
[Federal Register Volume 81, Number 63 (Friday, April 1, 2016)]
[Notices]
[Pages 18900-18902]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-07332]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77455; File No. SR-NYSEARCA-2016-48]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the NYSE 
Arca Equities Schedule of Fees and Charges for Exchange Services

March 28, 2016.
    Pursuant to section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that, on March 21, 2016, NYSE Arca, Inc. (the ``Exchange'' or ``NYSE 
Arca'') filed with the Securities and Exchange Commission 
(``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 exclude 
from its average daily volume and certain other calculations any 
trading day on which the Exchange is not open for the entire trading 
day and/or a disruption affects an Exchange system that lasts for more 
than 60 minutes during regular trading hours. The Exchange proposes to 
implement the fee change effective March 21, 2016. 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend the Fee Schedule to exclude from its 
average daily volume (``ADV'') and certain other calculations any 
trading day on which the Exchange is not open for the entire trading 
day and/or a disruption affects an Exchange system that lasts for more 
than 60 minutes during regular trading hours.
    The Exchange proposes to implement the fee change effective March 
21, 2016.\4\
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    \4\ The Exchange originally filed to amend the Fee Schedule on 
March 1, 2016 (SR-NYSEArca-2016-38) and withdrew such filing on 
March 11, 2016. The Exchange subsequently filed to amend the Fee 
Schedule on March 11, 2016 (SR-NYSEArca-2016-45) and withdrew such 
filing on March 21, 2016.
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    As provided in the Fee Schedule, many of the NYSE Arca Equities' 
transaction fees and credits are based on trading and liquidity 
thresholds that ETP Holders and Market Makers must satisfy in order to 
qualify for the particular rates. The Exchange believes that trading 
suspensions or disruptions can prevent ETP Holders and Market Makers 
from engaging in normal trading and liquidity provision in their 
assigned securities, leading to decreased trading volume compared to 
ADV. Accordingly, for purposes of determining transaction fees and 
credits for these market participants based on trading and liquidity 
thresholds [sic], ADV, and United States consolidated ADV (``US 
CADV''),\5\ the Exchange proposes to add text to current footnote 1 to 
the Fee Schedule that would permit the Exchange to exclude any trading 
day on which (1) the Exchange is not open for the entire trading day 
and/or (2) a disruption affects an Exchange system that lasts for more 
than 60 minutes during regular trading hours. The proposal is 
consistent with the Exchange's options rules \6\ and the rules of its 
affiliate NYSE MKT LLC.\7\
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    \5\ US CADV is used here as defined in footnote 3 to the Fee 
Schedule.
    \6\ See NYSE Arca Options Fees and Charges (``The Exchange may 
exclude from the calculation of ADV contracts traded any day that 
(1) the Exchange is not open for the entire trading day and/or (2) a 
disruption affects an Exchange system that lasts for more than 60 
minutes during regular trading hours (``Exchange System 
Disruption'').
    \7\ See NYSE Amex Options Fee Schedule (``The Exchange may 
exclude from its monthly calculations of contract volume any day 
that (1) the Exchange is not open for the entire trading day and/or 
(2) a disruption affects an Exchange system that lasts for more than 
60 minutes during regular trading hours'').
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    The proposed change would allow the Exchange to exclude days where 
the Exchange declares a trading halt in all securities or honors a 
market-wide trading halt declared by another market. The Exchange's 
proposal would be similar to the current provision in the Fee Schedule 
whereby trade activity on days when the market closes early and on the 
date of the annual reconstitution of the Russell Investments Indexes 
does not count toward volume tiers.\8\ Generally, the market closes 
early on certain days before or after a holiday observed by the 
Exchange.\9\ The Exchange's proposal is consistent with the rules of 
other self-regulatory organizations.\10\
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    \8\ See footnote 1 in the Fee Schedule.
    \9\ For example, the Exchange is closed on Thanksgiving Day and 
closes early on the Friday immediately following Thanksgiving Day 
(e.g., Friday, November 25, 2016).
    \10\ See notes 5-6 [sic], supra; see also NASDAQ Stock Market 
LLC Rule 7018(j) (``For purposes of determining average daily volume 
and total consolidated volume under this rule, any day that the 
market is not open for the entire trading day will be excluded from 
such calculation.''); International Securities Exchange, LLC Fee 
Schedule (``For purposes of determining Priority Customer ADV, any 
day that the regular order book is not open for the entire trading 
day or the Exchange instructs members in writing to route their 
orders to other markets may be excluded from such calculation; 
provided that the Exchange will only remove the day for members that 
would have a lower ADV with the day included.'').
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    The Exchange believes that artificially low volumes of trading on 
days when the Exchange is not open for the entire trading day reduces 
the average daily activity of ETP Holders and Market Makers both daily 
and monthly. Given the decreased trading volumes, the numerator for the 
monthly calculation (e.g., trading volume) would be correspondingly 
lower, but the denominator for the threshold calculations (e.g., the 
number of trading days) would not necessarily be decreased, and could 
result in an unintended increase in the cost of trading on the 
Exchange, a result that is unintended and undesirable to the Exchange 
and its ETP Holders and

[[Page 18901]]

Market Makers. The Exchange believes that the authority to exclude days 
when the Exchange is not open for the entire trading day would provide 
ETP Holders and Market Makers with greater certainty as to their 
monthly costs and diminish the likelihood of an effective increase in 
the cost of trading.\11\
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    \11\ See, e.g., Securities Exchange Act Release No. 70657 
(October 10, 2013), 78 FR 62899 (October 22, 2103) (SR-ISE-2013-51).
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    Similarly, the Exchange proposes to modify its Fee Schedule to 
permit the Exchange to exclude from the above calculations any trading 
day where a disruption affects an Exchange system that lasts for more 
than 60 minutes during regular trading hours even if such disruption 
would not be categorized as a complete outage of the Exchange's system. 
Such a disruption may occur where a [sic] certain securities traded on 
the Exchange are unavailable for trading due to an Exchange system 
issue or where, while the Exchange may be able to perform certain 
functions with respect to accepting and processing orders, the Exchange 
may be experiencing a failure to another significant process, such as 
routing to other market centers, that would lead ETP Holders and Market 
Makers that rely on such process to avoid utilizing the Exchange until 
the Exchange's entire system was operational. Once again, the 
Exchange's proposal is consistent with the rules of other self-
regulatory organizations.\12\
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    \12\ See notes 5-6 [sic], supra; see also BATS BZX Exchange Fee 
Schedule (``The Exchange excludes from its calculation of ADAV and 
ADV shares added or removed on any day that the Exchange's system 
experiences a disruption that lasts for more than 60 minutes during 
regular trading hours (``Exchange System Disruption''), on any day 
with a scheduled early market close and on the last Friday in June 
(the ``Russell Reconstitution Day'').
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    The Exchange is not proposing any changes to the level of rebates 
currently being provided on the Exchange, or to the thresholds required 
to achieve each rebate tier.
    The proposed change is also not otherwise intended to address any 
other issues, and the Exchange is not aware of any problems that ETP 
Holders and Market Makers 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,\13\ in general, and furthers the 
objectives of sections 6(b)(4) and 6(b)(5) of the Act,\14\ 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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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that it is reasonable to permit the Exchange 
to eliminate from the calculation days on which the market is not open 
the entire trading day because it preserves the Exchange's intent 
behind adopting volume-based pricing. Similarly, the Exchange believes 
that its proposal is reasonable because it will help provide ETP 
Holders and Market Makers with a greater level of certainty as to their 
level of rebates and costs for trading in any month where the Exchange 
experiences such a system disruption on one or more trading days. The 
Exchange is not proposing to amend the thresholds ETP Holders and 
Market Makers must achieve to become eligible for, or the dollar value 
associated with, the tiered rebates or fees. By eliminating the 
inclusion of a trading day on which a system disruption occurs, the 
Exchange would almost certainly be excluding a day that would otherwise 
lower ETP Holders' and Market Makers' trading volume, thereby making it 
more likely for them to meet the minimum or higher tier thresholds and 
thus incentivizing ETP Holders and Market Makers to increase their 
participation on the Exchange in order to meet the next highest tier.
    The Exchange further believes that the proposal is reasonable 
because the proposed exclusion seeks to avoid penalizing ETP Holders 
and Market Makers that might otherwise qualify for certain tiered 
pricing but that, because of a significant Exchange system problem, 
would not participate to the extent that they might have otherwise 
participated. The Exchange believes that certain systems disruptions 
could preclude some ETP Holders and Market Makers from submitting 
orders to the Exchange even if such issue is not actually a complete 
systems outage.
    Finally, the Exchange believes that the proposal is equitable and 
not unfairly discriminatory because the methodology for the monthly 
calculations would apply equally to all ETP Holders and Market Makers 
and to all volume tiers. The Exchange notes that, although unlikely, 
there is some possibility that a certain small proportion of ETP 
Holders and Market Makers may have a higher ADV as a percentage of 
average daily volume with their activity included from days where the 
Exchange experiences a system disruption. The Exchange believes that 
the proposal would still be equitable and not unfairly discriminatory 
given that the impacted universe is potentially quite small and that 
the proposal would benefit the overwhelming majority of market 
participants and would make the overall cost of trading on the Exchange 
more predictable for ETP Holders and Market Makers as a whole.
    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,\15\ 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.
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    \15\ 15 U.S.C. 78f(b)(8).
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    The Exchange believes that, with respect to monthly calculations 
for rebates, there are very few instances where the exclusion would be 
invoked, and if invoked, would have little or no impact on trading 
decisions or execution quality. On the contrary, the Exchange believes 
that the proposal fosters competition by avoiding a penalty to ETP 
Holders and Market Makers for days when trading on the Exchange is 
disrupted for a significant portion of the day and would result in 
lower total costs to end users, a positive outcome of competitive 
markets. Further, other options exchanges have adopted rules that are 
substantially similar to the change in ADV calculation being proposed 
by the Exchange.\16\
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    \16\ See note 5 [sic], supra.
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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) \17\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \18\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 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

[[Page 18902]]

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) \19\ of the Act to determine 
whether the proposed rule change should be approved or disapproved.
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    \19\ 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-2016-48 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-2016-48. 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-2016-48 and should 
be submitted on or before April 22, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
Robert W. Errett,
Deputy Secretary.
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    \20\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2016-07332 Filed 3-31-16; 8:45 am]
 BILLING CODE 8011-01-P


