Document ID: SEC-2022-1236-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2022-09-19T04:00Z

[Federal Register Volume 87, Number 180 (Monday, September 19, 2022)]
[Notices]
[Pages 57228-57233]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-20145]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95760; File No. SR-NYSEARCA-2022-59]

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

September 13, 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 on September 1, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the NYSE Arca Equities Fees and 
Charges (``Fee Schedule'') to amend the Retail Tiers. 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 to amend the Retail 
Tiers. The proposed changes respond to the current competitive 
environment where order flow providers have a choice of where to direct 
liquidity-providing orders by offering further incentives for ETP 
Holders to send additional displayed liquidity to the Exchange.
    The Exchange proposes to implement the fee changes effective 
September 1, 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

[[Page 57229]]

broader forms that are most important to investors and listed 
companies.'' \3\
---------------------------------------------------------------------------

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

    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 17% 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 10% market share of 
executed volume of equities trading.\8\
---------------------------------------------------------------------------

    \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 https://markets.cboe.com/us/equities/market_share/.
    \8\ See id.
---------------------------------------------------------------------------

    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. The competition for Retail Orders 
\9\ is even more stark, particularly as it relates to exchange versus 
off-exchange venues.
---------------------------------------------------------------------------

    \9\ A Retail Order is an agency order that originates from a 
natural person and is submitted to the Exchange by an ETP Holder, 
provided that no change is made to the terms of the order to price 
or side of market and the order does not originate from a trading 
algorithm or any other computerized methodology. See Securities 
Exchange Act Release No. 67540 (July 30, 2012), 77 FR 46539 (August 
3, 2012) (SR-NYSEArca-2012-77).
---------------------------------------------------------------------------

    The Exchange thus needs to compete in the first instance with non-
exchange venues for Retail Order flow, and with the 15 other exchange 
venues for that Retail Order flow that is not directed off-exchange. 
Accordingly, competitive forces compel the Exchange to use exchange 
transaction fees and credits, particularly as they relate to competing 
for Retail Order flow, because market participants can readily trade on 
competing venues if they deem pricing levels at those other venues to 
be more favorable.
    To respond to this competitive environment, the Exchange has 
established a number of Retail Tiers, which are designed to provide an 
incentive for ETP Holders to route Retail Orders to the Exchange by 
providing higher credits for adding liquidity correlated to an ETP 
Holder's higher trading volume in Retail Orders on the Exchange. Under 
three of these four tiers, ETP Holders also do not pay a fee when such 
Retail Orders have a time-in-force of Day that remove liquidity from 
the Exchange.
Proposed Rule Change
    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 enhanced rebates by quoting and trading more on 
the Exchange.
    The Exchange currently provides tiered credits for Retail Orders 
that provide liquidity on the Exchange. Specifically, Section VI. Tier 
Rates--Round Lots and Odd Lots (Per Share Price $1.00 or Above), 
provides a base Retail Order Tier credit of $0.0033 per share for 
Adding. Additionally, the Exchange has established Retail Order Step-Up 
Tier 1, Retail Order Step-Up Tier 2 and Retail Order Step-Up Tier 3 
that provide a credit of $0.0038 per share, $0.0035 per share, and 
$0.0036 per share, respectively, for Adding.\10\ The Retail Tiers are 
designed to encourage ETP Holders that provide displayed liquidity in 
Retail Orders on the Exchange to increase that order flow, which would 
benefit all ETP Holders by providing greater execution opportunities on 
the Exchange. In order to provide an incentive for ETP Holders to 
direct providing displayed Retail Order flow to the Exchange, the 
credits increase in the various tiers based on increased levels of 
volume directed to the Exchange.
---------------------------------------------------------------------------

    \10\ See Retail Tiers table under Section VI. Tier Rates--Round 
Lots and Odd Lots (Per Share Price $1.00 or Above).
---------------------------------------------------------------------------

    As described in greater detail below, the Exchange proposes to 
amend the requirements and the associated per share credit payable 
under the current pricing tiers applicable to Retail Orders that 
provide liquidity in Tape A, Tape B and Tape C securities.
    Currently, to qualify for the Retail Order Tier, an ETP Holder must 
have Retail Adding ADV of 0.15% or more of CADV. ETP Holders that meet 
the current Retail Order Tier requirement are eligible to earn a credit 
of $0.0033 per share for Retail Orders that add liquidity in Tape A, B 
and C securities.
    The Exchange proposes the following changes to the current pricing 
tier:
     Rename the Retail Order Tier to Retail Tier 3;
     Modify the requirement to qualify for the renamed tier; 
and
     Increase the credit applicable to the renamed tier.
    More specifically, to qualify for proposed Retail Tier 3, an ETP 
Holder must execute Retail Orders with a time-in-force of Day that add 
or remove liquidity equal to 0.10% of CADV. ETP Holders that meet the 
proposed Retail Tier 3 requirement would be eligible to earn an 
increased credit of $0.0034 per share for Retail Orders that add 
liquidity in Tape A, B and C securities.
    Next, to qualify for current Retail Order Step-Up Tier 1, an ETP 
Holder must execute an ADV of Retail Orders with a time-in-force of Day 
that add or remove liquidity that is an increase of 0.40% or more of 
CADV above its April 2018 ADV taken as a percentage of CADV and have 
Adding ADV of 1.00% or more of CADV. Alternatively, in addition to 
providing an ADV of 1.00% or more of CADV, an ETP Holder can qualify 
for the current fees and credits by executing an ADV of 55 million 
shares of Retail Orders with a time-in-force of Day that add or remove 
liquidity. ETP Holders that meet the current Retail Order Step-Up Tier 
1 requirement are eligible to earn a credit of $0.0038 per share for 
Retail Orders that add liquidity in Tape A, B and C securities.\11\ 
Under the Retail Order Step-Up Tier 1, the Exchange also does not 
charge a fee for Retail Removing with a time-in-force of Day.
---------------------------------------------------------------------------

    \11\ Pursuant to footnote (d) under Retail Tiers, ETP Holders 
that qualify for Retail Order Step-Up Tier 1 are subject to the 
following rates in Tape C: ($0.0035) for Adding displayed liquidity; 
$0.0027 for Removing; and Additional ($0.0002) for Adding non-
displayed liquidity. See Fee Schedule. With this proposed rule 
change, the Exchange proposes to rename Retail Order Step-Up Tier 1 
to Retail Tier 1 in footnote (d) under the Retail Tiers table.
---------------------------------------------------------------------------

    The Exchange proposes the following changes to the current pricing 
tier:

[[Page 57230]]

     Rename Retail Order Step-Up Tier 1 to Retail Tier 1; and
     Modify the percentage requirement to qualify for the 
renamed tier.
    More specifically, to qualify for proposed Retail Tier 1, an ETP 
Holder must execute an ADV of Retail Orders with a time-in-force of Day 
that add or remove liquidity that is 0.50% or more of CADV and have 
Adding ADV of 1.00% or more of CADV. ETP Holders may also alternatively 
qualify for proposed Retail Tier 1 by executing an ADV of 55 million 
shares of Retail Orders with a time-in-force of Day that add or remove 
liquidity and have Adding ADV of 1.00% or more of CADV.\12\ With this 
proposed rule change, to qualify for proposed Retail Tier 1, ETP 
Holders would no longer be required to `step-up' above their April 2018 
CADV and would instead qualify for the proposed tier by meeting the 
amended volume requirement during the billing month. ETP Holders that 
meet the proposed Retail Tier 1 requirement will continue to be 
eligible to earn a credit of $0.0038 per share for Retail Orders that 
add liquidity in Tape A, B and C securities. The Exchange is not 
proposing any change to the level of the credit payable under proposed 
Retail Tier 1. ETP Holders that qualify for the proposed Retail Tier 1 
would also not be a charged a fee for Retail Orders with a time-in-
force of Day that remove liquidity.\13\
---------------------------------------------------------------------------

    \12\ To streamline the Fee Schedule, the Exchange proposes a 
non-substantive change to delete the words ``of Retail Orders with a 
time-in-force of Day that add or remove'' from the proposed Retail 
Tier 1 table because these words are repetitive as they currently 
appear in the heading for that column under Minimum Requirement of 
CADV.
    \13\ Pursuant to footnote (e) under Retail Tiers, ETP Holders 
that qualify for current Retail Order Step-Up Tier 1, Retail Order 
Step-Up Tier 2 and Retail Order Step-Up Tier 3 are not charged a fee 
or provided a credit for Retail Orders where each side of the 
executed order (1) shares the same MPID and (2) is a Retail Order 
with a time-in-force of Day. See Fee Schedule. With this proposed 
rule change, the Exchange proposes to rename Retail Order Step-Up 
Tier 1 to Retail Tier 1, Retail Order Step-Up Tier 2 as Retail Step-
Up Tier and Retail Order Step-Up Tier 3 as Retail Tier 2 in footnote 
(e) under the Retail Tiers table.
---------------------------------------------------------------------------

    Next, to qualify for current Retail Order Step-Up Tier 2, an ETP 
Holder must execute an ADV of Retail Orders with a time-in-force of Day 
that add or remove liquidity that is an increase of 0.10% or more of 
CADV above its April 2018 ADV taken as a percentage of CADV. ETP 
Holders that meet the current Retail Order Step-Up Tier 2 requirement 
are eligible to earn a credit of $0.0035 per share for Retail Orders 
that add liquidity in Tape A, B and C securities.
    The Exchange proposes the following changes to the current pricing 
tier:
     Rename Retail Order Step-Up Tier 2 to Retail Step-Up Tier; 
and
     Modify the requirement to qualify for the renamed tier.
    More specifically, to qualify for proposed Retail Step-Up Tier, an 
ETP Holder must execute an ADV of Retail Orders with a time-in-force of 
Day that add or remove liquidity that is an increase of 0.075% or more 
of CADV above its April 2018 ADV taken as a percentage of CADV. ETP 
Holders that meet the proposed Retail Step-Up Tier requirement will 
continue to be eligible to earn a credit of $0.0035 per share for 
Retail Orders that add liquidity in Tape A, B and C securities. The 
Exchange is not proposing any change to the level of the credit payable 
under proposed Retail Step-Up Tier. ETP Holders that qualify for the 
proposed Retail Step-Up Tier would also not be charged a fee for Retail 
Orders with a time-in-force of Day that remove liquidity.\14\
---------------------------------------------------------------------------

    \14\ See id.
---------------------------------------------------------------------------

    Finally, to qualify for current Retail Order Step-Up Tier 3, an ETP 
Holder must execute an ADV of Retail Orders with a time-in-force of Day 
that add or remove liquidity that is an increase of 0.20% or more of 
CADV above its April 2018 ADV taken as a percentage of CADV. ETP 
Holders that meet the current Retail Order Step-Up Tier 3 requirement 
are eligible to earn a credit of $0.0036 per share for Retail Orders 
that add liquidity in Tape A, B and C securities.
    The Exchange proposes the following changes to the current pricing 
tier:
     Rename Retail Order Step-Up Tier 3 to Retail Tier 2; and
     Modify the requirement to qualify for the renamed tier.
    More specifically, to qualify for proposed Retail Tier 2, an ETP 
Holder must execute an ADV of Retail Orders with a time-in-force of Day 
that add or remove liquidity that is 0.20% or more of CADV. With this 
proposed rule change, ETP Holders would no longer be required to `step-
up' above their April 2018 CADV and would instead qualify for the 
proposed tier by meeting the volume requirement during the billing 
month. ETP Holders that meet the proposed Retail Tier 2 requirement 
will continue to be eligible to earn a credit of $0.0036 per share for 
Retail Orders that add liquidity in Tape A, B and C securities. ETP 
Holders that qualify for proposed Retail Tier 2 would also not be 
charged a fee for Retail Orders with a time-in-force of Day that remove 
liquidity.\15\
---------------------------------------------------------------------------

    \15\ See id.
---------------------------------------------------------------------------

    With this proposed rule change, the Exchange proposes to reformat 
the credits payable under the Retail Tiers such that the tier that pays 
the highest credit would appear at the top of the table followed by the 
tier that pays the second highest credit, then the tier that pays the 
lowest credit, followed by the tier that requires ETP Holders to `step-
up' from their baseline CADV. Accordingly, the Retail Tiers table would 
appear as follows:

------------------------------------------------------------------------
                 Tier                       Credit for retail adding
------------------------------------------------------------------------
Retail Tier 1.........................  $0.0038 (Tape A, Tape B and Tape
                                         C).
Retail Tier 2.........................  0.0036 (Tape A, Tape B and Tape
                                         C).
Retail Tier 3.........................  0.0034 (Tape A, Tape B and Tape
                                         C).
Retail Step-Up Tier...................  0.0035 (Tape A, Tape B and Tape
                                         C).
------------------------------------------------------------------------

    The purpose of the proposed rule change is to encourage greater 
participation from ETP Holders and promote additional liquidity in 
Retail Orders. The Exchange notes that the current Retail Tiers have 
been underutilized by ETP Holders. The Exchange believes that modifying 
the requirement of the existing tiers should incentivize ETP Holders to 
direct more of their Retail Orders to the Exchange and thus qualify for 
the credits payable under the Retail Tiers. As described above, ETP 
Holders with liquidity-providing orders have a choice of where to send 
those orders. The Exchange believes that the proposed amendment to the 
volume requirement and credit payable for Retail Orders could lead to 
more ETP Holders choosing to route their liquidity-providing Retail 
Orders to the Exchange rather than to a competing exchange.
    The Exchange does not know how much Retail Order flow ETP Holders 
choose to route to other exchanges or to off-exchange venues. 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 sending more of 
their Retail Orders to the Exchange to qualify for the proposed Retail 
Order credits. The Exchange cannot predict with certainty how many ETP 
Holders would avail themselves of this opportunity, but additional 
liquidity-providing Retail Orders would benefit all market participants 
because it would provide greater execution opportunities on the 
Exchange.
    The proposed changes are not otherwise intended to address any 
other issues, and the Exchange is not aware of any significant problems 
that market participants would have in complying with the proposed 
changes.

[[Page 57231]]

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\16\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\17\ in particular, 
because it provides for the equitable allocation of reasonable dues, 
fees, and other charges among its members, issuers and other persons 
using its facilities and does not unfairly discriminate between 
customers, issuers, brokers or dealers.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

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.'' \18\
---------------------------------------------------------------------------

    \18\ See supra note 3.
---------------------------------------------------------------------------

    Given this competitive environment, the proposal represents a 
reasonable attempt to attract additional order flow to the Exchange.
    As noted above, the competition for Retail Order flow is stark 
given the amount of retail limit orders that are routed to non-exchange 
venues. 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. This competition is 
particularly acute for non-marketable, or limit, retail orders, i.e., 
retail orders that can provide liquidity on an exchange. That 
competition is even more fierce for retail limit orders that provide 
displayed liquidity on an exchange. With respect to such orders, 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, particularly as they relate 
to competing for retail orders. Stated otherwise, changes to exchange 
transaction fees can have a direct effect on the ability of an exchange 
to compete for order flow.
    In particular, the Exchange believes that the proposed modification 
of the volume requirement to qualify for the proposed Retail Tiers is 
reasonable because it is designed to encourage greater participation 
from ETP Holders and promote additional liquidity in Retail Orders. The 
Exchange believes it is reasonable to require ETP Holders to meet the 
applicable volume threshold to qualify for the Retail Tier credits, 
which the Exchange proposes to increase to encourage ETP Holders to 
direct more of their liquidity-providing Retail Orders to the Exchange. 
Further, the proposed change is reasonable as it would allow ETP 
Holders additional opportunities to qualify for the credit payable 
under the various pricing tiers. The Exchange believes it is reasonable 
to modify two of the existing three Retail Tiers, from a `step-up,' to 
a straight volume requirement, without significantly modifying the 
volume requirement to qualify for each of the proposed Retail Tiers. 
The Exchange believes it is reasonable to replace the `step-up' tiers 
to `straight' tiers as the revised criteria would allow ETP Holders 
that may have been unable to meet the existing requirement to reach the 
proposed volume requirement more easily, particularly when there has 
been an overall decline of Retail Orders as a percentage of total 
volume in the equity markets, and yet sustained high consolidated daily 
volumes.
    The Exchange believes that the proposal represents a reasonable 
effort to provide 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 notes that market participants 
are free to shift their order flow to competing venues if they believe 
other markets offer more favorable fees and credits.
    The Exchange believes the proposed change is also reasonable 
because the increased credits proposed herein would continue to 
encourage ETP Holders to send Retail Orders to the Exchange to qualify 
for the proposed pricing tiers. As noted above, the Exchange operates 
in a highly competitive environment, particularly for attracting Retail 
Order flow that provides displayed liquidity on an exchange. The 
Exchange believes it is reasonable to continue to provide credits for 
adding liquidity, in general, and higher credits for Retail Orders that 
provide displayed liquidity if an ETP Holder meets the amended 
requirement for the Retail Tiers.
    Further, given the competitive market for attracting Retail Orders, 
the Exchange notes that with this proposed rule change, the Exchange's 
pricing for Retail Orders would be comparable, and in some cases, 
higher, to credits currently in place on other exchanges that the 
Exchange competes with for order flow. For example, the Nasdaq Stock 
Market LLC (``Nasdaq'') provides its members with a credit of $0.0033 
per share if such member has an 85% add to total volume (adding and 
removing) ratio during a billing month.\19\ Cboe BZX Exchange, Inc. 
(``BZX'') provides its members with a credit of $0.0032 per share for 
retail orders that add liquidity to that market.\20\ In addition, Cboe 
EDGX Exchange, Inc. (`EDGX'') provides its members with a credit of 
$0.0037 per share for retail orders that add liquidity to that market 
if an EDGX member adds liquidity in Retail Orders of 0.45% of CADV or 
more and a credit of $0.0034 per share for retail orders that add 
liquidity to that market if an EDGX member adds liquidity in Retail 
Orders of 0.35% of CADV or more.\21\
---------------------------------------------------------------------------

    \19\ See Nasdaq Price List, Rebate to Add Displayed Designated 
Retail Liquidity, at http://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2.
    \20\ See BZX Fee Schedule, Fee Codes and Associated Fees, at 
https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/.
    \21\ See EDGX Fee Schedule, Fee Codes and Associated Fees, at 
https://markets.cboe.com/us/equities/membership/fee_schedule/edgx/.
---------------------------------------------------------------------------

    The Exchange believes the proposed change is also reasonable 
because it is designed to attract higher volumes of Retail Orders 
transacted on the Exchange by ETP Holders which would benefit all 
market participants by offering greater price discovery, increased 
transparency, and an increased opportunity to trade on the Exchange.
    On the backdrop of the competitive environment in which the 
Exchange currently operates, the proposed rule change is a reasonable 
attempt to increase liquidity on the Exchange and improve the 
Exchange's market share relative to its competitors.
The Proposed Fee Change Is an Equitable Allocation of Fees and Credits
    The Exchange believes that the proposed rule change to modify the 
requirement and credit payable under the proposed Retail Tiers 
equitably allocates fees and credits among its market participants 
because it is reasonably related to the value of the Exchange's market 
quality associated with higher volume in Retail Orders. The Exchange 
believes that pricing is just one of the factors that ETP Holders 
consider when determining where to direct their order flow. Among other

[[Page 57232]]

things, factors such as execution quality, fill rates, and volatility, 
are important and deterministic to ETP Holders in deciding where to 
send their order flow.
    Further, the Exchange notes that, with this proposed rule change, 
the difference between the highest credit provided for Retail Orders, 
$0.0038 per share, as proposed, and the credit for Retail Orders that 
do not qualify for any Retail Order pricing tiers, $0.0032 per share, 
is $0.0006, or 15%, which the Exchange believes is relatively small 
given the heightened requirements that ETP Holders must meet to qualify 
for the higher credit. Similarly, with this proposed rule change, the 
difference in the highest credit for Retail Orders, $0.0038 per share 
under proposed Retail Tier 1 and the credit provided for Retail Orders 
to those ETP Holders qualifying for Retail Tier 3, $0.0034 per share, 
would only be $0.0004 per share, or 11%. Therefore, the Exchange 
believes the proposed amendment to the proposed Retail Tiers is 
equitably allocated and provides credits that are reasonably related to 
the value to the Exchange's market quality associated with higher 
volumes.
    Finally, the Exchange believes that the proposed amendment to the 
Retail Tiers is equitable because the magnitude of the proposed credits 
is not unreasonably high relative to credits paid by other exchanges 
for orders that provide additional liquidity in Retail Orders.\22\ The 
Exchange believes the proposed rule change would improve market quality 
for all market participants on the Exchange and, as a consequence, 
attract more Retail Orders to the Exchange, thereby improving market-
wide quality and price discovery.
---------------------------------------------------------------------------

    \22\ See supra notes 19-21.
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change equitably 
allocates its fees and credits because maintaining the proportion of 
Retail Orders in exchange-listed securities that are executed on a 
registered national securities exchange (rather than relying on certain 
available off-exchange execution methods) would contribute to 
investors' confidence in the fairness of their transactions and would 
benefit all investors by deepening the Exchange's liquidity pool, 
supporting the quality of price discovery, promoting market 
transparency and improving investor protection.
The Proposed Fee Change Is Not Unfairly Discriminatory
    The Exchange believes that the proposed rule change to modify the 
requirement and credit payable under the proposed Retail Tiers is not 
unfairly discriminatory. In the prevailing competitive environment, ETP 
Holders are free to disfavor the Exchange's pricing if they believe 
that alternatives offer them better value. Moreover, the proposal 
neither targets nor will it have a disparate impact on any particular 
category of market participant. The Exchange believes that the proposal 
does not permit unfair discrimination because the proposal would be 
applied to all similarly situated ETP Holders and all ETP Holders would 
be similarly subject to the proposed volume requirement to qualify for 
the proposed modified Retail Tiers. Accordingly, no ETP Holder already 
operating on the Exchange would be disadvantaged by the proposed 
allocation of fees. The Exchange further believes that the proposed 
changes 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 the proposed modification of the 
requirement and the credit payable under the proposed Retail Tiers will 
incentivize greater number of ETP Holders to direct their order flow to 
the Exchange. Lastly, the submission of Retail Orders is optional for 
ETP Holders in that they could choose whether to submit Retail Orders 
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,\23\ 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.'' \24\
---------------------------------------------------------------------------

    \23\ 15 U.S.C. 78f(b)(8).
    \24\ See supra note 3.
---------------------------------------------------------------------------

    Intramarket Competition. The Exchange believes the proposed rule 
change does not impose any burden on intramarket 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 change is designed to attract Retail 
Orders to the Exchange. The Exchange believes that amending criteria of 
established tiers and associated credits would incentivize market 
participants to direct liquidity adding retail 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 would 
benefit all market participants on the Exchange by enhancing market 
quality and would continue to encourage ETP Holders to send their 
orders to the Exchange, thereby contributing towards a robust and well-
balanced market ecosystem. Additionally, the proposed changes would 
apply to all ETP Holders equally in that all ETP Holders would be 
eligible for the proposed Retail Tiers, have a reasonable opportunity 
to meet each tier's criteria and would all receive the proposed credit 
if such criteria is met.
    Intermarket Competition. The Exchange believes the proposed rule 
change does not impose any burden on intermarket competition that is 
not necessary or appropriate in furtherance of the purposes of the Act. 
The Exchange operates in a highly competitive market in which market 
participants can readily choose to send their orders to other exchanges 
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 10%. 
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

[[Page 57233]]

order routing practices, the Exchange does not believe this proposed 
fee change would impose any burden on intermarket competition.
    The Exchange believes that the proposed change 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) \25\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \26\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
---------------------------------------------------------------------------

    \25\ 15 U.S.C. 78s(b)(3)(A).
    \26\ 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) \27\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \27\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NYSEARCA-2022-59 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEARCA-2022-59. 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 (https://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-2022-59, and should 
be submitted on or before October 11, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\28\
---------------------------------------------------------------------------

    \28\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-20145 Filed 9-16-22; 8:45 am]
BILLING CODE 8011-01-P