Document ID: SEC-2018-1454-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2018-09-18T04:00Z

[Federal Register Volume 83, Number 181 (Tuesday, September 18, 2018)]
[Notices]
[Pages 47216-47218]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-20196]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84103; File No. SR-NYSEARCA-2018-66]

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 To Introduce a New Pricing Tier, Step Up 
Tier 3

September 12, 2018.
    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 September 4, 2018, 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 Fees and 
Charges (``Fee Schedule'') to introduce a new pricing tier, Step Up 
Tier 3. The Exchange proposes to implement the fee change effective 
September 4, 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 to introduce a new 
pricing tier, Step Up Tier 3. The Exchange proposes to implement the 
fee change effective September 4, 2018.
    The Exchange currently has a Step Up Tier pursuant to which 
qualifying ETP Holders and Market Makers receive a credit of $0.0030 
per share for orders that provide displayed liquidity to the Book in 
Tape A Securities, $0.0023 per share for orders that provide displayed 
liquidity to the Book in Tape B Securities, and $0.0031 per share for 
orders that provide displayed liquidity to the Book in Tape C 
Securities if such ETP Holders and Market Makers directly execute 
providing average daily volume (``ADV'') per month of 0.50% or more but 
less than 0.70% of the US CADV, and directly execute providing ADV that 
is an increase of no less than 0.10% of US CADV for that month over the 
ETP Holder's or Market Maker's providing ADV in Q1 2018.\4\
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    \4\ See Securities Exchange Act Release No. 83032 (April 11, 
2018), 83 FR 16909 (April 17, 2018) (SR-NYSEArca-2018-20).
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    The Exchange also has a Step Up Tier 2 pricing tier pursuant to 
which ETP Holders and Market Makers receive a credit of $0.0028 per 
share for orders that provide displayed liquidity to the Book in Tape A 
and Tape C Securities, and $0.0022 per share for orders that provide 
displayed liquidity to the Book in Tape B Securities if such ETP 
Holders and Market Makers directly execute providing ADV per month of 
0.22% or more but less than 0.30% of the US CADV, and directly execute 
providing ADV that is an increase of no less than 0.06% of US CADV for 
that month over the ETP Holder's or Market Maker's providing ADV in May 
2018.\5\
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    \5\ See Securities Exchange Act Release No. 83418 (June 12, 
2018), 83 FR 28282 (June 18, 2018) (SR-NYSEArca-2018-41).
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    The Exchange proposes a new pricing tier--Step Up Tier 3--for 
securities with a per share price of $1.00 or above. As proposed, ETP 
Holders and Market Makers would qualify for the new Step Up Tier 3 if 
they directly execute providing ADV per month of 0.15% or more but less 
than 0.20% of the US CADV and directly execute providing ADV that is an 
increase of no less than 0.075% of US CADV for that month over the ETP 
Holder's or Market Maker's providing ADV in May 2018. ETP Holders and 
Market Makers that qualify for Step Up Tier 3 would receive a credit of 
$0.0025 per share for orders that provide displayed liquidity to the 
Book in Tape A and Tape C Securities and $0.0022 per share for orders 
that provide displayed liquidity to the Book in Tape B Securities. For 
all other fees and credits, tiered or basic rates apply based on a 
firm's qualifying levels.
    The goal of the proposed Step Up Tier 3 pricing tier is to further 
incentivize ETP Holders and Market Makers 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 
proposed pricing tier, which adopts a lower threshold than the Step Up 
Tier and Step Up Tier 2 is intended to allow ETP Holders and Market 
Makers to achieve rebates that weren't previously available. The 
Exchange believes that the proposed new pricing tier will provide an 
incentive for ETP Holders and Market Makers that do not meet current 
tier requirements to direct more of their order flow to the Exchange.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\6\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\7\ 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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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes the Step Up Tier 3 pricing tier will serve as 
an incentivize [sic] to market participants to increase the orders sent 
directly to NYSE Arca and therefore provide

[[Page 47217]]

liquidity that supports the quality of price discovery and promotes 
market transparency. The Exchange believes the proposed pricing tier, 
which adopts a lower threshold, is reasonable and equitable because it 
would allow ETP Holders and Market Makers that directly execute 
providing ADV of at least 0.15% but less than 0.20% of US CADV and 
directly execute providing ADV that is an increase of no less than 
0.075% of US CADV to receive credits that were not previously 
available. Firms that meet the requirement of the proposed pricing tier 
did not previously receive higher credits for adding displayed 
liquidity. Moreover, the addition of the Step Up Tier 3 would benefit 
market participants whose increased order flow provides meaningful 
added levels of liquidity thereby contributing to the depth and market 
quality on the Exchange. The Exchange believes that the proposed new 
Step Up Tier 3 is not unfairly discriminatory because it is open to all 
ETP Holders and Market Makers, on an equal basis, that add liquidity at 
or below the proposed Step Up Tier 3 requirement and who do not qualify 
for rebates currently provided pursuant to Tiers 1, 2 and 3 or pursuant 
to Step Up Tiers 1 and 2. The Exchange further believes that ETP 
Holders and Market Makers that provide liquidity below 0.20% of US 
CADV, which is a minimum requirement pursuant to Tier 3 to qualify for 
increased rebates, would now be eligible for the proposed rebates if 
they meet the requirements of the proposed Step Up Tier 3.
    The Exchange believes that the proposed fee 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.
    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,\8\ the Exchange 
believes that the proposed rule change would not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. Instead, the Exchange believes that the proposal 
to add a new pricing tier 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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    \8\ 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) \9\ of the Act and subparagraph (f)(2) of Rule 19b-
4 \10\ thereunder, because it establishes a due, fee, or other charge 
imposed by the Exchange.
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 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) \11\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \11\ 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-2018-66 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-2018-66. 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

[[Page 47218]]

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-2018-66 and should be submitted on or before October 9, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
Eduardo A. Aleman,
Assistant Secretary.
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    \12\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2018-20196 Filed 9-17-18; 8:45 am]
BILLING CODE 8011-01-P