[Federal Register Volume 84, Number 139 (Friday, July 19, 2019)]
[Notices]
[Pages 34979-34984]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-15346]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-86377; File No. SR-NYSEArca-2019-53]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending the NYSE 
Arca Equities Fees and Charges

July 15, 2019.
    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 July 12, 2019, NYSE Arca, Inc. (``NYSE Arca'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by the 
Exchange. The Commission is publishing this notice to solicit comments 
on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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 adopt new pricing tiers, Mid-Point 
Liquidity Orders Step Up Tier 1 and 2, and modify current Tier 3. The 
Exchange proposes to implement the fee changes effective July 12, 
2019.\4\ 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.
---------------------------------------------------------------------------

    \4\ The Exchange originally filed to amend the Fee Schedule on 
July 1, 2019 (SR-NYSEArca-2019-47). SR-NYSEArca-2019-47 was 
subsequently withdrawn and replaced by this filing.
---------------------------------------------------------------------------

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 adopt new 
pricing tiers that would (1) provide an additional incentive for all 
ETP Holders (including Market Makers) \5\ to send liquidity-providing 
Mid-Point Liquidity (``MPL'') Orders \6\ to the Exchange, and (2) 
provide additional incentives for ETP Holders to provide displayed 
liquidity in Tapes A and C Securities.
---------------------------------------------------------------------------

    \5\ All references to ETP Holders in connection with the MPL 
Orders Step Up Tier include Market Makers.
    \6\ A MPL Order is a limit order that is not displayed and does 
not route, with a working price at the midpoint of the Protected 
Best Bid/Offer. See NYSE Arca Rule 7.31-E(d)(3).
---------------------------------------------------------------------------

    With respect to MPL Orders, the Exchange currently has multiple 
levels of credits, ranging from $0.0010 per share to $0.0020 per share, 
for ETP Holders that send MPL Orders that provide liquidity. The amount 
of the per share credit is based on an ETP Holder's traded volume 
against its MPL orders that provide liquidity.
    The purpose of this proposed rule change is to add new pricing 
tiers to incentivize ETP Holders to increase the liquidity-providing 
MPL Orders they send to the Exchange as compared to such orders sent in 
May 2019. Specifically, the Exchange proposes that an ETP Holder would 
receive the following credits:
     If an ETP Holder's traded volume against its MPL orders 
that provide liquidity is one million shares more than such ETP 
Holder's baseline of MPL liquidity-providing average daily volume 
(``ADV''), as measured in May 2019, the ETP Holder will receive a 
credit of $0.0025 per share for such MPL orders (proposed MPL Orders 
Step Up Tier 2); or
     If an ETP Holder's traded volume against its MPL orders 
that provide liquidity is two million shares more than such ETP 
Holder's baseline of MPL liquidity-providing ADV, as measured in May 
2019, the ETP Holder will receive a credit of $0.0026 per share for 
such MPL orders (proposed MPL Orders Step Up Tier 1).
    The Exchange also proposes to introduce a credit of $0.0027 per 
share for adding displayed liquidity in Tapes A and C Securities if an 
ETP Holder meets both the existing Tier 3 requirements and increases 
its executed providing volume over its providing ADV as a percent of US 
CADV from May 2019.

[[Page 34980]]

    The Exchange proposes to implement the fee changes effective July 
12, 2019.
Background
    The Commission has repeatedly expressed its preference for 
competition over regulatory intervention in determining prices, 
products, and services in the securities markets. In Regulation NMS, 
the Commission highlighted the importance of market forces in 
determining prices and SRO revenues and, also, recognized that current 
regulation of the market system ``has been remarkably successful in 
promoting market competition in its broader forms that are most 
important to investors and listed companies.'' \7\
---------------------------------------------------------------------------

    \7\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37495, 37499 (June 29, 2005) (S7-10-04) (Final Rule) 
(``Regulation NMS'').
---------------------------------------------------------------------------

    As the Commission itself recognized, the market for trading 
services in NMS stocks has become ``more fragmented and competitive.'' 
\8\ Indeed, equity trading is currently dispersed across 13 
exchanges,\9\ 31 alternative trading systems,\10\ and numerous broker-
dealer internalizers and wholesalers, all competing for order flow. 
Based on publicly-available information, no single exchange has more 
than 18% market share (whether including or excluding auction 
volume).\11\ Therefore, no exchange possesses significant pricing power 
in the execution of equity order flow. More specifically, for the first 
five months of 2019, the Exchange averaged less than 9% market share of 
executed volume of equity trades.\12\
---------------------------------------------------------------------------

    \8\ See Securities Exchange Act Release No. 51808, 84 FR 5202, 
5253 (February 20, 2019) (File No. S7-05-18) (Final rule) 
(``Transaction Fee Pilot'').
    \9\ See Cboe U.S. Equities Market Volume Summary at https://markets.cboe.com/us/equities/market_share.
    \10\ See FINRA ATS Transparency Data (June 3, 2019), available 
at https://otctransparency.finra.org/otctransparency/AtsIssueData. 
Although 54 alternative trading systems were registered with the 
Commission as of May 31, 2019, only 31 are currently trading. A list 
of alternative trading systems registered with the Commission is 
available at https://www.sec.gov/foia/docs/atslist.htm.
    \11\ See Cboe Global Markets U.S. Equities Market Volume Summary 
(June 28, 2019), available at http://markets.cboe.com/us/equities/market_share/.
    \12\ Based on Cboe U.S. Equities Market Volume Summary, the 
Exchange's market share of intraday trading (excluding auctions) for 
the months of January 2019, February 2019, March 2019, April 2019 
and May 2019 was 9.01%, 8.33%, 9.02%, 8.73% and 8.8%, respectively.
---------------------------------------------------------------------------

    The Exchange believes that the ever-shifting market share among the 
exchanges from month to month demonstrates that market participants can 
move order flow, or discontinue or reduce use of certain categories of 
products, in response to fee changes. With respect to non-marketable 
order flow that would provide liquidity on an Exchange, ETP Holders can 
choose from any one of the 13 currently operating registered exchanges 
to route such order flow. Accordingly, competitive forces constrain 
exchange transaction fees that relate to orders that would provide 
liquidity on an exchange.
    In response to this competitive environment, the Exchange has 
already established multiple levels of credits for MPL Orders that 
allow ETP Holders to passively interact with trading interest on the 
Exchange and offer potential price improvement to incoming marketable 
orders submitted to the Exchange.\13\ In order to provide an incentive 
for ETP Holders to provide such liquidity to the Exchange, the credits 
increase based on increased levels of volume directed to the Exchange.
---------------------------------------------------------------------------

    \13\ See, e.g., Securities Exchange Act Release No. 54511 
(September 26, 2006), 71 FR 58460, 58461 (October 3, 2006) (SR-PCX-
2005-53).
---------------------------------------------------------------------------

    More specifically, the Exchange currently provides per share 
credits under Tier 1, Tier 2 and Basic Rates \14\ for MPL Orders that 
provide liquidity based on the ADV of provided liquidity in MPL Orders 
for Tape A, Tape B and Tape C Securities combined (``MPL Adding ADV''). 
For ETP Holders that have MPL Adding ADV during a billing month of at 
least 3 million shares, the Exchange provides a credit of $0.0015 per 
share for Tape A Securities and $0.0020 per share for Tape B and Tape C 
Securities. For ETP Holders with MPL Adding ADV during a billing month 
of at least 1.5 million shares but less than 3 million shares, the 
Exchange provides a credit of $0.0015 per share for Tape A, Tape B and 
Tape C Securities. For ETP Holders with MPL Adding ADV during a billing 
month of less than 1.5 million shares, the Exchange provides a credit 
of $0.0010 per share for Tape A, Tape B and Tape C Securities.\15\
---------------------------------------------------------------------------

    \14\ Tier 1 applies to ETP Holders (1) that provide liquidity an 
average daily share volume per month of 0.70% or more of the US 
CADV. Tier 2 applies to ETP Holders that provide liquidity an 
average daily share volume per month of 0.30% or more, but less than 
0.70% of the US CADV. Basic Rates apply when tier rates do not 
apply. US CADV means United States Consolidated Average Daily Volume 
for transactions reported to the Consolidated Tape, excluding odd 
lots through January 31, 2014 (except for purposes of Lead Market 
Maker pricing), and excludes volume on days when the market closes 
early and on the date of the annual reconstitution of the Russell 
Investments Indexes. Transactions that are not reported to the 
Consolidated Tape are not included in US CADV.
    \15\ The Exchange charges a fee of $0.0030 per share for MPL 
Orders in Tape A, Tape B and Tape C Securities that remove liquidity 
from the Exchange that are not designated as ``Retail Orders.'' MPL 
Orders removing liquidity from the Exchange that are designated as 
Retail Orders are subject to a fee of $0.0010 per share. See Fee 
Schedule.
---------------------------------------------------------------------------

    In addition, the Exchange currently has different rates depending 
on whether an ETP Holder meets different specified volume thresholds. 
Under the current Tier 3 threshold, if an ETP Holder provides liquidity 
of an average daily share volume per month of 0.20% or more, but less 
than 0.30% of US CADV, that ETP Holder is eligible for the specified 
Tier 3 fees and credits. For Tape A and C Securities, if an ETP Holder 
qualifies for Tier 3, that ETP Holder is eligible for a $0.0025 per 
share credit for orders that provide liquidity to the Book, and is 
charged a fee of $0.0030 per share for order that take liquidity from 
the Book.
Proposed Fee Change for MPL Orders
    The Exchange proposes two additional tiers designed to provide an 
additional incentive for ETP Holders to enter MPL Orders that post 
interest on the Exchange. As proposed:
     An ETP Holder that qualifies for the ``MPL Orders Step Up 
Tier 2'' is eligible for a $0.0025 per share credit for MPL Orders that 
provide liquidity in Tape A, Tape B, and Tape C Securities. To qualify 
for this tier, ETP Holders must provide liquidity to the Book in MPL 
Orders in Tape A, Tape B and Tape C Securities combined (``MPL Adding 
ADV'') during the billing month equal to at least one million shares 
more than the ETP Holder's May 2019 MPL Adding ADV.
     An ETP Holder that qualifies for the ``MPL Orders Step Up 
Tier 1'' is eligible for a $0.0026 per share credit in MPL Orders that 
provide liquidity in Tape A, Tape B, and Tape C Securities. To qualify 
for this tier, ETP Holders must provide liquidity to the Book in MPL 
Orders in Tape A, Tape B and Tape C Securities combined (``MPL Adding 
ADV'') during the billing month equal to at least two million shares 
more than the ETP Holder's May 2019 MPL Adding ADV.
    The goal of the proposed change to add MPL Orders Step Up Tiers 1 
and 2 is to incentivize ETP Holders with higher per share credits to 
increase the number of MPL Orders they post on the Exchange's Book, 
which would provide additional price improvement opportunities for 
incoming orders. MPL Orders allow for additional opportunities for 
passive interaction with trading interest on the Exchange and are 
designed to offer potential price improvement to incoming marketable 
orders submitted to the Exchange. The Exchange believes that by 
correlating the level of the credit to the level of MPL Adding ADV, the 
Exchange's fee structure would incentivize ETP Holders to submit more 
liquidity-

[[Page 34981]]

providing MPL Orders to the Exchange, thereby increasing the potential 
for price improvement to incoming marketable orders submitted to the 
Exchange.
    The Exchange proposes to increase the credits available under the 
proposed MPL Orders Step Up Tiers to provide an incentive for ETP 
Holders to send increased order flow to qualify for these tiers. As 
noted above, the Exchange operates in a competitive environment, 
particularly as it relates to attracting MPL Orders that are posted on 
the Exchange's Book. Because each of the proposed MPL Orders Step Up 
Tiers would require ETP Holders to provide increased liquidity over 
that ETP Holder's baseline providing volume, the Exchange believes that 
the proposed increased credits would incentivize ETP Holders to route 
additional liquidity providing MPL Orders to the Exchange to qualify 
for the higher credit.
    The Exchange does not know how much order flow ETP Holders choose 
to route to other exchanges or to off-exchange venues. There are 
currently two firms that qualify for the credits associated with MPL 
Orders under current Tier 1, while five other firms currently qualify 
for the credits associated with MPL Orders under current Tier 2. The 
Exchange further notes that there are 12 firms that currently have MPL 
Adding ADV of at least 500,000 shares and if these firms were to submit 
more of their liquidity-providing MPL Orders to the Exchange, each 
could qualify for the proposed increased credits under either of the 
proposed MPL Orders Step Up tiers. However, without having a view of 
ETP Holders' activity on other markets and off-exchange venues, the 
Exchange has no way of knowing whether this proposed rule change would 
result in any ETP Holders qualifying for these tiers. The Exchange 
believes the proposed higher credits would provide an incentive for ETP 
Holders to submit additional liquidity-providing MPL Orders to the 
Exchange to qualify for the higher credits.
Proposed Rule Change for Tier 3
    The Exchange proposes to provide an increased incentive for ETP 
Holders that otherwise qualify for the current Tier 3 to send displayed 
orders to the Exchange in Tape A and C Securities. As proposed, if an 
ETP Holder (including Market Makers) meets the requirements of Tier 3 
and, for the billing month, its ADV of executed orders that provide 
liquidity is at least 0.05% of US CADV more than the ETP Holder's ADV 
of executed orders that provide liquidity as a percent of US CADV in 
May 2019, that ETP Holder would be eligible for a $0.0027 per share 
credit for orders that provide liquidity to the Book in Tape A and C 
Securities.
    For example, assume an ETP Holder has an ADV of executed orders 
that provide liquidity of 0.10% of US CADV in all securities in the 
baseline month of May 2019. If that ETP Holder has an ADV of executed 
orders that provide liquidity of 0.25% of US CADV in the billing month, 
that ETP Holder would qualify for current Tier 3 credits of $0.0025 per 
share in Tape A and C Securities by meeting the 0.20% adding 
requirement, but would also qualify for the proposed higher credits of 
$0.0027 per share by meeting the 0.05% step up requirement with an 
increase of 0.15% (0.0025% Adding ADV in the billing month minus the 
0.0010% Adding ADV in the baseline month).
    The goal of this proposed rule change is to provide an additional 
incentive for ETP Holders to send displayed liquidity to the Exchange. 
If an ETP Holder qualifies for Tier 3 and meets the additional proposed 
volume requirements, that ETP Holder would be eligible for an increased 
credit for displayed liquidity as compared to the current credit for 
qualifying for Tier 3, which is $0.0025 per share credit for orders 
that provide liquidity in Tape A and C Securities.
    With this proposed change, the following credits would be available 
for orders that provide liquidity to the Book in Tapes A and C 
Securities:

------------------------------------------------------------------------
                                           Per share credit for orders
                  Tier                         providing liquidity
------------------------------------------------------------------------
Tier 1.................................  $0.0031 (Tape A), $0.0032 (Tape
                                          C).
Tier 2.................................  $0.0031 (Tapes A and C) or
                                          $0.0029 (Tapes A and C).
Tier 3.................................  $0.0025 (Tape A and C) or
                                          $0.0027 (Tape A and C).
Step Up Tier...........................  $0.0030 (Tape A), $0.0031 (Tape
                                          C).
Step Up Tier 2.........................  $0.0028 (Tapes A and C).
Step Up Tier 3.........................  $0.0025 (Tapes A and C).
Step Up Tier 4.........................  $0.0033 (Tapes A and C).
------------------------------------------------------------------------

    As noted above, the Exchange operates in a competitive environment, 
particularly as it relates to attracting non-marketable, providing 
liquidity that would be displayed on the Exchange. The proposed rule 
change is designed to incentivize ETP Holders to increase the orders 
sent to the Exchange that would provide displayed liquidity, which 
would support the quality of price discovery and transparency on the 
Exchange. The Exchange believes that by correlating the level of the 
credit to the level of executed providing volume on the Exchange, the 
Exchange's fee structure would incentivize ETP Holders to submit more 
displayed, liquidity-providing orders to the Exchange that are likely 
to be executed (i.e., are not orders that are intended to be displayed, 
but are priced such that they are not likely to be executed), thereby 
increasing the potential for incoming marketable orders submitted to 
the Exchange to receive an execution.
Applicability of Proposed Rule Change
    Both of the proposed changes to the Fee Schedule are designed to be 
available to all ETP Holders on the Exchange.
    With respect to the proposed new MPL Orders Step Up Tiers, there 
are currently two ETP Holders that have qualified for the credits 
associated with MPL Orders under current Tier 1, while five other ETP 
Holders currently qualify for the credits associated with MPL Orders 
under current Tier 2. The Exchange further notes that there are 12 ETP 
Holders that currently have MPL Adding ADV of at least 500,000 shares 
and if these firms were to submit more of their liquidity-providing MPL 
Orders to the Exchange, each could qualify for the proposed increased 
credits under either of the proposed MPL Order Step Up tiers.
    With respect to the proposed new credit under Tier 3 for orders 
that provide liquidity, there are currently four ETP Holders that 
qualify for Tier 3. The Exchange believes that each of these ETP 
Holders could meet the proposed volume requirements to qualify for the 
proposed new credit for displayed liquidity under this tier. In 
addition, the Exchange believes that there are additional ETP Holders 
that could qualify for both the existing Tier

[[Page 34982]]

3 requirements as well as the proposed new requirements in order to 
qualify for the proposed new credit. However, without having a view of 
ETP Holders' activity on other markets and off-exchange venues, the 
Exchange has no way of knowing whether these proposed rule changes 
would result in any ETP Holders qualifying for any of these proposed 
new credits.
    The proposed changes are not otherwise intended to address any 
other issues, and the Exchange is not aware of any significant problems 
that 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,\16\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\17\ 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.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

The Proposed Fee Change is Reasonable
    The Exchange operates in a highly competitive market. The 
Commission has repeatedly expressed its preference for competition over 
regulatory intervention in determining prices, products, and services 
in the securities markets. Specifically, in Regulation NMS, the 
Commission highlighted the importance of market forces in determining 
prices and SRO revenues and, also, recognized that current regulation 
of the market system ``has been remarkably successful in promoting 
market competition in its broader forms that are most important to 
investors and listed companies.'' \18\
---------------------------------------------------------------------------

    \18\ See Regulation NMS, 70 FR at 37499.
---------------------------------------------------------------------------

    As the Commission itself recognized, the market for trading 
services in NMS stocks has become ``more fragmented and competitive.'' 
\19\ Indeed, equity trading is currently dispersed across 13 
exchanges,\20\ 31 alternative trading systems,\21\ and numerous broker-
dealer internalizers and wholesalers, all competing for order flow. 
Based on publicly-available information, no single exchange has more 
than 18% market share (whether including or excluding auction 
volume).\22\ Therefore, no exchange possesses significant pricing power 
in the execution of equity order flow. More specifically, for the first 
five months of 2019, the Exchange averaged less than 9% market share of 
executed volume of equity trades (excluding auction volume).\23\ The 
Exchange believes that the ever-shifting market share among the 
exchanges from month to month demonstrates that market participants can 
shift order flow, or discontinue to reduce use of certain categories of 
products, in response to fee changes. Accordingly, competitive forces 
reasonably constrain exchange transaction fees. Stated otherwise, 
changes to exchange transaction fees can have a direct effect on the 
ability of an exchange to compete for order flow.
---------------------------------------------------------------------------

    \19\ See Transaction Fee Pilot, 84 FR at 5253.
    \20\ See Cboe U.S Equities Market Volume Summary at https://markets.cboe.com/us/equities/market_share.
    \21\ See FINRA ATS Transparency Data (June 3, 2019), available 
at https://otctransparency.finra.org/otctransparency/AtsIssueData. 
Although 54 alternative trading systems were registered with the 
Commission as of May 31, 2019, only 31 are currently trading. A list 
of alternative trading systems registered with the Commission is 
available at https://www.sec.gov/foia/docs/atslist.htm.
    \22\ See Cboe Global Markets U.S. Equities Market Volume Summary 
(June 28, 2019), available at http://markets.cboe.com/us/equities/market_share/.
    \23\ Based on Cboe U.S. Equities Market Volume Summary, the 
Exchange's market share of intraday trading (excluding auctions) for 
the months of January 2019, February 2019, March 2019, April 2019 
and May 2019 was 9.01%, 8.33%, 9.02%, 8.73% and 8.8%, respectively.
---------------------------------------------------------------------------

    The Exchange believes the proposed MPL Orders Step Up Tiers 1 and 2 
are reasonable because the higher credits under the proposed MPL Orders 
Step Up Tiers would provide an incentive for ETP Holders to route 
additional liquidity-providing MPL Orders to the Exchange. As noted 
above, the Exchange operates in a highly competitive environment, 
particularly for attracting order flow that provides liquidity on an 
exchange. The Exchange believes it is reasonable to continue to provide 
a higher credit for orders that provide liquidity if an ETP Holder 
meets the qualification for the proposed MPL Orders Step Up Tiers.
    Because the proposed MPL Orders Step Up Tiers would be new with a 
requirement to increase MPL Adding ADV, no ETP Holder currently 
qualifies for the proposed new pricing tiers. The Exchange believes the 
proposed increased credits are reasonable as they would provide an 
additional incentive for ETP Holders to qualify for these new tiers and 
direct their order flow to the Exchange and provide meaningful added 
levels of liquidity, thereby contributing to the depth and market 
quality on the Exchange.
    The Exchange notes that there are currently two firms that qualify 
for the credits associated with MPL Orders under current Tier 1, while 
five other firms currently qualify for the credits associated with MPL 
Orders under current Tier 2. The Exchange further notes that there are 
12 firms that currently have MPL Adding ADV of at least 500,000 shares 
and if these firms were to submit more of their liquidity-providing MPL 
Orders to the Exchange, each could qualify for the proposed increased 
credits. However, without having a view of ETP Holders' activity on 
other markets and off-exchange venues, the Exchange has no way of 
knowing whether this proposed rule change would result in any ETP 
Holders qualifying for these tiers. The Exchange believes the proposed 
higher credits would provide an incentive for ETP Holders to submit 
additional adding liquidity to qualify for the higher credits.
    The Exchange believes that the proposed new credit for displayed 
liquidity providing orders in Tapes A and C Securities under current 
Tier 3 is reasonable because it provides for an incentive for ETP 
Holders to route additional displayed liquidity-providing order flow to 
the Exchange, which will promote price discovery and increase execution 
opportunities for all ETP Holders. The proposed pricing is structured 
similarly to the Exchange's current Tier 2, which likewise provides for 
a per share credit for orders that provide liquidity in Tape A and C 
Securities, and provides for a higher per share credit for orders that 
provide displayed liquidity if the ETP Holder meets the additional 
qualifying requirements.\24\ The Exchange further believes that the 
proposed change to Tier 3 is reasonable because an ETP Holder that 
otherwise qualifies for the tier would still be eligible for the 
current per share credit of $0.0025 per share for orders that provide 
liquidity. The proposed additional credit is designed to provide an 
incentive for such ETP Holder to route additional displayed providing 
liquidity to the Exchange, which would be eligible for the higher 
credit.
---------------------------------------------------------------------------

    \24\ If an ETP Holder qualifies for Tier 2, the per share credit 
for orders that provide liquidity in Tape A and C Securities is 
$0.0029 per share. That that ETP Holder both meets the Tier 2 
qualifying requirements plus the additional requirements, the per 
share credit for orders that provide displayed liquidity in Tape A 
and C Securities is $0.0031 per share.
---------------------------------------------------------------------------

    On the backdrop of the competitive environment in which the 
Exchange currently operates, the proposed rule change is a reasonable 
attempt by the Exchange to increase its liquidity and improve its 
market share relative to its competitors.

[[Page 34983]]

The Proposed Fee Change Is an Equitable Allocation of Credits and Fees
    The Exchange believes the proposed fee change is an equitable 
allocation of its fees and credits. The Exchange believes that the 
proposed increased credit under the MPL Orders Step Up Tiers 1 and 2 is 
equitable because the magnitude of the additional credit is not 
unreasonably high in comparison to the credit paid with respect to 
other pricing tiers on the Exchange, and in comparison to the credits 
paid by other exchanges for orders that provide midpoint liquidity. For 
example, ETP Holders currently receive credits in Tape A, Tape B and 
Tape C Securities that range between $0.0010 per share and $0.0020 per 
share under Tier 1, Tier 2 and Basic Rates.
    With respect to credits paid by the Exchange's competitors, the 
Nasdaq Stock Market LLC provides a credit of $0.0025 per share for MPL 
orders in Tape A, Tape B and Tape C Securities that add non-displayed 
midpoint liquidity on that market for members that add greater than 5 
million shares of midpoint liquidity and add 8 million shares on non-
displayed liquidity.\25\
---------------------------------------------------------------------------

    \25\ See Rebate to Add Non-Displayed Midpoint Liquidity, at 
http://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2.
---------------------------------------------------------------------------

    The Exchange believes that the proposed new credit for liquidity 
providing orders in Tapes A and C Securities under current Tier 3 is 
also equitable because the proposal would continue to encourage ETP 
Holders to route displayed liquidity to the Exchange in Tape A and C 
Securities, thereby contributing to robust levels of liquidity, which 
benefits all market participants.
    The Exchange notes that there are currently 4 firms qualifying for 
Tier 3 and another 4 firms within 0.1% of qualifying for Tier 3. Based 
on current participation on the Exchange, one firm would qualify for 
the new credit and six firms are within 0.1% of qualifying for it. 
Without having a view of an ETP Holder's activity on other markets and 
off-exchange venues, the Exchange believes the proposed new credit 
would provide an incentive for market participants to increase 
liquidity in order to qualify for the proposed credit, thereby 
encouraging submission of additional liquidity to the Exchange. The 
proposed change will thereby encourage the submission of additional 
liquidity to a national securities exchange, thus promoting price 
discovery and transparency and enhancing order execution opportunities 
for ETP Holders from the substantial amounts of liquidity present on 
the Exchange. All ETP Holders would benefit from the greater amounts of 
liquidity that will be present on the Exchange, which would provide 
greater execution opportunities.
    The Exchange believes the proposed rule change would improve market 
quality for all market participants on the Exchange and, as a 
consequence, attract more liquidity to the Exchange thereby improving 
market-wide quality. The proposal neither targets nor will it have a 
disparate impact on any particular category of market participant. ETP 
Holders that currently qualify for credits associated with MPL Orders 
will continue to receive credits when they provide liquidity to the 
Exchange. With the proposed new MPL Orders Step Up Tiers, all ETP 
Holders would be eligible to qualify for the higher credit if they 
increase their MPL Adding ADV over their own baseline of order flow. 
The Exchange believes that recalibrating the credits for providing 
liquidity will continue to attract order flow and liquidity to the 
Exchange, thereby providing additional price improvement opportunities 
on the Exchange and benefiting investors generally. As to those market 
participants that do not presently qualify for the credits associated 
with MPL Orders, the proposal will not adversely impact their existing 
pricing or their ability to qualify for other credits provided by the 
Exchange.
The Proposed Fee Change Is not Unfairly Discriminatory
    The Exchange believes it is not unfairly discriminatory to provide 
increased per share credits as the proposed increased credits would be 
provided on an equal basis to all ETP Holders that add liquidity by 
meeting the requirements of the proposed MPL Orders Step Up Tiers. 
Further, the Exchange believes the proposed increased per share credits 
would incentivize ETP Holders that meet the current tiered requirements 
to send more of their MPL Orders to the Exchange to qualify for 
increased credits. The Exchange also believes that the proposed change 
is not unfairly discriminatory because it is reasonably related to the 
value of the Exchange's market quality associated with higher volume. 
The proposed increased per share credits would apply equally to all ETP 
Holders as each would be required to provide liquidity in MPL Orders 
for Tape A, Tape B and Tape C Securities combined during the billing 
month equal to at least 2 million shares over the ETP Holder's May 2019 
MPL Adding ADV in order to qualify for MPL Orders Step Up Tier 1 and at 
least 1 million shares over the ETP Holder's May 2019 MPL Adding ADV in 
order to qualify for MPL Orders Step Up Tier 2 regardless of whether an 
ETP Holder currently meets the requirement of another pricing tier.
    Similarly, the Exchange believes it is not unfairly discriminatory 
to provide a higher new credit for liquidity providing orders in Tapes 
A and C Securities under current Tier 3 because the proposed credit 
would be provided on an equal basis to all ETP Holders that add 
liquidity by meeting the Tier 3 requirements. Further, the Exchange 
believes the proposed credit would incentivize ETP Holders to send more 
orders to the Exchange to qualify for the higher credit.
    Finally, the submission of orders to the Exchange is optional for 
ETP Holders in that they could choose whether to submit orders to the 
Exchange and, if they do, the extent of its activity in this regard. 
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,\26\ 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, as discussed above, the Exchange believes 
that the proposed changes would encourage the submission of additional 
liquidity to a public exchange, thereby promoting market depth, price 
discovery and transparency and enhancing order execution opportunities 
for ETP Holders. As a result, the Exchange believes that the proposed 
change furthers the Commission's goal in adopting Regulation NMS of 
fostering integrated competition among orders, which promotes ``more 
efficient pricing of individual stocks for all types of orders, large 
and small.'' \27\
---------------------------------------------------------------------------

    \26\ 15 U.S.C. 78f(b)(8).
    \27\ Regulation NMS, 70 FR at 37498-99.
---------------------------------------------------------------------------

    Intramarket Competition. The proposed changes are designed to 
attract additional order flow to the Exchange. The Exchange believes 
that the proposed increased credits would continue to incentivize 
market participants to direct more orders to the Exchange, and in 
particular, liquidity providing MPL Orders. Greater liquidity

[[Page 34984]]

benefits all market participants on the Exchange by providing more 
trading opportunities and encourages ETP Holders, to send orders, 
thereby contributing to robust levels of liquidity, which benefits all 
market participants on the Exchange. The proposed credits would be 
available to all similarly-situated market participants, and, as such, 
the proposed change would not impose a disparate burden on competition 
among market participants on the Exchange.
    Intermarket Competition. The Exchange operates in a highly 
competitive market in which market participants can readily choose to 
send their orders to other exchange and off-exchange venues if they 
deem fee levels at those other venues to be more favorable. The 
Exchange notes that for the months of January 2019, February 2019, 
March 2019, April 2019 and May 2019, the Exchange's market share of 
intraday trading (excluding auctions) was 9.01%, 8.33%, 9.02%, 8.73% 
and 8.8%, respectively.\28\ In such an environment, the Exchange must 
continually adjust its fees and rebates to remain competitive with 
other exchanges and with off-exchange venues. 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 does not believe its proposed fee change can impose any 
burden on intermarket competition.
---------------------------------------------------------------------------

    \28\ See note 12, supra.
---------------------------------------------------------------------------

    The Exchange believes that the proposed change could promote 
competition between the Exchange and other execution venues, including 
those that currently offer similar order types and comparable 
transaction pricing, by encouraging additional orders to be sent to the 
Exchange for execution.

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) \29\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \30\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
---------------------------------------------------------------------------

    \29\ 15 U.S.C. 78s(b)(3)(A).
    \30\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    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) \31\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \31\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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-2019-53 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-2019-53. 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 offices 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-2019-53, and should be 
submitted on or before August 9, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\32\
---------------------------------------------------------------------------

    \32\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-15346 Filed 7-18-19; 8:45 am]
BILLING CODE 8011-01-P


