83 FR 23983 - Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the NYSE Arca Equities Fees and Charges

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 100 (May 23, 2018)

[Federal Register Volume 83, Number 100 (Wednesday, May 23, 2018)]
[Notices]
[Pages 23983-23985]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-10969]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83268; File No. SR-NYSEArca-2018-34]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the NYSE 
Arca Equities Fees and Charges

May 17, 2018.
    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 May 9, 2018, 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 the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend the NYSE Arca Equities Fees and 
Charges (``Fee Schedule'') to introduce a new pricing tier, Retail 
Order Step-Up Tier. The Exchange proposes to implement the fee change 
effective May 9, 2018.\4\ 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.
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    \4\ The Exchange originally filed to amend the Fee Schedule on 
May 1, 2018 (SR-NYSEArca-2018-30) and withdrew such filing on May 9, 
2018.

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[[Page 23984]]

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, as described 
below, to introduce a new pricing tier, Retail Order Step-Up Tier.
    The Exchange currently provides a credit of $0.0033 per share under 
the Retail Order Tier for Retail Orders \5\ that provide liquidity 
during the month in Tape A, Tape B and Tape C Securities to ETP 
Holders, including Market Makers, that execute an average daily volume 
(``ADV'') of Retail Orders that provide liquidity during the month that 
is 0.15% or more of U.S. consolidated ADV (``CADV'').\6\ For all other 
fees and credits, tiered or basic rates apply based on a firm's 
qualifying levels. In order to encourage participation from a greater 
number of ETP Holders, and promote additional liquidity in Retail 
Orders, the Exchange proposes to introduce a new pricing tier, Retail 
Order Step-Up Tier.
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    \5\ A Retail Order is an agency order that originates from a 
natural person and is submitted to the Exchange by an ETP Holder, 
provided that no change is made to the terms of the order to price 
or side of market and the order does not originate from a trading 
algorithm or any other computerized methodology. See Securities 
Exchange Act Release No. 67540 (July 30, 2012), 77 FR 46539 (August 
3, 2012) (SR-NYSEArca-2012-77).
    \6\ 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.
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    As proposed, a new Retail Order Step-Up Tier credit of $0.0033 per 
share for Retail Orders that provide liquidity during the month in Tape 
A, Tape B and Tape C Securities would apply to ETP Holders, including 
Market Makers, that execute an ADV of Retail Orders with a time-in-
force designation of Day that add or remove liquidity during the month 
that is an increase of 0.12% or more of the U.S. CADV above their April 
2018 ADV taken as a percentage of U.S. CADV. Retail Orders with a time-
in-force designation of Day that remove liquidity from the Book will 
not be charged a fee. For all other fees and credits, tiered or basic 
rates apply based on a firm's qualifying levels.
    For example, assume an ETP Holder averages 1 million shares in 
Retail Orders with a time-in-force designation of Day that add or 
remove liquidity per day in April, or 0.015% of U.S. CADV, where U.S. 
CADV was 6.6 billion shares.
    If that ETP holder then averages 9 million shares in Retail Orders 
with a time-in-force designation of Day that add or remove liquidity in 
the billing month, or 0.136% of U.S. CADV, where U.S. CADV was also 6.6 
billion shares, that ETP Holder would qualify for the Retail Order 
Step-Up Tier because it would have met the requirement of the proposed 
new pricing tier, i.e., an increase of at least 0.12% of the U.S. CADV 
over the ETP Holder's April 2018 ADV taken as a percentage of U.S. 
CADV, or 0.121% (0.136% in the billing month over 0.015% in the 
baseline month).
    Also assume that same ETP holder averages 5 million shares in 
Retail Order that remove liquidity in Tape A Securities, of which 1 
million shares are in Retail Orders with a time-in-force designation of 
Day. As a result, the 4 million shares in Retail Orders that remove 
liquidity would be subject to the Tape A fee for removing liquidity of 
$0.0030 per share while the 1 million shares in Retail Orders with a 
time-in-force designation of Day would not be charged a fee.
    Further assume that the same ETP Holder qualified for both the 
Cross-Asset Tier 3 credit of $0.0030 per share and the Tape C 
incremental credit of $0.0004 per share and receive a combined credit 
for adding liquidity in Tape C of $0.0034. Since the combined Cross-
Asset Tier and Tape C Tier credit is higher than the proposed Retail 
Order Step-Up Tier, the ETP holder would receive the higher credit of 
$0.0034 per share instead of the Retail Order Step-Up Tier credit of 
$0.0033 per share.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\7\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\8\ 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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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes it is reasonable to add the new Retail Order 
Step-Up Tier because the Exchange believes it would encourage 
participation from a greater number of ETP Holders, which would promote 
additional liquidity in Retail Orders. In this regard, an ETP Holder 
that does not qualify for the proposed higher credit could still be 
eligible for a credit for its Retail Orders that provide liquidity 
under the current Retail Order Tier or under Basic Rates. The proposed 
new Retail Order Step-Up Tier would create an added financial incentive 
for ETP Holders to bring additional retail flow to a public market. The 
proposed new credit is also reasonable because it would reduce the 
costs of ETP Holders that represent retail flow and potentially also 
reduce costs to their customers.
    The Exchange believes that it is reasonable that only Retail Orders 
with a time-in-force designation of Day that add or remove liquidity 
would count toward qualifying for the Retail Order Step-Up Tier. This 
would largely result in the type of orders to which the corresponding 
credit applies being the same as the volume that counts toward 
qualification--i.e., only Retail Orders with a time-in-force 
designation of Day. The Exchange believes that the proposed threshold 
of 0.12% or more of CADV above the ETP Holder's April 2018 ADV taken as 
a percentage of U.S. CADV is reasonable because it is within a range 
that the Exchange believes would continue to incentivize ETP Holders to 
submit Retail Orders to the Exchange in order to qualify for the 
proposed credit.
    The Exchange believes that the proposed rule change is equitable 
and not unfairly discriminatory because maintaining or increasing the 
proportion of Retail 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. This 
aspect of the proposed

[[Page 23985]]

rule change also is consistent with the Act because all similarly 
situated ETP Holders would pay the same rate, as is currently the case, 
and because all ETP Holders would be eligible to qualify for the rates 
by satisfying the related threshold, where applicable. Furthermore, the 
submission of Retail Orders is optional for ETP Holders, in that an ETP 
Holder could choose whether to submit Retail Orders and, if it does, 
the extent of its activity in this regard.
    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,\9\ 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 
rule change 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 comparable transaction pricing, by encouraging 
additional orders to be sent to the Exchange for execution. The 
Exchange also believes that the proposed rule change is consistent with 
the Act because it strikes an appropriate balance between fees and 
credits, which will encourage submission of orders to the Exchange, 
thereby promoting competition.
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    \9\ 15 U.S.C. 78f(b)(8).
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    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 to attract order 
flow to the Exchange. 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) \10\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \11\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 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) \12\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \12\ 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-2018-34 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-2018-34. 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 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. 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-2018-34, and should be 
submitted on or before June 13, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-10969 Filed 5-22-18; 8:45 am]
 BILLING CODE 8011-01-P