or OTP Firm and in addition, the ETP Holder's and Market 
Maker's affiliated OTP Holder or OTP Firm would be required to provide 
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 OCC.
    The Exchange believes that expanding the basis for Tier 2 to 
include Customer equity and ETF options ADV will better reflect the 
correlation between options trading and the underlying securities, 
which trade at the Exchange, including ETFs. In this respect, the 
Exchange notes that Equity and ETF Customer volume is a widely followed 
benchmark of industry volume and is indicative of industry market 
share. The Exchange believes that the proposal is equitable and not 
unfairly discriminatory because all ETP Holders and Market Makers would 
be subject to the same fee structure and be offered the same 
alternative to qualifying for Tier 2 fees and credits. Moreover, Tier 2 
fees and credits would be available for all ETP Holders and Market 
Makers to satisfy, including those that are not affiliated with an NYSE 
Arca Options OTP Holder or OTP Firm. ETP Holders and Market Makers that 
are not affiliated with an NYSE Arca Options OTP Holder or OTP Firm 
would continue to be eligible for Tier 2 fees and credits subject to 
their meeting the current requirements.
    Further, the Exchange believes that the proposal is reasonable and 
would create an added incentive for ETP Holders and Market Makers to 
execute additional orders on the Exchange. The Exchange believes that 
the proposed change is equitable and not unfairly discriminatory 
because providing incentives for orders in exchange-listed securities 
that are executed on a registered national securities exchange (rather 
than relying on certain available off-exchange execution methods) would 
contribute to investors' confidence in the fairness of their 
transactions and would benefit all investors by deepening the 
Exchange's liquidity pool, supporting the quality of price discovery, 
promoting market transparency and improving investor protection.

[[Page 39978]]

    Volume-based rebates and fees such as the ones currently in place 
on the Exchange, and as proposed herein, have been widely adopted in 
the cash equities markets and are equitable because they are open to 
all ETP Holders and Market Makers on an equal basis and provide 
additional benefits or discounts that are reasonably related to the 
value to an exchange's market quality associated with higher levels of 
market activity, such as higher levels of liquidity provision and/or 
growth patterns, and introduction of higher volumes of orders into the 
price and volume discovery processes. Further, the Exchange believes 
that the proposed amendment to Tier 2 will provide such enhancements in 
market quality on both the Exchange's equity market and options market 
by incentivizing increased participation on both platforms.
    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,\10\ 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, the Exchange believes that the proposal 
to add an additional way to qualify for Tier 2 would encourage the 
submission of additional liquidity to a public exchange, thereby 
promoting price discovery and transparency and enhancing order 
execution opportunities for ETP Holders and Market Makers. The Exchange 
believes that this 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.
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    \10\ 15 U.S.C. 78f(b)(8).
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    Finally, the Exchange notes that it operates in a highly 
competitive market in which market participants can readily favor 
competing venues if they deem fee levels at a particular venue to be 
excessive or rebate opportunities available at other venues to be more 
favorable. In such an environment, the Exchange must continually adjust 
its fees and rebates to remain competitive with other exchanges and 
with alternative trading systems that have been exempted from 
compliance with the statutory standards applicable to exchanges. 
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 believes that the degree to which 
fee changes in this market may impose any burden on competition is 
extremely limited. As a result of all of these considerations, the 
Exchange does not believe that the proposed changes will impair the 
ability of ETP Holders or competing order execution venues to maintain 
their competitive standing in the financial markets.

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) \11\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \12\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 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) \13\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \13\ 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-2016-85 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEArca-2016-85. 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 Web site (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 Web site 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 such 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. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NYSEArca-2016-85, and should 
be submitted on or before July 11, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-14449 Filed 6-17-16; 8:45 am]
 BILLING CODE 8011-01-P