
[Federal Register Volume 80, Number 96 (Tuesday, May 19, 2015)]
[Notices]
[Pages 28735-28737]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-12062]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74947; File No. SR-NYSEArca-2015-39]


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 
Reduce Fees for Routing Certain Retail Orders to Away Market Centers

May 13, 2015.
    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 30, 2015, 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 Schedule of 
Fees and Charges for Exchange Services (``Fee Schedule'') to reduce 
fees for routing certain retail orders to away market centers. The 
Exchange proposes to implement the changes on May 1, 2015. 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 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 reduce fees for 
routing certain retail orders to away market centers. The Exchange 
proposes to implement the changes on May 1, 2015.
    The Exchange currently charges $0.0029 per share for all orders in 
Tape A Securities that are routed outside the Book to the NYSE; and 
$0.0035 per share for all orders in Tape B Securities and Tape C 
Securities that are routed outside the Book to any away market center.
    The Exchange proposes to reduce the fees for certain orders, i.e., 
for Primary Until 9:45 Orders \4\ and Primary After

[[Page 28736]]

3:55 Orders \5\ that are designated as retail orders and meet the 
requirements of Rule 7.44(a)(3), but which are not executed in the 
Retail Liquidity Program \6\ (``Retail Orders''). Under Rule 
7.44(a)(3), a Retail Order is an agency order or a riskless principal 
order that meets the criteria of Financial Industry Regulatory 
Authority, Inc. Rule 5320.03 that originates from a natural person and 
is submitted to the Exchange by a Retail Member Organization 
(``RMO''),\7\ provided that no change is made to the terms of the order 
with respect to price or side of market and the order does not 
originate from a trading algorithm or any other computerized 
methodology. An ETP Holder may designate an order a Retail Order either 
(1) by designating certain order entry ports at the Exchange as 
``Retail Order Ports'' and attesting, in a form and/or manner 
prescribed by the Exchange, that all orders submitted to the Exchange 
via such Retail Order Ports are Retail Orders; or (2) by means of a 
specific tag in the order entry message.\8\
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    \4\ A Primary Until 9:45 Order is an Order entered for 
participation on the primary market until 9:45 a.m. Eastern Time 
(6:45 a.m. Pacific Time) after which time the order is cancelled on 
the primary market and entered on the NYSE Arca Book. The Primary 
Until 9:45 Order may be Day only and may not be designated as GTC or 
GTD. Orders that return to the NYSE Arca Book after routing to the 
primary market retain their original order attributes. See NYSE Arca 
Equities Rule 7.31(f)(2).
    \5\ A Primary After 3:55 Order is an Order entered for 
participation on the Exchange until 3:55 p.m. Eastern Time (12:55 
p.m. Pacific Time) after which time the order is cancelled on the 
Exchange and an order is entered for participation on the primary 
market. The Primary After 3:55 Order may be Day only and may not be 
designated as GTC or GTD. Orders that route to the primary market at 
3:55 p.m. Eastern Time retain their original order attributes. See 
NYSE Arca Equities Rule 7.31(f)(2) [sic].
    \6\ The Retail Liquidity Program is a pilot program designed to 
attract additional retail order flow to the Exchange for NYSE Arca-
listed securities and securities traded pursuant to unlisted trading 
privileges (``UTP Securities'') while also providing the potential 
for price improvement to such order flow. See Rule 7.44. See 
Securities Exchange Act Release No. 71176 (December 23, 2013), 78 FR 
79524 (December 30, 2013) (SR-NYSEArca-2013-107).
    \7\ ``RMO'' is defined in Rule 7.44(a)(2) as an ETP Holder that 
is approved by the Exchange to submit Retail Orders. However, an 
order designated as a Retail Order of an RMO for purposes of the 
Retail Liquidity Program is separate from the designation of an 
order as a Retail Order for purposes of existing pricing tiers in 
the Fee Schedule. See Securities Exchange Act Release No. 71722 
(March 13, 2014), 78 [sic] FR 15376 (March 19, 2014) (SR-NYSEArca-
2014-22) (``Arca Retail Approval Order'' [sic]). The proposed rule 
change solely concerns Retail Orders outside the Retail Liquidity 
Program that are currently defined in the Fee Schedule as ``Retail 
Orders''.
    \8\ See, e.g., Securities Exchange Act Release No. 68322 
(November 29, 2012), 77 FR 72425 (December 5, 2012) (SR-NYSEArca-
2012-129). ETP Holders designating orders as Retail Orders by using 
a tag in the order entry message are required to have written 
policies and procedures reasonably designed to assure that it only 
designates orders as Retail Orders if all requirements of a Retail 
Order are met. The written policies and procedures require the ETP 
Holder to (i) exercise due diligence before entering a Retail Order 
to assure that entry as a Retail Order is in compliance with the 
requirements specified by the Exchange, and (ii) monitor whether 
orders entered as Retail Orders meet the applicable requirements. If 
the ETP Holder represents Retail Orders from another broker-dealer 
customer, the ETP Holder's supervisory procedures must be reasonably 
designed to assure that the orders it receives from such broker-
dealer customer that it designates as Retail Orders meets the 
definition of a Retail Order.
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    Specifically, the Exchange proposes to charge a fee of $0.0010 per 
share for all Primary Until 9:45 Orders and Primary After 3:55 Orders 
that are designated as Retail Orders and that are routed to the primary 
listing market. The Exchange proposes to include this fee in three 
places in the Basic Rates section of the Fee Schedule for each of Tape 
A, Tape B, and Tape C securities by adding text following the existing 
rate for routing orders that provides ``except that Primary Until 9:45 
Orders and Primary After 3:55 Orders that are designated as Retail 
Orders and routed to the primary listing market will be charged $0.0010 
per share (fee).''
    The proposed changes are 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 changes.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\9\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\10\ 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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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed fee changes are reasonable 
as they are designed to attract additional retail order flow to the 
Exchange that include an instruction to route to the primary listing 
market at designated times. In addition, the proposed fees are 
equitable and not unfairly discriminatory because they will apply 
uniformly to all similarly situated ETP Holders.
    The Exchange notes that a significant percentage of the orders of 
individual investors are executed over-the-counter.\11\ While the 
Exchange believes that markets and price discovery optimally function 
through the interactions of diverse flow types, it also believes that 
growth in internalization has required differentiation of retail order 
flow from other order flow types. The proposed new fee is set at a 
level to incentivize ETP Holders to continue to direct a subset of 
Retail Orders to the Exchange, rather than to an over-the-counter 
market. The Exchange believes that, because Retail Orders are likely to 
reflect long-term investment intentions, they promote price discovery 
and dampen volatility. Accordingly, the presence of Retail Orders on 
the Exchange, or if routed, on the primary listing market for those 
securities, has the potential to benefit all market participants. For 
this reason, the Exchange believes that the proposed pricing is 
equitable and not unfairly discriminatory and would continue to 
encourage greater retail participation on the Exchange and other 
registered exchanges.
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    \11\See Concept Release on Equity Market Structure, Securities 
Exchange Act Release No. 61358 (January 14, 2010), 75 FR 3594 
(January 21, 2010) (``Concept Release'') (noting that dark pools and 
internalizing broker-dealers executed approximately 25.4% of share 
volume in September 2009). See also Mary Jo White, Focusing on 
Fundamentals: The Path to Address Equity Market Structure (Speech at 
the Security Traders Association 80th Annual Market Structure 
Conference, Oct. 2, 2013) (available on the Commission's Web site) 
(``White Speech''); Mary L. Schapiro, Strengthening Our Equity 
Market Structure (Speech at the Economic Club of New York, Sept. 7, 
2010) (available on the Commission's Web site) (``Schapiro 
Speech''). In her speech, Chair White noted a steadily increasing 
percentage of trading that occurs in ``dark'' venues, which appear 
to execute more than half of the orders of long-term investors. 
Similarly, in her speech, only three years earlier, Chair Schapiro 
noted that nearly 30 percent of volume in U.S.-listed equities was 
executed in venues that do not display their liquidity or make it 
generally available to the public and the percentage was increasing 
nearly every month.
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    The pricing proposed herein is not designed to permit unfair 
discrimination, but instead to promote a competitive process around 
retail executions such that retail investors would receive better 
prices. The proposed change is also equitable and not unfairly 
discriminatory because it would contribute to investors' confidence in 
the fairness of their transactions and because it 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 these reasons, the Exchange 
believes that the proposal is consistent with the Act.

[[Page 28737]]

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 
fees would increase competition for retail order flow among execution 
venues and encourage additional execution opportunities on the Exchange 
and other registered exchanges. The Exchange believes the proposed fee 
change also would not impose any burden on competition among market 
participants. To the contrary, because Primary Until 9:45 Orders and 
Primary After 3:55 Orders are designed to route to the primary listing 
market during designated times, the Exchange believes that the proposed 
fee would promote inter-exchange competition by proving an incentive 
for ETP Holders to route such orders to the Exchange, which would also 
benefit the primary listing markets that would receive the orders when 
routed.
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    \12\ 15 U.S.C. 78f(b)(8).
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    The Exchange notes that it operates in a highly competitive market 
in which market participants can readily favor competing venues. In 
such an environment, the Exchange must continually review, and consider 
adjusting, its fees and credits to remain competitive with other 
exchanges. For the reasons described above, the Exchange believes that 
the proposed rule change promotes a competitive environment.

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) \13\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \14\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 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) \15\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \15\ 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-2015-39 on the subject line.

Paper Comments

     Send paper comments in triplicate to Robert W. Errett, 
Deputy Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEArca-2015-39. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet 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 will also 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-2015-39 and should 
be submitted on or before June 9, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-12062 Filed 5-18-15; 8:45 am]
 BILLING CODE 8011-01-P


