Document ID: SEC-2023-0631-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2023-06-15T04:00Z

[Federal Register Volume 88, Number 115 (Thursday, June 15, 2023)]
[Notices]
[Pages 39275-39280]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-12754]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97681; File No. SR-NYSEARCA-2023-39]

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

June 9, 2023.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on May 31, 2023, NYSE Arca, Inc. (``NYSE Arca'' or the ``Exchange'') 
filed with the Securities and Exchange Commission (``SEC'' or 
``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the NYSE Arca Equities Fees and 
Charges (``Fee Schedule'') to (i) modify Ratio Threshold Fees and (ii) 
eliminate the Step Up Tier 1 pricing tier under Step Up Tiers. The 
Exchange proposes to implement the fee changes effective June 1, 2023. 
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 (i) modify Ratio 
Threshold Fees, which apply to orders ranked Priority 2--Display Orders 
and to shares of Auction-Only Orders that have a disproportionate ratio 
of orders that are not executed,\3\ and (ii) eliminate the Step Up Tier 
1 pricing tier under Step Up Tiers. The Exchange proposes to implement 
the fee changes effective June 1, 2023.
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    \3\ See Securities Exchange Act Release No. 88930 (May 21, 
2020), 85 FR 32068 (May 28, 2020) (SR-NYSEArca-2020-45) (``Ratio 
Threshold Fee Filing'').
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Background
    The Exchange operates in a highly competitive market. The 
Commission has repeatedly expressed its preference for competition over 
regulatory intervention in determining prices, products, and services 
in the securities markets. In Regulation NMS, the Commission 
highlighted the importance of market forces in determining prices and 
SRO revenues and, also, recognized that current regulation of the 
market system ``has been remarkably successful in promoting market 
competition in its broader forms that are most important to investors 
and listed companies.'' \4\
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    \4\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005) (File No. S7-10-04) (Final 
Rule) (``Regulation NMS'').
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    While Regulation NMS has enhanced competition, it has also fostered 
a ``fragmented'' market structure where trading in a single stock can 
occur across multiple trading centers. When multiple trading centers 
compete for order flow in the same stock, the

[[Page 39276]]

Commission has recognized that ``such competition can lead to the 
fragmentation of order flow in that stock.'' \5\ Indeed, equity trading 
is currently dispersed across 16 exchanges,\6\ numerous alternative 
trading systems,\7\ 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.\8\ 
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.\9\
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    \5\ 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).
    \6\ See Cboe U.S Equities Market Volume Summary, available at 
https://markets.cboe.com/us/equities/market_share.
    \7\ 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.
    \8\ See Cboe Global Markets U.S. Equities Market Volume Summary, 
available at http://markets.cboe.com/us/equities/market_share/.
    \9\ See id.
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    The Exchange believes that the ever-shifting market share among the 
exchanges from month to month demonstrates that market participants can 
move order flow, or discontinue or reduce use of certain categories of 
products, based on transaction fees and credits. Accordingly, the 
Exchange's fees, including the proposed modification to the Ratio 
Threshold Fee, are reasonably constrained by competitive alternatives 
and market participants can readily trade on competing venues if they 
deem pricing levels at those other venues to be more favorable.
Proposed Rule Change
Ratio Threshold Fee
    The Ratio Threshold Fee applies to orders ranked Priority 2--
Display Orders (``RT-Display Fee'') and to shares of Auction-Only 
Orders during the period when Auction Imbalance information is being 
disseminated for a Core Open Auction or Closing Auction (``RT-Auction 
Fee''). The purpose of this proposed rule change is to modify the RT-
Auction Fee. The Exchange is not proposing any change to the RT-Display 
Fee.
    Currently, for Auction-Only Orders,\10\ ETP Holders with an average 
daily number of orders of 10,000 or more are charged an RT-Auction Fee 
on a monthly basis.\11\ For purposes of determining the RT-Auction Fee:
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    \10\ An Auction-Only Order is a Limit or Market Order that is to 
be traded only within an auction pursuant to Rule 7.35-E or routed 
pursuant to Rule 7.34-E. See Rule 7.31-E(c). Auction-Only Orders are 
orders submitted by an ETP Holder during the Early Open Auction, 
Core Open Auction, Closing Auction and Trading Halt Auction. See 
Rule 7.35-E.
    \11\ Similar to orders ranked Priority 2--Display Orders, the 
current fee focuses on Auction-Only Orders because a 
disproportionate ratio of such orders that are not executed uses 
more system resources, including updates to the Auction Imbalance 
Information as such orders are entered and cancelled, than other 
order entry and cancellation practices of ETP Holders. Accordingly, 
for Auction-Only Orders, Ratio Shares include shares of Auction-Only 
Orders executed in a disproportionate ratio to the quantity of 
shares entered during the period when Auction Imbalance Information 
is being disseminated for the Core Open Auction and Closing Auction.
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     The number of ``Ratio Shares'' is the average daily number 
of shares of Auction-Only Orders that are cancelled by an ETP Holder at 
a disproportionate ratio to the average daily number of shares executed 
by that ETP Holder. Orders ranked Priority 2--Display Orders designated 
for the Core Trading Session only that are entered during the period 
when Auction Imbalance Information for the Core Open Auction is being 
disseminated are included in the Ratio Shares calculation.\12\ All 
orders entered by an ETP Holder for securities in which it is 
registered as a Lead Market Maker are not included the calculation of 
Ratio Shares.
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    \12\ For purposes of the Ratio Threshold Fees, orders ranked 
Priority 2--Display Orders designated for the Core Trading Session 
only that are cancelled during the period when Auction Imbalance 
Information for the Core Open Auction is being disseminated are 
included in the calculation of the RT-Auction Fee. The Exchange 
includes such orders as Auction-Only Orders for purposes of such fee 
because prior to the Core Open Auction, such orders would not be 
eligible to trade and therefore would not be included in the RT-
Display Fee calculation, yet such orders would be included in the 
imbalance calculation for the Core Open Auction.
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     The ``Ratio Shares Threshold'' is an ETP Holder's Ratio 
Shares divided by the average daily executed shares by the ETP Holder.
    As noted above, the Exchange charges the RT-Auction Fee for 
Auction-Only Orders during the period when Auction Imbalance 
Information is being disseminated.\13\
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    \13\ See Rules 7.35-E(c)(1) (Core Open Auction Imbalance 
Information begins at 8:00 a.m. ET) and 7.35-E(d)(1) (Closing 
Auction Imbalance Information begins at 3:00 p.m. ET).
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    The Exchange currently does not charge the RT-Auction Fee if 
Auction-Only Orders have a Ratio Shares Threshold of less than 50. The 
Exchange proposes that it would not charge the RT-Auction Fee if 
Auction-Only Orders have a Ratio Shares Threshold of less than 25.
    Currently, if the Ratio Shares Threshold is greater than or equal 
to 50, the fee is as follows:
     No Charge for ETP Holders with an average of fewer than 20 
million Ratio Shares per day.
     $1.00 per million Ratio Shares for ETP Holders with an 
average of 20 million to 200 million Ratio Shares per day.
     $10.00 per million Ratio Shares for ETP Holders with an 
average of more than 200 million Ratio Shares per day.
    The Exchange proposes that if the Ratio Shares Threshold is greater 
than or equal to 25, the fee would be as follows:
     No Charge for ETP Holders with an average of fewer than 10 
million Ratio Shares per day.
     $5.00 per million Ratio Shares for ETP Holders with an 
average of 10 million to 100 million Ratio Shares per day.
     $15.00 per million Ratio Shares for ETP Holders with an 
average of more than 100 million Ratio Shares per day.
    ETP Holders are currently charged for the entirety of their Ratio 
Shares at a rate of $1.00 per million Ratio Shares if the ETP Holder 
has an average of 20 million to 200 million Ratio Shares; and $10.00 
per million Ratio Shares if the ETP Holder has an average of more than 
200 million Ratio Shares. The Exchange proposes that ETP Holders would 
be charged for the entirety of their Ratio Shares at a rate of $5.00 
per million Ratio Shares if the ETP Holder has an average of 10 million 
to 100 million Ratio Shares; and $15.00 per million Ratio Shares if the 
ETP Holder has an average of more than 100 million Ratio Shares.
    The following example illustrates the calculation of the RT-Auction 
Fee for Auction-Only Orders, as modified by this proposed rule change.
     In a month, ETP Holder B enters a daily average of 50,000 
Auction-Only Orders for the Closing Auction, with an average size of 
600 shares.
     Thus, ETP Holder B's daily average number of shares 
submitted in Auction-Only Orders for the Closing Auction is 30,000,000 
shares (50,000 orders x 600 shares).
     During the period when Closing Auction Imbalance 
Information is being disseminated, ETP Holder B cancels a daily average 
of 29,000,000 shares and executes a daily average of 1,000,000 shares 
in the Closing Auction.
     ETP Holder B has an average daily Ratio Shares quantity of 
28,000,000 (29,000,000-1,000,000), and a Ratio Shares Threshold of 28 
(28,000,000/1,000,000).

[[Page 39277]]

     Since the Ratio Shares Threshold is greater than 25 and 
the average daily Ratio Shares quantity is between 10 million and 100 
million, ETP Holder B would be subject to the proposed fee of $5.00 per 
million Ratio Share, resulting in a fee of $2,940 assuming a 21-day 
month (28,000,000/1,000,000 x $5.00 x 21).
    Finally, the combined RT-Display Fee and RT-Auction Fee for an ETP 
Holder is currently capped at $2,000,000 per month. The Exchange 
proposes to lower the cap to $1,000,000 per month.
    The purpose of the proposed rule change is to recalibrate the 
application of the RT-Auction Fee. The Exchange believes the proposed 
modification to the calculation of the RT-Auction Fee will continue to 
strengthen the Exchange's goal of providing a more efficient 
marketplace and enhance the trading experience of all ETP Holders by 
encouraging them to more efficiently participate on the Exchange.
    As noted in the Ratio Threshold Fee Filing, the purpose of the 
Ratio Threshold Fee is not to create revenue, but rather to provide an 
incentive for a small number of ETP Holders to change their order entry 
practices. Based on an analysis of order entry practices by ETP Holders 
between December 2022 and May 2023, only 2 ETP Holders incurred the RT-
Auction Fee during that time period. Additionally, between December 
2022 and May 2023, the median Order Entry Ratio across all ETP Holders 
for Auction-Only Orders ranged from -0.87 to -.09, which indicates that 
the median ETP Holder had more executed shares than Ratio Shares. The 
Exchange does not anticipate the proposed recalibration would subject 
any additional ETP Holders to the RT-Auction Fee.
    The Ratio Threshold Fee is intended to encourage efficient usage of 
Exchange systems by ETP Holders. The Exchange believes that it is in 
the best interests of all ETP Holders and investors who access the 
Exchange to encourage efficient systems usage. Unproductive share entry 
and cancellation practices, such as when ETP Holders flood the market 
with orders that are frequently and/or rapidly cancelled, do little to 
support meaningful price discovery, may create investor confusion about 
the extent of trading interest in a security. The Exchange further 
believes that inefficient order entry practices of a small number of 
ETP Holders may place excessive burdens on Exchange systems and to the 
systems of other ETP Holders that are ingesting market data, while also 
negatively impacting the usefulness of market data feeds that transmit 
each order and subsequent cancellation.\14\ ETP Holders with an 
excessive ratio of cancelled to executed orders do little to support 
meaningful price discovery.
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    \14\ See generally Recommendations Regarding Regulatory Reponses 
to the Market Events of May 6, 2010, Joint CFTC-SEC Advisory 
Committee on Emerging Regulatory Issues, at 11 (February 18, 2011) 
(``The SEC and CFTC should also consider addressing the 
disproportionate impact that [high frequency trading] has on 
Exchange message traffic and market surveillance costs. . . . The 
Committee recognizes that there are valid reasons for algorithmic 
strategies to drive high cancellation rates, but we believe that 
this is an area that deserves further study. At a minimum, we 
believe that the participants of those strategies should properly 
absorb the externalized costs of their activity.'').
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    As noted above, only a small number of ETP Holders are executing 
orders at a disproportionately low ratio to the number of orders that 
have been entered and, thus, the impact of the current fee has been 
narrow and limited to those ETP Holders. These ETP Holders could avoid 
the fee by changing their behavior.
Eliminate Underutilized Credit
    In this competitive environment, the Exchange has already 
established Step Up Tiers 1-3, which are designed to encourage ETP 
Holders that provide displayed liquidity on the Exchange to increase 
that order flow, which would benefit all ETP Holders by providing 
greater execution opportunities on the Exchange. In order to provide an 
incentive for ETP Holders to direct providing displayed order flow to 
the Exchange, the credits increase in the various tiers based on 
increased levels of volume directed to the Exchange.
    Currently, the following credits are available to ETP Holders that 
provide increased levels of displayed liquidity on the Exchange:

------------------------------------------------------------------------
                                             Credit for adding displayed
                   Tier                               liquidity
------------------------------------------------------------------------
Step Up Tier 1............................  $0.0028 (Tape A and C).
                                            $0.0022 (Tape B).
Step Up Tier 2............................  $0.0033 (Tape A and C).
                                            $0.0034 (Tape B).
Step Up Tier 3............................  $0.0031 (Tape A, B and C).
------------------------------------------------------------------------

    The Exchange proposes to eliminate current Step Up Tier 1 and 
remove the pricing tier from the Fee Schedule. The current Step Up Tier 
1 pricing tier has been underutilized by ETP Holders. The Exchange has 
observed that only once has an ETP Holder qualified for the tiered 
credit in the last 6 months. Since the current Step Up Tier 1 pricing 
tier has not been effective in accomplishing its intended purpose, 
which is to incent ETP Holders to increase their liquidity adding 
activity on the Exchange, the Exchange has determined to eliminate the 
pricing tier and remove it from the Fee Schedule.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with section 6(b) of the Act,\15\ in general, and furthers the 
objectives of sections 6(b)(4) and (5) of the Act,\16\ 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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    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed fee change would help to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest, because it is designed to 
reduce the numbers of orders and shares being entered and then 
cancelled prior to an execution.
The Proposed Changes Are 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.'' \17\
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    \17\ See Regulation NMS, supra note 5, 70 FR at 37499.
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    As the Commission itself recognized, the market for trading 
services in NMS stocks has become ``more fragmented and competitive.'' 
\18\ Indeed, equity trading is currently dispersed across 13 
exchanges,\19\ numerous alternative

[[Page 39278]]

trading systems,\20\ 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 (whether 
including or excluding auction volume).\21\ 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. Accordingly, the Exchange's fees, including 
the proposed modification to the Ratio Threshold Fee, are reasonably 
constrained by competitive alternatives and market participants can 
readily trade on competing venues if they deem pricing levels at those 
other venues to be more favorable.
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    \18\ See Securities Exchange Act Release No. 51808, 84 FR 5202, 
5253 (February 20, 2019) (File No. S7-05-18) (Final Rule).
    \19\ 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.
    \20\ 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.
    \21\ See Cboe Global Markets U.S. Equities Market Volume 
Summary, available at http://markets.cboe.com/us/equities/market_share/.
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Ratio Threshold Fee
    The Exchange believes that the proposed change to the Ratio 
Threshold Fee is reasonable because it is designed to achieve 
improvements in the quality of displayed liquidity, particularly in 
advance of auctions, on the Exchange for the benefit of all market 
participants. In addition, the proposed change is reasonable because 
market participants may readily avoid the fee by adjusting their order 
entry and/or cancellation practices, which would result in more orders 
or shares being cancelled before execution.
    Although only a small number of ETP Holders have been impacted 
since the Ratio Threshold Fee was implemented, the Exchange believes 
the proposed change to the manner in which the RT--Auction Fee is 
calculated is necessary to incent the small number of ETP Holders whose 
trading behavior imposes on others through order entry practices 
resulting in a disproportionate ratio of executed orders or shares to 
those that are not executed. Accordingly, the Exchange believes that it 
is fair to modify the manner in which the RT--Auction Fee is calculated 
and impose the fee on these market participants in order to incentivize 
them to modify their practices and thereby benefit the market.
    The Exchange believes that the proposed combined fee cap of 
$1,000,000 is reasonable as it would reduce the impact of the fee on 
ETP Holders. As noted above, the purpose of the proposed fee is not to 
generate revenue for the Exchange, but rather to provide an incentive 
for a small number of ETP Holders to change their order entry and/or 
cancellation behavior. As a general principal, the Exchange believes 
that greater participation on the Exchange by ETP Holders improves 
market quality for all market participants. Thus, in modifying the 
current fee, and the cap, the Exchange balanced the desire to improve 
market quality against the need to discourage inefficient order entry 
and/or cancellation practices.
    The Exchange notes that the notion of a fee that incentivizes 
efficient order entry and/or cancellation practices is not novel. The 
Exchange's current fee is comparable to a fee charged by the NASDAQ 
Stock Market LLC (``Nasdaq'') \22\ and by Exchange's options market, 
NYSE Arca Options, to OTP Holders to disincentivize a disproportionate 
ratio of orders that are not executed.\23\
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    \22\ See Securities Exchange Act Release No. 66951 (May 9, 
2012), 77 FR 28647 (May 15, 2012) (SR-NASDAQ-2012-055) (Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To 
Institute an Excess Order Fee).
    \23\ See Ratio Threshold Fee, at https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf. The Ratio Threshold Fee is 
charged to OTP Holders based on the number of orders entered 
compared to the number of executions received in a calendar month.
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Eliminate Underutilized Credit
    The Exchange believes that the proposed rule change to eliminate 
the Step Up Tier 1 pricing tier is reasonable because the pricing tier 
that is the subject of this proposed rule change has been underutilized 
and has not incentivized ETP Holders to bring liquidity and increase 
trading on the Exchange. Only once has an ETP Holder qualified for the 
tiered credit in the last 6 months. The Exchange also does not 
anticipate any ETP Holder in the near future will qualify for the 
pricing incentive proposed for deletion. The Exchange believes it is 
reasonable to eliminate requirements and credits, and even entire 
pricing tiers, when such incentives become underutilized. The Exchange 
believes eliminating underutilized incentive programs would also 
simplify the Fee Schedule. The Exchange further believes that removing 
reference to the pricing tier that the Exchange proposes to eliminate 
from the Fee Schedule would also add clarity to the Fee Schedule.
The Proposal Is an Equitable Allocation of Fees
Ratio Threshold Fee
    The Exchange believes that the proposed change to the Ratio 
Threshold Fee is equitably allocated among its market participants. 
Although only a small number of ETP Holders may be subject to the RT--
Auction Fee based on their current trading practices, any ETP Holder 
could determine to change its order entry practices at any time, and 
thus avoid the fee. The fee is therefore designed to encourage better 
order entry practices by all ETP Holders for the benefit of all market 
participants. Moreover, as noted above, the purpose of the Ratio 
Threshold Fee is not to generate revenue for the Exchange, but rather 
to provide an incentive for a small number of ETP Holders to change 
their order entry and/or cancellation behavior.
    The Exchange believes that the proposal constitutes an equitable 
allocation of fees because all similarly situated ETP Holders would be 
subject to the fees. As noted above, the Exchange believes that because 
having a disproportionate ratio of unexecuted orders is a problem 
associated with a relatively small number of ETP Holders, the impact of 
the proposal would be limited to those ETP Holders, and only if they do 
not alter their trading practices. The Exchange believes the proposal 
would encourage ETP Holders that could be impacted to modify their 
practices in order to avoid the fee, thereby improving the market for 
all participants.
Eliminate Underutilized Credit
    The Exchange believes that eliminating requirements and credits, 
and even entire pricing tiers, from the Fee Schedule when such 
incentives become ineffective is equitable because the requirements, 
and credits, and even entire pricing tiers, would be eliminated in 
their entirety and would no longer be available to any ETP Holder. The 
Exchange also believes that the proposed change would protect investors 
and the public interest because the deletion of the underutilized 
pricing tier would make the Fee Schedule more accessible and 
transparent and facilitate market participants' understanding of the 
fees charged for services currently offered by the Exchange.

[[Page 39279]]

The Proposal Is Not Unfairly Discriminatory
    The Exchange believes that the proposal is not unfairly 
discriminatory.
Ratio Threshold Fee
    The Exchange believes that the proposed change to the Ratio 
Threshold Fee 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, and are free to transact on competitor markets to avoid being 
subject to the Exchange's fees that are the subject of this proposed 
rule change. The Exchange believes that the proposed fee change 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 it would be applied to all 
similarly situated ETP Holders, who would all be subject to the fee on 
an equal basis.
Eliminate Underutilized Credit
    The Exchange believes that eliminating requirements and credits 
associated with Step Up Tier 1 from the Fee Schedule when such 
incentives become ineffective is not unfairly discriminatory because 
the requirements and credits associated with the pricing tier would be 
eliminated in its entirety and would no longer be available to any ETP 
Holder. All ETP Holders would continue to be subject to the same fee 
structure, and access to the Exchange's market would continue to be 
offered on fair and non-discriminatory terms. The Exchange also 
believes that the proposed change would protect investors and the 
public interest because the deletion of the underutilized pricing tier 
would make the Fee Schedule more accessible and transparent and 
facilitate market participants' understanding of the fees charged for 
services currently offered by the Exchange.
    Finally, the submission of orders to the Exchange is optional for 
ETP Holders in that they could choose whether to submit orders to the 
Exchange and, if they do, the extent of its activity in this regard. 
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,\24\ 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 fee change would encourage ETP Holders to modify 
their order entry and/or cancellation practices so that fewer orders or 
shares are cancelled without resulting in an execution, thereby 
promoting price discovery and transparency and enhancing order 
execution opportunities on the Exchange.
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    \24\ 15 U.S.C. 78f(b)(8).
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    Intramarket Competition. The Exchange believes the proposed change 
to the Ratio Threshold Fee would not place any undue burden on 
intramarket competition that is not necessary or appropriate in 
furtherance of the purposes of the Act because the proposed fee change 
is designed to encourage ETP Holders to submit orders or shares into 
the market that are actionable. Further, the proposal would apply to 
all ETP Holders on an equal basis, and, as such, the proposed change 
would not impose a disparate burden on competition among market 
participants on the Exchange. To the extent that these purposes are 
achieved, the Exchange believes that the proposal would serve as an 
incentive for ETP Holders to modify their order entry practices, thus 
enhancing the quality of the market and increase the volume of orders 
or shares directed to, and executed on, the Exchange. In turn, all the 
Exchange's market participants would benefit from the improved market 
liquidity. The Exchange also does not believe the proposed rule change 
to eliminate underutilized pricing tiers will impose any burden on 
intramarket competition because the proposed change would impact all 
ETP Holders uniformly. To the extent the proposed rule change places a 
burden on competition, any such burden would be outweighed by the fact 
that the pricing incentive proposed for deletion has not served its 
intended purpose of incentivizing ETP Holders to more broadly 
participate on the Exchange.
    Intermarket Competition. The Exchange operates in a highly 
competitive market in which market participants can readily choose to 
send their orders to other exchange and off-exchange venues if they 
deem fee levels at those other venues to be more favorable. As noted 
above, the Exchange's market share of intraday trading (i.e., excluding 
auctions) is currently less than 10%. In such an environment, the 
Exchange must continually review, and consider adjusting 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, the Exchange does not believe its proposed fee 
change can impose any burden on intermarket competition.

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 has become effective upon filing pursuant 
to section 19(b)(3)(A) \25\ of the Act and paragraph (f) thereunder. At 
any time within 60 days of the filing of the 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.
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    \25\ 15 U.S.C. 78s(b)(3)(A).
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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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-NYSEARCA-2023-39 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-2023-39. 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

[[Page 39280]]

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-2023-39, and should be submitted on or before July 6, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
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    \26\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-12754 Filed 6-14-23; 8:45 am]
BILLING CODE 8011-01-P