[Federal Register Volume 87, Number 98 (Friday, May 20, 2022)]
[Notices]
[Pages 31044-31050]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[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 www.nyse.com, at the principal office of the 
Exchange, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
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 
https://markets.cboe.com/us/equities/market_share. See generally 
https://www.sec.gov/fast-answers/divisionsmarketregmrexchangesshtml.html.
    \6\ See FINRA ATS Transparency Data, available at https://otctransparency.finra.org/otctransparency/AtsIssueData. A list of 
alternative trading systems registered with the Commission is 
available at https://www.sec.gov/foia/docs/atslist.htm.
    \7\ See Cboe Global Markets U.S. Equities Market Volume Summary, 
available at http://markets.cboe.com/us/equities/market_share/.
    \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
------------------------------------------------------------------------
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\
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    \13\ 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 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\
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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 (http://www.sec.gov/rules/sro.shtml); 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 (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of 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\
---------------------------------------------------------------------------

    \19\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

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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