82 FR 15249 - 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 57 (March 27, 2017)

[Federal Register Volume 82, Number 57 (Monday, March 27, 2017)]
[Notices]
[Pages 15249-15251]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-05918]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80285; File No. SR- NYSEArca-2017-27]


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

March 21, 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 March 10, 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 (``Fee Schedule''). The Exchange 
proposes to implement the fee changes effective March 10, 2017.\4\ 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.
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    \4\ The Exchange originally filed to amend the Fee Schedule on 
February 28, 2017 (SR-NYSEArca-2017-21) and withdrew such filing on 
March 10, 2017.
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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 March 10, 2017.
Mid-Point Liquidity Order--Securities $1.00 and Greater
    A Mid-Point Liquidity Order is defined in Rule 7.31(d)(3) as a 
Limit Order that is not displayed and does not route, with a working 
price at the midpoint of the Protected Best Bid and Offer 
(``PBBO'').\5\
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    \5\ See Rule 7.31(d)(3).
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    The Exchange currently does not charge a fee for MPL Orders in Tape 
A, Tape B and Tape C securities that remove liquidity from the Exchange 
that are designated as ``Retail Orders.'' \6\ The Exchange proposes to 
charge a fee of $0.0010 per share in each of Tier 1, Tier 2 and Basic 
Rates sections of the Fee Schedule for MPL Orders that remove liquidity 
from the Exchange and that are designated as Retail Orders.
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    \6\ Retail Orders are defined in the Fee Schedule as orders 
designated as retail orders and that meet the requirements of Rule 
7.44(a)(3), but that are not executed in the Retail Liquidity 
Program. The Retail Liquidity Program is a pilot program designed to 
attract additional retail order flow to the Exchange for NYSE Arca-
listed securities and securities traded pursuant to unlisted trading 
privileges while also providing the potential for price improvement 
to such order flow. See Rule 7.44. See also Securities Exchange Act 
Release No. 71176 (December 23, 2013), 78 FR 79524 (December 30, 
2013) (SR-NYSEArca-2013-107).
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Tape B Orders
    The Fee Schedule currently provides that a fee of $0.00285 per 
share is charged for orders that take liquidity from the Book in Tape B 
securities in each of Tier 1, Tier 2, Tier 3, and Cross-Asset Tier 2 
sections of the Fee Schedule, and for Limit Non-Displayed Orders \7\ 
that take liquidity from the Book in Tape B securities in each of Tier 
1, Tier 2 and Tier 3 of the Fee Schedule. The Exchange proposes to 
increase this fee to $0.0029 per share.
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    \7\ A Limit Non-Displayed Order is a Limit Order that is not 
displayed and does not route. See Rule 7.31(d)(2).
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Lead Market Maker (``LMM'') \8\ Transaction Fees
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    \8\ The term ``Lead Market Maker'' is defined in Rule 1.1(ccc) 
to mean a registered Market Maker that is the exclusive Designated 
Market Maker in listings for which the Exchange is the primary 
market.
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    The Exchange currently charges a fee of $0.00285 per share to LMMs 
for orders in primary listed securities that remove liquidity from the 
NYSE Arca Book. The Exchange proposes to increase this fee to $0.0029 
per share.
Tape C Tier 2
    The Exchange proposes a new pricing tier--Tape C Tier 2--for 
securities with a per share price at or above $1.00.
    As proposed, the Tape C Tier 2 would apply 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 0.20% of the US Tape 
C CADV for the billing month over the ETP Holder's or Market Maker's Q4 
2016 Tape C Adding ADV taken as a percentage of Tape C CADV. Such ETP 
Holders and Market Makers would be charged a fee of $0.0029 per share 
for orders that take liquidity from the Book in Tape C Securities. For 
example, if an ETP Holder's Tape C Baseline % CADV during fourth 
quarter 2016 was 0.500%, the ETP Holder would need a Tape C Adding ADV 
of at least 0.700% to meet the requirements for Tape C Tier 2. For all 
other fees and credits, Tiered or Basic Rates apply based on a firm's 
qualifying levels.
    The Exchange recently adopted a Tape C Tier credit of $0.0002 per 
share for orders that provide liquidity to the Book.\9\ That credit is 
applied in addition to the ETP Holder's or Market Maker's Tiered or 
Basic Rate credit(s) except that

[[Page 15250]]

such combined credit cannot exceed $0.0031 per share. For ETP Holders 
and Market Makers that would be subject to the proposed Tape C Tier 2 
fee, the combined credit shall not exceed $0.0033 per share.
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    \9\ See Securities Exchange Act Release No. 80032 (February 13, 
2017), 82 FR 11076 (February 17, 2017) (SR-NYSEArca-2017-10).
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    The Exchange also proposes to rename the current Tape C Tier to 
Tape C Tier 1 to distinguish this pricing tier from the proposed new 
pricing tier, Tape C Tier 2.
Cross Asset Tier 3
    The Exchange proposes a new pricing tier--Cross Asset Tier 3--for 
securities with a per share price at or above $1.00.
    As proposed the Cross Asset Tier 3 would apply to ETP Holders and 
Market Makers that (a) provide liquidity of 0.30% or more of the US 
CADV per month and (b) 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 0.80% of total Customer equity and ETF option ADV 
as reported by OCC, of which at least 0.20% of total Customer equity 
and ETF option ADV as reported by OCC is from Customer and Professional 
Customer executions in non-Penny Pilot issues on NYSE Arca Options. 
Such ETP Holders and Market Makers would receive a credit of $0.0030 
per share for orders that provide liquidity to the order book in Tape 
A, Tape B and Tape C Securities. For all other fees and credits, Tiered 
or Basic Rates apply based on a firm's qualifying levels.
    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,\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) and (5).
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Mid-Point Liquidity Order
    The Exchange believes that the proposed increase to the fee for 
executions of MPL Orders that remove liquidity and that are designated 
as Retail Orders is reasonable. MPL Orders provide opportunities for 
market participants to interact with orders priced at the midpoint of 
the PBBO, thus providing price improving liquidity to market 
participants and increasing the quality of order execution on the 
Exchange's market, which benefits all market participants.
    Specifically, the Exchange believes that charging a fee for MPL 
Orders that remove liquidity from the Exchange and that are designated 
as Retail Orders is reasonable because the fee is substantially lower 
than the $0.0030 per share (fee) for MPL orders removing liquidity from 
the Book that are not designated as ``Retail Orders.''
Tape B Orders
    The Exchange believes that the proposal to increase the fee charged 
for orders in Tape B Securities in Tier 1, Tier 2, Tier 3 and Cross-
Asset Tier 2 that take liquidity from the Book, and for Limit Non-
Displayed Orders that take liquidity from the Book in Tape B securities 
in each of Tier 1, Tier 2 and Tier 3, is reasonable because the 
proposed rate will continue to be lower than the fee charged by other 
exchanges. For example, Bats EDGX Exchange (``EDGX'') currently charges 
a fee of $0.0030 per share for orders that remove liquidity in Tape B 
securities on that exchange.\12\ The Exchange further believes that the 
proposed fee increase is equitable and not unfairly discriminatory 
because it would apply to all orders in Tape B Securities in Tier 1, 
Tier 2, Tier 3 and Cross-Asset Tier 2 that take liquidity from the 
Book.
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    \12\ See EDGX Fee Schedule at http://www.bats.com/us/equities/membership/fee_schedule/edgx/.
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LMM Transaction Fees
    The Exchange believes that it is reasonable to increase the fee 
charged to LMMs for orders in primary listed securities that remove 
liquidity from the NYSE Arca Book as this fee would be the same as the 
fee increase proposed by the Exchange to Tier 1, Tier 2, Tier 3 and 
Cross-Asset Tier 2 ETP Holders and Market Makers that take liquidity in 
Tape B securities. In addition, the proposed fee change is equitable 
and not unfairly discriminatory because it would apply uniformly to all 
similarly situated LMMs.
Tape C Tier 2
    The Exchange believes that the proposal to adopt a lower fee of 
$0.0029 per share for orders that take liquidity from the Book in Tape 
C Securities for firms that qualify for Tape C Tier 2 is reasonable 
because the proposed rate is lower than fees charged by other exchanges 
for taking liquidity in Tape C Securities, and would create an added 
incentive for ETP Holders and Market Makers to execute additional 
orders on the Exchange. For example, EDGX currently charges a fee of 
$0.0030 per share fee for orders that take liquidity from that exchange 
in Tape C Securities. The Exchange further believes that the proposed 
fee decrease is equitable and not unfairly discriminatory because it 
would apply to all orders in Tape C Securities with a per share price 
of $1.00 and greater that take liquidity from the Book. The Exchange 
believes that the proposal to raise the cap on the combined credit from 
$0.0031 per share to $0.0033 per share for ETP Holders and Market 
Makers that meet the requirement for proposed new Tape C Tier 2 is 
reasonable because it would create an added incentive for ETP Holders 
and Market Makers to add liquidity on the Exchange for the benefit of 
all market participants.
Cross Asset Tier 3
    The Exchange believes the proposed Cross Asset Tier 3 is reasonable 
and equitably allocated because it would apply to ETP Holders and 
Market Makers that provide liquidity 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 Cross Asset Tier 3 is equitable because it 
would be available to all similarly situated ETP Holders and Market 
Makers on an equal basis and would provide credits that are reasonably 
related to the value of an exchange's market quality associated with 
higher volumes. The Exchange further believes that the proposed Cross 
Asset Tier 3 is reasonable, equitable and not unfairly discriminatory 
because the Exchange has previously implemented cross asset tiers, 
including the current Cross Asset Tier 1 and Cross Asset Tier 2.
    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 these reasons, the Exchange 
believes that the proposal is consistent with the Act.

[[Page 15251]]

B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act,\13\ 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 proposed 
changes 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. 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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    \13\ 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. Finally, the 
Exchange believes the proposed fee changes do not impose any burden on 
competition as the fee changes are consistent with the fees charged by 
other exchanges.\14\
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    \14\ See supra, note 12.
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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) \15\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \16\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 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) \17\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \17\ 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-2017-27 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-2017-27. 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-2017-27 and should 
be submitted on or before April 17, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
Eduardo A. Aleman,
Assistant Secretary.
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    \18\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2017-05918 Filed 3-24-17; 8:45 am]
 BILLING CODE 8011-01-P