
[Federal Register Volume 80, Number 125 (Tuesday, June 30, 2015)]
[Notices]
[Pages 37340-37343]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-15979]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75282; File No. SR-NYSEArca-2015-52]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending NYSE Arca 
Equities Rules 7.25 and 8.800 in Order To Allow An Issuer to Elect for 
its Exchange Traded Product to Participate in the Crowd Participant 
Program or the ETP Incentive Program Monthly Rather than Quarterly and 
To Extend the Effectiveness of the Crowd Participant Program until June 
23, 2016

June 24, 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 June 18, 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 and II 
below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C.78s(b)(1).
    \2\ 15 U.S. C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend NYSE Arca Equities Rule 7.25 (``Rule 
7.25'') and NYSE Arca Equities Rule 8.800 (``Rule 8.800) in order to 
(1) allow an issuer to elect for its Exchange Traded Product (``ETP'') 
listed on the Exchange to participate in the Crowd Participant (``CP'') 
program (the ``CP Program'') or the ETP Incentive Program (the ``ETP 
Incentive Program''), respectively, at the time of listing or 
thereafter at the beginning of each month, rather than just at the 
beginning of each quarter; and (2) extend the effectiveness of the CP 
Program for an additional one-year pilot period, ending June 23, 2016. 
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.

[[Page 37341]]

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 NYSE Arca Equities Rules 7.25 and 
8.800 in order to (1) allow an issuer to elect for its ETP \4\ listed 
on the Exchange to participate in the CP Program or the ETP Incentive 
Program, respectively, at the time of listing or thereafter at the 
beginning of each month, rather than just at the beginning of each 
quarter; \5\ and (2) extend the effectiveness of the CP Program for an 
additional one-year pilot period, ending June 23, 2016.\6\
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    \4\ For purposes of the CP Program and the ETP Incentive 
Program, ETPs include securities listed on the Exchange under the 
following rules: NYSE Arca Equities Rules 5.2(j)(3) (Investment 
Company Units), 5.2(j)(5) (Equity Gold Shares), 8.100 (Portfolio 
Depositary Receipts), 8.200 (Trust Issued Receipts), 8.201 
(Commodity-Based Trust Shares), 8.202 (Currency Trust Shares), 8.203 
(Commodity Index Trust Shares), 8.204 (Commodity Futures Trust 
Shares), 8.300 (Partnership Units), 8.600 (Managed Fund Shares), and 
8.700 (Managed Trust Securities).
    \5\ The Commission approved the CP Program on a pilot basis in 
Securities Exchange Act Release No. 71804 (March 16, 2014), 79 FR 
18357 (April 1, 2014) (SR-NYSEArca-2013-141) (CP Program Release). 
The Commission approved the ETP Incentive Program on a pilot basis 
in Securities Exchange Act Release No. 69706 (June 6, 2013), 78 FR 
35340 (June 12, 2013) (SR-NYSEArca-2013-34) (ETP Incentive Program 
Release).
    \6\ The CP Program is scheduled to end on June 23, 2015.
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    Both the CP Program and the ETP Incentive Program are pilot 
programs that were designed to incentivize quoting and trading in ETPs 
and to add competition among existing qualified Market Makers.\7\ The 
CP Program seeks to encourage Market Makers on the Exchange to quote 
and trade in certain low-volume ETPs by offering issuers an alternative 
fee program funded by participating issuers and credited to CPs from 
the Exchange's general revenues. By requiring CPs to quote at the 
``National Best Bid'' or ``National Best Offer,'' for a percentage of 
the regular trading day, the CP Program rewards competitive liquidity-
providing Market Makers. The ETP Incentive Program is also designed to 
enhance the market quality for ETPs by incentivizing Market Makers to 
take Lead Market Maker (``LMM'') \8\ assignments in certain lower-
volume ETPs by offering an alternative fee structure for such LMMs that 
would be funded from the Exchange's general revenues. The ETP Incentive 
Program is designed to improve the quality of market for lower-volume 
ETPs, thereby incentivizing issuers to list them on the Exchange. 
Moreover, as described in the ETP Incentive Program Release, the 
Exchange believes that the ETP Incentive Program, which is entirely 
voluntary, encourages competition among markets for issuers' listings 
and among Market Makers for LMM assignments.
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    \7\ A Market Maker is an Equity Trading Permit Holder that acts 
as a Market Maker pursuant to NYSE Arca Equities Rule 7. See NYSE 
Arca Equities Rule 1.1(v). An Equity Trading Permit Holder is a sole 
proprietorship, partnership, corporation, limited liability company, 
or other organization in good standing that has been issued an 
Equity Trading Permit. See NYSE Arca Equities Rule 1.1(n).
    \8\ The LMM program is designed to incentivize firms to take on 
the LMM designation and foster liquidity provision and stability in 
the market. In order to accomplish this, the Exchange currently 
provides LMMs with an opportunity to receive incrementally higher 
transaction credits and incur incrementally lower transaction fees 
(``LMM Rates'') compared to standard liquidity maker-taker rates 
(``Standard Rates''). The Exchange generally employs a maker-taker 
transactional fee structure, whereby an Equity Trading Permit Holder 
that removes liquidity is charged a fee (``Take Rate''), and an 
Equity Trading Permit Holder that provides liquidity receives a 
credit (``Make Rate''). See Trading Fee Schedule, available at 
https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf.
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    Currently, an issuer can elect for an ETP to participate in either 
the CP Program or the ETP Incentive Program either at the time of 
listing or thereafter at the beginning of each quarter.\9\ The Exchange 
proposes to amend Rules 7.25(c) and 8.800(b) to provide that ETPs 
already listed on the Exchange can be added to the CP Program or ETP 
Incentive Program, respectively, on a monthly basis rather than at the 
beginning of each quarter. The Exchange believes that increasing the 
frequency for when an ETP may be added to either the CP Program or the 
ETP Incentive Program will permit each of the programs to be utilized 
by an issuer on a more timely basis and without the need to wait as 
long as a calendar quarter before electing for its ETP to participate 
in the CP Program or applying to have its ETP participate in the ETP 
Incentive Program. By allowing issuers to enter listed ETPs into the CP 
Program and the ETP Incentive Program on a monthly rather than a 
quarterly basis, issuers would be provided with more frequent 
opportunities to add ETPs to each program. With respect to the CP 
Program, such an increase would provide the opportunity for increased 
competition among qualified Market Makers and thereby provide 
additional liquidity-providing opportunities for Market Makers. With 
respect to the ETP Incentive Program, the Exchange also anticipates 
that expanding the opportunity for issuers to enter the ETP Incentive 
Program will facilitate the provision of extra liquidity to lower-
volume ETPs by incentivizing more Market Makers to take LMM assignments 
in certain lower-volume ETPs.
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    \9\ See Rules 7.25(c)(2) and 8.800(b)(1).
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    The Exchange also proposes to extend the current operation of the 
CP Program for an additional year to allow the Commission, the 
Exchange, LMMs, and issuers to further assess the impact of each 
program before making it available to other securities and implementing 
the programs on a permanent basis.\10\ During the initial one-year 
pilot period, no ETP issuers have utilized the CP Program and the 
Exchange does not have any data to assess the impact of the CP Program 
on ETP market quality or whether any provisions of the CP Program 
should be modified. The Exchange believes that extending the CP Program 
pilot period for an additional year will provide additional time for 
issuers to participate in the CP Program so that the Exchange may 
assess the impact of the CP Program before making it available to other 
securities or implementing it on a permanent basis.
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    \10\ The Exchange notes that any proposed further continuance of 
the CP Program or a proposal to make the CP Program permanent would 
require a rule filing with the Commission pursuant to Section 19(b) 
of the Act and Rule 19b-4 thereunder.
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    This filing is not otherwise intended to address any other issues 
and the Exchange is not aware of any problems that Equity Trading 
Permit Holders or issuers would have in complying with the monthly 
selection provisions or the proposed extension of the CP Program.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\11\ in general, and furthers the objectives of Section 6(b)(5) of 
the Act,\12\ in particular, in that it is designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to remove impediments to and perfect the

[[Page 37342]]

mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest. The Exchange 
believes that the proposal would remove impediments to and perfect the 
mechanics of a free and open market and national market system because 
increasing the frequency with which listed ETPs can join the respective 
programs will provide additional ETP issuers the opportunity to 
participate in the CP Program or ETP Incentive Program, which would 
result potentially in more competitive quoting and trading by 
additional Market Makers assigned to those ETPs. Accordingly, the 
proposed rule change would contribute to the protection of investors 
and the public interest because it may provide a better trading 
environment for investors in ETPs included in the programs and, 
generally, encourage greater competition among markets.
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    \11\ 15 U.S. C. 78f(b).
    \12\ 15 U.S. C. 78f(b)(5).
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    The Exchange believes that increasing the flexibility for issuers 
with regards to when they can enter an incentive program has the 
potential to expand the pool of ETP liquidity providers, encourage 
competitive trading and enhance the quality of the markets in ETPs by 
tightening quote spreads, increasing depth of liquidity and reducing 
execution costs for investors. As stated in the CP Program Release,\13\ 
the Exchange believes that the CP Program would enhance quote 
competition, improve liquidity, support the quality of price discovery, 
promote market transparency, and increase competition for listings and 
trade executions while reducing spreads and transaction costs. The 
Exchange further believes that enhancing liquidity in CP Program ETPs 
would help raise investors' confidence in the fairness of the market 
generally and their transactions in particular. As such, the CP Program 
would foster cooperation and coordination with persons engaged in 
facilitating securities transactions, enhance the mechanism of a free 
and open market, and promote fair and orderly markets in ETPs on the 
Exchange. Increasing the frequency by which issuers can enter listed 
ETPs into the CP Program would provide additional opportunities for 
ETPs to reap the benefits of the CP Program on a more timely basis.
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    \13\ See note 5, supra.
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    The Exchange further believes that the ETP Incentive Program is 
designed to enhance the market quality for ETPs by incentivizing Market 
Makers to take LMM assignments in certain lower volume ETPs by offering 
an alternative fee structure for such LMMs that would be funded from 
the Exchange's general revenues. The ETP Incentive Program is designed 
to improve the quality of market for lower-volume ETPs, thereby 
incentivizing them to list on the Exchange. Moreover, as described in 
the ETP Incentive Program Release, the Exchange believes that the ETP 
Incentive Program, which is entirely voluntary, encourages competition 
among markets for issuers' listings and among Market Makers for LMM 
assignments. Increasing the frequency by which issuers can enter listed 
ETPs into the ETP Incentive Program would allow ETPs to reap the 
benefits of the ETP Incentive Program on a more timely basis. The 
Exchange believes that the proposed amendments to Rules 7.25 and 8.800 
to provide that ETPs listed on the Exchange can be added to the CP 
Program or ETP Incentive Program, respectively, on a monthly basis, by 
providing more frequent opportunities for issuers to add ETPs to the 
respective programs, would facilitate enhancements to liquidity and 
market quality as described in the CP Program Release and the ETP 
Incentive Program Release.
    The Exchange believes that, by providing additional time for 
issuers to participate in the CP Program, through an extension of the 
pilot period until June 23, 2016, the CP Program would continue to 
provide an opportunity for rewarding competitive liquidity-providing 
Market Makers, with associated requirements for quoting by CPs at the 
National Best Bid or National Best Offer. The CP Program, therefore, 
has the potential to enhance competition among liquidity providers and 
thereby improve execution quality on the Exchange. An extension of such 
pilot period will permit additional time for the Commission, the 
Exchange, LMMs, and issuers to assess the impact of the CP Program 
before making it available to other securities. The Exchange will 
continue to monitor the efficacy of the CP Program during the extended 
pilot period.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposed rule change is 
not designed to address any competitive issues, but rather increase the 
frequency with which issuers of listed ETPs can elect to join either 
the existing CP Program or ETP Incentive Program and there are no other 
substantive changes being proposed to the respective programs. Rather, 
the Exchange believes that permitting issuers to utilize each program 
on a monthly rather than a quarterly basis, and extending the operation 
of the CP Program, will enhance competition among liquidity providers 
and thereby improve execution quality on the Exchange.
    The proposed extension to the pilot period for the CP Program is 
not designed to address any competitive issues but rather to provide 
additional time for the Commission, the Exchange, LMMs and issuers to 
assess the impact of the CP Program.

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 Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \14\ and Rule 19b-4(f)(6) thereunder.\15\ 
Because the proposed rule change does not: (i) Significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
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    \14\ 15 U.S. C. 78s(b)(3)(A)(iii).
    \15\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) \16\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\17\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposed 
rule change can be both effective and implemented upon filing. The 
Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest 
because it ensures that the CP Program pilot will be extended for 
another year without interruption.

[[Page 37343]]

Therefore, the Commission hereby waives the 30-day operative delay and 
designates the proposed rule change to be operative upon filing with 
the Commission.\18\
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    \16\ 17 CFR 240.19b-4(f)(6).
    \17\ 17 CFR 240.19b-4(f)(6)(iii).
    \18\ For purposes only of waiving the operative delay for this 
proposal, the Commission has considered the proposed rule's impact 
on efficiency, competition, and capital formation. See 15 U.S. C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved.

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-NYSE-Arca-2015-52 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-2015-52. 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 such filing also will be available 
for inspection and copying at the principal offices 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-
52, and should be submitted on or before July 21, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-15979 Filed 6-29-15; 8:45 am]
 BILLING CODE 8011-01-P


