81 FR 54891 - Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the NYSE Arca Equities Schedule of Fees and Charges for Exchange Services Related to Tier 1 and Cross Asset Tier 2 Fees and Credits for Orders Executed on the Exchange, and Eliminate the Routable Retail Order Tier

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 159 (August 17, 2016)

[Federal Register Volume 81, Number 159 (Wednesday, August 17, 2016)]
[Notices]
[Pages 54891-54893]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-19576]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78545; File No. SR-NYSEArca-2016-111]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the NYSE 
Arca Equities Schedule of Fees and Charges for Exchange Services 
Related to Tier 1 and Cross Asset Tier 2 Fees and Credits for Orders 
Executed on the Exchange, and Eliminate the Routable Retail Order Tier

August 11, 2016.
    Pursuant to section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that, on July 29, 2016, NYSE Arca, Inc. (the ``Exchange'' or ``NYSE 
Arca'') filed with the Securities and Exchange Commission 
(``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 Schedule of 
Fees and Charges for Exchange Services (the ``Fee Schedule'') related 
to Tier 1 and Cross Asset Tier 2 fees and credits for orders executed 
on the Exchange, and eliminate the Routable Retail Order Tier. 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 related to Tier 1 
and Cross Asset Tier 2 fees and credits for orders executed on the 
Exchange.\4\ The Exchange also proposes to eliminate the Routable 
Retail Order Tier. The Exchange proposes to implement the fee change 
effective August 1, 2016.
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    \4\ The Tier 2 [sic] fees and credits are available for round 
lots and odd lots with a per share price $1.00 or above.
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Tier 1
    Currently, ETP Holders and Market Makers qualify for Tier 1 fees 
and credits by providing liquidity an average daily share volume per 
month of 0.70% or more of the United States consolidated average daily 
volume (``US CADV'').\5\ In Tape C Securities, ETP Holders and Market 
Makers currently receive a credit of $0.0033 per share for orders that 
provide liquidity to the Book and pay a fee of $0.0029 per share for 
orders that take liquidity from the Book. The Exchange proposes to 
amend the fees and credits applicable to ETP Holders and Market Makers 
for orders executed in Tape C Securities. As proposed, ETP Holders and 
Market Makers would receive a credit of $0.0032 per share for orders 
that provide liquidity to the Book in Tape C Securities and would pay a 
fee of $0.0030 per share for orders that take liquidity from the Book 
in Tape C Securities. The Exchange is not proposing any other pricing 
change in Tier 1.
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    \5\ 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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Cross Asset Tier 2
    Additionally, Cross Asset Tier 2 fees and credits currently apply 
to ETP Holders and Market Makers that either (1) provide liquidity an 
average daily volume share per month of 0.30% or more of the US CADV 
and are affiliated with an OTP Holder or OTP Firm that provides an ADV 
of electronic posted executions for the account of a market maker in 
Penny Pilot issues on NYSE Arca Options (excluding mini options) of at 
least 0.75% of total Customer equity and ETF option ADV as reported by 
The Options Clearing Corporation (``OCC''), or (2) provide liquidity an 
average daily volume share per month of 0.40% or more of the US CADV 
and are affiliated with an OTP Holder or OTP Firm that provides an ADV 
of electronic posted executions for the account of a market maker in 
Penny Pilot issues on NYSE Arca Options (excluding mini options) of at 
least 0.65% of total Customer equity and ETF option ADV as reported by 
OCC. Such ETP Holders and Market Makers receive a credit of $0.0033 per 
share for orders that provide liquidity to the Book in Tape C 
Securities and pay a fee of $0.0029 per share for orders that take 
liquidity from the Book in Tape C Securities. The Exchange proposes to 
amend the fees and credits applicable to ETP Holders and Market Makers 
for orders executed in Tape C Securities. As proposed, ETP Holders and 
Market Makers would receive a credit of $0.0032 per share for orders 
that provide liquidity to the Book in Tape C Securities and pay a fee 
of $0.0030 per share for orders that take liquidity from the Book in 
Tape C Securities.
Elimination of Obsolete Pricing
    The Fee Schedule currently includes a pricing tier, Routable Retail 
Order Tier, that has not encouraged ETP Holders and Market Makers to 
increase their activity to qualify for this pricing tier as 
significantly as the Exchange had anticipated it would. As a result, 
the Exchange proposes to remove this pricing tier from the Fee 
Schedule.
    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

[[Page 54892]]

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,\6\ in general, and furthers the 
objectives of sections 6(b)(4) and 6(b)(5) of the Act,\7\ 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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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(4) and (5).
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Tier 1
    The Exchange believes that the proposed change to increase the fee 
from $0.0029 per share to $0.0030 per share and to lower the credit 
from $0.0033 per share to $0.0032 per share for Tier 1 customers in 
Tape C Securities is reasonable as it is comparable to fees charged and 
credits paid by at least one other exchange, specifically, Bats BZX 
Exchange, which charges a fee of $0.0030 per share for orders that 
remove liquidity in Tape C Securities on that market,\8\ and provides a 
credit that ranges between $0.0020 per share and $0.0032 per share, 
depending on the amount of volume transacted.\9\ The Exchange believes 
that the proposed fee change is equitable and not unfairly 
discriminatory because the proposed fees and credits would apply 
uniformly to all similarly situated ETP Holders and Market Makers and 
would apply to all Tier 1 orders that add or take liquidity from the 
Book in Tape C Securities. The Exchange believes that recalibrating the 
fees and credits will continue to attract order flow to the Exchange, 
thereby contributing to price discovery on the Exchange and benefiting 
investors generally.
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    \8\ See Fee Codes and Associated Fees, Bats BZX Exchange Fee 
Schedule, at https://batstrading.com/support/fee_schedule/bzx/.
    \9\ See Add Volume Tiers, Bats BZX Exchange Fee Schedule, at 
https://batstrading.com/support/fee_schedule/bzx/.
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Cross Asset Tier 2
    The Exchange believes that the proposed change to increase the fee 
from $0.0029 per share to $0.0030 per share and to lower the credit 
from $0.0033 per share to $0.0032 per share for Cross Asset Tier 2 
customers in Tape C Securities is reasonable as it is comparable to 
fees charged and credits paid by at least one other exchange, 
specifically, Bats BZX Exchange, which charges a fee of $0.0030 per 
share for orders that remove liquidity from that exchange in Tape C 
Securities,\10\ and provides a lower cross-asset tier rebate of $0.0029 
[sic] per share in Tape C Securities.\11\ The Exchange believes that 
the proposed fee change is equitable and not unfairly discriminatory 
because the proposed fees and credits would apply uniformly to all 
similarly situated ETP Holders and Market Makers and would apply to all 
Cross Asset Tier 2 orders that add or take liquidity from the Book in 
Tape C Securities. The Exchange believes that recalibrating the fees 
and credits will continue to attract order flow to the Exchange, 
thereby contributing to price discovery on the Exchange and benefiting 
investors generally.
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    \10\ See Fee Codes and Associated Fees, Bats BZX Exchange Fee 
Schedule, at https://batstrading.com/support/fee_schedule/bzx/.
    \11\ See Add Volume Tiers, Bats BZX Exchange Fee Schedule, at 
https://batstrading.com/support/fee_schedule/bzx/.
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Elimination of Obsolete Pricing
    The Exchange believes that it is reasonable to eliminate the 
obsolete pricing tier from the Fee Schedule because ETP Holders and 
Market Makers have not increased their activity to qualify for the 
Routable Retail Order Tier as significantly as the Exchange anticipated 
they would. The Exchange believes that it is equitable and not unfairly 
discriminatory to eliminate the Routable Retail Order Tier because, as 
proposed, the pricing tier would be eliminated entirely--ETP Holders 
and Market Makers would no longer be able to qualify for this pricing 
tier. This aspect of the proposed change would therefore result in a 
more streamlined Fee Schedule.
    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. The proposal to amend the level of fees and 
credits applicable to Tier 1 customers in Tape C Securities and to 
Cross Asset Tier 2 customers in Tape C Securities would not place a 
burden on competition as the proposed changes are comparable to fees 
and credits for Tape C Securities provided by at least one other 
exchange.\13\ The Exchange believes that the proposed fee changes could 
promote competition between the Exchange and other execution venues, 
including those that currently offer comparable transaction pricing, by 
encouraging additional orders to be sent to the Exchange for execution.
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    \12\ 15 U.S.C. 78f(b)(8).
    \13\ See supra, notes 8-11.
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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) \14\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \15\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 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

[[Page 54893]]

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) \16\ of the Act to determine 
whether the proposed rule change should be approved or disapproved.
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    \16\ 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-2016-111 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-2016-111. 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 the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NYSEArca-2016-111 and should 
be submitted on or before September 7, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-19576 Filed 8-16-16; 8:45 am]
 BILLING CODE 8011-01-P