Document ID: SEC-2018-0282-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2018-02-14T05:00Z

[Federal Register Volume 83, Number 31 (Wednesday, February 14, 2018)]
[Notices]
[Pages 6627-6629]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-02976]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82661; File No. SR-NYSEArca-2018-10]

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

February 8, 2018.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that, on February 1, 2018, NYSE Arca, Inc. (``Exchange'' or ``NYSE 
Arca'') filed with the Securities and Exchange Commission 
(``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 Fees and 
Charges (``Fee Schedule'') to (i) modify the credits the Exchange 
provides for routing certain orders to the New York Stock Exchange LLC 
(``NYSE''); (ii) delete a pricing tier; and (iii) delete certain 
obsolete dates from the Fee Schedule. The Exchange proposes to 
implement the fee changes effective February 1, 2018. 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend the Fee Schedule, as described 
below, to (i) modify the credits the Exchange provides for routing 
certain orders to the NYSE; (ii) delete a pricing tier, the Large Order 
Tier; and (iii) delete certain obsolete dates from the Fee Schedule. 
The Exchange proposes to implement the fee changes on February 1, 2018.
Primary Only (``PO'') Orders
    A PO Order is designed to route to the primary listing market of 
the security underlying the order (i.e., NYSE, Nasdaq Stock Market, 
etc.) immediately upon arrival and the order therefore does not rest on 
the Exchange's order book. Because PO Orders do not rest on the 
Exchange's book, the Exchange charges fees or provides credits for 
those orders based on the fees and credits of the destination primary 
listing market, which are the non-tier fees and credits that the 
Exchange is charged by the primary listing market that receives the 
orders. For Tier 1 and Tier 2 PO Orders that are routed to the NYSE, 
the Exchange currently provides a credit of $0.0014 per share for such 
orders.
    In a recent rule filing, the NYSE modified its fee structure for 
equities transactions by decreasing the level of rebate that it 
provides to its members that provide liquidity from $0.0014 per share 
to $0.0012 per share.\4\ In order to maintain the same relationship 
between the rate that the Exchange charges for a PO Order and the 
rebate provided by the destination venue, the Exchange is also amending 
the per share credit for PO Orders routed to the NYSE that provide 
liquidity to the NYSE to $0.0012 per share. The Exchange proposes 
corresponding changes to the Basic Rates pricing section of the Fee 
Schedule.
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    \4\ See Securities Exchange Act Release No. 82563 (January 22, 
2018), 83 FR 3799 (January 26, 2018) (SR-NYSE-2018-03).
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Large Order Tier
    In April 2017, the Exchange filed a proposed rule change to adopt a 
new pricing tier to incentivize large order flow (``Large Order 
Tier'').\5\ The Large Order Tier adopted a lower fee of $0.0010 per 
share to ETP Holders, including Market Makers, that execute an average 
daily volume (``ADV'') of 1,250,000 shares or greater of Market

[[Page 6628]]

Orders, Market-On-Close Orders, Limit-On-Close Orders and Auction-Only 
Orders executed in the Closing Auction from orders of 650,000 shares 
and greater (``Large Closing Orders'') and that have a ratio of Large 
Closing Order shares to total shares executed during the month of at 
least 35%. The Large Order Tier has not encouraged ETP Holders and 
Market Makers to increase their activity to qualify for this pricing 
tier as significantly as the Exchange had anticipated they would. As a 
result, the Exchange proposes to remove this pricing tier from the Fee 
Schedule.
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    \5\ See Securities Exchange Act Release No. 80516 (April 24, 
2017), 82 FR 19775 (April 28, 2017) (SR-NYSEArca-2017-43).
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Elimination of Obsolete Dates--Step-Up Tier
    In September 2017, the Exchange filed a proposed rule change to 
adopt a second way by which an ETP Holder or Market Maker could qualify 
for the Step-Up Tier.\6\ As an incentive for ETP Holders and Market 
Makers to direct their order flow to the Exchange, for the months of 
September 2017 and October 2017 only, the Exchange adopted lower 
requirements for ETP Holders and Market Makers to qualify for the 
pricing tier. Given that the months during which the incentive was 
applicable have passed, the Exchange proposes to delete from the Fee 
Schedule reference to the Step-Up Tier credits applicable to ETP 
Holders and Market Makers for the months of September 2017 and October 
2017 as that language is now obsolete. This proposed change would have 
no impact on pricing.
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    \6\ See Securities Exchange Act Release No. 81601 (September 13, 
2017), 82 FR 43633 (September 18, 2017) (SR-NYSEArca-2017-104).
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Elimination of Obsolete Dates--ELP Program
    In March 2017, the Exchange filed a proposed rule change to adopt 
the Exchange Traded Fund Liquidity Provider Program to incentivize ETP 
Holders and Market Makers (collectively, the ``ELPs'') to provide 
displayed liquidity to the NYSE Arca Book in NYSE Arca-listed Tape B 
Securities (``ELP Program'').\7\ The ELP Program requires participating 
ELPs to quote at the NBBO for at least 15% of the time for the billing 
month (``Quoting Standard''), and display at least 2,500 shares that 
are priced no more than 2% away from the NBBO at least 90% of the time 
for the billing month (``Depth Standard''), in at least 50 ELP 
Securities, to qualify for the pricing incentive. For the months of 
March 2017, April 2017 and May 2017, ELPs were only required to meet to 
meet the Quoting Standard to qualify for the incremental credit 
provided under the ELP Program. Beginning June 2017, ELPs must meet 
both the Quoting Standard and the Depth Standard to qualify for the 
pricing incentive. Given that the months during which the Quoting 
Standard only was required have passed, the Exchange proposes to delete 
from the Fee Schedule reference to such months as that language is now 
obsolete. This proposed change would have no impact on pricing.
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    \7\ See Securities Exchange Act Release Nos. 80258 (March 16, 
2017), 82 FR 14775 (March 22, 2017) (SR-NYSEArca-2017-28); and 80632 
(May 9, 2017), 82 FR 22360 (May 15, 2017) (SR-NYSEArca-2017-50).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\8\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\9\ 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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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed changes to routing credits 
for PO Orders that provide liquidity to the NYSE are reasonable because 
the Exchange's credits for routing an order that does not rest on the 
Exchange's order book, but rather is designed to route to the primary 
listing market on arrival, are closely related to the NYSE's non-tier 
rebate for its members for providing liquidity, and the proposed change 
is consistent with the recent change to the NYSE Price List to lower 
its non-tier rebate for providing liquidity. While the proposed change 
would result in a decrease in the per share credit for PO Orders routed 
to the NYSE that provide liquidity to the NYSE, the rebate that the 
Exchange would provide to ETP Holders is competitive with the rate that 
NYSE provides to its members for providing liquidity and would maintain 
the same relationship between the rebate provided by the venue to which 
the PO Order is routed and the fees charged by the Exchange for such 
orders. Further, the proposed change is equitable and not unfairly 
discriminatory because the rebate would apply uniformly across pricing 
tiers and all similarly situated ETP Holders would be subject to the 
same credit.
    The Exchange believes that it is reasonable to delete obsolete 
pricing tiers from the Fee Schedule because ETP Holders and Market 
Makers have not increased their activity to qualify for the Large Order 
Tier as significantly as the Exchange anticipated they would. The 
Exchange believes that it is equitable and not unfairly discriminatory 
to eliminate the Large Order Tier because, as proposed, the pricing 
tier would be eliminated entirely--ETP Holders and Market Makers would 
no longer be able to qualify for this pricing tier. This aspect of the 
proposed rule change would result in the removal of obsolete text from 
the Fee Schedule and therefore add greater clarity to the Fee Schedule.
    The Exchange believes that it is reasonable, equitable and not 
unfairly discriminatory to delete reference to obsolete dates from the 
Fee Schedule. The Step Up Tier and the ELP Program adopted specific 
requirements that were applicable for certain months in 2017. Given the 
months during which the lower requirements were applicable have passed, 
the Exchange believes deletion of the outdated language will bring 
clarity to the Fee Schedule.
    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,\10\ 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. In particular, the routing credits would not place 
a burden on competition because the Exchange is maintaining the 
existing relationship between the rebate provided by the Exchange for 
PO Orders that are routed to the NYSE that provide liquidity on the 
NYSE and the non-tier rebate the NYSE provides to its members that 
provide liquidity. In addition, the removal of obsolete text from the 
Fee Schedule would not have any impact on inter- or intra-market 
competition because the proposed change would result in a streamlined 
Fee Schedule without any impact on pricing.
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    \10\ 15 U.S.C. 78f(b)(8).
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    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 to attract order 
flow to the Exchange. Because

[[Page 6629]]

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) \11\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \12\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 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) \13\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \13\ 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 [email protected]. Please include 
File Number SR-NYSEArca-2018-10 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-2018-10. 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 office 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-2018-10 and should be submitted 
on or before March 7, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-02976 Filed 2-13-18; 8:45 am]
 BILLING CODE 8011-01-P