Document ID: SEC-2014-1156-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2014-07-10T04:00Z

[Federal Register Volume 79, Number 132 (Thursday, July 10, 2014)]
[Notices]
[Pages 39419-39421]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-16100]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72542; File No. SR-NYSEArca-2014-73]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending the NYSE 
Arca Equities Schedule of Fees and Charges for Exchange Services to 
Exclude the Date of the Annual Reconstitution of the Russell 
Investments Indexes for Billing Purposes When Calculating ETP Holder 
Average Daily Volume of Trade Activity and Consolidated ADV

July 3, 2014.
    Pursuant to Section 19(b)(1)\1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on June 24, 2014, NYSE Arca, Inc. (the ``Exchange'' or 
``NYSE Arca'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule

[[Page 39420]]

change as described in Items I, II, and III below, which Items have 
been prepared by the self-regulatory organization. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend the NYSE Arca Equities Schedule of 
Fees and Charges for Exchange Services (``Fee Schedule'') to exclude 
the date of the annual reconstitution of the Russell Investments 
Indexes (the ``Russell Reconstitution Date'') for billing purposes when 
calculating ETP Holder average daily volume (``ADV'') of trade activity 
and consolidated ADV (``CADV''). The Exchange proposes to implement the 
fee change effective immediately. The text of the proposed rule change 
is available on the Exchange's Web site 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 exclude the 
Russell Reconstitution Date for billing purposes when calculating ETP 
Holder ADV of trade activity and CADV.\4\ The Exchange proposes to 
implement the fee change effective immediately.
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    \4\ Questions and answers related to the Russell Reconstitution 
Date are available at http://www.russell.com/indexes/americas/tools-resources/reconstitution/frequently-asked-questions.page.
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    Various fees and credits in the Fee Schedule are based on an ETP 
Holder's ADV of trade activity during the billing month, taken as a 
percentage of CADV. CADV means U.S. CADV for transactions reported to 
the Consolidated Tape. Trade activity across all markets on the Russell 
Reconstitution Date typically exceeds levels on other days during the 
month, thereby resulting in an unusually higher CADV for the billing 
month. The Exchange therefore proposes to exclude the Russell 
Reconstitution Date when calculating ETP Holder ADV of trade activity 
and CADV. The Exchange would amend Footnotes 1 and 3 in the Fee 
Schedule to specify that trade activity and CADV, respectively, do not 
include the Russell Reconstitution Date. ETP Holder transactions on the 
Russell Reconstitution Date would continue to be subject to the fees 
and credits in the Fee Schedule. The 2014 Russell Reconstitution Date 
is June 27, 2014.
    The proposed change is not otherwise intended to address any other 
issues, and the Exchange is not aware of any problems that ETP Holders 
would have in complying with the proposed change.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\5\ in general, and furthers the 
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\6\ 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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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed change is reasonable 
because trade activity across all markets on the Russell Reconstitution 
Date typically exceeds levels on other days during the month, thereby 
resulting in an artificially higher CADV for the billing month. Trade 
activity of a particular ETP Holder, taken as a percentage of CADV, 
could therefore be lower on the Russell Reconstitution Date than during 
the rest of the billing month. This could prevent an ETP Holder from 
qualifying for the pricing tiers in the Fee Schedule, despite such ETP 
Holder's trade activity during the rest of the billing month being 
sufficient to qualify. The proposed change would therefore eliminate 
the potential for the increased trade activity that typically occurs on 
the Russell Reconstitution Date to cause an ETP Holder to fail to 
qualify for the pricing tiers in the Fee Schedule during that month.
    The proposed change is equitable and not unfairly discriminatory 
because the Russell Reconstitution Date would be excluded when 
determining trade activity for all ETP Holders and when determining 
CADV for billing purposes for all ETP Holders. The proposed change 
would eliminate a particular day of trade activity that is likely to be 
an outlier compared to the rest of the trading month, both with respect 
to a particular ETP Holder's trade activity as well as CADV for the 
month. While the proposed change is primarily designed so that an ETP 
Holder that would otherwise qualify for a pricing tier is not 
negatively impacted by the higher trade activity on the Russell 
Reconstitution Date, the proposed change would also eliminate the 
potential for an ETP Holder whose trade activity is artificially higher 
on the Russell Reconstitution Date to qualify for the pricing tiers 
when such ETP Holder's activity during the rest of the month is not 
representative of the levels required by the pricing tiers.
    The proposed change is also reasonable because it is similar to the 
manner in which Footnotes 1 and 3 in the Fee Schedule currently specify 
that trade activity and CADV exclude trade activity on days when the 
market closes early. Without this existing exclusion, and in contrast 
to the artificially higher CADV for the month caused by the Russell 
Reconstitution Date, CADV for a billing month during which the market 
closes early on a particular day or days would be artificially low. The 
current exclusion eliminates the potential for the decreased trade 
activity that typically occurs on an early close day to make it more 
likely for an ETP Holder to qualify for the pricing tiers in the Fee 
Schedule. As with the existing exclusion for early close days, the 
proposed exclusion of the Russell Reconstitution Date is consistent 
with the Act because it would address a somewhat predictable variance 
in typical trade activity resulting from a known, future event (i.e., 
an early close day or, as discussed herein, the Russell Reconstitution 
Date).
    The Exchange also believes that it is reasonable to exclude the 
Russell Reconstitution Date as proposed herein because the Nasdaq Stock 
Market LLC (``Nasdaq'') treats the Russell Reconstitution Date in the 
same manner.\7\
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    \7\ See, e.g., Nasdaq Rule 7018(a). See also Securities Exchange 
Act Release No. 69758 (June 13, 2013), 78 FR 36801 (June 19, 2013) 
(SR-NASDAQ-2013-081).
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    Finally, the Exchange believes that it is subject to significant 
competitive forces, as described below in the Exchange's statement 
regarding the burden on competition.

[[Page 39421]]

    For these 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,\8\ 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. The proposed change would eliminate a particular 
trading day from consideration when calculating trade activity of ETP 
Holders and CADV for billing purposes, given that trade activity across 
all markets on the Russell Reconstitution Date typically exceeds levels 
on other days during the month, thereby resulting in an artificially 
higher CADV for the billing month. This proposed change would therefore 
provide all ETP Holders with a clearer picture of the level of trade 
activity required of them in order to qualify for the pricing tiers in 
the Fee Schedule. The Russell Reconstitution Date occurs toward the end 
of the billing month--June 27, 2014 for the next reconstitution. Only 
one trading day would remain in the month. Without this proposed 
exclusion, it would be difficult for an ETP Holder to modify its trade 
activity on the Exchange during the remainder of the month in order to 
make up for any shortfall with respect to the pricing tiers caused by 
the increased trade activity on the Russell Reconstitution Date.
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    \8\ 15 U.S.C. 78f(b)(8).
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    Also, the Exchange does not believe that the proposed change will 
impair the ability of ETP Holders or competing order execution venues 
to maintain their competitive standing in the financial markets. In 
this regard, the Exchange notes that pricing on other exchanges treats 
the Russell Reconstitution Date in the same manner.\9\
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    \9\ See supra note 7.
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    Finally, the Exchange notes that it operates in a highly 
competitive market in which market participants can readily favor 
competing venues if they deem fee levels at a particular venue to be 
excessive or rebate opportunities available at other venues to be more 
favorable. In such an environment, the Exchange must continually adjust 
its fees and rebates to remain competitive with other exchanges and 
with alternative trading systems that have been exempted from 
compliance with the statutory standards applicable to exchanges. 
Because competitors are free to modify their own fees and credits in 
response, and because market participants may readily adjust their 
order routing practices, the Exchange believes that the degree to which 
fee changes in this market may impose any burden on competition is 
extremely limited. As a result of all of these considerations, the 
Exchange does not believe that the proposed changes will impair the 
ability of member organizations or competing order execution venues to 
maintain their competitive standing in the financial markets.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change is effective upon filing pursuant to 
Section 19(b)(3)(A) \10\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \11\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \12\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \12\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2014-73 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-2014-73. 
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 Web site (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 Web site 
viewing and printing in the Commission's Public Reference Room, 100 F 
Street NE., Washington, DC 20549 on official business days between the 
hours of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be 
available for inspection and copying at the principal office of the 
Exchange. All comments received will be posted without change; the 
Commission does not edit personal identifying information from 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-
NYSEArca-2014-73, and should be submitted on or before July 31, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2014-16100 Filed 7-9-14; 8:45 am]
BILLING CODE 8011-01-P