
[Federal Register Volume 81, Number 197 (Wednesday, October 12, 2016)]
[Notices]
[Pages 70473-70475]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-24579]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79054; File No. SR-NYSEArca-2016-137]


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 
Revise the Requirements for the Current Step Up Tier

    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 September 29, 2016, 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 (the ``Fee Schedule'') to revise 
the requirements for the current Step Up Tier. The Exchange proposes to 
implement the fee change effective October 3, 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend the Fee Schedule to revise the 
requirements for the current Step Up Tier. The Exchange proposes to 
implement the fee change effective October 3, 2016.
Step Up Tier
    The Exchange recently adopted a Step Up Pricing Tier.\4\ Currently, 
ETP Holders and Market Makers qualify for a Step Up Tier credit of 
$0.0029 per share for providing liquidity in Tape A and Tape C 
Securities and $0.0028 per share for providing liquidity in Tape B 
Securities. The Step Up Tier credits apply to ETP Holders and Market 
Makers that, on a daily basis, measured monthly,
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    \4\ See Securities Exchange Act Release No. 78892 (September 21, 
2016), 81 FR 66315 (September 27, 2016) (SR-NYSEArca-2016-128) (the 
``Step Up Tier Filing'').
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    (i) directly execute providing average daily volume (``ADV'') on 
NYSE Arca in an amount that is an increase of no less than 0.15% of 
United States consolidated average daily volume (``US CADV'') in Tape 
A, Tape B and Tape C Securities for that month over the ETP Holder's or 
Market Maker's providing ADV in July 2016 (``Baseline Month''), and
    (ii) set a new Best Bid or Offer (``BBO'') on the Exchange with at 
least 40% of the ETP Holder's or Market Maker's providing ADV.
    As an incentive for ETP Holders and Market Makers to direct their 
order flow to the Exchange, for the months of September 2016 and 
October 2016 only, the Exchange adopted lower providing ADV criteria 
for ETP Holders and Market Makers to qualify for the Step Up Tier 
credits. For the billing month of September 2016 only, the Step Up Tier 
credit applied to ETP Holders and Market Makers that, on a daily basis, 
measured monthly,
    (i) directly executed providing ADV on NYSE Arca in an amount that 
was an increase of no less than 0.045% of US CADV in Tape A, Tape B and 
Tape C Securities for that month over the ETP Holder's or Market 
Maker's providing ADV in the Baseline Month, and
    (ii) set a new BBO on the Exchange with at least 40% of the ETP 
Holder's or Market Maker's providing ADV.\5\
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    \5\ The Step Up Tier Filing adopted lower requirements for ETP 
Holders and Market Makers to qualify for the Step Up Tier credits 
for the months of September 2016 and October 2016. Given this 
proposed rule change would become effective October 3, 2016 and 
would no longer be applicable for September 2016, the Exchange 
proposes to delete from the Fee Schedule reference to the Step Up 
Tier credits applicable to ETP Holders and Market Makers for the 
month of September 2016.
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    As proposed in the Step Up Tier Filing, for the billing month of 
October 2016 only, the Step Up credit would be applicable to ETP 
Holders and Market Makers that, on a daily basis, measured monthly,
    (i) directly execute providing ADV on NYSE Arca in an amount that 
is an increase of no less than 0.09% of US CADV in Tape A, Tape B and 
Tape C Securities for that month over the ETP Holder's or Market 
Maker's providing ADV in the Baseline Month, and
    (ii) set a new BBO on the Exchange with at least 40% of the ETP 
Holder's and Market Maker's providing ADV.
    The Exchange proposes to revise the requirement for the Step Up 
Tier that would be applicable to ETP Holders and Market Makers, with a 
lower requirement for October 2016, to provide market participants with 
an incentive to direct their orders to the Exchange.
    The Exchange is proposing a change to the second part of the 
current Step Up Tier by requiring ETP Holders and Market Makers to set 
a new BBO on the Exchange with at least 25% in each of the ETP Holder's 
or Market Maker's Tape A, Tape B and Tape C providing ADV. 
Specifically, as proposed, the Step Up Credit would be applicable to 
ETP Holders and Market Makers that, on a daily basis, measured monthly,
    (i) directly execute providing ADV on NYSE Arca in an amount that 
is an increase of no less than 0.15% of US CADV in Tape A, Tape B and 
Tape C Securities for that month over the ETP Holder's or Market 
Maker's providing ADV in the Baseline Month, and
    (ii) set a new BBO on the Exchange with at least 25% in each of the 
ETP Holder's or Market Maker's Tape A, Tape B and Tape C providing ADV.
    The Exchange is not proposing any change to the first part of the 
Step Up Tier or to the level of credits payable under the Step Up Tier.
    To illustrate, an ETP Holder who has a providing ADV of 15 million 
shares in the Baseline Month would be required to execute, at a 
minimum, an additional 9.75 million shares of providing ADV if CADV is 
6.5 billion shares in the billing month, or 0.15% over the Baseline 
Month, for a total providing ADV of 24.75 million shares for the 
billing month. Further, of the 24.75 million shares, assume 10.75 
million shares are in Tape A Securities, and 7 million shares are each 
in Tape B and Tape C Securities. The ETP Holder would be

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required to have a providing ADV that sets a new BBO on the Exchange of 
at least 2.6875 million shares in Tape A Securities, and 1.750 million 
shares each in Tape B and Tape C Securities.
    For the billing month of October 2016 only, the Step Up credit 
would be applicable to ETP Holders and Market Makers that, on a daily 
basis, measured monthly,
    (i) directly execute providing ADV on NYSE Arca in an amount that 
is an increase of no less than 0.09% of US CADV in Tape A, Tape B and 
Tape C Securities for that month over the ETP Holder's or Market 
Maker's providing ADV in the Baseline Month, and
    (ii) set a new BBO on the Exchange with at least 25% in each of the 
ETP Holder's or Market Maker's Tape A, Tape B and Tape C providing ADV.
    The Exchange believes revising the requirement for ETP Holders and 
Market Makers to set a new BBO on the Exchange with at least 25% in 
each of the ETP Holder's or Market Maker's Tape A, Tape B and Tape C 
providing ADV should allow a greater number of participants to qualify 
for the credit and will also encourage ETP Holders and Market Makers to 
provide liquidity across more symbols traded on the Exchange to the 
benefit of all market participants who trade on the Exchange.
    The Exchange notes that if an ETP Holder or Market Maker qualifies 
for more than one tier in the Fee Schedule, the Exchange would apply 
the most favorable rate available under such tiers.
    The goal of the Step-Up Tier when adopted by the Exchange in 
September 2016 was to incentivize ETP Holders and Market Makers to 
increase the orders sent directly to NYSE Arca and therefore provide 
liquidity that supports the quality of price discovery and promotes 
market transparency. The Exchange believes the proposed change to the 
Step Up Tier furthers that goal by encouraging ETP Holders and Market 
Makers to direct their order flow in more securities traded on the 
Exchange rather than just a subset of securities.
    The proposed changes are not otherwise intended to address any 
other problem, and the Exchange is not aware of any significant problem 
that the affected market participants 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,\6\ in general, and furthers the 
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\7\ 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. The Exchange believes 
that the proposal does not constitute an inequitable allocation of 
fees, as all similarly situated market participants will be subject to 
the same fees and credits and access to the Exchange's market is 
offered on fair and non-discriminatory terms.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that amendments [sic] to the Step Up Tier is 
reasonable, equitable and not unfairly discriminatory because the 
proposed amendment would continue to directly relate to the activity of 
ETP Holders and Market Makers and would apply uniformly to all 
similarly situated ETP Holders and Market Makers that send orders to 
the Exchange. The Exchange further believes that lowering the level for 
setting a new BBO on the Exchange from 40% to 25% of adding ADV is 
reasonable because it may allow a greater number of ETP Holders and 
Market Makers to qualify for the Step up Tier credits. The Exchange 
believes adopting separate BBO requirements for each of Tape A, Tape B 
and Tape C securities is reasonable because it would create an 
incentive for ETP Holders and Market Makers to improve displayed quotes 
on the Exchange for securities in each Tape, which would benefit all 
market participants in securities of each tape.
    As the Exchange noted in the Step Up Tier Filing, the Exchange 
believes that the Step-Up Tier is intended to provide market 
participants with an incentive to increase the orders sent directly to 
NYSE Arca and thereby provide liquidity that supports the quality of 
price discovery and promotes market transparency. The Exchange believes 
the proposed amendment to the Step Up Tier will continue to provide 
market participants with the incentive to direct their order flow to 
the Exchange. Moreover, the amendment to the Step Up Tier would benefit 
market participants whose targeted order flow would provide meaningful 
added levels of liquidity thereby contributing to the depth and market 
quality on the Exchange. In addition, the Exchange believes the 
proposed amendment to the Step Up Tier should result in more market 
participants providing order flow and therefore more market 
participants would be eligible to receive the credits for their orders.
    The Exchange believes that adopting lower providing ADV criteria 
for October 2016 is reasonable because it may allow a greater number of 
ETP Holders and Market Makers to qualify for the proposed credits while 
also providing ETP Holders and Market Makers the opportunity to 
gradually increase their activity in order to qualify for the credits. 
The Exchange believes that adopting lower providing ADV criteria for 
October 2016 is also equitable and not unfairly discriminatory because 
the lower criteria would apply uniformly to all ETP Holders and Market 
Makers during October 2016.
    Volume-based rebates such as the ones currently in place on the 
Exchange have been widely adopted in the cash equities markets and are 
equitable because they are open to all ETP Holders and Market Makers on 
an equal basis and provide additional benefits or discounts that are 
reasonably related to the value to an exchange's market quality 
associated with higher levels of market activity, such as higher levels 
of liquidity provision and/or growth patterns, and introduction of 
higher volumes of orders into the price and volume discovery processes.
    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,\8\ 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 proposal 
to amend the Step Up Tier would continue to encourage the submission of 
additional liquidity to a public exchange, thereby promoting price 
discovery and transparency and enhancing order execution opportunities 
for ETP Holders and Market Makers. The Exchange believes that this 
could promote competition between the Exchange and other execution 
venues, including those that currently offer similar order types and 
comparable transaction pricing, by

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encouraging additional orders to be sent to the Exchange for execution.
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    \8\ 15 U.S.C. 78f(b)(8).
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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 ETP Holders 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) \9\ of the Act and subparagraph (f)(2) of Rule 19b-
4 \10\ thereunder, because it establishes a due, fee, or other charge 
imposed by the Exchange.
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 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) \11\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \11\ 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-2016-137 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEArca-2016-137. 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-2016-137 and should 
be submitted on or before November 2, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).

    Dated: October 5, 2016.
Brent J. Fields,
Secretary.
[FR Doc. 2016-24579 Filed 10-11-16; 8:45 am]
 BILLING CODE 8011-01-P


