Notice2022-10802
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
May 20, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 98 (Friday, May 20, 2022)</title>
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[Federal Register Volume 87, Number 98 (Friday, May 20, 2022)]
[Notices]
[Pages 31044-31050]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-10802]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-94917; File No. SR-NYSEArca-2022-27]
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 16, 2022.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on May 2, 2022, 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 Exchange. 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\ 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'') by introducing two new pricing tiers, Tier 2
under Adding Tiers and Step Up Tier 3 under Step Up Tiers. The Exchange
also proposes to eliminate Step Up Tier 1 under Step Up Tiers and
eliminate Tier 4 under Tape C Tiers for Adding. Lastly, the Exchange
proposes to amend the criteria to qualify for Tier 3 under Tape C Tiers
for Adding. The Exchange proposes to implement the fee changes
effective May 2, 2022. 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 by introducing two
new pricing tiers, Tier 2 under Adding Tiers and Step Up Tier 3 under
Step Up Tiers. The Exchange also proposes to eliminate Step Up Tier 1
under Step Up Tiers and eliminate Tier 4 under Tape C Tiers for Adding.
Lastly, the Exchange proposes to amend the criteria to qualify for Tier
3 under Tape C Tiers for Adding. The Exchange proposes to implement the
fee changes effective May 2, 2022.
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.'' \3\
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\3\ 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.'' \4\ Indeed, equity trading is currently dispersed across
16 exchanges,\5\ numerous alternative trading systems,\6\ 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.\7\ 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.\8\
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\4\ 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).
\5\ 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>.
\6\ 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>.
\7\ 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>.
\8\ 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
Adding Tiers--Tier 2
The Exchange proposes to introduce a new pricing tier, Tier 2, in
the Adding Tiers table under Section VI. Tier Rates--Round Lots and Odd
Lots (Per Share Price $1.00 or Above). As proposed, an ETP Holder could
qualify for a credit of $0.0030 per share for Adding in Tape A
securities, $0.0023 per share for Adding in Tape B securities and
$0.0031 per share for Adding in Tape C securities if the ETP Holder has
Adding ADV that is equal to at least 0.50% of CADV.\9\ With the
proposed addition of a new pricing tier and the renumbering of existing
tiers, the Exchange proposes to amend the
[[Page 31045]]
text regarding certain fees that are applicable to ETP Holders that
qualify for each of the tiers by adding reference to the newly
renumbered Tier 4.
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\9\ With the introduction of the new Tier 2 pricing tier, the
Exchange proposes to renumber current Tier 2 as Tier 3 and current
Tier 3 as Tier 4 without making any changes to the requirement or
credits to those tiers. Additionally, the Exchange proposes to
replace reference to Tier 3 with Tier 4 in the text attached to the
note denoted by * under current Tier 3.
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The Exchange believes that the proposed new pricing tier will
incentivize ETP Holders to route their liquidity-providing order flow
to the Exchange in order to qualify for the tier, which provides higher
credits than those currently available under current Tier 2 and current
Tier 3. This in turn would support the quality of price discovery on
the Exchange and provide additional price improvement opportunities for
incoming orders. The Exchange believes that by correlating the amount
of the fee to the level of orders sent by an ETP Holder that add
liquidity, the Exchange's fee structure would incentivize ETP Holders
to submit more orders that add liquidity to the Exchange, thereby
increasing the potential for price improvement to incoming marketable
orders submitted to the Exchange.
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. The Exchange does not know how much
order flow ETP Holders choose to route to other exchanges or to off-
exchange venues. Based on the profile of liquidity-adding firms
generally, the Exchange believes that a number of ETP Holders could
qualify for the proposed new pricing tier if they choose to direct
order flow to the Exchange. However, without having a view of ETP
Holders' activity on other exchanges and off-exchange venues, the
Exchange has no way of knowing whether this proposed rule change would
result in any additional ETP Holders directing orders to the Exchange
in order to qualify for the new Tier 2 credits.
Step Up Tiers
The proposed rule change is designed to be available to all ETP
Holders on the Exchange and is intended to provide ETP Holders an
opportunity to receive an enhanced rebate by executing more of their
orders on the Exchange. The Exchange currently provides credits to ETP
Holders who submit orders that provide displayed liquidity on the
Exchange. The Exchange currently has multiple levels of credits for
orders that provide displayed liquidity that are based on the amount of
volume of such orders that ETP Holders send to the Exchange.
In this competitive environment, the Exchange has already
established Step Up Tiers 1-3, which are designed to encourage ETP
Holders that provide displayed liquidity on the Exchange to increase
that order flow, which would benefit all ETP Holders by providing
greater execution opportunities on the Exchange. In order to provide an
incentive for ETP Holders to direct providing displayed order flow to
the Exchange, the credits increase in the various tiers based on
increased levels of volume directed to the Exchange.
Currently, the following credits are available to ETP Holders that
provide increased levels of displayed liquidity on the Exchange:
------------------------------------------------------------------------
Tier Credit for adding displayed liquidity
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Step Up Tier 1............... $0.0030 (Tape A), $0.0023 (Tape B),
$0.0031 (Tape C).
Step Up Tier 2............... $0.0028 (Tape A and C), $0.0022 (Tape B).
Step Up Tier 3............... $0.0033 (Tape A and C), $0.0034 (Tape B).
------------------------------------------------------------------------
The Exchange proposes the following changes to the Step Up Tiers.
First, the Exchange proposes to eliminate current Step Up Tier 1 and
remove the pricing tier from the Fee Schedule. The current Step Up Tier
1 pricing tier has been underutilized by ETP Holders. The Exchange has
observed that not a single ETP Holder has qualified for the pricing
tier proposed for elimination in the last three months. Since the
current Step Up Tier 1 pricing tier has not been effective in
accomplishing its intended purpose, which is to incent ETP Holders to
increase their liquidity adding activity on the Exchange, the Exchange
has determined to eliminate the pricing tier from the Fee Schedule.
With the proposed elimination of Step Up Tier 1, the Exchange proposes
to rename current Step Up Tier 2 as Step Up Tier 1 and current Step Up
Tier 3 as Step Up Tier 2.\10\
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\10\ With the proposed addition of a new pricing tier and the
renumbering of existing tiers, the Exchange proposes to amend
footnote (b) under Section VI. of the Fee Schedule by replacing
reference to Step Up Tier 3 with Step Up Tier 2 in the footnote. The
applicability of footnote (b) would otherwise remain unchanged.
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Second, the Exchange proposes to introduce a new pricing tier, Step
Up Tier 3, in the Step Up Tiers table under Section VI. Tier Rates--
Round Lots and Odd Lots (Per Share Price $1.00 or Above). As proposed,
an ETP Holder would qualify for the new Step Up Tier 3 if the ETP
Holder has Adding ADV that is an increase of at least 0.35% as a
percentage of CADV over the ETP Holder's Adding ADV in September 2019.
An ETP Holder would alternatively qualify for the new Step Up Tier 3 if
the ETP Holder has Removing ADV that is equal to at least 0.50% as a
percentage of CADV and has Adding ADV that is an increase of at least
0.25% as a percentage of CADV over the ETP Holder's Adding ADV in
September 2019. ETP Holders that meet either of the two criteria would
qualify for a credit of $0.0031 per share for orders that provide
displayed liquidity in Tape A, Tape B and Tape C securities.
The Exchange believes the proposed new Step Up Tier 3 pricing tier
would incentivize order flow providers to send a greater number of
liquidity-providing orders to the Exchange to qualify for the pricing
tier. While the proposed pricing tier would pay a credit that is lower
than that available to ETP Holders under current Step Up Tier 3, the
new tier also adopts lower volume thresholds than that required to
qualify for current Step Up Tier 3. Additionally, proposed new Step Up
Tier 3 provides ETP Holders with two ways to qualify for the credits
payable under the pricing tier, and also provides for higher credits
than those provided under current Step Up Tier 2 and current Step Up
Tier 1, the latter of which the Exchange is proposing to eliminate
entirely with this proposed rule change.
Tape C Tiers
The proposed rule change is designed to be available to all ETP
Holders on the Exchange and is intended to provide ETP Holders an
opportunity to receive credits by executing their orders in Tape C
securities on the Exchange.
In this competitive environment, the Exchange has already
established pricing for trading activity in Tape C securities where the
credits increase in the various tiers based on increased levels of
volume directed to the Exchange. The current Tape C Tiers are designed
to encourage ETP Holders that provide liquidity in Tape C securities to
increase that order flow, which would benefit all ETP Holders by
providing greater execution opportunities on the Exchange.
Currently, the following credits are available to ETP Holders that
add
[[Page 31046]]
liquidity in Tape C securities on the Exchange:
<bullet> Tape C Tier 4 credit of $0.0029 per share for ETP Holders
that have at least 0.15% Adding ADV as a percentage of CADV, or 20
million shares of Adding ADV;
<bullet> Tape C Tier 3 credit of $0.0031 per share for ETP Holders
that have at least 0.25% Adding ADV as a percentage of CADV;
<bullet> Tape C Tier 2 credit of $0.0033 per share for ETP Holders
that have at least 0.35% Adding ADV as a percentage of CADV; and
<bullet> Tape C Tier 1 credit of $0.0034 per share for ETP Holders
that have at least 0.40% Adding ADV as a percentage of CADV and a fee
of $0.0029 per share for removing liquidity.
The Exchange proposes the following changes to the Tape C Tiers.
First, the Exchange proposes to eliminate current Tape C Tier 4 and
remove the pricing tier from the Fee Schedule. The current Tape C Tier
4 tier has been underutilized by ETP Holders. The Exchange has observed
that not a single ETP Holder has qualified for the pricing tier
proposed for elimination in the last three months. Since the current
Tape C Tier 4 pricing tier has not been effective in accomplishing its
intended purpose, which is to incent ETP Holders to direct their
liquidity adding activity in Tape C securities to the Exchange, the
Exchange has determined to eliminate the pricing tier from the Fee
Schedule.
Second, the Exchange proposes to modify the requirements to qualify
for current Tape C Tier 3 and the credit associated with Tape C Tier 3.
As proposed, an ETP Holder would qualify for Tape C Tier 3 if the ETP
Holder has Adding ADV of at least 0.20% as a percentage of CADV. ETP
Holders that meet the proposed lower volume requirement would qualify
to receive a credit of $0.0030 per share for orders in Tape C
securities that provide liquidity on the Exchange.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\11\ in general, and furthers the
objectives of Sections 6(b)(4) and (5) of the Act,\12\ 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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\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(4) and (5).
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The Proposed Fee Change Is Reasonable
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.'' \13\
---------------------------------------------------------------------------
\13\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
---------------------------------------------------------------------------
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 that 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.
Adding Tiers--Tier 2
The Exchange believes that the proposed new Tier 2 pricing tier is
reasonable because it is designed to encourage increased trading
activity on the Exchange. The Exchange believes it is reasonable to
require ETP Holders to meet the applicable volume threshold as it
offers liquidity providers an opportunity to receive an enhanced
rebate. Further, the proposed new pricing tier is reasonable as it
would provide ETP Holders an additional opportunity to qualify for a
rebate by meeting lower volume threshold than that required to qualify
for current Tier 1. The Exchange believes that the proposal represents
a reasonable effort to promote price improvement and enhanced order
execution opportunities for ETP Holders. All ETP Holders would benefit
from the greater amounts of liquidity on the Exchange, which would
represent a wider range of execution opportunities. The Exchange
believes the proposed new Tier 2 pricing tier is a reasonable means to
encourage ETP Holders to increase their liquidity providing orders in
Tape A, Tape B and Tape C securities.
As noted above, the Exchange operates in a highly competitive
environment, particularly for attracting order flow that provides
liquidity on an exchange. More specifically, the Exchange notes that
greater add volume order flow may provide for deeper, more liquid
markets and execution opportunities at improved prices, which the
Exchange believes would incentivize liquidity providers to submit
additional liquidity and enhance execution opportunities.
Step Up Tiers
The Exchange believes the proposal to adopt the new Step Up Tier 3
pricing tier is reasonable as it would serve as an incentive to market
participants to increase the orders sent directly to NYSE Arca and
therefore provide liquidity that supports the quality of price
discovery and promotes market transparency. The Exchange believes the
proposed pricing tier is reasonable and equitable because it would
allow ETP Holders to receive increased credits from those currently
available under current Step Up Tier 2 and current Step Up Tier 1, the
latter of which the Exchange proposes to eliminate with this proposed
rule change. Moreover, the addition of the new Step Up Tier 3 pricing
tier 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. Further, the Exchange
believes the proposed pricing tier is reasonable as it also provides
ETP Holders two methods to qualify for the proposed credit. An ETP
Holder can choose to either send only liquidity-providing orders or a
combination of orders that Add liquidity and Remove liquidity and as
long as the ETP Holder meets the prescribed requirement, the ETP Holder
would qualify for the proposed new pricing tier and the corresponding
credit.
The Exchange believes that the proposed rule change to eliminate
the Step Up Tier 1 pricing tier is reasonable because the pricing tier
has been underutilized and has not incentivized ETP Holders to bring
liquidity and increase trading on the Exchange. No ETP Holder has
availed itself of the pricing tier in the last three months. The
Exchange believes it is reasonable to eliminate requirements and
credits, and
[[Page 31047]]
even entire pricing tiers, when such incentives become underutilized.
The Exchange believes eliminating underutilized incentive programs
would also simplify the Fee Schedule. The Exchange further believes
that removing reference to the pricing tier that the Exchange proposes
to eliminate from the Fee Schedule would also add clarity to the Fee
Schedule.
The Exchange notes that volume-based incentives and discounts have
been widely adopted by exchanges, including the Exchange, and are
reasonable, equitable and not unfairly discriminatory because they are
available to all ETP Holders on an equal basis. They also provide
additional benefits or discounts that are reasonably related to the
value of the Exchange's market quality and associated higher levels of
market activity. Additionally, the Exchange is one of many venues and
off-exchange venues to which market participants may direct their order
flow, and it represents a small percentage of the overall market.
Competing exchanges offer similar tiered pricing structures to that of
the Exchange, including schedules of rebates and fees that apply based
on members achieving certain volume thresholds.
Tape C Tiers
The Exchange believes the proposed change to lower the volume
requirement under the Tape C Tier 3 is reasonable because it would
allow ETP Holders to more easily meet the requirement of the pricing
tier to receive per share credits payable under the pricing tier,
thereby encouraging the submission of additional liquidity to a
national securities exchange. 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 believes the
proposed lower volume requirement is also reasonable as it would
provide an additional incentive for ETP Holders to qualify for this
established tier and direct their order flow to the Exchange and
provide meaningful added levels of displayed liquidity, thereby
contributing to the depth and market quality on the Exchange. The
Exchange also believes it is reasonable to offer a nominally lower
credit to ETP Holders when they qualify for Tape C Tier because ETP
Holders would correspondingly be subject to lower volume requirement to
qualify for such credit.
The Exchange believes that the proposed rule change to eliminate
the Tape C Tier 4 pricing tier is reasonable because the pricing tier
has been underutilized and has not incentivized ETP Holders to bring
liquidity and increase trading on the Exchange. No ETP Holder has
availed itself of the pricing tier in the last three months. The
Exchange believes it is reasonable to eliminate requirements and
credits, and even entire pricing tiers, when such incentives become
underutilized. The Exchange believes eliminating underutilized
incentive programs would also simplify the Fee Schedule. The Exchange
further believes that removing reference to the pricing tier that the
Exchange proposes to eliminate from the Fee Schedule would also add
clarity to the Fee Schedule.
The Proposed Fee Change Is an Equitable Allocation of Fees and Credits
The Exchange believes its proposal equitably allocates its fees and
credits among its market participants.
Adding Tiers--Tier 2
The Exchange believes the proposed rule change to introduce a new
pricing tier for ETP Holders equitably allocates its fees among its
market participants. The Exchange believes the proposed new Tier 2
pricing tier is equitable because it is open to all similarly situated
ETP Holders on an equal basis and provides a per share credit that is
reasonably related to the value of an exchange's market quality
associated with higher volumes. The Exchange believes it is equitable
to require ETP Holders to meet the applicable volume thresholds to
qualify for the new Tier 2 credits. The Exchange believes the proposed
change would continue to encourage ETP Holders to both submit
additional liquidity to the Exchange and execute orders on the
Exchange, thereby contributing to robust levels of liquidity, to the
benefit of all market participants.
The proposed change is designed as an incentive to any and all
liquidity providers interested in meeting the tier criteria to submit
order flow to the Exchange and each will receive the associated rebate
if the tier criteria is met. The Exchange believes that the proposed
new Tier 2 could encourage the submission and removal of additional
liquidity from the Exchange, thus enhancing order execution
opportunities for ETP Holders from the substantial amounts of liquidity
present on the Exchange. All ETP Holders would benefit from the greater
amounts of liquidity that would be present on the Exchange, which would
provide greater execution opportunities.
The Exchange believes the proposed rule change would also improve
market quality for all market participants seeking to remove liquidity
on the Exchange and, as a consequence, attract more liquidity to the
Exchange, thereby improving market-wide quality. The Exchange believes
that the proposal constitutes an equitable allocation of fees because
all similarly situated ETP Holders would be eligible for the fees and
credits provided under the proposed new pricing tier.
Step Up Tiers
The Exchange believes the proposed new Step Up Tier 3 pricing tier
is equitable because it would allow ETP Holders to receive increased
credits above those currently available under current Step Up Tier 2
and current Step Up Tier 1, the latter of which the Exchange proposes
to eliminate with this proposed rule change. Moreover, the addition of
the new Step Up Tier 3 pricing tier 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. Given that Step Up Tier 3 would be a new pricing tier, no ETP
Holder currently qualifies for the proposed credit. And 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 any ETP Holders qualifying for this tier.
However, the Exchange believes the proposed volume requirements and the
multiple ways by which an ETP Holder could qualify for the proposed
pricing tier should provide an incentive for ETP Holders to submit
orders that both provide liquidity and remove liquidity, which would
promote price discovery and increase execution opportunities for all
ETP Holders. The Exchange notes that the proposed new Step Up Tier 3
would use the same September 2019 baseline as the current Step Up Tier
3, renamed as Step Up Tier 2. The Exchange believes that utilizing the
same baseline would make it easier for ETP Holders to monitor their
providing ADV, as opposed to introducing a new baseline. The Exchange
believes the proposed change would thereby encourage the submission of
additional orders to a national securities exchange, thus promoting
price discovery and transparency and enhancing order execution
opportunities for ETP Holders from the substantial amounts of liquidity
present on the Exchange, which would benefit all market participants on
the Exchange.
The Exchange believes that eliminating requirements and credits,
and even entire pricing tiers, from the
[[Page 31048]]
Fee Schedule when such incentives become ineffective is equitable
because the requirements, and credits, and even entire pricing tiers,
would be eliminated in their entirety and would no longer be available
to any ETP Holder. The Exchange also believes that the proposed change
would protect investors and the public interest because the deletion of
the underutilized pricing tier would make the Fee Schedule more
accessible and transparent and facilitate market participants'
understanding of the fees charged for services currently offered by the
Exchange.
Tape C Tiers
The Exchange believes that the proposed modification of the volume
threshold to qualify for Tape C Tier 3 and the corresponding credit
payable under the pricing tier represents an equitable allocation of
fees. The Exchange believes the proposal would continue to encourage
ETP Holders 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 that lowering the
requirement would make it easier for liquidity providers to qualify for
the Tape C Tier 3 credit of $0.0030 per share. While the Exchange
proposes to nominally lower the credit that would be payable under the
pricing tier, the Exchange believes the proposed lower volume
requirement would nonetheless encourage the submission of additional
liquidity to the Exchange, thus promoting price discovery and
transparency and enhancing order execution opportunities for all ETP
Holders.
The Exchange believes the proposed lower volume requirement should
incentivize ETP Holders to submit liquidity-providing order flow, which
would promote price discovery and increase execution opportunities for
all ETP Holders. While the Exchange has no way of knowing whether this
proposed rule change would definitively result in any particular ETP
Holder qualifying for the modified Tape C Tier 3, the Exchange
anticipates a number of ETP Holders would be able to meet, or will
reasonably be able to meet, the modified criteria. However, without
having a view of activity on other markets and off-exchange venues, the
Exchange has no way of knowing whether this proposed rule change would
result in any ETP Holder meeting the modified requirement and
qualifying for the modified Tape C Tier 3 rebate. As stated, the
proposed changes to the requirements to qualify for the Tape C Tier 3
pricing tier and the corresponding credit is designed to continue to
incentivize ETP Holders to submit additional liquidity in Tape C
securities. The Exchange believes the proposed rule change would
improve market quality for all market participants on the Exchange and,
as a consequence, attract more liquidity to the Exchange thereby
improving market-wide quality.
The Exchange believes that the proposal represents an equitable
allocation of fees and credits and is not unfairly discriminatory
because it would apply uniformly to all ETP Holders, in that all ETP
Holders will have the opportunity to meet the tier's criteria and
receive the applicable rebate if such criteria is met. The proposed
rebate would apply automatically and uniformly to all ETP Holders that
achieve the corresponding criteria.
The Proposed Fee Change Is Not Unfairly Discriminatory
The Exchange believes that the proposal is not unfairly
discriminatory.
Adding Tiers--Tier 2
The Exchange believes that the proposed rule change to introduce
the new Tier 2 pricing tier is not unfairly discriminatory. The
Exchange believes that the proposal does not permit unfair
discrimination because the proposed new pricing tier would be applied
to all similarly situated ETP Holders and all ETP Holders would be
subject to the same requirements under the proposed new tier.
Accordingly, no ETP Holder already operating on the Exchange would be
disadvantaged by the proposed allocation of fees and credits under the
proposed new tier. The Exchange further believes that the proposed fee
change would not permit unfair discrimination among ETP Holders because
the general and tiered rates are available equally to all ETP Holders.
As described above, in today's competitive marketplace, order flow
providers have a choice of where to direct liquidity-providing order
flow, and the Exchange believes there are a number of ETP Holders who
could qualify for proposed new tier if they chose to direct their order
flow to the Exchange.
Step Up Tiers
The Exchange believes that the proposed new Step Up Tier 3 pricing
tier is not unfairly discriminatory because it is open to all ETP
Holders, on an equal basis, who meet the requirements to qualify for
the tier. The proposal does not permit unfair discrimination because
the proposed volume requirements to qualify for the new pricing tier
would be applied to all similarly situated ETP Holders, who would all
be eligible for the same credit on an equal basis. Accordingly, no ETP
Holder already operating on the Exchange would be disadvantaged by this
allocation of fees. The Exchange believes the proposed new pricing tier
would also serve as an incentive to ETP Holders that do not currently
meet the requirement of other pricing tiers on the Exchange to increase
the level of orders sent directly to NYSE Arca in order to qualify for,
and receive the credits associated with the proposed new Step Up Tier
3. The proposed new pricing tier would apply equally to all ETP Holders
as each would be required to meet one of two volume requirements to
qualify for the proposed credit associated with the proposed new
pricing tier, regardless of whether an ETP Holder currently meets the
requirement of another pricing tier.
The Exchange believes that eliminating requirements and credits
associated with Step Up Tier 1 from the Fee Schedule when such
incentives become ineffective is not unfairly discriminatory because
the requirements and credits associated with the pricing tier would be
eliminated in its entirety and would no longer be available to any ETP
Holder. 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 the deletion of the underutilized pricing tier
would make the Fee Schedule more accessible and transparent and
facilitate market participants' understanding of the fees charged for
services currently offered by the Exchange.
Tape C Tiers
The Exchange believes it is not unfairly discriminatory to adopt
lower volume requirements for ETP Holders to qualify for the Tape C
Tier 3 pricing tier and a corresponding lower credit as the proposed
change would apply on an equal basis to all ETP Holders. The proposal
does not permit unfair discrimination because the lower threshold and
the corresponding credit would be applied to all similarly situated ETP
Holders, who would all be eligible for the same credit on an equal
basis. The Exchange notes that the proposed change will not adversely
impact any ETP Holder's pricing or their ability to qualify for other
tiers. The Exchange also believes that the proposed change is not
unfairly
[[Page 31049]]
discriminatory because it is reasonably related to the value of the
Exchange's market quality associated with higher volume. The proposed
modified volume requirement and corresponding credit would apply
equally to all ETP Holders as each would be required to meet the
revised criteria in order to receive the corresponding credit.
The Exchange believes that eliminating requirements and credits
associated with Tape C Tier 4 from the Fee Schedule when such
incentives become ineffective is not unfairly discriminatory because
the requirements and credits associated with the pricing tier would be
eliminated in its entirety and would no longer be available to any ETP
Holder. 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 the deletion of the underutilized pricing tier
would make the Fee Schedule more accessible and transparent and
facilitate market participants' understanding of the fees charged for
services currently offered by the Exchange.
* * * * *
In the prevailing competitive environment, ETP Holders are free to
disfavor the Exchange's pricing if they believe that alternatives offer
them better value. Moreover, this proposed rule change neither targets
nor will it have a disparate impact on any particular category of
market participant. The Exchange believes that this proposal does not
permit unfair discrimination because the changes described in this
proposal would be applied uniformly to all similarly situated ETP
Holders and all ETP Holders would be subject to the same requirements.
Accordingly, no ETP Holder already operating on the Exchange would be
disadvantaged by the proposed allocation of fees.
Finally, the submission of orders to the Exchange is optional for
ETP Holders in that they could choose whether to submit orders to the
Exchange and, if they do, the extent of its activity in this regard.
The Exchange believes that it is subject to significant competitive
forces, as described below in the Exchange's statement regarding the
burden on competition.
For the foregoing reasons, the Exchange believes that the proposal
is consistent with the Act.
B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with Section 6(b)(8) of the Act,\14\ 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.'' \15\
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\14\ 15 U.S.C. 78f(b)(8).
\15\ See Securities Exchange Act Release No. 51808, 70 FR 37495,
37498-99 (June 29, 2005) (S7-10-04) (Final Rule).
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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
change represents 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, in particular with
respect to Tape C securities. The Exchange believes that the proposed
adoption of new pricing tiers and amending criteria of established
tiers would incentivize market participants to direct liquidity adding
order flow to the Exchange, bringing with it additional execution
opportunities for market participants and improved price transparency.
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. The Exchange also does not believe the proposed rule
change to eliminate underutilized pricing tiers will impose any burden
on intramarket competition because the proposed change would impact all
ETP Holders uniformly.
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 change can
impose any burden on intermarket competition.
The Exchange believes that the proposed changes 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.
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) \16\ of the Act and subparagraph (f)(2) of Rule
19b-4 \17\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\16\ 15 U.S.C. 78s(b)(3)(A).
\17\ 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) \18\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\18\ 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
[[Page 31050]]
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#5321263f367e303c3e3e363d2720132036307d343c25"><span class="__cf_email__" data-cfemail="7103041d145c121e1c1c141f0502310214125f161e07">[email protected]</span></a>. Please include
File Number SR-NYSEArca-2022-27 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-2022-27. 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 website (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
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-2022-27, and should be
submitted on or before June 10, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-10802 Filed 5-19-22; 8:45 am]
BILLING CODE 8011-01-P
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