Notice2021-25749
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
Primary source
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Published
November 26, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 86 Issue 225 (Friday, November 26, 2021)</title>
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[Federal Register Volume 86, Number 225 (Friday, November 26, 2021)]
[Notices]
[Pages 67531-67538]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-25749]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-93621; File No. SR-NYSEArca-2021-99]
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
November 19, 2021.
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 November 15, 2021, NYSE Arca, Inc. (``NYSE Arca'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``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 Fees and
Charges (``Fee Schedule'') to (1) amend the standard rates for adding
and removing liquidity in Round Lots and Odd Lots in Tapes A, B and C
securities with a per share price below $1.00; (2) consolidate the fee
charged for PO Orders in Tape B and Tape C securities routed to
auctions at away markets; (3) amend the application of the credits for
Retail Orders that add liquidity; (4) amend the requirement applicable
to the additional credit payable for Tape B securities; and (5) amend
the requirement applicable to tiered credits payable for adding
liquidity in Round Lots and Odd Lots in Tapes A, B and C securities
with a per share price below $1.00. The Exchange proposes to implement
the fee changes effective November 15, 2021. The proposed rule change
is available on the Exchange's website at <a href="http://www.nyse.com">www.nyse.com</a>, 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 (1) amend the
standard rates for adding and removing liquidity in Round Lots and Odd
Lots in Tapes A, B and C securities with a per share price below $1.00;
(2) consolidate the fee charged for PO Orders in Tape B and Tape C
securities routed to auctions at
[[Page 67532]]
away markets; (3) amend the application of the credits for Retail
Orders that add liquidity; (4) amend the requirement applicable to the
additional credit payable for Tape B securities; and (5) amend the
requirement applicable to tiered credits payable for adding liquidity
in Round Lots and Odd Lots in Tapes A, B and C securities with a per
share price below $1.00.
The Exchange proposes to implement the fee changes effective
November 15, 2021.\4\
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\4\ The Exchange originally filed to amend the Fee Schedule on
November 1, 2021 (SR-NYSEArca-2021-95). SR-NYSEArca-2021-95 was
subsequently withdrawn and replaced by this filing.
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Background
The Exchange operates in a highly competitive market. The
Commission has repeatedly expressed its preference for competition over
regulatory intervention in determining prices, products, and services
in the securities markets. In Regulation NMS, the Commission
highlighted the importance of market forces in determining prices and
SRO revenues and, also, recognized that current regulation of the
market system ``has been remarkably successful in promoting market
competition in its broader forms that are most important to investors
and listed companies.'' \5\
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\5\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005) (File No. S7-10-04) (Final
Rule) (``Regulation NMS'').
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While Regulation NMS has enhanced competition, it has also fostered
a ``fragmented'' market structure where trading in a single stock can
occur across multiple trading centers. When multiple trading centers
compete for order flow in the same stock, the Commission has recognized
that ``such competition can lead to the fragmentation of order flow in
that stock.'' \6\ Indeed, equity trading is currently dispersed across
16 exchanges,\7\ numerous alternative trading systems,\8\ and broker-
dealer internalizers and wholesalers, all competing for order flow.
Based on publicly available information, no single exchange currently
has more than 18% market share.\9\ Therefore, no exchange possesses
significant pricing power in the execution of equity order flow. More
specifically, the Exchange currently has less than 12% market share of
executed volume of equities trading.\10\
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\6\ See Securities Exchange Act Release No. 61358, 75 FR 3594,
3597 (January 21, 2010) (File No. S7-02-10) (Concept Release on
Equity Market Structure).
\7\ See Cboe U.S Equities Market Volume Summary, available at
<a href="https://markets.cboe.com/us/equities/market_share">https://markets.cboe.com/us/equities/market_share</a>. See generally
<a href="https://www.sec.gov/fast-answers/divisionsmarketregmrexchangesshtml.html">https://www.sec.gov/fast-answers/divisionsmarketregmrexchangesshtml.html</a>.
\8\ See FINRA ATS Transparency Data, available at <a href="https://otctransparency.finra.org/otctransparency/AtsIssueData">https://otctransparency.finra.org/otctransparency/AtsIssueData</a>. A list of
alternative trading systems registered with the Commission is
available at <a href="https://www.sec.gov/foia/docs/atslist.htm">https://www.sec.gov/foia/docs/atslist.htm</a>.
\9\ See Cboe Global Markets U.S. Equities Market Volume Summary,
available at <a href="http://markets.cboe.com/us/equities/market_share/">http://markets.cboe.com/us/equities/market_share/</a>.
\10\ See id.
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The Exchange believes that the ever-shifting market share among the
exchanges from month to month demonstrates that market participants can
move order flow, or discontinue or reduce use of certain categories of
products. While it is not possible to know a firm's reason for shifting
order flow, the Exchange believes that one such reason is because of
fee changes at any of the registered exchanges or non-exchange venues
to which a firm routes order flow. With respect to non-marketable order
flow that would provide liquidity on an Exchange against which market
makers can quote, ETP Holders can choose from any one of the 16
currently operating registered exchanges to route such order flow.
Accordingly, competitive forces constrain exchange transaction fees
that relate to orders that would provide liquidity on an exchange.
Proposed Rule Change
Standard Rate for Adding and Removing Liquidity in Round Lots and Odd
Lots in Tapes A, B and C Securities With a per Share Price Below $1.00
(``Sub-Dollar Securities'')
The Exchange currently provides a base credit of $0.00004 per share
for adding liquidity in Sub-Dollar Securities. The base credit of
$0.00004 per share also applies to Retail Orders and MPL Orders that
add liquidity in Sub-Dollar Securities. For orders in Sub-Dollar
Securities that remove liquidity, the Exchange currently charges a fee
of 0.295% of dollar value.
With this proposed rule change, the Exchange proposes to eliminate
the credit for Sub-Dollar Securities that add liquidity, including for
MPL Orders in Sub-Dollar Securities that add liquidity. For Retail
Orders in Sub-Dollar Securities, the Exchange proposes to modify the
credit, from $0.00004 per share to 0.05% of dollar value.\11\ For
orders in Sub-Dollar Securities that remove liquidity, the Exchange
proposes to increase the fee, from 0.295% of dollar value to 0.30% of
dollar value.
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\11\ The Exchange notes that other exchanges provide credits for
liquidity-adding transactions in securities priced below $1.00 that
are denominated in a percentage of the total dollar amount of the
transaction. See e.g., the Members Exchange fee schedule on its
public website (available at <a href="https://info.memxtrading.com/fee-schedule/">https://info.memxtrading.com/fee-schedule/</a>), which reflects a rebate of 0.05% of total dollar value
for Retail Orders that add displayed liquidity in securities priced
below $1.00 per share.
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The purpose of reducing the standard rebate for orders, including
MPL Orders, in Sub-Dollar Securities is for business and competitive
reasons, as the Exchange believes the reduction of rebates would
decrease the Exchange's expenditures with respect to transaction
pricing and would also offset some of the costs associated with rebates
paid to ETP Holders that qualify for the Sub-Dollar Step Up Tier and
the rebates paid by the Exchange for Retail Orders in Sub-Dollar
Securities, and the Exchange's operations generally, in a manner that
is still consistent with the Exchange's overall pricing philosophy of
encouraging added liquidity. The Exchange notes that the proposed
standard rebate for orders, including MPL Orders, in Sub-Dollar
Securities that add liquidity, and the proposed standard fee for orders
in Sub-Dollar Securities that remove liquidity is comparable to, and
competitive with, the standard rebate and fee provided by at least one
other exchange for executions of orders in securities priced below
$1.00 per share.\12\ Additionally, the proposed standard rebate for
Retail Orders in Sub-Dollar Securities that add liquidity is also
comparable to, and competitive with, the standard rebate provided by at
least one other exchange for execution of orders in securities priced
below $1.00 per share.\13\
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\12\ See the Nasdaq Stock Market equities trading fee schedule
on its public website (available at <a href="https://www.nasdaqtrader.com/Trader.aspx?id=PriceListTrading2">https://www.nasdaqtrader.com/Trader.aspx?id=PriceListTrading2</a>), which reflects a standard rebate
of $0.00 per share to add liquidity in securities priced below $1.00
per share and a standard fee of 0.30% of total dollar volume in
securities priced below $1.00 per share.
\13\ See note 11, supra.
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PO Orders
Currently, under Section V. Standard Rates--Routing, the Exchange
charges a fee of $0.0030 per share for PO Orders \14\ in Tape B
securities routed for execution in the open or closing auction on Cboe
BZX. The Exchange also currently charges a similar fee of $0.0030 per
share for PO Orders in Tape C securities routed for execution in the
open or closing auction on Nasdaq.
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\14\ A PO Order is a Market or Limit Order that on arrival is
routed directly to the primary listing market without being assigned
a working time or interacting with interest on the NYSE Arca Book.
See NYSE Arca Rule 7.31-E(f)(1).
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The Exchange proposes to streamline the Fee Schedule by deleting
the column for the fee for PO Orders in Tape C securities routed to
Nasdaq auction and merge it with the column
[[Page 67533]]
for the fee for PO Orders in Tape B securities routed to Cboe BZX
auction. The purpose of the proposed change is to simplify the Fee
Schedule. The Exchange is not making any substantive change other than
to streamline the Standard Rates--Routing table under Section V. by
merging the per share fees for PO Orders routed to Cboe BZX and Nasdaq
into a single column.
Retail Orders
The Exchange currently provides tiered credits for Retail Orders
that provide liquidity on the Exchange. Specifically, Section VI. Tier
Rates--Round Lots and Odd Lots (Per Share Price $1.00 or Above),
provides a base Retail Order Tier credit of $0.0033 per share for
Adding. Additionally, the Exchange has established Retail Order Step-Up
Tier 1, Retail Order Step-Up Tier 2 and Retail Order Step-Up Tier 3
that provide a credit of $0.0038 per share, $0.0035 per share, and
$0.0036 per share, respectively, for Adding.\15\
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\15\ See Retail Tiers table under Section VI. Tier Rates--Round
Lots and Odd Lots (Per Share Price $1.00 or Above). Footnote (f)
provides that the credit payable under Retail Order Step-Up Tier 1,
Retail Order Step-Up Tier 2 and Retail Order Step-Up Tier 3 applies
for Adding displayed liquidity.
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The Exchange proposes to eliminate the distinction with respect to
the type of liquidity for which the Exchange provides credits under
Retail Order Step-Up Tier 1, Retail Order Step-Up Tier 2 and Retail
Order Step-Up Tier 3 by removing current footnote (f) from the Retail
Tiers table. With the proposed elimination of footnote (f), all Retail
Orders sent to the Exchange by ETP Holders that add liquidity would
receive the credits payable under the Retail Order Tier, Retail Order
Step-Up Tier 1, Retail Order Step-Up Tier 2 and Retail Order Step-Up
Tier 3. The Exchange is not proposing any substantive change to the
requirement or the amount of the credit under each of the Retail Order
tiers. The Exchange also proposes to renumber footnotes (g) and (h) as
footnotes (f) and (g), respectively, in conjunction to the changes
discussed herein.
The purpose of the proposed rule change is to adopt consistency
within the Fee Schedule as to the type of activity for which the
Exchange provides credits. The Exchange believes the proposed rule
change will continue to encourage participation from ETP Holders to
provide liquidity in Retail Orders on the Exchange to increase that
order flow which would benefit all ETP Holders by providing greater
execution opportunities on the Exchange. The Exchange also believes
that the proposed change would protect investors and the public
interest because maintaining such consistency within the Fee Schedule
would make the Fee Schedule more transparent and facilitate market
participants' understanding of the credits provided by the Exchange.
Tape B Credits
Currently, ETP Holders that meet the requirement under Tape B Step
Up Tier can earn the following incremental credits:
<bullet> An incremental credit of $0.0002 per share when an ETP
Holder has Adding ADV of Tape B CADV of at least 0.50% and has an
Adding Increase in Tape B of Tape B CADV of at least 20% in Q3 2019;
<bullet> An incremental credit of $0.0003 per share when an ETP
Holder has Adding ADV of Tape B CADV of at least 0.50% and has an
Adding Increase in Tape B of Tape B CADV of at least 30% in Q3 2019;
and
<bullet> An incremental credit of $0.0004 per share when an ETP
Holder has Adding ADV of Tape B CADV of at least 0.50% and has an
Adding Increase in Tape B of Tape B CADV of at least 40% in Q3 2019.
The incremental credits are payable in addition to the ETP Holder's
Tiered or Standard credit(s); provided, however, that such combined
credit(s) in Tape B securities currently cannot exceed $0.0032 per
share.
The Exchange also provides an increased cap applicable under the
Tape B Step Up Tier pricing tier. Specifically, if an ETP Holder's
providing ADV increases at least 150% over the ETP Holder's Adding ADV
in Q3 2019, then the ETP Holder can receive a combined credit of up to:
<bullet> $0.0033 per share if the ETP Holder is registered as a
Lead Market Maker or Market Maker in at least 150 Less Active ETPs in
which it meets at least two Performance Metrics, and has Tape B Adding
ADV equal to at least 0.65% of Tape B CADV, or
<bullet> $0.0034 per share if the ETP Holder or Market Maker is
registered as a Lead Market Maker or Market Maker in at least 200 Less
Active ETPs in which it meets at least two Performance Metrics, and has
Tape B Adding ADV equal to at least 0.70% of Tape B CADV.
The Exchange proposes to amend the requirement to qualify for the
increased cap applicable under the Tape B Step Up Tier pricing tier.
The Exchange is not proposing any change to the level of the credits.
As proposed, if an ETP Holder is registered as a Lead Market Maker
or Market Maker in at least 100 Less Active ETPs in which it meets at
least two Performance Metrics, where the ETP Holder, together with any
affiliates, has Adding Tape B ADV that is an increase of at least 60%
over the ETP Holder's Adding ADV in Q3 2019, as a percentage of Tape B
CADV, then such ETP Holder can receive a combined credit of up to:
<bullet> $0.0033 per share if the ETP Holder, together with any
affiliates, has Tape B Adding ADV equal to at least 0.65% of Tape B
CADV, or
<bullet> $0.0034 per share if the ETP Holder, together with any
affiliates, has Tape B Adding ADV equal to at least 0.70% of Tape B
CADV.
The Exchange believes lowering the Adding Tape B ADV requirement
from 150% over the ETP Holder's Adding ADV in Q3 2019 to 60% and
lowering the number of Less Active ETPs in which an ETP Holder is
required to register as a Lead Market Maker or Market Maker from 150
and 200 Less Active ETPs to 100 Less Active ETPs, would allow ETP
Holders to more easily qualify for the additional credits. The Exchange
believes the amended requirements would continue to provide an
incentive to ETP Holders to register as Lead Market Makers or Market
Makers and incentivize such liquidity providers to increase the number
of orders sent to the Exchange.
Sub-Dollar Adding Step Up Tier
The Exchange currently provides tiered credits to ETP Holders that
add liquidity in Sub-Dollar Securities. Specifically, an ETP Holder
that has an Adding ADV of 1 million shares with a per share price below
$1.00 (``Sub-Dollar Adding Orders''), and Adding Increase of CADV in
Sub-Dollar Adding Orders over July 2020, as a percentage of CADV with a
per share price below $1.00, receives a credit for Sub-Dollar Adding
Orders, as follows:
<bullet> A credit equal to 0.050% of the total dollar value for
Adding Increase of CADV in Sub-Dollar Adding Orders of at least 0.20%
over July 2020;
<bullet> A credit equal to 0.100% of the total dollar value for
Adding Increase of CADV in Sub-Dollar Adding Orders of at least 0.50%
over July 2020;
<bullet> A credit equal to 0.125% of the total dollar value for
Adding Increase of CADV in Sub-Dollar Adding Orders of at least 0.75%
over July 2020; and
<bullet> A credit equal to 0.150% of the total dollar value for
Adding Increase of CADV in Sub-Dollar Adding Orders of at least 1.00%
over July 2020.
The Exchange proposes to eliminate the tier in the third bullet
above because no ETP Holder has reached that tier in the last 6 months.
Additionally, the Exchange proposes to modify the
[[Page 67534]]
requirement for tiers in the first and second bullets above. The
Exchange is not proposing any change to the level of the credits
provided for adding liquidity in Sub-Dollar Securities.
Specifically, the Exchange proposes to modify the volume threshold
that ETP Holders would have to meet to qualify for the credits in the
tiers in the first and second bullets above. With the proposed
modifications, the tiered credits payable to ETP Holders that liquidity
in Sub-Dollar Securities would be as follows:
<bullet> A credit equal to 0.050% of the total dollar value for
Adding Increase of CADV in Sub-Dollar Adding Orders of at least 0.30%
over July 2020;
<bullet> A credit equal to 0.100% of the total dollar value for
Adding Increase of CADV in Sub-Dollar Adding Orders of at least 0.60%
over July 2020; and
<bullet> A credit equal to 0.150% of the total dollar value for
Adding Increase of CADV in Sub-Dollar Adding Orders of at least 1.00%
over July 2020.
The purpose of this proposed change is to continue to incentivize
ETP Holders to increase the liquidity-providing orders in Sub-Dollar
Securities they send to the Exchange, which would support the quality
of price discovery on the Exchange and provide additional liquidity for
incoming orders. As noted above, the Exchange operates in a competitive
environment, particularly as it relates to attracting non-marketable
orders, which add liquidity to the Exchange. While the Exchange
proposes to increase the volume threshold for two of the current tiers,
the Exchange believes ETP Holders will continue to be able to meet the
increased requirement given the increased trading in Sub-Dollar
Securities in recent months. ETP Holders that trade in Sub-Dollar
Securities would benefit by receiving enhanced credits if they choose
to send such orders to the Exchange. The Exchange also believes that
maintaining July 2020 as the baseline month would continue to allow ETP
Holders to meet the increased volume requirement. Based on their
current trading profile on the Exchange, a number of ETP Holders would
already meet the increased volume threshold and would therefore
continue to receive credits that they previously earned. However,
without having a view of ETP Holders' activity on other markets and
off-exchange venues, the Exchange has no way of knowing whether this
proposed rule change would result in other ETP Holders directing orders
to the Exchange in order to qualify for the tiers. The Exchange cannot
predict with certainty how many ETP Holders would avail themselves of
this opportunity, but additional liquidity-providing orders would
benefit all market participants because it would provide greater
execution opportunities on the Exchange.
The Exchange believes that eliminating a tier that has become
underutilized will streamline the Fee Schedule. The Exchange further
believes that the remaining tiers will continue to incentivize ETP
Holders to submit liquidity providing orders in Sub-Dollar Securities
to qualify for the credits. As noted above, the Exchange is not
proposing any change to the level of credits payable under the
remaining tiers for adding liquidity in Sub-Dollar Securities.
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,\16\ in general, and furthers the
objectives of Sections 6(b)(4) and (5) of the Act,\17\ 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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\16\ 15 U.S.C. 78f(b).
\17\ 15 U.S.C. 78f(b)(4) and (5).
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As discussed above, the Exchange operates in a highly fragmented
and competitive market. The Commission has repeatedly expressed its
preference for competition over regulatory intervention in determining
prices, products, and services in the securities markets. Specifically,
in Regulation NMS, the Commission highlighted the importance of market
forces in determining prices and SRO revenues and, also, recognized
that current regulation of the market system ``has been remarkably
successful in promoting market competition in its broader forms that
are most important to investors and listed companies.'' \18\
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\18\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
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The Exchange believes that the ever-shifting market share among the
exchanges from month to month demonstrates that market participants can
shift order flow, or discontinue or reduce use of certain categories of
products, in response to fee changes. With respect to non-marketable
orders which provide liquidity on an Exchange, ETP Holders can choose
from any one of the 16 currently operating registered exchanges to
route such order flow. Accordingly, competitive forces reasonably
constrain exchange transaction fees that relate to orders that would
provide displayed liquidity on an exchange. Stated otherwise, changes
to exchange transaction fees can have a direct effect on the ability of
an exchange to compete for order flow.
Given this competitive environment, the proposal represents a
reasonable attempt to attract additional order flow to the Exchange.
The Exchange believes that the proposal is also equitable and not
unfairly discriminatory. In the prevailing competitive environment, ETP
Holders are free to disfavor the Exchange's pricing if they believe
that alternatives offer them better value. The proposal is also not
unfairly discriminatory because it neither targets nor will it have a
disparate impact on any particular category of market participant.
Standard Rate for Adding and Removing Liquidity in Sub-Dollar
Securities
The Exchange believes that the proposed changes to increase the
standard fee for orders in Sub-Dollar Securities that remove liquidity
and reduce the standard rebate for orders, including MPL Orders, in
Sub-Dollar Securities that add liquidity are reasonable, equitable, and
consistent with the Act because such changes are designed to generate
additional revenue and decrease the Exchange's expenditures with
respect to transaction pricing and also to offset some of the costs
associated with the rebates paid to ETP Holders that qualify for the
Sub-Dollar Step Up Tier and the higher rebates paid by the Exchange for
Retail Orders in Sub-Dollar Securities, and the Exchange's operations
generally, in a manner that is still consistent with the Exchange's
overall pricing philosophy of encouraging added liquidity.
The Exchange also believes the proposed increased standard fee for
orders in Sub-Dollar Securities is reasonable and appropriate because
it represents a modest increase from the current standard fee and, as
noted above, remains comparable to the fee to remove liquidity in
securities below $1.00 charged by at least one other exchange.\19\
Similarly, the Exchange believes the proposed reduced standard rebate
for orders, including MPL Orders, in Sub-Dollar Securities that add
liquidity, and modification, from a per share basis to total dollar
value, of the standard rebate for Retail Orders in Sub-
[[Page 67535]]
Dollar Securities that add liquidity is reasonable and appropriate
because the reduction represents a modest decrease from the current
standard rebate and, as noted above, remains comparable to, and
competitive with, the standard rebates provided by other exchanges for
orders, including Retail Orders, that add liquidity in securities
priced below $1.00 per share.\20\ The Exchange further believes that
the proposed changes to the standard fees and rebates for adding and
removing liquidity in Sub-Dollar Securities are equitably allocated and
not unfairly discriminatory because they would apply equally to all ETP
Holders.
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\19\ See note 12, supra.
\20\ See notes 11 and 12, supra.
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PO Orders
The Exchange believes that the proposed rule change to merge the
fee columns for PO Orders routed to Cboe BZX and Nasdaq is reasonable
because the resulting change will simplify the Fee Schedule. The
Exchange believes the proposed change is also reasonable because the
Exchange is not making any substantive change other than to streamline
the Standard Rates--Routing table in Section V. by merging the per
share fees for PO Orders routed to Cboe BZX and Nasdaq into a single
column.
The Exchange believes that simplifying and streamlining the Fee
Schedule is equitable and not unfairly discriminatory because all ETP
Holders would continue to be subject to the same fee structure, and
access to the Exchange's market would continue to be offered on fair
and non-discriminatory terms. The Exchange also believes that the
proposed change would protect investors and the public interest because
a streamlined Fee Schedule would make it more accessible and
transparent and facilitate market participants' understanding of the
fees charged for services currently offered by the Exchange.
Retail Orders
The Exchange believes that the proposed rule change to eliminate
the distinction between orders that provide liquidity and those that
provide displayed liquidity under Retail Order Step-Up Tier 1, Retail
Order Step-Up Tier 2 and Retail Order Step-Up Tier 3 is reasonable
because it will result in consistency on the Exchange with respect to
the credits provided for liquidity-adding Retail Orders under the
Retail Order tiers. With this proposed rule change, the Exchange would
provide a credit to all liquidity-adding Retail Orders that qualify
under the Retail Order Step-Up Tier 1, Retail Order Step-Up Tier 2 and
Retail Order Step-Up Tier 3, similar to liquidity-adding Retail Orders
that qualify under the Retail Order Tier, which does not currently
require that such orders provide displayed liquidity. The Exchange
believes it is reasonable to provide credits for Retail Orders that
provide liquidity without any distinction. At least one other exchange
does not make a distinction when providing a credit for liquidity-
adding Retail Orders.\21\
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\21\ See Cboe BZX U.S. Equities Exchange (``BZX'') Fee Schedule,
Fee Code ZA, which provides a credit for Retail Orders that add
liquidity, available at <a href="https://www.cboe.com/us/equities/membership/fee_schedule/bzx/">https://www.cboe.com/us/equities/membership/fee_schedule/bzx/</a>.
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The Exchange believes the proposed change is also reasonable
because the Exchange is not making any change other than to remove
footnote (f) and therefore, adopt consistency in how credits would be
payable for liquidity-adding Retail Orders; the Exchange is not
proposing any change to the requirements or the level of credits under
the Retail Order Tier, Retail Order Step-Up Tier 1, Retail Order Step-
Up Tier 2 and Retail Order Step-Up Tier 3. As noted above, the purpose
of the proposed rule change is to adopt consistency within the Fee
Schedule as to the type of activity for which the Exchange provides
credits. The Exchange believes the proposed rule change will continue
to encourage participation from ETP Holders to provide liquidity in
Retail Orders on the Exchange to increase that order flow which would
benefit all ETP Holders by providing greater execution opportunities on
the Exchange.
The Exchange believes that adopting consistent application in how
credits are paid is equitable and not unfairly discriminatory because
all ETP Holders would continue to be subject to the same fee structure,
and access to the Exchange's market would continue to be offered on
fair and non-discriminatory terms. The Exchange also believes that the
proposed change would protect investors and the public interest because
a simplified Fee Schedule would make it more transparent and facilitate
market participants' understanding of the credits provided by the
Exchange.
Tape B Credits
The Exchange believes the proposed rule change to modify the
requirements to qualify for the additional Tape B credits is a
reasonable means of attracting additional liquidity to the Exchange.
The Exchange believes the modified requirements would continue to
encourage ETP Holders to submit additional liquidity to a national
securities exchange and receive the current level of credits, which are
among the highest paid by the Exchange. The Exchange believes it is
reasonable to require ETP Holders to meet the applicable volume
threshold to qualify for the increased credits, given the higher
combined credit of $0.0033 per share and $0.0034 per share that the
Exchange would pay if the tier criteria is met. The Exchange believes
that submission of additional liquidity to the Exchange would promote
price discovery and transparency and enhance order execution
opportunities for ETP Holders from the substantial amounts of liquidity
present on the Exchange. The Exchange also believes it is reasonable to
require ETP Holders to register as a Lead Market Maker or Market Maker
in a minimum number of Less Active ETPs and to meet at least two
Performance Metrics in such securities as the Exchange believes this
requirement would enhance market quality in Less Active ETPs and
support the quality of price discovery in such securities. The Exchange
also believes it is reasonable to lower the number of Less Active ETPs
in which an ETP Holder is required to register as a Lead Market Maker
or Market Maker because it would lead to greater participation by ETP
Holders in Less Active ETPs.
The Exchange believes the proposed rule change to modify the
requirements to qualify for the additional Tape B credits equitably
allocates its fees and credits among market participants because it is
reasonably related to the value of the Exchange's market quality
associated with higher equities volume. As proposed, the Exchange would
continue to provide qualifying ETP Holders with some of the highest
credits payable by the Exchange provided they continue to participate
as Lead Market Makers or Market Makers and continue to provide
increased Tape B adding ADV. The more an ETP Holder participates, the
greater the credit that ETP Holder would receive. The Exchange believes
the modified requirements would encourage ETP Holders to continue to
send orders that add liquidity to the Exchange, thereby contributing to
robust levels of liquidity, which would benefit all market
participants.
The Exchange believes it is not unfairly discriminatory to modify
the requirements to qualify for the increased Tape B credits because
the resulting requirements would be applied on an equal basis to all
ETP Holders, who would all be subject to them on an equal basis.
Additionally, the proposal neither targets nor will it have a disparate
impact on any particular category of
[[Page 67536]]
market participant. The proposal does not permit unfair discrimination
because the modified requirements would be applied to all ETP Holders,
who would all be subject to the requirements on an equal basis.
Sub-Dollar Adding Step Up Tier
The Exchange believes the proposal to modify the volume requirement
for ETP Holders to qualify for the Sub-Dollar Adding Step Up Tier is
reasonable because, despite the increased volume requirement, ETP
Holders would continue to be incentivized to send orders in Sub-Dollar
Securities to qualify for the credits provided by the Exchange, which
the Exchange is not changing. Additionally, despite the increased
volume requirement, the Exchange believes that ETP Holders would
continue to send orders in Sub-Dollar Securities to the Exchange
because no competing market currently provides tier-based credits in
Sub-Dollar Securities similar to those provided by the Exchange. To the
extent that ETP Holders would be required to send increased orders in
Sub-Dollar Securities to the Exchange to qualify for the credits, such
increased participation would result in increased liquidity which in
turn would support the quality of price discovery and would promote
market transparency as such orders would be sent to a national
securities exchange rather than to off-exchange venues. Moreover, the
addition of liquidity would benefit market participants whose increased
order flow would provide meaningful added levels of liquidity thereby
contributing to the depth and market quality on the Exchange.
The Exchange notes that volume-based incentives and discounts have
been widely adopted by exchanges,\22\ including the Exchange,\23\ and
are reasonable, equitable and non-discriminatory because they are open
to all ETP Holders on an equal basis and provide additional credits
that are reasonably related to the value to an exchange's market
quality and associated higher levels of market activity.
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\22\ See, e.g., BZX Fee Schedule, Footnote 1, Add Volume Tiers
which provide enhanced rebates between $0.0025 and $0.0031 per share
for displayed orders where BZX members meet certain volume
thresholds.
\23\ See, e.g., Fee Schedule, Step Up Tiers, which provide
enhanced rebates between $0.0028 and $0.0033 per share in Tape A
Securities, between $0.0022 and $0.0034 per share in Tape B
Securities, and between $0.0028 and $0.0033 per share in Tape C
Securities for orders that provide displayed liquidity where ETP
Holders meet certain volume thresholds.
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The Exchange believes that the proposed rule change to eliminate
one of the tiers is reasonable because the tier proposed for deletion
has been underutilized and has not incentivized ETP Holders to bring
liquidity and increase trading on the Exchange. In the last 6 months,
no ETP Holder has availed itself of the tier's requirement. The
Exchange believes it is reasonable to eliminate pricing tiers when they
become underutilized. The Exchange believes eliminating underutilized
tiers would also simplify the Fee Schedule. The Exchange further
believes that removing reference to underutilized tiers that the
Exchange proposes to eliminate from the Fee Schedule would also add
clarity to the Fee Schedule.
The Exchange believes the proposal to modify the volume requirement
for ETP Holders to qualify for the Sub-Dollar Adding Step Up Tier is
equitable because, despite the increased volume requirement, ETP
Holders would continue to be incentivized to send orders in Sub-Dollar
Securities to qualify for the credits provided by the Exchange, which
the Exchange is not changing. Moreover, any increased order flow would
be to the benefit of all market participants because such increased
order flow in Sub-Dollar Securities would provide meaningful added
levels of liquidity thereby contributing to the depth and market
quality on the Exchange.
As noted above, based on their current trading profile on the
Exchange, a number of ETP Holders would already meet the increased
volume threshold and would therefore continue to receive credits that
they previously earned. However, without having a view of ETP Holders'
activity on other markets and off-exchange venues, the Exchange has no
way of knowing whether this proposed rule change would result in other
ETP Holders directing orders to the Exchange in order to qualify for
the tiers. The Exchange cannot predict with certainty how many ETP
Holders would avail themselves of this opportunity, but additional
liquidity-providing orders would benefit all market participants
because it would provide greater execution opportunities on the
Exchange.
The Exchange believes that offering credits for providing liquidity
in Sub-Dollar Securities, which are some of the highest among the
Exchange's competitors, if the step-up requirements are met, will
continue to attract increased order flow and liquidity to the Exchange,
thereby providing additional price improvement opportunities on the
Exchange and benefiting investors generally. As to those market
participants that do not qualify for the adding liquidity credits by
increasing order flow and liquidity, the proposal will not adversely
impact their existing pricing or their ability to qualify for other
credits provided by the Exchange.
The Exchange believes that the proposed rule change to eliminate
one of the tiers is an equitable allocation of its fees and credits.
The Exchange believes that eliminating a tier from the Fee Schedule
when such tier becomes underutilized is equitable because the tier
would be eliminated in its entirety and would no longer be available to
any ETP Holder.
The Exchange believes it is not unfairly discriminatory to modify
the volume requirement for ETP Holders to qualify for the Sub-Dollar
Adding Step Up Tier, as the modified requirement would be applicable on
an equal basis to all ETP Holders that add liquidity under the pricing
tier. The Exchange believes that, despite the increased volume
requirement, the credits payable under the pricing tier, which the
Exchange is not proposing to change, would continue to serve as an
incentive to ETP Holders to increase the level of orders sent to the
Exchange in order to qualify for such credits.
The Exchange believes that the proposed rule change is not unfairly
discriminatory because maintaining or increasing the proportion of Sub-
Dollar 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. Finally, the submission of orders in Sub-Dollar Securities
to the Exchange is optional for ETP Holders in that they could choose
whether to submit such orders to the Exchange and, if they do, the
extent of its activity in this regard.
The Exchange believes that the proposed rule change to eliminate
one of the tiers is not unfairly discriminatory. The Exchange believes
that eliminating a tier from the Fee Schedule when such tier becomes
underutilized is not unfairly discriminatory because the tier would be
eliminated in its entirety and would no longer be available to any ETP
Holder.
On the backdrop of the competitive environment in which the
Exchange currently operates, the proposed rule change is a reasonable
attempt to
[[Page 67537]]
increase liquidity on the Exchange and improve the Exchange's market
share relative to its competitors.
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,\24\ 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, as discussed above, the Exchange believes
that the proposed changes would encourage the submission of additional
liquidity to a public exchange, thereby promoting market depth, price
discovery and transparency and enhancing order execution opportunities
for ETP Holders. As a result, the Exchange believes that the proposed
change furthers the Commission's goal in adopting Regulation NMS of
fostering integrated competition among orders, which promotes ``more
efficient pricing of individual stocks for all types of orders, large
and small.'' \25\
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\24\ 15 U.S.C. 78f(b)(8).
\25\ See Regulation NMS, 70 FR 37498-99.
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Intramarket Competition. The Exchange believes the proposed
amendments to its Fee Schedule would not impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act. The Exchange does not believe that the proposed
changes represent a significant departure from previous pricing offered
by the Exchange or its competitors. The proposed changes are designed
to attract additional order flow to the Exchange, and would continue to
incentivize market participants to direct order flow to the Exchange,
bringing with it additional execution opportunities for market
participants. In particular, the proposed changes to the standard fees
and rebates for Sub-Dollar Securities would be available to all
similarly situated market participants, and as such, would not impose a
disparate burden on competition among market participants on the
Exchange. The Exchange's proposal to remove the distinction between
Retail Orders that provide liquidity from those that provide displayed
liquidity would also continue to incentivize ETP Holders to direct more
of their Retail Orders to the Exchange as each Retail Order would be
treated in a similar fashion for purposes of the credits offered by the
Exchange. Additionally, the proposed volume requirement to qualify for
the Tape B credits and to qualify for the Sub-Dollar Adding Step Up
tier would continue to incentivize ETP Holders to direct order flow to
the Exchange, and would apply to all ETP Holders equally in that all
ETP Holders are eligible for these tiers, have a reasonable opportunity
to meet the tiers' criteria and will receive credits on their
qualifying orders if such criteria are met. Greater overall order flow,
trading opportunities, and pricing transparency benefits all market
participants on the Exchange by enhancing market quality and continuing
to encourage ETP Holders to send orders, thereby contributing towards a
robust and well-balanced market ecosystem. Moreover, the proposal to
modify the Fee Schedule to consolidate the pricing applicable to PO
Orders routed to away markets would add clarity and transparency to the
Fee Schedule. The Exchange also does not believe the proposed rule
change to eliminate underutilized tiers will impose any burden on
intramarket competition because the proposed change would impact all
ETP Holders uniformly (i.e., the tier will not be available to any ETP
Holder). The proposed changes would equally impact all similarly-
situated market participants, and, as such, would not impose a
disparate burden on competition among market participants on the
Exchange.
Intermarket Competition. The Exchange operates in a highly
competitive market in which market participants can readily choose to
send their orders to other exchange and off-exchange venues if they
deem fee levels at those other venues to be more favorable. As noted
above, the Exchange's market share of intraday trading (i.e., excluding
auctions) is currently less than 12%. In such an environment, the
Exchange must continually adjust its fees and rebates to remain
competitive with other exchanges and with off-exchange venues. 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 does not believe its proposed fee changes
imposes any burden on intermarket competition.
The Exchange believes that the proposed fee changes may 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.
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) \26\ of the Act and subparagraph (f)(2) of Rule
19b-4 \27\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\26\ 15 U.S.C. 78s(b)(3)(A).
\27\ 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) \28\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\28\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
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
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#4634332a236b25292b2b232832350635232568212930"><span class="__cf_email__" data-cfemail="1062657c753d737f7d7d757e6463506375733e777f66">[email protected]</span></a>. Please include
File Number SR-NYSEArca-2021-99 on the subject line.
Paper Comments
<bullet> 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-2021-99. 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/
[[Page 67538]]
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 the filing also will be
available for inspection and copying at the principal offices 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-2021-99, and should
be submitted on or before December 17, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\29\
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\29\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-25749 Filed 11-24-21; 8:45 am]
BILLING CODE 8011-01-P
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This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.