
[Federal Register Volume 79, Number 117 (Wednesday, June 18, 2014)]
[Notices]
[Pages 34819-34822]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-14201]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72381; File No. SR-NYSEARCA-2014-65]


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 To Add 
an Additional Requirement To Qualify for Step Up Tier 3

June 12, 2014.
    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 May 30, 2014, 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 proposes to [sic] amend the NYSE Arca 
Equities Schedule of Fees and Charges for Exchange Services (``Fee 
Schedule'') to add an additional requirement to qualify for Step Up 
Tier 3. The Exchange proposes to implement the fee change effective 
June 1, 2014. The text of 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.

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

[[Page 34820]]

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 add an 
additional requirement to qualify for Step Up Tier 3, which was 
introduced into the Fee Schedule effective February 1, 2014.\4\ The 
Exchange proposes to implement the fee change effective June 1, 2014.
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    \4\ See Securities Exchange Act Release No. 71503 (February 6, 
2014), 79 FR 8524 (February 12, 2014) (SR-NYSEArca-2014-13).
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    Step Up Tier 3 in the Fee Schedule is applicable to an ETP Holder, 
including a Market Maker, that on a daily basis, measured monthly, 
directly executes providing volume (``Adding ADV'') during the billing 
month that is both (i) at least 0.20% of U.S. consolidated average 
daily volume (``U.S. CADV'') for the billing month and (ii) at least 
0.125% taken as a percentage of U.S. CADV for the billing month over 
the ETP Holder's December 2013 Adding ADV taken as a percentage of U.S. 
CADV in December 2013 (``Baseline % CADV'').\5\ For example, if U.S. 
CADV during the billing month is 7 billion shares, an ETP Holder's 
Adding ADV during the billing month would first need to be at least 14 
million shares (i.e., at least 0.20% of U.S. CADV for the billing 
month). If U.S. CADV in December 2013 was 6 billion shares and an ETP 
Holder's December 2013 Adding ADV was 6 million shares, the ETP 
Holder's Baseline % CADV would be 0.10% (i.e., the ETP Holder's 
December 2013 Adding ADV taken as a percentage of U.S. CADV in December 
2013). The ETP Holder's Adding ADV during the billing month would 
therefore need to be at least 0.225% of U.S. CADV for the billing month 
(i.e., Baseline % CADV of 0.10% plus at least 0.125%). This would 
equate to at least 15.75 million shares of Adding ADV, which would be a 
``step up'' of 9.75 million shares.
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    \5\ U.S. CADV means 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. Transactions that are not reported to the Consolidated 
Tape are not included in U.S. CADV. An ETP Holder with zero Adding 
ADV in December 2013 (e.g., a firm that became an ETP Holder after 
December 2013) is treated as having Baseline % CADV of zero for 
purposes of Step Up Tier 3.
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    A qualifying ETP Holder is eligible to receive a credit of $0.0004 
per share for (i) Adding ADV in Tape A securities during the billing 
month taken as a percentage of U.S. CADV in Tape A securities in the 
billing month in excess of the Baseline % CADV in Tape A securities and 
(ii) Adding ADV in Tape C securities during the billing month taken as 
a percentage of U.S. CADV in Tape C securities in the billing month in 
excess of the Baseline % CADV in Tape C securities.\6\ This credit 
would be in addition to the ETP Holder's Tiered or Basic Rate 
credit(s); provided, however, that such combined credit may not exceed 
$0.0034 per share.
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    \6\ Orders that provide liquidity in Tape B securities count 
toward the ETP Holder's qualification for Step Up Tier 3, but such 
orders are not eligible for a credit under Step Up Tier 3. The 
Exchange's Fee Schedule includes a ``Tape B Step Up Tier'' that 
provides for a similar credit of $0.0004 per share only for orders 
in Tape B securities that provide liquidity.
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    The Exchange proposes that, in addition to the existing two 
requirements described above, to qualify for Step Up Tier 3 an ETP 
Holder would be required to directly execute Adding ADV during the 
billing month that is at least 40% over the ETP Holder's Baseline % 
CADV as a percentage of U.S. CADV for the billing month.\7\ Continuing 
with the example above, if an ETP Holder's Baseline % CADV was 0.10%, 
the ETP Holder's Adding ADV during the billing month would need to be 
at least 0.14% of U.S. CADV for the billing month. If U.S. CADV for the 
billing month was 7 billion shares, the ETP Holder's Adding ADV during 
the billing month would need to be at least 9.8 million shares (i.e., 
.0.14% multiplied by 7 billion). For an ETP Holder like this, with 
relatively low Baseline % CADV, this new requirement would not result 
in a new threshold that it would need to reach, because the 9.8 million 
shares would be less than the two existing required thresholds (i.e., 
14 million shares and 15.75 million shares, respectively).
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    \7\ An ETP Holder with zero Adding ADV in December 2013 (e.g., a 
firm that became an ETP Holder after December 2013) would be treated 
as having a Baseline % CADV of zero for purposes of the proposed new 
Step Up Tier 3 requirement. This proposed new requirement would 
therefore have no effect on such an ETP Holder. However, the 
existing two requirements would continue to apply.
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    However, and for further example, if the ETP Holder's Baseline % 
CADV instead was 0.60%, the ETP Holder's Adding ADV during the billing 
month would need to be at least 0.84% for the billing month. If U.S. 
CADV for the billing month was 7 billion shares, the ETP Holder's 
Adding ADV during the billing month would need to be at least 58.8 
million shares (i.e., 0.84% multiplied by 7 billion). Under the 
existing two requirements, this ETP Holder would be required to have 
Adding ADV during the billing month of 14 million shares or 50.75 
million shares, respectively. This proposed new requirement would 
therefore result in the ETP Holder being required to have Adding ADV of 
8.05 million shares greater than the higher of the two existing 
requirements and an overall ``step up'' of 22.8 million shares over its 
December 2013 Adding ADV.
    No other changes to Step Up Tier 3, or the corresponding credit, 
would result from this proposed change.
    The proposed change is not otherwise intended to address any other 
issues, and the Exchange is not aware of any problems that ETP Holders 
would have in complying with the proposed change.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\8\ in general, and furthers the 
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\9\ in 
particular, because it provides for the equitable allocation of 
reasonable dues, fees, and other charges among its members, issuers and 
other persons using its facilities and does not unfairly discriminate 
between customers, issuers, brokers or dealers.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(4) and (5).
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    The existing requirement of Adding ADV during the billing month 
that is at least 0.20% of U.S. CADV establishes a minimum for any ETP 
Holder in order to qualify for Step Up Tier 3. The existing requirement 
of Adding ADV during the billing month of at least 0.125% taken as a 
percentage of U.S. CADV for the billing month over the ETP Holder's 
Baseline % CADV establishes a minimum amount that the ETP Holder must 
``step up'' during the billing month, based on U.S. CADV during the 
billing month. In other words, as U.S. CADV during a particular billing 
month increases, the Adding ADV required of an ETP Holder would 
similarly increase (conversely, required Adding ADV would decrease if 
U.S. CADV during a particular billing month decreases). The proposed 
new requirement of Adding ADV during the billing month that is at least 
40% over the ETP Holder's Baseline % CADV as a percentage of U.S. CADV 
for the billing month is reasonable because it would establish a 
minimum amount that each ETP Holder must ``step up'' during the billing 
month, but based

[[Page 34821]]

primarily on the ETP Holder's own activity during the baseline month of 
December 2013.
    The Exchange believes that this proposed new requirement is also 
reasonable because it would further contribute to the goal of Step Up 
Tier 3--namely, encouraging ETP Holders to send additional orders to 
the Exchange for execution in order to qualify for an incrementally 
higher credit for such executions in Tape A and Tape C securities that 
add liquidity on the Exchange.\10\ In this regard, the Exchange 
believes that this may incentivize ETP Holders 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 new requirement is also reasonable because 
the level at which it would be set, i.e., 40%, is consistent with a 
threshold within the Fee Schedule that similarly provides for specific 
pricing based on an ETP Holder's volume in the billing month compared 
to a particular ``baseline month.'' \11\
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    \10\ See supra note 4 at 8525.
    \11\ See, e.g., the ``Routable Order Tier'' within the Fee 
Schedule, pursuant to which an ETP Holder must provide, in part, an 
ADV of liquidity during the billing month across all Tapes that is 
equal to at least the ETP Holder's provide liquidity across all 
Tapes during a ``baseline'' month, plus 40%. See also Securities 
Exchange Act Release No. 69926 (July 3, 2013), 78 FR 41154 (July 9, 
2013) (SR-NYSEArca-2013-67).
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    The Exchange also believes that the proposed additional requirement 
to qualify for Step Up Tier 3 credit is equitable and not unfairly 
discriminatory because it would incentivize ETP Holders to submit 
orders to the Exchange and would result in a credit that is reasonably 
related to an exchange's market quality that is associated with higher 
volumes. Moreover, like existing pricing on the Exchange that is tied 
to ETP Holder volume levels, the Exchange believes that the proposed 
qualifying threshold for Step Up Tier 3 is equitable and not unfairly 
discriminatory because it would be available for all ETP Holders, 
including Market Makers, on an equal and non-discriminatory basis. It 
is also equitable and not unfairly discriminatory that an ETP Holder 
with zero Adding ADV in December 2013 (e.g., a firm that became an ETP 
Holder after December 2013) would be treated as having a Baseline % 
CADV of zero for purposes of the proposed Step Up Tier 3 because, as 
discussed above, the existing two requirements would continue to apply 
and would already require a higher Adding ADV from such an ETP Holder 
than if the Exchange applied a small, artificial Baseline % CADV for 
the ETP Holder.
    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 these 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,\12\ 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 proposed 
change will encourage competition, including by attracting additional 
liquidity to the Exchange, which will make the Exchange a more 
competitive venue for, among other things, order execution and price 
discovery. In general, ETP Holders impacted by the proposed change may 
readily adjust their trading behavior to maintain or increase their 
credits or decrease their fees in a favorable manner, and will 
therefore not be disadvantaged in their ability to compete. More 
specifically, an ETP Holder could qualify for Step Up Tier 3 by 
providing sufficient adding liquidity to satisfy the proposed new 
volume requirement.
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    \12\ 15 U.S.C. 78f(b)(8).
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    Also, the Exchange does not believe that the proposed change will 
impair the ability of ETP Holders or competing order execution venues 
to maintain their competitive standing in the financial markets. In 
this regard, the Exchange notes that existing pricing tiers of other 
exchanges similarly provide for credits for market participants that 
provide certain levels of liquidity on those exchanges.\13\
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    \13\ See, e.g., the ``Investor Support Program'' under NASDAQ 
Stock Market, LLC (``NASDAQ'') Rule 7014.
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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 member organizations 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) \14\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \15\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 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) \16\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \16\ 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-2014-65 on the subject line.

[[Page 34822]]

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-2014-65. 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 
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; 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-2014-65 and should 
be submitted on or before July 9, 2014.
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    \17\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-14201 Filed 6-17-14; 8:45 am]
BILLING CODE 8011-01-P


