82 FR 11076 - 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

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 32 (February 17, 2017)

[Federal Register Volume 82, Number 32 (Friday, February 17, 2017)]
[Notices]
[Pages 11076-11079]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-03183]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80032; File No. SR-NYSEARCA-2017-10]


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

February 13, 2017.
    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 January 30, 2017, 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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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 Exchange proposes to 
implement the fee changes effective February 1, 2017. 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend the Fee Schedule, as described 
below, and implement the fee changes on February 1, 2017.
Tape B Tiers
    Currently, a Tape B Tier 1 credit of $0.0030 per share \4\ applies 
to ETP Holders and Market Makers, that, on a daily basis, measured 
monthly, directly execute providing volume in Tape B Securities during 
the billing month (``Tape B Adding ADV'') that is equal to at least 
0.40% of US Tape B CADV over the ETP Holder's second quarter 2015 Tape 
B Adding ADV taken as a percentage of Tape B CADV (``Tape B Baseline % 
CADV'').
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    \4\ Under the Basic Rate, ETP Holders receive a credit of 
$0.0020 per share for Tape B orders that provide liquidity to the 
Book.
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    The Exchange proposes to revise the threshold such that, to qualify 
for the Tape B Tier 1 credit, providing volume executed by ETP Holders 
and Market Makers would no longer be measured against the ETP Holder's 
Tape B baseline % CADV and would instead be based on such ETP holder 
directly executing providing volume in Tape B Securities that is equal 
to at least 1.50% of US Tape B CADV for the billing month.
    The Exchange is not proposing any change to the level of Tape B 
Tier 1 credits.
    Secondly, the Exchange proposes to introduce an alternative method 
of qualifying for Tape B Tier 2 credits. Currently, a Tape B Tier 2 
credit of $0.0028 per share \5\ applies to ETP Holders and Market 
Makers, that, on a daily basis, measured monthly, directly execute Tape 
B Adding ADV that is equal to at least 0.20% of the US Tape B CADV over 
the ETP Holder's or Market Maker's Tape B Baseline % CADV. As proposed, 
ETP Holders and Market Makers could alternatively qualify for the Tape 
B Tier 2 credit by directly executing Tape B Adding ADV that is equal 
to at least 1.0% of the US Tape B CADV. The Exchange believes that, by 
providing for an additional method of qualifying for Tape B Tier 2, 
this proposed change will provide a greater incentive to attract 
additional liquidity in Tape B Securities so as to qualify for the Tape 
B Tier 2 credit.
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    \5\ Under the Basic Rate, ETP Holders receive a credit of 
$0.0020 per share for Tape B orders that provide liquidity to the 
Book.
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    The Exchange is not proposing any change to the level of Tape B 
Tier 2 credits.
Tape C Tier
    The Exchange proposes to introduce a new pricing tier level--Tape C 
Tier--for securities with a per share price above $1.00.
    As proposed, a new Tape C Tier credit of $0.0002 per share \6\ 
would be applicable to ETP Holders and Market Makers, that, on a daily 
basis, measured monthly, directly execute providing volume in Tape C 
Securities during the billing month (``Tape C Adding ADV'') that is 
equal to at least 0.10% of US Tape C CADV over the ETP Holder's or 
Market Maker's fourth quarter 2016 Tape C Adding ADV taken as a 
percentage of Tape C CADV.\7\ For example, if an ETP Holder's Tape C 
Baseline % CADV during fourth quarter 2016 was 0.500%, the ETP Holder

[[Page 11077]]

would need a Tape C Adding ADV of at least 0.600% in order to qualify 
for the proposed Tape C Tier credit of $0.0002 per share (i.e., 0.500% 
Tape C Baseline % CADV plus 0.100% of the US Tape C CADV for the 
billing month).\8\ The credit provided under the proposed Tape C Tier 
would be in addition to the ETP Holder's Tiered or Basic Rate 
credit(s); provided, however, that such combined credit would not be 
permitted to exceed $0.0031 per share.
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    \6\ Under the Basic Rate, ETP Holders receive a credit of 
$0.0020 per share for Tape C orders that provide liquidity to the 
Book.
    \7\ The Exchange proposes to use the same definition of US CADV 
for purposes of the proposed Tape C Tier. Specifically, U.S. CADV 
means United States Consolidated Average Daily Volume for 
transactions reported to the Consolidated Tape, excluding odd lots 
through January 31, 2014 (except for purposes of Lead Market Maker 
pricing), and excludes volume on days when the market closes early 
and on the date of the annual reconstitution of the Russell 
Investments Indexes. Transactions that are not reported to the 
Consolidated Tape are not included in U.S. CADV. See Fee Schedule, 
Footnote 3.
    \8\ The Exchange recognizes that a firm that becomes an ETP 
Holder or Market Maker after the Baseline Month would have a Tape C 
Baseline ADV of zero. In this regard, a new ETP Holder or Market 
Maker would need to have a Tape C Adding ADV during the billing 
month of no less than 0.100% of US Tape C CADV for the $0.0002 per 
share credit to apply.
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    Finally, for ETP Holders that qualify for the proposed new Tape C 
Tier, Tiered or Basic Rates would apply to all other fees and credits, 
based on a firm's qualifying levels, and if an ETP Holder qualifies for 
more than one tier in the Fee Schedule, the Exchange would apply the 
most favorable rate available under such tiers.
Deletion of the ``P'' Modifier
    On April 30, 2015, the Exchange filed the first of a number of 
proposed rule changes (the ``first Pillar filing'') to adopt new equity 
trading rules to reflect the implementation of Pillar, the Exchange's 
new integrated trading technology platform designed to use a single 
specification for connecting to the equities and options markets 
operated by NYSE Arca and its affiliates, New York Stock Exchange LLC 
and NYSE MKT LLC.\9\ The Commission approved the first Pillar filing, 
including the interim use of the ``P'' modifier.\10\ The Exchange also 
previously filed a proposed rule change to amend its Fee Schedule to 
adopt references that would be applicable during the migration to 
Pillar,\11\ including the adoption of the ``P'' modifier, where 
applicable, to the Fee Schedule.\12\
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    \9\ See Securities Exchange Act Release No. 74951 (May 13, 
2015), 80 FR 28721 (May 19, 2015) (SR-NYSEArca-2015-38) (notice of 
filing of proposed rule change adopting new equity trading rules 
relating to trading sessions, order ranking and display, and order 
execution, and the use of the ``P'' modifier).
    \10\ See Securities Exchange Act Release No. 75494 (July 20, 
2015), 80 FR 44170 (July 24, 2015) (SR-NYSEArca-2015-38) (approval 
of proposed rule change adopting new equity trading rules relating 
to trading sessions, order ranking and display, and order execution, 
and the use of ``P'' modifier).
    \11\ See Securities Exchange Act Release Nos. 77124 (February 
12, 2016), 81 FR 8548 (February 19, 2016) (SR-NYSEArca-2016-18); and 
77588 (April 12, 2016), 81 FR 22676 (April 18, 2016) (SR-NYSEArca-
2016-54) (``Pillar Fee Filings'').
    \12\ Id.
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    Once the migration of securities to Pillar was completed, the 
Exchange filed a proposed rule change to amend the Fee Schedule to 
remove references adopted in the Pillar Fee Filings,\13\ with exception 
to references to the ``P'' modifier as the ``P'' modified rules 
remained in effect at that time. The Exchange has since amended its 
rules to, among other things, delete the ``P'' modifier,\14\ and now 
proposes to delete references to the ``P'' modifier from the Fee 
Schedule.
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    \13\ See Securities Exchange Act Release No. 77925 (May 26, 
2016), 81 FR 35412 (June 2, 2016) (SR-NYSEArca-2016-78).
    \14\ See Securities Exchange Act Release No. 79078 (October 11, 
2016), 81 FR 71559 (October 17, 2016) (SR-NYSEArca-2016-135).
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Deletion of Obsolete Fee Language
    In September 2016, the Exchange filed a proposed rule change to 
adopt a new Step Up pricing tier.\15\ The Step Up Tier Filing adopted 
lower requirements for ETP Holders and Market Makers to qualify for the 
Step Up Tier credits for the months of September 2016 and October 2016. 
The Exchange previously filed a proposed rule change to delete from the 
Fee Schedule reference to the Step Up Tier credits applicable to ETP 
Holders and Market Makers for the month of September 2016,\16\ and now 
proposes to delete from the Fee Schedule reference to the Step Up Tier 
credits applicable to ETP Holders and Market Makers for the month of 
October 2016 as that language is now obsolete.
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    \15\ See Securities Exchange Act Release No. 78892 (September 
21, 2016), 81 FR 66315 (September 27, 2016) (SR-NYSEArca-2016-128) 
(the ``Step Up Tier Filing'').
    \16\ See Securities Exchange Act Release No. 79054 (October 5, 
2016), 81 FR 70473 (October 12, 2016) (SR-NYSEArca-2016-137).
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    The proposed changes are not otherwise intended to address any 
other issues, and the Exchange is not aware of any significant problems 
that market participants would have in complying with the proposed 
changes.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\17\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\18\ 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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    \17\ 15 U.S.C. 78f(b).
    \18\ 15 U.S.C. 78f(b)(4) and (5).
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Tape B Tiers
    The Exchange believes the proposed changes to the Tape B Tiers are 
reasonable and equitably allocated because they would apply to ETP 
Holders and Market Makers that provide liquidity to the Exchange and 
are designed to incentivize these market participants to increase the 
orders sent directly to the Exchange and therefore provide liquidity 
that supports the quality of price discovery and promotes market 
transparency. The Exchange believes the Tape B Tiers are equitable 
because they are open to all similarly situated ETP Holders and Market 
Makers on an equal basis and provide credits that are reasonably 
related to the value of an exchange's market quality associated with 
higher volumes.
    The Exchange believes that the proposed thresholds for qualifying 
for Tape B Tiers are reasonable because they are designed to encourage 
increased trading activity on the NYSE Arca equity market. The Exchange 
believes it is reasonable, equitable and not unfairly discriminatory to 
require ETP Holders and Market Makers to meet the higher threshold to 
qualify for the Tape B Tier 1 credit because doing so would result in a 
higher credit paid to such participants. Further, ETP Holders and 
Market Makers that do not meet the proposed threshold for the Tape B 
Tier 1 can also avail themselves to the Tape B Tier 2 credit, which 
while providing for a lower credit, also has lower requirements to 
qualify for such credit. Further, pursuant to this proposed rule 
change, ETP Holders and Market Makers will now be able to alternatively 
qualify for the Tape B Tier 2 credit.
    The proposed new method of qualifying for the Tape B Tier 2 credit 
is also equitable and not unfairly discriminatory because it would be 
available to all ETP Holders and Market Makers on an equal and non-
discriminatory basis. In this regard, the Exchange notes that ETP 
Holders and Market Makers that do not meet the proposed alternative 
method would continue to have the opportunity to qualify for the Tape B 
Tier 2 credit by satisfying the existing requirement, which would not 
change as a result of this proposal.
Tape C Tier
    The Exchange believes the proposed Tape C Tier is reasonable and 
equitably allocated because it would apply to ETP Holders and Market 
Makers that provide liquidity in Tape C Securities to the Exchange and 
is designed to incentivize these market participants to increase the 
orders sent directly to the Exchange and therefore provide liquidity 
that supports the quality of price discovery and promotes market 
transparency. The Exchange believes the new Tape C Tier

[[Page 11078]]

is equitable because it would be available to all similarly situated 
ETP Holders and Market Makers on an equal basis and provides a credit 
that is reasonably related to the value of an exchange's market quality 
associated with higher volumes. The Exchange further believes that the 
proposed Tape C Tier is reasonable, equitable and not unfairly 
discriminatory because the Exchange has previously implemented pricing 
tiers that target a particular segment of securities, such as Tape A 
and Tape B Securities.
    The Exchange further believes that it is equitable and not unfairly 
discriminatory that the proposed $0.0002 credit under the Tape C Tier 
would not be permitted to exceed $0.0031 per share when combined with 
other credits available to ETP Holders under other tiers specified in 
the Fee Schedule because the ETP Holders that qualify for these 
specified tiers would already receive a higher credit for such 
executions.
    The Exchange believes that the proposed rule change regarding Tape 
B and Tape C credits 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.
    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. The Exchange believes that the 
proposed amendment to Tape B Tiers and the introduction of Tape C Tier 
will provide such enhancements in market quality on the Exchange's 
equity market by incentivizing increased participation.
Deletion of the ``P'' Modifier
    The Exchange believes that the proposed changes to the Fee Schedule 
to delete the ``P'' modifier from rules referenced in the Fee Schedule 
is reasonable, equitable and not unfairly discriminatory because the 
changes are intended to add clarity to the Fee Schedule and avoid 
investor confusion, which is in the public interest. The ``P'' 
modifier, which is no longer necessary, was intended to distinguish the 
Pillar trading rules from the now obsolete rules during the 
transitional period to a single trading platform and a single set of 
rules governing trading, would remove impediments to and perfect the 
mechanism of a national market system because these proposed changes 
would add greater clarity to the Exchange's rules and promote market 
transparency and efficiency.
Deletion of Obsolete Fee Language
    The Exchange believes that it is reasonable, equitable and not 
unfairly discriminatory to delete reference to obsolete fees from the 
Fee Schedule. The Step Up Tier Filing adopted lower requirements for 
ETP Holders and Market Makers to qualify for the Step Up Tier credits 
for the month of October 2016. Given that October 2016 has now passed, 
the Exchange believes deletion of the outdated language will bring 
clarity to the Fee Schedule.
    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,\19\ 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 revise the threshold to qualify for Tape B credits and the addition 
of a new Tape C credit 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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    \19\ 15 U.S.C. 78f(b)(8).
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    With respect to the changes related to the renaming of order types 
[sic] on Pillar, the proposed changes are not designed to address any 
competitive issue but rather provide the public and investors with a 
Fee Schedule that is transparent.
    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) \20\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \21\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \20\ 15 U.S.C. 78s(b)(3)(A).
    \21\ 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

[[Page 11079]]

Commission takes such action, the Commission shall institute 
proceedings under Section 19(b)(2)(B) \22\ of the Act to determine 
whether the proposed rule change should be approved or disapproved.
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    \22\ 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-2017-10 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-2017-10. 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-2017-10 and should 
be submitted on or before March 10, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-03183 Filed 2-16-17; 8:45 am]
BILLING CODE 8011-01-P