[Federal Register Volume 83, Number 159 (Thursday, August 16, 2018)]
[Notices]
[Pages 40816-40818]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-17636]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83828; File No. SR-NYSEARCA-2018-58]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the NYSE 
Arca Equities Fees and Charges To Introduce a New Pricing Tier

August 10, 2018.
    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 August 1, 2018, 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 Fees and 
Charges (``Fee Schedule'') to introduce a new pricing tier, Retail 
Order Step-Up Tier 2. The Exchange proposes to implement the fee change 
effective August 1, 2018. The proposed rule change is available on the 
Exchange's website 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, as described 
below, to introduce a new pricing tier, Retail Order Step-Up Tier 2, 
for securities with a per share price of $1.00 or above.
    The Exchange currently has a Retail Order Step-Up Tier pursuant to 
which ETP Holders, including Market Makers, that execute an ADV of 
Retail Orders \4\ with a time-in-force designation of Day that add or 
remove liquidity during the month that is an increase of 0.12% or more 
of the U.S. CADV above their April 2018 ADV taken as a percentage of 
U.S. CADV receive a credit of $0.0033 per share when such orders 
provide liquidity to the book during the month in Tape A, Tape B and 
Tape C Securities. Retail Orders with a time-in-force designation of 
Day that remove liquidity from the Book are not charged a fee.\5\
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    \4\ A Retail Order is an agency order that originates from a 
natural person and is submitted to the Exchange by an ETP Holder, 
provided that no change is made to the terms of the order to price 
or side of market and the order does not originate from a trading 
algorithm or any other computerized methodology. See Securities 
Exchange Act Release No. 67540 (July 30, 2012), 77 FR 46539 (August 
3, 2012) (SR-NYSEArca-2012-77).
    \5\ See Securities Exchange Act Release No. 83268 (May 17, 
2018), 83 FR 23983 (May 23, 2017) (SR-NYSEArca-2018-34).
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    To encourage even greater participation from ETP Holders and 
promote additional liquidity in Retail Orders, the Exchange proposes a 
new pricing tier--Retail Order Step-Up Tier 2.\6\
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    \6\ The Exchange proposes a non-substantive amendment to the Fee 
Schedule to rename the current Retail Order Step-Up Tier as ``Retail 
Order Step-Up Tier 1.''
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    As proposed, a new Retail Order Step-Up Tier 2 credit of $0.0035 
per share for Retail Orders that provide displayed liquidity during the 
month in Tape A, Tape B and Tape C Securities would apply to ETP 
Holders, including Market Makers, that provide liquidity an average 
daily share volume per month of 1.10% or more of the U.S. CADV, and 
execute an ADV of Retail Orders with a time-in-force designation of Day 
that add or remove liquidity during the month that is an increase of 
0.35% or more of the U.S. CADV above their April 2018 ADV taken as a 
percentage of U.S. CADV. Retail Orders with a time-in-force designation 
of Day that remove liquidity from the Book will not be charged a fee.
    Additionally, if an ETP Holder qualifies for the new Retail Order 
Step-

[[Page 40817]]

Up Tier 2, that ETP Holder would also receive a credit of $0.0035 per 
share for orders (not just Retail Orders) that provide displayed 
liquidity to the order book in Tape C Securities, and an incremental 
credit of $0.0002 per share for orders that provide non-displayed 
liquidity \7\ to the order book in Tape C Securities. The proposed 
incremental credit would be in addition to the ETP Holder's or Market 
Maker's Tiered or Basic Rate credit(s). Such ETP Holders and Market 
Makers would also pay a fee of $0.0027 per share for orders that take 
liquidity from the order book in Tape C Securities.
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    \7\ The following orders provide non-displayed liquidity to the 
order book: Limit Non-Displayed Order, Mid-Point Liquidity (``MPL'') 
Order and Tracking Order. See Rule 7.31-E(d)(2), (3) and (4).
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    For all other fees and credits, tiered or basic rates apply based 
on a firm's qualifying levels.
    For example, assume an ETP Holder averages 1 million shares in 
Retail Orders with a time-in-force designation of Day that add or 
remove liquidity per day in April, or 0.015% of U.S. CADV, where U.S. 
CADV was 6.6 billion shares.
    If that ETP holder then averages 24.25 million shares in Retail 
Orders with a time-in-force designation of Day that add or remove 
liquidity in the billing month, or 0.367% of U.S. CADV, where U.S. CADV 
was also 6.6 billion shares, that ETP Holder would qualify for the 
proposed Retail Order Step-Up Tier 2 because it would have met the 
requirement of the proposed new pricing tier, i.e., an increase of at 
least 0.35% of the U.S. CADV over the ETP Holder's April 2018 ADV taken 
as a percentage of U.S. CADV, or 0.352% (0.367% in the billing month 
over 0.015% in the baseline month).
    Also assume that same ETP holder averages 5 million shares in 
Retail Orders that remove liquidity in Tape A Securities, of which 
100,000 shares are in Retail Orders with a time-in-force designation of 
Day. As a result, 4.9 million shares in Retail Orders that remove 
liquidity would be subject to the Tape A fee for removing liquidity of 
$0.0030 per share while the 100,000 shares in Retail Orders with a 
time-in-force designation of Day would not be charged a fee.
    Further assume that the same ETP Holder qualified for the MPL Order 
credit of $0.0020 per share for MPL Orders that add liquidity in Tape C 
Securities, a Tracking Order Tier 1 credit of $0.0015 per share, and no 
fee or credit for Limit Non-Displayed Orders. That ETP holder would 
receive in Tape C Securities a credit for $0.0022 per share for MPL 
Orders that add liquidity ($0.0020 + $0.0002 Retail Order Step-Up Tier 
2 credit), a credit of $0.0017 per share for Tracking Orders ($0.0015 + 
$0.0002 Retail Order Step-Up Tier 2 credit) and a credit of $0.0002 per 
share for Limit Non-Displayed Orders (no fee/credit + $0.0002 Retail 
Order Step-Up Tier 2 credit).
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 (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 Exchange believes it is reasonable to add the proposed Retail 
Order Step-Up Tier 2 because the Exchange believes it would encourage 
participation from a greater number of ETP Holders, which would promote 
additional liquidity in Retail Orders. In this regard, an ETP Holder 
that does not qualify for the proposed higher credit and lower fees 
could still be eligible for the pricing for its Retail Orders that 
provide liquidity under the current Retail Order Tier, the Retail Order 
Step-Up Tier 1, or under Basic Rates. The proposed new Retail Order 
Step-Up Tier 2 would create an added financial incentive for ETP 
Holders to bring additional retail flow to a public market. The 
proposed new pricing tier is also reasonable because it would reduce 
the costs of ETP Holders that represent retail flow and potentially 
also reduce costs to their customers.
    The Exchange believes that the proposed modification to adopt an 
incremental credit and lower take fee for Tape C Securities is 
reasonable, fair, and equitable. The proposed credit is designed to 
encourage increased trading of Retail Orders by ETP Holders and Market 
Makers in Tape C Securities while the decreased fee to ETP Holders and 
Market Makers would further incent liquidity to the Exchange and 
provide an incentive to ETP Holders to provide liquidity that supports 
the quality of price discovery and promotes market transparency. The 
Exchange further believes the proposed incremental credit is reasonable 
and appropriate in that it is based on the amount of business 
transacted on the Exchange. The Exchange believes offering the same 
credit of $0.0035 per share in Tape C Securities for orders that 
provide displayed liquidity as Retail Orders that provide displayed 
liquidity is reasonable and equitable as it would provide an incentive 
to ETP Holders to provide displayed liquidity that supports the quality 
of price discovery, improves quoting, and promotes market transparency. 
The Exchange believes the proposed incremental credit for adding non-
displayed liquidity is also reasonable because it will encourage 
liquidity and competition in Tape C securities traded on the Exchange. 
The Exchange believes charging lower fees for orders in Tape C 
Securities that remove liquidity from the order book will also 
incentivize ETP Holders to increase the orders sent to the Exchange. 
The Exchange believes that recalibrating the fees for taking liquidity 
will attract additional order flow and liquidity to the Exchange, 
thereby contributing to price discovery on the Exchange and benefiting 
investors generally.
    The Exchange also believes the proposed Retail Order Step-Up Tier 2 
is equitable and not unfairly discriminatory because it is available to 
all ETP Holders and Market Makers on an equal basis and provides 
discounts that are reasonably related to the value to the Exchange's 
market quality associated with higher volumes. The Exchange does not 
believe that it is unfairly discriminatory to offer increased credits 
and lower fees to ETP Holders and Market Makers as these participants 
would be subject to additional volume requirements.
    The Exchange believes that it is reasonable that only Retail Orders 
with a time-in-force designation of Day that add or remove liquidity 
would count toward qualifying for the Retail Order Step-Up Tier 2. This 
would largely result in the type of orders to which the corresponding 
credit applies being the same as the volume that counts toward 
qualification--i.e., only Retail Orders with a time-in-force 
designation of Day. The Exchange believes that the proposed 
requirements to provide liquidity of an average daily share volume per 
month of 1.10% or more of the U.S. CADV and execute an ADV of Retail 
Orders with a time-in-force of Day that add or remove liquidity during 
the month that is an increase of 0.35% or more of U.S. CADV above the 
ETP Holder's April 2018 ADV taken as a percentage of U.S. CADV are 
reasonable because they are within ranges that the Exchange believes 
would continue to incentivize ETP Holders to submit Retail Orders to 
the Exchange in order to qualify for the proposed credit.
    The Exchange believes that the proposed rule change is equitable 
and

[[Page 40818]]

not unfairly discriminatory because maintaining or increasing the 
proportion of Retail Orders in exchange-listed securities that are 
executed on a registered national securities exchange (rather than 
relying on certain available off-exchange execution methods) would 
contribute to investors' confidence in the fairness of their 
transactions and would benefit all investors by deepening the 
Exchange's liquidity pool, supporting the quality of price discovery, 
promoting market transparency and improving investor protection. This 
aspect of the proposed rule change also is consistent with the Act 
because all similarly situated ETP Holders would pay the same rate, as 
is currently the case, and because all ETP Holders would be eligible to 
qualify for the rates by satisfying the related threshold, where 
applicable. Furthermore, the submission of Retail Orders is optional 
for ETP Holders, in that an ETP Holder could choose whether to submit 
Retail Orders and, if it does, the extent of its activity in this 
regard.
    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,\10\ 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 
rule change would 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 comparable transaction pricing, by encouraging 
additional orders to be sent to the Exchange for execution. The 
Exchange also believes that the proposed rule change is consistent with 
the Act because it strikes an appropriate balance between fees and 
credits, which will encourage submission of orders to the Exchange, 
thereby promoting competition.
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    \10\ 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 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 to attract order 
flow to the Exchange. 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) \11\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \12\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 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) \13\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \13\ 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 [email protected]. Please include 
File Number SR-NYSEARCA-2018-58 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-2018-58. 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 website (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 website 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. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NYSEARCA-2018-58 and should be submitted 
on or before September 6, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2018-17636 Filed 8-15-18; 8:45 am]
 BILLING CODE 8011-01-P


