Document ID: SEC-2017-0685-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2017-04-28T04:00Z

[Federal Register Volume 82, Number 81 (Friday, April 28, 2017)]
[Notices]
[Pages 19775-19778]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-08577]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80516; File No. SR-NYSEArca-2017-43]

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

April 24, 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 April 20, 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 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 add a new 
pricing tier, the Large Order Tier, and to change pricing in Tier 3. 
The Exchange proposes to implement the fee changes effective April 20, 
2017.\4\ 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.
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    \4\ The Exchange originally filed to amend the Fee Schedule on 
March 31, 2017 (SR-NYSEArca-2017-34) and withdrew such filing on 
April 10, 2017. On April 10, 2017, the Exchange re-filed to amend 
the Fee Schedule (SR-NYSEArca-2017-39) and withdrew such filing on 
April 20, 2017.
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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

[[Page 19776]]

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, as described 
below, to add a new pricing tier, the Large Order Tier, and change 
pricing in Tier 3. The proposed fee changes would be applicable to 
securities with a per share price of $1.00 or above. The Exchange 
proposes to implement the fee changes on April 20, 2017.
Large Order Tier
    Currently, ETP Holders, including Market Makers, are charged a fee 
of $0.0010 per share for Market Orders,\5\ Market-On-Close (``MOC'') 
Orders,\6\ Limit-On-Close (``LOC'') Orders \7\ and Auction-Only Orders 
\8\ that are executed in the Closing Auction \9\ if the ETP Holder 
meets the current Tier 1, Tier 2 or Tier 3 requirements. ETP Holders 
that do not meet the Tier 1, Tier 2 or Tier 3 requirements are charged 
a fee of $0.0012 per share for such orders, as provided in the Basic 
Rates section of the Fee Schedule. The Exchange is proposing a new 
pricing tier to incentivize large order flow to the Exchange. The 
proposed Large Order Tier fee of $0.0010 per share would be applicable 
to ETP Holders, including Market Makers, that execute an average daily 
volume (``ADV'') of 1,250,000 shares or greater of Market Orders, MOC 
Orders, LOC 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%.
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    \5\ A Market Order is an unpriced order to buy or sell a stated 
amount of a security that is to be traded at the best price 
obtainable without trading through the NBBO. See Rule 7.31(a)(1).
    \6\ A MOC Order is a Market Order that is to be traded only 
during the Closing Auction. See Rule 7.31(c)(4).
    \7\ A LOC Order is a Limit Order that is to be traded only 
during the Closing Auction. See Rule 7.31(c)(3).
    \8\ An Auction-Only Order is a Limit or Market Order that is to 
be traded only within an auction pursuant to Rule 7.35 or routed 
pursuant to Rule 7.34. Any quantity of an Auction-Only Order that is 
not traded in the designated auction is cancelled. See Rule 7.31(c).
    \9\ The Closing Auction is conducted at the end of the Core 
Trading Session. See Rule 7.35(d).
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    For example, if, in a month, an ETP Holder has an ADV of 3,000,000 
shares of Market, MOC, LOC, and Auction-Only orders that are executed 
in the Closing Auction, of which 2,000,000 shares are from Large 
Closing Orders, and a total ADV of 5,000,000 shares (all volume, 
including but not limited to orders that add liquidity, take liquidity, 
are routed to and executed at other markets, and are executed in the 
Core Open Auction \10\ and Closing Auction), such ETP Holder will have 
a ratio of Large Closing Orders to total shares executed during the 
month of 40% (2,000,000/5,000,000). Such ETP Holder would therefore 
meet the proposed requirements of the Large Order Tier and the Exchange 
would charge this ETP Holder a fee of $0.0010 per share for the 
2,000,000 shares from Large Closing Orders. The remaining 1,000,000 
shares executed in the Closing Auction that are not from Large Closing 
Orders would be charged per the Exchange's current fees, i.e., $0.0010 
per share if the ETP Holder meets the Tier 1, Tier 2 or Tier 3 
requirements, or $0.0012 per share under the Basic Rates section of the 
Fee Schedule.
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    \10\ The Core Open Auction is conducted at the beginning of the 
Core Trading Session. See Rule 7.35(c).
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    The proposed fee for Large Closing Orders is the lowest fee 
applicable to ETP Holders, and would be equivalent to the fee charged 
for Market, MOC, LOC, and Auction-Only orders that are executed in the 
Closing Auction if an ETP Holder meets Tier 1, Tier 2 or Tier 3 
requirements. For the ETP Holder in the example above, absent the 
proposed fee, the ETP Holder would be charged a fee of $0.0010 per 
share for Market, MOC, LOC, and Auction-Only orders that are executed 
in the Closing Auction if that ETP Holder met Tier 1, Tier 2 or Tier 3 
requirements, or $0.0012 per share under the Basic Rates section of the 
Fee Schedule.
    For ETP Holders that qualify for the proposed Large Order Tier, 
Tiered or Basic Rates would apply to all other fees and credits, based 
on the ETP Holder's qualifying levels, and if an ETP Holder qualifies 
for more than one tier in the Fee Schedule, the Exchange would apply 
the most favorable rate available under such tiers.
Tier 3
    The Fee Schedule currently provides, in Tier 1 and Tier 2 sections, 
that a fee of $0.0010 per share is charged for Market, MOC, LOC and 
Auction-Only Orders executed in the Closing Auction. For Basic Rates 
customers, this fee is $0.0012 per share.\11\ Per the current Fee 
Schedule, Tier 3 customers are subject to the fee provided in the Basic 
Rates section of the Fee Schedule, or $0.0012 per share. The Exchange 
proposes to modify the Tier 3 section of the Fee Schedule to include a 
$0.0010 per share fee for Market, MOC, LOC and Auction-Only Orders 
executed in the Closing Auction for Tapes A, B and C.
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    \11\ This fee for Basic Rates customers was increased to $0.0012 
per share in June 2016. See Securities Exchange Act Release No. 
77925 (May 26, 2016), 81 FR 35412 (June 2, 2016) (SR-NYSEArca-2016-
78) (``June Fee Filing''). Prior to the June Fee Filing, the fee for 
Market, MOC, LOC and Auction-Only Orders executed in the Closing 
Auction was $0.0010 per share for all customers.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\12\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\13\ 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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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes the proposed Large Order Tier is reasonable 
and equitably allocated because it would apply to ETP Holders and 
Market Makers that execute large orders in the Exchange's Closing 
Auction and is designed to incentivize these market participants to 
increase the orders sent directly to the Exchange and therefore provide 
liquidity that supports the quality of price discovery and promotes 
market transparency. The Exchange believes the new Large Order Tier is 
equitable because it would be available to all similarly situated ETP 
Holders and Market Makers on an equal basis and provides a fee that is 
reasonably related to the value of an exchange's market quality 
associated with higher volumes. The Exchange believes that the Large 
Order Tier proposal is reasonable because it provides ETP Holders with 
an additional way to qualify for the same $0.0010 fee for Market, MOC, 
LOC, and Auction-Only orders that are charged to tiered customers.
    The Exchange further believes that the proposed Large Order Tier is 
reasonable, equitable and not unfairly discriminatory because providing 
pricing tiers that favor a particular segment of securities or type of 
activity

[[Page 19777]]

is not unusual. For example, NYSE MKT LLC provides a higher per share 
credit on a per transaction basis for displayed liquidity when adding 
liquidity in orders that originally display a minimum of 2,000 
shares.\14\
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    \14\ See NYSE MKT Equities Price List, Transaction Fees and 
Credits For Non-ETP Securities Traded Pursuant to Unlisted Trading 
Privileges at https://www.nyse.com/publicdocs/nyse/markets/nyse-mkt/NYSE_MKT_Equities_Price_List.pdf. See also Securities Exchange Act 
Release No. 66599 (March 14, 2012), 77 FR 16302 (March 20, 2012) 
(SR-NYSEAmex-2012-17). The proposed Large Order Tier omits a 
reference to the originally displayed size like the NYSE MKT credit 
because auction orders on the Exchange are submitted to the auction 
once and do not decrement in size. While it could be possible for a 
market order to receive a fill and resize, the Exchange believes 
that this would be extremely unlikely.
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    The Exchange believes that the proposed new pricing tier would 
create an added incentive for ETP Holders and Market Makers to execute 
large orders on the Exchange. The Exchange believes that the proposed 
change is equitable and not unfairly discriminatory because providing a 
lower fee as an 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.
    Tier 3 customers have always been charged a fee of $0.0010 per 
share. The Exchange does not believe that there is any confusion among 
market participants with respect to the applicable Tier 3 fee for 
Market, MOC, LOC and Auction-Only Orders executed in the Closing 
Auction, but rather that the addition of the proposed language would 
serve to provide transparency in the Exchange's rules, and is an 
equitable allocation of reasonable fees. The Exchange believes that the 
addition of the proposed Tier 3 fee is consistent with Section 6(b)(5) 
of the Act in that it is designed to promote just and equitable 
principles of trade, 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, by clarifying what fees 
apply for certain transactions and market participants.
    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,\15\ 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 addition 
of the new Large Order Tier and the Tier 3 fee 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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    \15\ 15 U.S.C. 78f(b)(8).
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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 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) \16\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \17\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 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) \18\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \18\ 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-2017-43 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-2017-43. 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

[[Page 19778]]

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-2017-43, and should 
be submitted on or before May 19, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-08577 Filed 4-27-17; 8:45 am]
BILLING CODE 8011-01-P