Document ID: SEC-2017-1044-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2017-06-20T04:00Z

[Federal Register Volume 82, Number 117 (Tuesday, June 20, 2017)]
[Notices]
[Pages 28106-28109]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-12761]

[[Page 28106]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80920; File No. SR-NYSEArca-2017-64]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the NYSE 
Arca Equities Schedule of Fees and Charges for Exchange Services

June 14, 2017.
    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 1, 2017, NYSE Arca, Inc. (the ``Exchange'' or 
``NYSE Arca'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C.78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the NYSE Arca Equities Schedule of 
Fees and Charges for Exchange Services (``Fee Schedule''). 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend the Cross-Asset Tier 2 and Cross-
Asset Tier 3 pricing in the Fee Schedule. Specifically, for Cross-Asset 
Tier 2, for securities with a per share price $1.00 or above, the 
Exchange proposes to: (1) Reduce the volume threshold requirement to be 
eligible for the tier, and (2) remove the alternate way to qualify for 
the Cross-Asset Tier 2 pricing. Further, for Cross-Asset Tier 3, for 
securities with a per share price $1.00 or above, the Exchange proposes 
to adopt an incremental credit. The Exchange proposes to implement the 
fee changes effective June 1, 2017.
Cross-Asset Tier 2
    Currently, Cross-Asset Tier 2 fees and credits apply to ETP Holders 
and Market Makers that provide liquidity an average daily volume share 
per month of 0.30% or more of the US Consolidated Average Daily Volume 
(``CADV''), and are affiliated with an OTP Holder or OTP Firm that 
provides an ADV of electronic posted executions for the account of a 
market maker in Penny Pilot issues on NYSE Arca Options (excluding mini 
options) of at least 0.75% of total Customer equity and ETF option ADV 
as reported by the Options Clearing Corporation (``OCC''). ETP Holders, 
including Market Makers, can currently alternatively qualify for the 
Cross-Asset Tier 2 fees and credits if they provide liquidity an ADV 
share per month of 0.40% or more of the US CADV, and are affiliated 
with an OTP Holder or OTP Firm that provides an ADV of electronic 
posted executions for the account of a market maker in Penny Pilot 
issues on NYSE Arca Options (excluding mini options) of at least 0.65% 
of total Customer equity and ETF option ADV, as reported by OCC. Such 
ETP Holders and Market Makers currently receive a credit of $0.0031 per 
share for orders that provide liquidity to the order book in Tape A 
Securities; a credit of $0.0030 per share for providing liquidity to 
the order book and a fee of $0.0029 per share for taking liquidity from 
the order book in Tape B Securities; and a credit of $0.0032 per share 
for providing liquidity to the order book and a fee of $0.0030 per 
share for taking liquidity from the order book in Tape C Securities.
    The Exchange proposes to reduce the current 0.75% of total Customer 
equity and ETF option ADV requirement on NYSE Arca Options (excluding 
mini options) to 0.55% of total Customer equity and ETF option ADV 
requirement on NYSE Arca Options (excluding mini options). The Exchange 
also proposes to replace the words ``Penny Pilot'' with ``all'' within 
the text of current Cross Asset Tier 2 criteria. This proposed change 
to the rule would make the options volume requirement, in terms of 
which options issues are used for purposes of calculating the 
requirement, consistent with the requirements currently found in Cross-
Asset Tier 1 and Cross-Asset Tier 3. The Exchange is not proposing any 
change to the 0.30% or more of the US CADV requirement, or to the level 
of fees and credits currently applicable to Cross-Asset Tier 2.
    The Exchange also proposes to remove the current alternative method 
to qualify for the fees and credits for the Cross-Asset Tier 2 pricing 
as the alternative method has not had a meaningful effect of 
incentivizing order flow to the Exchange as originally designed. The 
Exchange notes that ETP Holders that previously qualified for fees and 
credits under the alternate method may achieve the same range of fees 
and credits by satisfying the revised threshold proposed to current 
Cross-Asset Tier 2.
Cross-Asset Tier 3
    Currently, the Exchange provides ETP Holders and Market Makers with 
a credit of $0.0030 per share for orders that provide liquidity to the 
order book in Tape A, Tape B and Tape C Securities if such ETP Holders 
and Market Makers (a) provide liquidity of 0.30% or more of the US CADV 
per month and (b) are affiliated with an OTP Holder or OTP Firm that 
provides an ADV of electronic posted Customer and Professional Customer 
executions in all issues on NYSE Arca Options (excluding mini options) 
of at least 0.80% of total Customer equity and ETF option ADV as 
reported by OCC, of which at least 0.20% of total Customer equity and 
ETF option ADV as reported by OCC is from Customer and Professional 
Customer executions in non-Penny Pilot issues on NYSE Arca Options.
    The Exchange proposes to adopt an incremental credit of $0.0004 per 
share for orders that provide liquidity to the order book in Tape C 
Securities that would be payable to ETP Holders and Market Makers who 
meet the requirements of Cross-Asset Tier 3 and execute providing 
volume in Tape C Securities during the billing month equal to at least 
0.35% of Tape C CADV. ETP Holders and Market Makers that qualify for 
the proposed incremental Tape C credit shall not qualify for any

[[Page 28107]]

fees or credits under Tape C Tier 1, Tape C Tier 2, and Tape C Tier 3.
    The proposed changes are not otherwise intended to address any 
other issues, and the Exchange is not aware of any significant problems 
that market participants would have in complying with the proposed 
changes.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\4\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\5\ 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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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(4) and (5).
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Cross-Asset Tier 2
    The Exchange believes the proposed amendments to Cross-Asset Tier 2 
are reasonable and equitably allocated because they would apply to ETP 
Holders and Market Makers equally and are designed to incentivize these 
market participants to send their orders to the Exchange and therefore 
provide liquidity that supports the quality of price discovery and 
promotes market transparency. The Exchange believes the Cross-Asset 
Tier 2 pricing tier is equitable because it is applicable to all 
similarly situated ETP Holders and Market Makers on an equal and non-
discriminatory basis and provides fees and credits that are reasonably 
related to the value of an exchange's market quality associated with 
higher volumes.
    The Exchange believes that the proposed revised threshold for 
qualifying for Cross-Asset Tier 2 is reasonable because it is designed 
to encourage increased trading activity on the NYSE Arca options 
market. The Exchange believes it is reasonable, equitable and not 
unfairly discriminatory to require ETP Holders and Market Makers to 
meet the revised threshold to qualify for Cross-Asset Tier 2 because 
doing so would allow ETP Holders and Market Makers to more easily 
qualify for the fees and credits applicable to such participants.
    The Exchange believes that the proposed modification to eliminate 
the alternate method to qualify for Cross-Asset Tier 2 is reasonable, 
fair, and equitable because the alternate method was not providing the 
desired result of incentivizing ETP Holders and Market Makers to 
increase their participation on the NYSE Arca equity and option 
markets. Therefore, eliminating the alternative method will have a 
negligible effect on order flow and market behavior. The Exchange 
believes the proposed change is not unfairly discriminatory because it 
will apply equally to all participants. Further, as described above, 
the Exchange notes that ETP Holders and Market Makers that previously 
qualified for the fees and credits under the alternative method would 
achieve the same fees and credits by satisfying what the Exchange 
believes to be similar or lower criteria as the existing and revised 
Cross-Asset Tier 2 discussed above. Specifically, the proposed 0.55% of 
total Customer equity and ETF option ADV requirement in all issues on 
NYSE Arca Options (excluding mini options) is lower than the 0.65% of 
total Customer equity and ETF option ADV requirement in Penny Pilot 
issues on NYSE Arca Options (excluding mini options) under the 
alternative method that the Exchange is proposing to eliminate. 
Similarly, the current 0.30% or more of the US CADV requirement is 
lower than the 0.40% or more of the US CADV requirement for the 
alternative method that the Exchange is proposing to eliminate.
    The Exchange believes the proposed change to replace the words 
``Penny Pilot'' with ``all'' issues within the text of current Cross 
Asset Tier 2 is reasonable, equitable and not unfairly discriminatory. 
This proposed change to the rule would make the options volume 
requirement, in terms of which options issues are used for purposes of 
calculating the requirement, consistent with the requirements currently 
found in Cross-Asset Tier 1 and Cross-Asset Tier 3, and would therefore 
provide consistency and clarity to the Fee Schedule.
    The Exchange believes that the proposal is equitable and not 
unfairly discriminatory because all ETP Holders would be subject to the 
same fee structure. Moreover, the Cross-Asset Tier 2 fees and credits 
are available for all ETP Holders to satisfy, except for those ETP 
Holders that are not affiliated with an NYSE Arca Options OTP Holder or 
OTP Firm. ETP Holders that are not affiliated with an NYSE Arca Options 
OTP Holder or OTP Firm are still eligible for fees and credits by means 
other than the Cross-Asset Tier. NASDAQ similarly charges certain fees 
based on both equity and options volume.\6\
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    \6\ See NASDAQ Rule 7018.
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Cross-Asset Tier 3
    The Exchange believes that the proposed modification to add the 
additional Tape C credit of $0.0004 per share for ETP Holders and 
Market Makers that execute providing volume in Tape C Securities during 
the billing month equal to at least 0.35% of Tape C CADV is reasonable, 
fair, and equitable because the because it is designed to encourage 
increased trading activity in Tape C Securities. The Exchange notes 
that ETP Holders and Market Makers that do not execute providing volume 
of at least 0.35% of Tape C CADV in the billing month can still qualify 
for Cross-Asset Tier 3 if they meet the Cross-Asset Tier 3 
requirements.
    The Exchange believes that the proposed change is equitable and not 
unfairly discriminatory because providing incentives for 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 Exchange further believes the proposed incremental credit is 
reasonable and appropriate in that it is based on the amount of 
business transacted on the Exchange. The Exchange believes the proposed 
incremental credit for adding liquidity is also reasonable because it 
will encourage liquidity and competition in Tape C securities quoted 
and traded on the Exchange.
    The Exchange believes the proposed incremental credits are 
equitable and not unfairly discriminatory because they are open to all 
ETP Holders and Market Makers on an equal basis and provide discounts 
that are reasonably related to the value to the Exchange's market 
quality associated with higher volumes. The Exchange further believes 
that the proposed incremental rebate is not unfairly discriminatory 
because the magnitude of the additional rebate is not unreasonably high 
in comparison to the rebate paid with respect to other displayed 
liquidity-providing orders. The Exchange does not believe that it is 
unfairly discriminatory to offer increased rebates to ETP Holders and 
Market Makers as these participants would be subject to additional 
volume requirements in Tape C Securities.

[[Page 28108]]

    The Exchange believes that prohibiting Cross-Asset Tier 3 ETP 
Holders and Market Makers from qualifying for the Tape C Tier 1, Tape C 
Tier 2, and Tape C Tier 3 tiers is reasonable, equitable and not 
unfairly discriminatory because ETP Holders and Market Makers that 
qualify for Cross-Asset Tier 3 and execute providing volume in Tape C 
Securities during the billing month equal to at least 0.35% of Tape C 
CADV would already receive an incremental Tape C credit of $0.0004 
before the Tape C Tier 1, Tape C Tier 2, and Tape C Tier 3 tiers, which 
is as equal to or higher than the those credits associated with the 
Tape C tiers.
    Further, with regards to Cross-Asset pricing in general, the 
Exchange believes that the proposal is reasonable and would continue to 
directly relate to the activity of an ETP Holder and the activity of an 
affiliated OTP Holder or OTP Firm on NYSE Arca Options, thereby 
encouraging increased trading activity on both the NYSE Arca equity and 
option markets. In this regard, the proposal is designed to bring 
additional posted order flow to NYSE Arca Options, so as to provide 
additional opportunities for all OTP Holders and OTP Firms to trade on 
NYSE Arca Options.
    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.
    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,\7\ 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, the Exchange believes that the proposed 
change would encourage the submission of additional liquidity to a 
public exchange, thereby promoting price discovery and transparency and 
enhancing order execution opportunities for ETP Holders and Market 
Makers. The Exchange believes that this 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.
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    \7\ 15 U.S.C. 78f(b)(8).
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    Further, the proposal to amend the requirements to qualify for 
Cross-Asset Tier 2 and Cross-Asset Tier 3 will not place an undue 
burden on competition because both tiers would remain available for all 
ETP Holders to satisfy, except those ETP Holders that are not 
affiliated with an NYSE Arca Options OTP Holder or OTP Firm. ETP 
Holders that are not affiliated with an NYSE Arca Options OTP Holder or 
OTP Firm are eligible for similar fees and credits by others means than 
the Cross-Asset pricing tiers.
    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 ETP Holders 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) \8\ of the Act and subparagraph (f)(2) of Rule 19b-
4 \9\ thereunder, because it establishes a due, fee, or other charge 
imposed by the Exchange.
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 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) \10\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \10\ 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-2017-64 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSEArca-2017-64. 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 the 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

[[Page 28109]]

submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-
NYSEArca-2017-64 and should be submitted on or before July 11, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
Eduardo A. Aleman,
Assistant Secretary.
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    \11\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2017-12761 Filed 6-19-17; 8:45 am]
 BILLING CODE 8011-01-P