Document ID: SEC-2021-0377-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2021-03-18T04:00Z

[Federal Register Volume 86, Number 51 (Thursday, March 18, 2021)]
[Notices]
[Pages 14781-14787]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-05559]

[[Page 14781]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91319; File No. SR-NYSEArca-2021-16]

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

March 12, 2021.
    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 
March 1, 2021, 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 (1) replace current Tape C Tier 1 and 
Tape C Tier 2 pricing tiers with four new pricing tiers, Tape C Tiers 
1-4; (2) adopt an alternative requirement to qualify for the Tier 1 
pricing tier; (3) modify the requirement associated with the Step Up 
Tier pricing tier; and (4) eliminate the Cross-Asset Tier 1 pricing 
tier. The Exchange proposes to implement the fee changes effective 
March 1, 2021. 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 (1) replace 
current Tape C Tier 1 and Tape C Tier 2 pricing tiers with four new 
pricing tiers, Tape C Tiers 1-4; (2) adopt an alternative requirement 
to qualify for the Tier 1 pricing tier; (3) modify the requirement 
associated with the Step Up Tier pricing tier; and (4) eliminate the 
Cross-Asset Tier 1 pricing tier.
    The proposed changes respond to the current competitive environment 
where order flow providers have a choice of where to direct liquidity-
providing orders by offering further incentives for ETP Holders \3\ to 
send additional liquidity to the Exchange.
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    \3\ All references to ETP Holders in connection with this 
proposed fee change include Market Makers.
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    The Exchange proposes to implement the fee changes effective March 
1, 2021.
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 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. See generally 
https://www.sec.gov/fast-answers/divisionsmarketregmrexchangesshtml.html.
    \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. While it is not possible to know a firm's reason for shifting 
order flow, the Exchange believes that one such reason is because of 
fee changes at any of the registered exchanges or non-exchange venues 
to which a firm routes order flow. With respect to non-marketable order 
flow that would provide liquidity on an Exchange against which market 
makers can quote, ETP Holders can choose from any one of the 16 
currently operating registered exchanges to route such order flow. 
Accordingly, competitive forces constrain exchange transaction fees 
that relate to orders that would provide liquidity on an exchange.
Proposed Rule Change
Tape C Tiers 1-4
    The proposed rule change is designed to be available to all ETP 
Holders on the Exchange and is intended to provide ETP Holders an 
opportunity to receive enhanced rebates by executing more of their 
orders in Tape C securities on the Exchange.
    In this competitive environment, the Exchange has already 
established Tape C Tiers 1 and 2, which are designed to encourage ETP 
Holders that provide liquidity in Tape C securities to increase that 
order flow, which would benefit all ETP Holders by providing greater 
execution opportunities on the Exchange. The Exchange currently has 
multiple levels of credits for such orders that are based on the amount 
of volume that ETP Holders send to the Exchange.

[[Page 14782]]

Specifically, under Tape C Tier 1,\10\ ETP Holders receive a credit of 
$0.0002 per share for orders that provide liquidity. This credit is in 
addition to the ETP Holder's tiered or basic rate credit(s) and is 
capped at $0.0031 per share. Additionally, under Tape C Tier 2,\11\ ETP 
Holders also receive a credit of $0.0002 per share for orders that 
provide liquidity. This credit is in addition of the ETP Holder's 
tiered or basic rate credit(s) and is capped at $0.0033 per share.
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    \10\ To qualify for Tape C Tier 1, an ETP Holder on a daily 
basis, measured monthly, is required to execute providing volume in 
Tape C securities that is equal to at least 0.10% of the US Tape C 
CADV over the ETP Holder's Q4 2016 providing volume taken as a 
percentage of Tape C CADV.
    \11\ To qualify for Tape C Tier 2, an ETP Holder on a daily 
basis, measured monthly, is required to execute providing volume in 
Tape C securities that is equal to at least 0.20% of the US Tape C 
CADV over the ETP Holder's Q4 2016 providing volume taken as a 
percentage of Tape C CADV.
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    In order to provide an incentive for ETP Holders to direct 
increased liquidity in Tape C securities, the Exchange proposes to 
replace the current Tape C pricing tiers with four new Tape C pricing 
tiers where the credits increase in the various tiers based on 
increased levels of volume directed to the Exchange.
    Specifically, under proposed new Tape C Tier 4, ETP Holders that 
add liquidity to the Exchange in Tape C securities with a per share 
price of $1.00 or more and that have at least 0.15% Tape C Adding ADV 
as a percentage of US CADV,\12\ or 20 million shares of Tape C Adding 
ADV would receive a credit of $0.0029 per share. Under proposed new 
Tape C Tier 3, ETP Holders that have at least 0.25% Tape C Adding ADV 
as a percentage of US CADV would receive a credit of $0.0031 per share. 
Under proposed new Tape C Tier 2, ETP Holders that have at least 0.35% 
Tape C Adding ADV of US CADV would receive a credit of $0.0033 per 
share. Finally, under proposed new Tape C Tier 1, ETP Holders that have 
at least 0.40% Tape C Adding ADV of US CADV would receive a credit of 
$0.0034 per share and would pay a fee of $0.0029 per share for removing 
liquidity.
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    \12\ US CADV means the United States Consolidated Average Daily 
Volume for transactions reported to the Consolidated Tape, excluding 
odd lots through January 31, 2014 (except for purposes of Lead 
Market Maker pricing), and excludes volume on days when the market 
closes early and on the date of the annual reconstitution of the 
Russell Investments Indexes. Transactions that are not reported to 
the Consolidated Tape are not included in US CADV. See Fee Schedule, 
footnote 3.
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    The Exchange proposes to replace the current Tape C pricing tiers 
because the pricing tiers have been underutilized by ETP Holders. The 
Exchange believes the proposed new Tape C pricing tiers will encourage 
ETP Holders to increase their trading activity on the Exchange and 
direct more of their liquidity providing orders in Tape C securities to 
the Exchange.
Tier 1
    Currently, under Tier 1, ETP Holders that provide liquidity an 
average daily share volume (ADV) per month of 0.70% or more of US CADV 
are provided a credit of $0.0031 per share for orders that provide 
liquidity in Tape A securities, a credit of $0.0023 per share for 
orders that provide liquidity in Tape B securities,\13\ and a credit of 
$0.0032 per share for orders that provide liquidity in Tape C 
securities.\14\
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    \13\ ETP Holders can receive an additional credit if they are 
affiliated with Lead Market Makers (``LMMs'') that provide displayed 
liquidity based on the number of Less Active ETP Securities in which 
the LMM is registered as an LMM. See Fee Schedule, LMM Transaction 
Fees and Credits.
    \14\ Under Tier 1, ETP Holders are also charged a fee of $0.0010 
per share for Market, Market-On-Close, Limit-On Close, and Auction-
Only Orders in Tape A, Tape B and Tape C securities executed in a 
Closing Auction.
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    The Exchange proposes to modify the requirements to qualify for 
Tier 1 by adopting an alternative qualification basis for the Tier 1 
fees and credits. As proposed, ETP Holders would qualify for the 
current fees and credits by providing liquidity an ADV of 0.70% or more 
of US CADV or at least 84 million shares of providing ADV. The Exchange 
does not propose any changes to the amount of fees charged and credits 
provided under Tier 1.
    The Exchange believes that introducing alternative criteria for ETP 
Holders to qualify for Tier 1 will allow greater number of ETP Holders 
to potentially qualify for the tier, and will incentivize more ETP 
Holders to route their liquidity-providing order flow to the Exchange 
in order to qualify for the tier. This in turn would support the 
quality of price discovery on the Exchange and provide additional price 
improvement opportunities for incoming orders. The Exchange believes 
that by correlating the amount of the fee to the level of orders sent 
by an ETP Holder that add liquidity, the Exchange's fee structure would 
incentivize ETP Holders to submit more orders that add liquidity to the 
Exchange, thereby increasing the potential for price improvement to 
incoming marketable orders submitted to the Exchange.
    The Exchange also proposes the non-substantive change of deleting 
``share'' from ``average daily share volume'' in Tier 1 and adopting 
``ADV'' as an abbreviation for average daily volume.
    As noted above, the Exchange operates in a competitive environment, 
particularly as it relates to attracting non-marketable orders, which 
add liquidity to the Exchange. The Exchange does not know how much 
order flow ETP Holders choose to route to other exchanges or to off-
exchange venues. Based on the profile of liquidity-adding firms 
generally, the Exchange believes that additional ETP Holders could 
qualify for the tiered rate under the new qualification criteria if 
they choose to direct order flow to, and increase quoting on, the 
Exchange. However, without having a view of ETP Holders' activity on 
other exchanges and off-exchange venues, the Exchange has no way of 
knowing whether this proposed rule change would result in any 
additional ETP Holders directing orders to the Exchange in order to 
qualify for the Tier 1 fees and credits.
Step Up Tier
    Under the Step Up Tier, an ETP Holder is eligible to earn credits 
payable under the tier if the ETP Holder directly executes providing 
average daily volume (ADV) per month of 0.50% or more, but less than 
0.70%, of US CADV and directly executes providing ADV that is an 
increase of no less than 0.10% of US CADV for that month over the ETP 
Holder's providing ADV in Q1 2018. ETP Holders that meet this 
requirement are eligible to earn the following credit:
     $0.0030 per share for orders that provide displayed 
liquidity in Tape A securities;
     $0.0023 per share for orders that provide displayed 
liquidity in Tape B securities; and
     $0.0031 per share for orders that provide displayed 
liquidity in Tape C securities.
    The Exchange proposes to modify the volume requirement applicable 
to ETP Holders to qualify for the Step Up Tier by lowering the 
percentage threshold that an ETP Holder must meet, from 0.50% or more, 
but less than 0.70%, of US CADV to 0.45% or more, but less than 0.70%, 
of US CADV.
    The Exchange believes the amended criteria would incentivize order 
flow providers to send a greater number of liquidity-providing orders 
to the Exchange to qualify for the pricing tier. As described above, 
ETP Holders with liquidity-providing orders have a choice of where to 
send those orders. The Exchange believes that, if it lowers the 
requirement to qualify for the credit, more ETP Holders will choose to 
route

[[Page 14783]]

their liquidity-providing orders to the Exchange.
    As noted above, the Exchange operates in a competitive environment, 
particularly as relates to attracting non-marketable orders, which add 
liquidity to the Exchange. The Exchange does not know how much order 
flow ETP Holders choose to route to other exchanges or to off-exchange 
venues. Based on the profile of liquidity-adding firms generally, the 
Exchange believes that additional ETP Holders could qualify for the 
Step Up Tier credits under the revised qualification criteria if they 
choose to direct order flow to, and increase quoting on, the Exchange. 
However, without having a view of ETP Holders' activity on other 
exchanges and off-exchange venues, the Exchange has no way of knowing 
whether this proposed rule change would result in any additional ETP 
Holders directing orders to the Exchange in order to qualify for the 
Step Up Tier credits. The Exchange cannot predict with certainty how 
many ETP Holders would avail themselves of this opportunity but 
additional liquidity-providing orders would benefit all market 
participants because it would provide greater execution opportunities 
on the Exchange.
    The Exchange is not proposing to amend any of the credits payable 
under the Step Up Tier.
Cross-Asset Tier 1
    The Exchange proposes to eliminate the Cross-Asset Tier 1 pricing 
tier.
    Under Cross-Asset Tier 1, ETP Holders can receive a credit of 
$0.0031 per share in Tape A securities, a credit of $0.0030 per share 
and a fee of $0.0029 per share in Tape B securities, and a credit of 
$0.0032 per share in Tape C securities if such ETP Holder provides 
liquidity of 0.30% or more of the US CADV per month, and is affiliated 
with an OTP Holder or OTP Firm that provides an ADV of electronic 
posted Customer executions in all issues on NYSE Arca Options 
(excluding mini options) of at least 0.55% of total Customer equity and 
ETF option ADV as reported by The Options Clearing Corporation 
(``OCC'').
    The Exchange proposes to eliminate the Cross-Asset Tier 1 pricing 
tier and remove it from the Fee Schedule because the pricing tier has 
been underutilized by ETP Holders. The Exchange has observed that 
historically, few ETP Holders have qualified for the fees and credits 
under the Cross-Asset Tier 1 pricing tier. The pricing tier has not 
served to meaningfully increase activity on the Exchange or improve the 
quality of the market. Since January 2020, no ETP Holder has qualified 
under the pricing tier.
    With the proposed elimination of Cross-Asset Tier 1, the Exchange 
proposes to rename current Cross-Asset Tier 2 as Cross-Asset Tier and 
replace reference to Cross-Asset Tier 2 with Cross-Asset Tier in the 
Fee Schedule. Additionally, the Exchange proposes to delete the 
following rule text under current Cross-Asset Tier 2 pricing tier: 
``ETP Holders and Market Makers that qualify for this incremental Tape 
C credit shall not qualify for any fees and credits under Tape C Tier 1 
and Tape C Tier 2.'' With the proposed deletion of current Tape C Tier 
1 and Tape C Tier 2, the above rule text would no longer be applicable. 
For the same reason, the Exchange also proposes to delete the following 
rule text under current Step Up Tier 4: ``ETP Holders and Market Makers 
that qualify for Step Up Tier 4 shall not receive any additional 
incremental Tape C Tier credits for providing displayed liquidity.''
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 Proposed Fee Change Is 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 Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
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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 
shift order flow, or discontinue to [sic] reduce use of certain 
categories of products, in response to fee changes. With respect to 
non-marketable order [sic] which provide liquidity on an Exchange, ETP 
Holders can choose from any one of the 16 currently operating 
registered exchanges to route such order flow. Accordingly, competitive 
forces reasonably constrain exchange transaction fees that relate to 
orders that would provide displayed liquidity on an exchange. Stated 
otherwise, changes to exchange transaction fees can have a direct 
effect on the ability of an exchange to compete for order flow.
Tape C Tiers 1-4
    The Exchange believes the proposal to eliminate current Tape C Tier 
1 and Tier 2 is reasonable because the Exchange is not required to 
maintain these tiers. Moreover, ETP Holders still have a number of 
other opportunities and a variety of ways to receive enhanced rebates 
for liquidity adding orders, including via the proposed new Tape C 
Tiers 1-4. The Exchange notes that the proposed change does not 
preclude any ETP Holder from achieving the proposed new Tape C Tiers 1-
4 to qualify for the rebates or other available rebates under other 
pricing tiers (i.e., Tier 2, Step Up Tier and Step Up Tier 4). 
Additionally, ETP Holders are still entitled to a rebate for their 
liquidity adding orders (i.e., the standard rebate). Further, as noted 
above, all ETP Holders are eligible to qualify for the proposed new 
Tape C Tiers 1-4 should they satisfy the respective criteria.
    The Exchange believes that the proposal to adopt Tape C Tiers 1-4 
is reasonable because the tiers continue to provide an opportunity for 
ETP Holders to receive enhanced rebates based on the level of their 
trading activity in Tape C securities. The Exchange notes that relative 
volume-based incentives and discounts have been widely adopted by 
exchanges, including the Exchange, and are reasonable, equitable and 
non-discriminatory because they are open to all ETP Holders on an equal 
basis and provide additional benefits or discounts that are reasonably 
related to the value to an exchange's market quality and associated 
higher levels of market activity. Additionally, as noted above, the 
Exchange operates in highly competitive market. The Exchange is only 
one of 16 equity venues to which market participants may direct their 
order flow, and it represents a small percentage of the overall market. 
Competing equity exchanges offer similar tiered pricing structures to 
that of the Exchange, including schedules of rebates and fees that 
apply based upon members achieving certain volume and/

[[Page 14784]]

or growth thresholds. These competing pricing schedules, moreover, are 
presently comparable to those that the Exchange provides, including the 
pricing of comparable tiers.\18\
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    \18\ See e.g., Cboe BZX U.S. Equities Exchange (``BZX'') Fee 
Schedule, Footnote 1, Add/Remove Volume Tiers, which provide 
enhanced rebates between $0.0025 and $0.0031 per share for displayed 
orders where BZX members meet certain volume thresholds.
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    Moreover, the Exchange believes the proposed new pricing tiers 
continue to be a reasonable means to encourage ETP Holders to increase 
their liquidity on the Exchange. Increased liquidity benefits all 
investors by deepening the Exchange's liquidity pool, offering 
additional flexibility for all investors to enjoy cost savings, 
supporting the quality of price discovery, promoting market 
transparency and improving investor protection.
Tier 1
    The Exchange believes that the proposed new additional threshold 
for qualifying for Tier 1 is reasonable because it is designed to 
encourage increased trading activity on the Exchange. The Exchange 
believes it is reasonable to require ETP Holders to meet the applicable 
volume threshold to qualify for the Tier 1 credits. Further, the 
proposed change is reasonable as it would allow ETP Holders an 
additional method to qualify for the credits payable under the pricing 
tier if ETP Holders are unable to meet the existing requirement. The 
Exchange believes that the proposal represents a reasonable effort to 
promote price improvement and enhanced order execution opportunities 
for ETP Holders. All ETP Holders would benefit from the greater amounts 
of liquidity on the Exchange, which would represent a wider range of 
execution opportunities.
    The Exchange further believes that removing an extraneous phrase 
from Tier 1 and adopting ADV as an abbreviation for ``average daily 
volume'' is reasonable as it would add clarity to the Fee Schedule.
Step Up Tier
    The Exchange believes the proposed change to lower the volume 
requirement under the Step Up Tier is reasonable because it would allow 
ETP Holders to more easily meet the requirement of the pricing tier to 
receive per share credits payable under the pricing tier, thereby 
encouraging the submission of additional liquidity to a national 
securities exchange. Submission of additional liquidity to the Exchange 
would promote price discovery and transparency and enhance order 
execution opportunities for ETP Holders from the substantial amounts of 
liquidity present on the Exchange. All ETP Holders would benefit from 
the greater amounts of liquidity that will be present on the Exchange, 
which would provide greater execution opportunities.
    The Exchange believes the proposed lower volume requirement is also 
reasonable as it would provide an additional incentive for ETP Holders 
to qualify for this established tier and direct their order flow to the 
Exchange and provide meaningful added levels of displayed liquidity, 
thereby contributing to the depth and market quality on the Exchange.
    On the backdrop of the competitive environment in which the 
Exchange currently operates, the proposed rule change is a reasonable 
attempt to increase liquidity on the Exchange and improve the 
Exchange's market share relative to its competitors.
Cross-Asset Tier 1
    The Exchange believes that the proposed rule change to eliminate 
the Cross-Asset Tier 1 is reasonable because the pricing tier has been 
underutilized and has not incentivized ETP Holders to bring liquidity 
and increase trading on the Exchange. Since January 2020, no ETP Holder 
has availed itself to the pricing tier that the Exchange is proposing 
to eliminate. The Exchange does not anticipate any ETP Holder in the 
near future to qualify for the pricing tier that is the subject of this 
proposed rule change. The Exchange believes it is reasonable to 
eliminate requirements and credits, and even an entire pricing tier 
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 is proposing to eliminate would also 
add clarity to the Fee Schedule.
The Proposed Fee Change Is an Equitable Allocation of Fees and Credits
    The Exchange believes its proposal equitably allocates its fees 
among its market participants.
Tape C Tiers 1-4
    The Exchange believes the proposal to eliminate the current Tape C 
Tier 1 and Tier 2 pricing tiers is equitable and not unfairly 
discriminatory because it would equally impact to all ETP Holders 
(i.e., the tiers won't be available for any ETP Holder).
    The Exchange believes that the proposed adoption of Tape C Tiers 1-
4 represents an equitable allocation of fees and is not unfairly 
discriminatory because all ETP Holders will be eligible for the 
proposed new tiers and the corresponding rebates will apply uniformly 
to all ETP Holders that reach the proposed tier criteria. That is, the 
proposed tiers are designed as an incentive to any and all ETP Holders 
interested in meeting the tier criteria to submit additional order flow 
to the Exchange and each will receive the proposed rebate if a tier 
criteria is met. While the Exchange has no way of knowing whether this 
proposed rule change would definitively result in any particular ETP 
Holder qualifying for the proposed tiers, the Exchange anticipates a 
number of ETP Holders meeting, or being reasonably able to meet, the 
proposed criteria. However, without having a view of ETP Holders' 
activity on other markets and off-exchange venues, the Exchange has no 
way of knowing whether this proposed rule change would result in any 
ETP Holder qualifying for the proposed new pricing tiers. The Exchange 
also notes that the proposed change will not adversely impact any ETP 
Holder's pricing or their ability to qualify for other rebate tiers. 
Rather, should an ETP Holder not meet the proposed criteria, the ETP 
Holder will merely not receive the corresponding rebate.
Tier 1
    The Exchange believes the proposed rule change to introduce 
alternative criteria for ETP Holders to qualify for Tier 1 equitably 
allocates its fees among its market participants. The Exchange believes 
the Tier 1 pricing tier is equitable because it is open to all 
similarly situated ETP Holders on an equal basis and provides a per 
share credit that is reasonably related to the value of an exchange's 
market quality associated with higher volumes. The Exchange believes it 
is equitable to require ETP Holders to meet the applicable volume 
thresholds to qualify for the Tier 1 credits. Further, the proposed 
change is also equitable as it would allow ETP Holders an additional 
method to qualify for the credits payable under the pricing tier if ETP 
Holders are unable to meet the current requirement. The Exchange 
believes the proposed change would continue to encourage ETP Holders to 
both submit additional liquidity to the Exchange and execute orders on 
the Exchange, thereby contributing to robust levels of liquidity, to 
the benefit of all market participants.
    The Exchange believes that modifying Tier 1 would encourage the 
submission and removal of additional liquidity from the Exchange, thus 
enhancing order execution opportunities for ETP Holders from the 
substantial amounts of

[[Page 14785]]

liquidity present on the Exchange. All ETP Holders would benefit from 
the greater amounts of liquidity that would be present on the Exchange, 
which would provide greater execution opportunities.
    The Exchange believes the proposed rule change would also improve 
market quality for all market participants seeking to remove liquidity 
on the Exchange and, as a consequence, attract more liquidity to the 
Exchange, thereby improving market-wide quality. The Exchange believes 
that the proposal constitutes an equitable allocation of fees because 
all similarly situated ETP Holders and other market participants would 
be eligible for the same basic and tiered rates and would be eligible 
for the same fees and credits. Moreover, the proposed change is 
equitable because the revised criteria would apply equally to all 
similarly situated ETP Holders.
Step Up Tier
    The Exchange believes that the proposed modification of the volume 
threshold to qualify for Step Up Tier represents an equitable 
allocation of fees. The Exchange is not proposing to adjust the amount 
of the Step Up Tier credits, which will remain at the current level for 
all ETP Holders. Rather, the proposal would continue to encourage ETP 
Holders to send orders that add liquidity to the Exchange, thereby 
contributing to robust levels of liquidity, which benefits all market 
participants. The Exchange believes that lowering the requirements 
would make it easier for liquidity providers to qualify for the Step Up 
Tier credits. The proposed change will thereby encourage the submission 
of additional liquidity to a national securities exchange, thus 
promoting price discovery and transparency and enhancing order 
execution opportunities for ETP Holders from the substantial amounts of 
liquidity present on the Exchange. All ETP Holders would benefit from 
the greater amounts of liquidity that will be present on the Exchange, 
which would provide greater execution opportunities.
    Without having a view of ETP Holders' activity on other markets and 
off-exchange venues, the Exchange has no way of knowing whether this 
proposed rule change would result in any additional ETP Holders 
qualifying for this established tier. However, the Exchange believes 
the proposed lower volume requirement would provide an incentive for 
ETP Holders to continue to submit liquidity-providing order flow, which 
would promote price discovery and increase execution opportunities for 
all ETP Holders. While the Exchange has no way of knowing whether this 
proposed rule change would definitively result in any particular ETP 
Holder qualifying for this established tier, the Exchange anticipates a 
number of ETP Holders meeting, or being reasonably able to meet, the 
proposed lower volume threshold. The proposed change will thereby 
encourage the submission of additional liquidity to a national 
securities exchange, thus promoting price discovery and transparency 
and enhancing order execution opportunities for ETP Holders from the 
substantial amounts of liquidity present on the Exchange, which would 
benefit all market participants on the Exchange.
    The Exchange believes the proposed rule change would improve market 
quality for all market participants on the Exchange and, as a 
consequence, attract more liquidity to the Exchange thereby improving 
market-wide quality. ETP Holders that currently qualify for credits 
associated with Step Up pricing tiers on the Exchange will continue to 
receive credits when they provide liquidity to the Exchange. The 
Exchange believes that recalibrating the requirements for providing 
liquidity will continue to attract order flow and liquidity to the 
Exchange for the benefit of investors generally.
Cross-Asset Tier 1
    The Exchange believes the proposal to eliminate Cross-Asset Tier 1 
is equitably allocated because it would apply to all ETP Holders (i.e., 
the tier won't be available for any ETP Holder). The Exchange notes 
that the proposed elimination of the tier does not preclude any ETP 
Holder from qualifying for the remaining Cross-Asset pricing tier or 
other pricing tiers.\19\
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    \19\ See e.g., Fee Schedule, Tier 2, which provides and fees and 
credits to ETP Holders affiliated with an OTP Holder or OTP Firm 
that has a market maker account on NYSE Arca Options.
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    Specifically, the Exchange believes that the proposal constitutes 
an equitable allocation of fees because all similarly situated ETP 
Holders and other market participants would be equally ineligible for 
the tier proposed for deletion. The Exchange believes that eliminating 
requirements and credits, and even entire pricing tiers from the Fee 
Schedule when such incentives become ineffective is equitable and not 
unfairly discriminatory 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 Proposed Fee Change Is Not Unfairly Discriminatory
    The Exchange believes that the proposal 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.
Tape C Tiers 1- 4
    The Exchange believes that the proposed change to eliminate Tape C 
Tier 1 and Tier 2 and adopt Tape C Tiers 1-4 is not unfairly 
discriminatory because all ETP Holders will be impacted equally (i.e., 
each won't be able to access current Tape C Tier 1 and Tier 2 and will 
equally be able to qualify for the proposed new Tape C Tiers 1-4 
rebates if they meet the requirement under the new pricing tiers). The 
proposed new tiers are designed as an incentive to any and all ETP 
Holders interested in meeting the tier criteria to submit additional 
order flow to the Exchange and each will receive the proposed rebate if 
the tier criteria are met. While the Exchange has no way of knowing 
whether this proposed rule change would definitively result in any 
particular ETP Holder qualifying for the proposed tiers, the Exchange 
anticipates a number of ETP Holders meeting, or being reasonably able 
to meet, the proposed criteria; however, the proposed tiers are open to 
any ETP Holder that satisfies each tier's criteria. The Exchange also 
notes that the proposed change will not adversely impact any ETP 
Holder's pricing or their ability to qualify for other tiers. Rather, 
should an ETP Holder not meet the criteria of the proposed new pricing 
tiers, the ETP Holder will merely not receive the corresponding rebate.
Tier 1
    The Exchange believes that the proposed rule change to introduce 
alternative criteria for ETP Holders to qualify for Tier 1 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. Moreover, the proposal 
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 the proposal would be 
applied to all similarly situated ETP Holders and all ETP Holders would 
be subject to the same modified Tier 1. Accordingly, no ETP Holder 
already operating on the Exchange would be disadvantaged by

[[Page 14786]]

the proposed allocation of fees. The Exchange further believes that the 
proposed changes would not permit unfair discrimination among ETP 
Holders because the general and tiered rates are available equally to 
all ETP Holders. As described above, in today's competitive 
marketplace, order flow providers have a choice of where to direct 
liquidity-providing order flow, and the Exchange believes there are 
additional ETP Holders that could qualify for Tier 1 if they chose to 
direct their order flow to the Exchange.
Step Up Tier
    The Exchange believes that the proposed rule change to lower the 
volume requirement under Step Up Tier 1 is not unfairly discriminatory. 
The proposal neither targets nor will it have a disparate impact on any 
particular category of market participant. The proposal does not permit 
unfair discrimination because the lower threshold would be applied to 
all similarly situated ETP Holders, who would all be eligible for the 
same credit on an equal basis. Accordingly, no ETP Holder already 
operating on the Exchange would be disadvantaged by this allocation of 
fees.
    The Exchange believes it is not unfairly discriminatory to adopt 
lower volume requirements for ETP Holders to qualify for the Step Up 
Tier pricing tier as the proposed change would apply on an equal basis 
to all ETP Holders. Further, the Exchange believes the proposed lower 
volume requirement would incentivize ETP Holders to execute more of 
their liquidity-providers orders on the Exchange to qualify for the 
credits payable under the Step Up Tier. The Exchange also believes that 
the proposed change is not unfairly discriminatory because it is 
reasonably related to the value of the Exchange's market quality 
associated with higher volume. The proposed lower volume requirement 
would apply equally to all ETP Holders as each would be required to 
meet the revised criteria.
Cross-Asset Tier 1
    The Exchange believes the proposal to eliminate Cross-Asset Tier 1 
is not unfairly discriminatory. As noted above, tn [sic] the prevailing 
competitive environment, ETP Holders are free to disfavor the 
Exchange's pricing if they believe that alternatives offer them better 
value.
    Moreover, the proposal 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 the proposal would be applied to all similarly situated ETP 
Holders (i.e., the tier won't be available for any ETP Holder). 
Accordingly, no ETP Holder already operating on the Exchange would be 
disadvantaged by the proposed allocation of fees.
    The Exchange believes that eliminating requirements and credits, 
and even entire pricing tiers from the Fee Schedule when such 
incentives become ineffective is equitable and not unfairly 
discriminatory 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.
    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. 
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,\20\ 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 changes would encourage the submission of additional 
liquidity to a public exchange, thereby promoting market depth, price 
discovery and transparency and enhancing order execution opportunities 
for ETP Holders. As a result, the Exchange believes that the proposed 
change furthers the Commission's goal in adopting Regulation NMS of 
fostering integrated competition among orders, which promotes ``more 
efficient pricing of individual stocks for all types of orders, large 
and small.'' \21\
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    \20\ 15 U.S.C. 78f(b)(8).
    \21\ See Securities Exchange Act Release No. 51808, 70 FR 37495, 
37498-99 (June 29, 2005) (S7-10-04) (Final Rule).
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    Intramarket Competition. The Exchange believes the proposed 
amendments to its Fee Schedule would not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. The Exchange does not believe that the proposed 
change represents a significant departure from previous pricing offered 
by the Exchange or its competitors. The proposed changes are designed 
to attract additional order flow to the Exchange. The Exchange believes 
that the proposed adoption of new pricing tiers and amending criteria 
of established tiers would incentivize market participants to direct 
liquidity adding order flow to the Exchange, bringing with it 
additional execution opportunities for market participants and improved 
price transparency. Greater overall order flow, trading opportunities, 
and pricing transparency benefits all market participants on the 
Exchange by enhancing market quality and continuing to encourage ETP 
Holders to send orders, thereby contributing towards a robust and well-
balanced market ecosystem. 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.
    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 adjust 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, 
and because market participants may readily adjust their order routing 
practices, the Exchange does not believe its proposed fee change can 
impose any burden on intermarket competition.
    The Exchange believes that the proposed change 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.

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.

[[Page 14787]]

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) \22\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \23\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \22\ 15 U.S.C. 78s(b)(3)(A).
    \23\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    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) \24\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \24\ 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-2021-16 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-2021-16. 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 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-2021-16, and should be 
submitted on or before April 8, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-05559 Filed 3-17-21; 8:45 am]
BILLING CODE 8011-01-P