[Federal Register Volume 84, Number 201 (Thursday, October 17, 2019)]
[Notices]
[Pages 55603-55608]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-22700]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87292; File No. SR-NYSEArca-2019-70]


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

October 11, 2019.
    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 October 1, 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.
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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 (1) modify the requirements associated 
with the Step Up Tier 4, and (2) adopt a new pricing tier, Tape B Step 
Up Tier. The Exchange proposes to implement the fee changes effective 
October 1, 2019. 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 to (1) modify the 
volume requirements applicable to ETP Holders (including Market Makers) 
to qualify for the per share credits for orders that provide displayed 
liquidity under the Step Up Tier 4,\4\ and (2) adopt a new pricing 
tier, the Tape B Step Up Tier.
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    \4\ See Securities Exchange Act Release No. 85311 (March 14, 
2019), 84 FR 10348 (March 20, 2019) (SR-NYSEArca-2019-10).
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    The proposed changes respond to the current competitive environment 
where order flow providers have a choice of where to direct liquidity-
providing orders by offering further incentives for ETP Holders \5\ to 
send additional displayed liquidity to the Exchange.
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    \5\ All references to ETP Holders in connection with the Step Up 
Tier 4 and the Tape B Step Up Tier include Market Makers.
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    The Exchange proposes to implement the fee changes effective 
October 1, 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.'' \6\
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    \6\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
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    As the Commission itself recognized, the market for trading 
services in NMS stocks has become ``more fragmented and competitive.'' 
\7\ Indeed, equity trading is currently dispersed across 13 
exchanges,\8\ 31 alternative trading systems,\9\ and numerous broker-
dealer internalizers and wholesalers, all competing for order flow. 
Based on publicly-available information for

[[Page 55604]]

August 2019, no single exchange has more than 19% market share (whether 
including or excluding auction volume).\10\ Therefore, no exchange 
possesses significant pricing power in the execution of equity order 
flow. More specifically, in August 2019, the Exchange had 8.2% market 
share of executed volume of equity trades (excluding auction 
volume).\11\
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    \7\ See Securities Exchange Act Release No. 51808, 84 FR 5202, 
5253 (February 20, 2019) (File No. S7-05-18) (Final Rule).
    \8\ See Cboe U.S Equities Market Volume Summary, available at 
https://markets.cboe.com/us/equities/market_share. See generally 
https://www.sec.gov/fast-answers/divisionsmarketregmrexchangesshtml.html.
    \9\ See FINRA ATS Transparency Data, available at https://otctransparency.finra.org/otctransparency/AtsIssueData. A list of 
alternative trading systems registered with the Commission is 
available at https://www.sec.gov/foia/docs/atslist.htm.
    \10\ See Cboe Global Markets U.S. Equities Market Volume 
Summary, available at http://markets.cboe.com/us/equities/market_share/.
    \11\ See id.
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    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. While it is not possible to know a firm's reason for shifting 
order flow, the Exchange believes that one such reason is because of 
fee changes at any of the registered exchanges or non-exchange venues 
to which a firm routes order flow. With respect to non-marketable order 
flow that would provide displayed liquidity on an Exchange against 
which market makers can quote, 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 displayed liquidity on an 
exchange.
Proposed Rule Change
    The proposed rule change is designed to be available to all ETP 
Holders on the Exchange and is intended to provide ETP Holders an 
opportunity to receive an enhanced rebate by executing more of their 
orders on the Exchange. The Exchange currently provides credits to ETP 
Holders who submit orders that provide displayed liquidity on the 
Exchange. The Exchange currently has multiple levels of credits for 
orders that provide displayed liquidity that are based on the amount of 
volume of such orders that ETP Holders send to the Exchange.
    As described in greater detail below, the Exchange proposes the 
following change:
     Modify the volume requirements applicable to ETP Holders 
to qualify for the Step Up Tier 4 by lowering the percentage threshold 
that an ETP Holder must meet, and modify the baseline month over which 
the minimum threshold requirement must be met; and
     A new pricing tier that provides an incremental credit 
between $0.0002 per share and $0.0004 per share to ETP Holders that 
provide liquidity in Tape B Securities when such providing volume is at 
least 0.50% of the US Tape B CADV and such volume in Tape B Securities 
as a percentage of US Tape B CADV is an increase of 20% or more over 
the ETP Holder's providing ADV as a percentage of US Tape B CADV in the 
third quarter (``3Q'') of 2019.
Step Up Tier 4
    In this competitive environment, the Exchange has already 
established Step Up Tiers 1-4, which are designed to encourage ETP 
Holders that provide displayed liquidity on the Exchange to increase 
that order flow, which would benefit all ETP Holders by providing 
greater execution opportunities on the Exchange. In order to provide an 
incentive for ETP Holders to direct providing displayed order flow to 
the Exchange, the credits increase in the various tiers based on 
increased levels of volume directed to the Exchange.
    Currently, the following credits are available to ETP Holders that 
provide increased levels of displayed liquidity on the Exchange:

------------------------------------------------------------------------
                                                Credit for providing
                   Tier                          displayed liquidity
------------------------------------------------------------------------
Step Up Tier..............................  $0.0030 (Tape A).
                                            $0.0023 (Tape B).
                                            $0.0031 (Tape C).
Step Up Tier 2............................  $0.0028 (Tape A and C).
                                            $0.0022 (Tape B).
Step Up Tier 3............................  $0.0025 (Tape A and C).
                                            $0.0022 (Tape B).
Step Up Tier 4............................  $0.0033 (Tape A and C).
                                            $0.0034 (Tape B).
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    Under the Step Up Tier 4, if an ETP Holder increases its providing 
liquidity on the Exchange by a specified percentage over the level that 
such ETP Holder provided liquidity in January 2019, it is eligible to 
earn higher credits for providing displayed liquidity. Specifically, to 
qualify for the credits under the Step Up Tier 4, an ETP Holder must 
directly execute providing average daily volume (ADV) per month that is 
an increase of no less than 0.70% of US CADV \12\ for that month over 
the ETP Holder's providing ADV in January 2019, taken as a percentage 
of US CADV.
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    \12\ US CADV means the 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. See Fee Schedule, 
footnote 3.
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    Currently, if an ETP Holder meets these Step Up Tier 4 
qualifications, such ETP Holder is eligible to earn a credit of:
     $0.0033 per share for orders that provide displayed 
liquidity to the Book in Tape A and Tape C Securities, and
     $0.0034 per share for orders that provide displayed 
liquidity to the Book in Tape B Securities.\13\
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    \13\ See Securities Exchange Act Release No. 86122 (June 17, 
2019), 84 FR 29258 (June 21, 2019) (SR-NYSEArca-2019-43).
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    With this proposed rule change, the Exchange proposes to modify the 
volume requirements applicable to ETP Holders to qualify for the Step 
Up Tier 4 by lowering the percentage threshold that an ETP Holder must 
meet, from a minimum of 0.70% of US CADV for the billing month to a 
minimum of 0.55% of US CADV for the billing month. Additionally, the 
Exchange proposes to modify the baseline month over which the minimum 
threshold requirement must be met from January 2019 to September 2019.
    The purpose of the proposed rule change is to increase the 
incentive for order flow providers to send liquidity-providing orders 
to the Exchange. As described above, ETP Holders with liquidity-
providing orders have a choice of where to send those orders. The 
Exchange believes that, if it reduces the requirement to qualify for a 
tiered credit, more ETP Holders will choose to route their liquidity-
providing orders to the Exchange to qualify for the credit.
    The Exchange does not know how much order flow ETP Holders choose 
to route to other exchanges or to off-exchange venues. While the Step 
Up Tier 4 pricing tier is available to all ETP Holders, to date, not 
one ETP Holder has qualified for it.\14\ 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 the Step Up Tier 4 credit. The 
Exchange cannot predict with certainty how many ETP Holders would avail 
themselves of this opportunity but additional liquidity-providing 
orders would benefit all market participants because it would provide 
greater execution opportunities on the Exchange.
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    \14\ As of July 24, 2019, there are 165 ETP Holders on the 
Exchange that could qualify for the Exchange's Step Up pricing 
tiers.
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    The Exchange is not proposing to amend any of the credits payable 
under the Step Up Tier 4.

[[Page 55605]]

Tape B Step Up Tier
    The Exchange proposes to adopt a new pricing tier, Tape B Step Up 
Tier, that would offer an incremental credit to ETP Holders that 
qualify for the tier. As proposed, an ETP Holder that sends orders that 
add liquidity in Tape B Securities would receive the following:
     An incremental credit of $0.0002 per share when an ETP 
Holder's providing ADV in Tape B Securities during the billing month is 
at least 0.50% of the US Tape B CADV and the ETP Holder's providing ADV 
in Tape B Securities during the billing month as a percentage of US 
Tape B CADV is at least 20% more but less than 30% of the ETP Holder's 
providing ADV as a percentage of US Tape B CADV in 3Q 2019;
     An incremental credit of $0.0003 per share when an ETP 
Holder's providing ADV in Tape B Securities during the billing month is 
at least 0.50% of the US Tape B CADV and the ETP Holder's providing ADV 
in Tape B Securities during the billing month as a percentage of US 
Tape B CADV is at least 30% more but less than 40% of the ETP Holder's 
providing ADV as a percentage of US Tape B CADV in 3Q 2019; and
     An incremental credit of $0.0004 per share when an ETP 
Holder's providing ADV in Tape B Securities during the billing month is 
at least 0.50% of the US Tape B CADV and the ETP Holder's providing ADV 
in Tape B Securities during the billing month as a percentage of US 
Tape B CADV is at least 40% more than the ETP Holder's providing ADV as 
a percentage of US Tape B CADV in 3Q 2019.
    The proposed incremental credit would be payable in addition to the 
ETP Holder's Tiered or Basic Rate credit(s); provided, however, that 
such combined credit(s) in Tape B Securities shall not exceed $0.0032 
per share.
    For example, assume an ETP Holder has providing ADV of 0.80% of 
Tape B CADV in Tape B securities in the baseline period of third 
quarter of 2019. Further assume that the same ETP Holder has providing 
ADV of 0.96% of Tape B in the billing month, which is at least 20% more 
but less than 30% of the ETP Holder's baseline ADV of 0.80% of Tape B 
CADV. Therefore, the ETP Holder in the above example would qualify to 
receive an incremental credit of $0.0002 per share. If instead, the 
same ETP Holder had providing ADV of Tape B CADV of 1.04% of Tape B in 
the billing month, then that ETP Holder would qualify for an 
incremental credit of $0.0003 per share, as 1.04% is at least 30% more 
but less than 40% of the ETP Holder's baseline ADV of 0.80% of Tape B 
CADV.\15\ If instead, the same ETP Holder had providing ADV of Tape B 
CADV of 1.12% of Tape B in the billing month, then that ETP Holder 
would qualify for an incremental credit of $0.0004 per share, as 1.12% 
is at least 40% more than the ETP Holder's baseline ADV of 0.80% of 
Tape B CADV.\16\
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    \15\ The ETP Holder would also qualify for the existing Tape B 
Tier 2 credit of $0.0028 by meeting the 1.0% of the US Tape B CADV 
requirement, for a total credit of $0.0031 per share ($0.0028 per 
share Tape B Tier 2 credit plus the proposed $0.0003 per share Tape 
B Step Up Tier credit).
    \16\ The ETP Holder would also qualify for the existing Tape B 
Tier 2 credit of $0.0028 by meeting the 1.0% of the US Tape B CADV 
requirement, for a total credit of $0.0032 per share ($0.0028 per 
share Tape B Tier 2 credit plus the proposed $0.0004 per share Tape 
B Step Up Tier credit).
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    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. Because, as 
proposed, the tier requires an ETP Holder to increase the volume of its 
liquidity-providing orders over that ETP Holder's 3Q 2019 baseline, the 
Exchange believes that the proposed incremental credit would provide an 
incentive for ETP Holders to route additional liquidity to the Exchange 
in order to qualify for it.
    The proposed rule change is designed to incentivize ETP Holders to 
increase the orders sent to the Exchange that would provide liquidity, 
which would support the quality of price discovery and transparency on 
the Exchange. The Exchange believes that by correlating the level of 
the credits 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.
    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,\17\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\18\ 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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    \17\ 15 U.S.C. 78f(b).
    \18\ 15 U.S.C. 78f(b)(4) and (5).
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The Proposed Fee Change is Reasonable
    As discussed above, the Exchange operates in a highly fragmented 
and 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.'' \19\
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    \19\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
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    As the Commission itself recognized, the market for trading 
services in NMS stocks has become ``more fragmented and competitive.'' 
\20\ Indeed, equity trading is currently dispersed across 13 
exchanges,\21\ 31 alternative trading systems,\22\ and numerous broker-
dealer internalizers and wholesalers, all competing for order flow. 
Based on publicly-available information, no single exchange has more 
than 19% market share (whether including or excluding auction 
volume).\23\ Therefore, no exchange possesses significant pricing power 
in the execution of equity order flow. More specifically, as noted 
earlier, the Exchange averaged less than 9% market share of executed 
volume of equity trades (excluding auction volume) for August 2019.
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    \20\ See Securities Exchange Act Release No. 51808, 84 FR 5202, 
5253 (February 20, 2019) (File No. S7-05-18) (Final rule).
    \21\ See Cboe Global Markets, U.S Equities Market Volume 
Summary, available at https://markets.cboe.com/us/equities/market_share/.
    \22\ See FINRA ATS Transparency Data, available at https://otctransparency.finra.org/otctransparency/AtsIssueData. A list of 
alternative trading systems registered with the Commission is 
available at https://www.sec.gov/foia/docs/atslist.htm.
    \23\ See Cboe Global Markets U.S. Equities Market Volume 
Summary, available at http://markets.cboe.com/us/equities/market_share/.
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    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

[[Page 55606]]

products, in response to fee changes. With respect to non-marketable 
order which 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 reasonably 
constrain exchange transaction fees that relate to orders that would 
provide displayed liquidity on an exchange. Stated otherwise, changes 
to exchange transaction fees can have a direct effect on the ability of 
an exchange to compete for order flow.
    Given this competitive environment, the proposal represents a 
reasonable attempt to attract additional order flow to the Exchange.
    The Exchange believes the proposed change to lower the volume 
requirements under the Step Up Tier 4 is reasonable because it would 
allow ETP Holders an additional opportunity to meet the requirement of 
the pricing tier to receive per share credits payable under the Step Up 
Tier 4, thereby encouraging the submission of additional liquidity to a 
national securities exchange. Submission of additional liquidity to the 
Exchange would promote price discovery and transparency and enhance 
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 that the proposed change to modify the baseline month 
from January 2019 to September 2019 is reasonable given the trend of 
recent trading on the Exchange. The Exchange's market share in January 
2019, the original baseline month adopted under the Step Up Tier 4, was 
9.0%, and has declined to 8.2% in August 2019.\24\ The Exchange 
believes modifying the baseline month would allow ETP Holders to more 
easily qualify for the pricing tier as it would need to submit lesser 
number of orders to qualify for the tier.
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    \24\ See id.
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    Because no ETP Holder to date has qualified for the Step Up Tier 4, 
the Exchange believes the proposed lower volume requirements are 
reasonable as they would provide an additional incentive for ETP 
Holders to qualify for this established tier and direct their order 
flow to the Exchange and provide meaningful added levels of displayed 
liquidity, thereby contributing to the depth and market quality on the 
Exchange.
    The Exchange believes the proposed Tape B Step Up Tier would 
provide an incentive for ETP Holders to route additional liquidity-
providing orders to the Exchange in Tape B Securities. As noted above, 
the Exchange operates in a highly competitive environment, particularly 
for attracting order flow that provides displayed liquidity on an 
exchange. The Exchange believes it is reasonable to provide a higher 
credit for orders that provide additional liquidity. Similarly, the 
Exchange believes that it is reasonable to provide an incremental 
credit to ETP Holders that meet the requirements of the Tape B Step Up 
Tier that add additional liquidity in Tape B Securities on the 
Exchange.
    Since the proposed Tape B Step Up Tier would be new with a 
requirement for increased providing volume over the baseline month, no 
ETP Holder currently qualifies for the proposed pricing tier. The 
Exchange believes that a number of ETP Holders could qualify for the 
proposed higher credit but without a view of ETP Holder activity on 
other exchanges and off-exchange venues, the Exchange has no way of 
knowing whether the proposed rule change would result in any ETP Holder 
qualifying for the tier. The Exchange believes the proposed higher 
credit is reasonable as it would provide an additional incentive for 
ETP Holders to direct their order flow to the Exchange and provide 
meaningful added levels of liquidity in order to qualify for the higher 
credit, thereby contributing to depth and market quality on the 
Exchange.
    The Exchange notes that volume-based incentives and discounts have 
been widely adopted by exchanges,\25\ including the Exchange,\26\ and 
are reasonable, equitable and non-discriminatory because they are open 
to all ETP Holders on an equal basis and provide additional credits 
that are reasonably related to the value to an exchange's market 
quality and associated higher levels of market activity.
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    \25\ See e.g., Cboe BZX U.S. Equities Exchange (``BZX'') Fee 
Schedule, Footnote 1, Add Volume Tiers which provide enhanced 
rebates between $0.0025 and $0.0032 per share for displayed orders 
where BZX members meet certain volume thresholds.
    \26\ See e.g., Fee Schedule, Step Up Tier, Step Up Tier 2, Step 
Up Tier 3 and Step Up Tier 4, which provide enhanced rebates between 
$0.0025 and $0.0033 per share in Tape A Securities, between $0.0022 
and $0.0034 per share in Tape B Securities, and between $0.0025 and 
$0.0033 per share in Tape C Securities for orders that provide 
displayed liquidity where ETP Holders meet certain volume 
thresholds.
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    On the backdrop of the competitive environment in which the 
Exchange currently operates, the proposed rule change is a reasonable 
attempt to increase liquidity on the Exchange and improve the 
Exchange's market share relative to its competitors.
The Proposed Fee Change is an Equitable Allocation of Fees and Credits
    The Exchange believes its proposal equitably allocates its fees 
among its market participants.
    First, the Exchange is not proposing to adjust the amount of the 
Step Up Tier 4 credits, which will remain at the current level for all 
ETP Holders. Rather, the proposal would continue to encourage ETP 
Holders to send orders that add liquidity to the Exchange, thereby 
contributing to robust levels of liquidity, which benefits all market 
participants. The Exchange believes that, for the reasons discussed 
above, lowering the requirements would make it easier for liquidity 
providers to qualify for the Step Up Tier 4 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.
    As noted above, no ETP Holder currently qualifies for the Step Up 
Tier 4 pricing tier. 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 this tier. However, the Exchange believes the 
proposed lower volume requirements would provide an incentive for ETP 
Holders to continue to submit liquidity-providing order flow, which 
would promote price discovery and increase execution opportunities for 
all ETP Holders. 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, which would benefit all market 
participants on the Exchange.
    Finally, the Exchange believes that the proposed Tape B Step Up 
Tier is equitable because the magnitude of the additional credit is not 
unreasonably

[[Page 55607]]

high relative to credits paid by other exchanges for orders that 
provide additional step up liquidity.\27\ 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 and 
price discovery.
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    \27\ See note 25, supra.
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    Since the proposed Tape B Step Up Tier would be new, no ETP Holder 
currently qualifies for it. The Exchange believes that at least seven 
ETP Holders could qualify for the proposed higher credit, but without a 
view of ETP Holder activity on other exchanges and off-exchange venues, 
the Exchange has no way of knowing whether this proposed rule change 
would result in any ETP Holder qualifying for the tier. The Exchange 
believes the proposed higher credit is reasonable as it would provide 
an additional incentive for ETP Holders to direct their order flow to 
the Exchange and provide meaningful added levels of liquidity in order 
to qualify for the higher credit, thereby contributing to depth and 
market quality on the Exchange.
    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 Step Up 
pricing tiers on the Exchange will continue to receive credits when 
they provide liquidity to the Exchange. The Exchange believes that 
recalibrating the requirements for providing liquidity will continue to 
attract order flow and liquidity to the Exchange for the benefit of 
investors generally.
    Since no ETP Holder presently qualifies for the credits associated 
with Step Up Tier 4, the proposal will not adversely impact their 
existing pricing or their ability to qualify for other credits provided 
by the Exchange. With the proposed new Tape B Step Up Tier, all ETP 
Holders would be eligible to qualify for the higher credit if they 
increase their Adding ADV over their own baseline of order flow. The 
Exchange believes that offering a higher step up credit for providing 
liquidity if the step up requirements for Tape B securities are met, 
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 adding liquidity 
credits, 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 that the proposal is not unfairly 
discriminatory. In the prevailing competitive environment, ETP Holders 
are free to disfavor the Exchange's pricing if they believe that 
alternatives offer them better value.
    The proposal to lower the volume requirement under Step Up Tier 4 
neither targets or will it have a disparate impact on any particular 
category of market participant. The proposal does not permit unfair 
discrimination because the lower threshold would be applied to all 
similarly situated ETP Holders, who would all be eligible for the same 
credit on an equal basis. Accordingly, no ETP Holder already operating 
on the Exchange would be disadvantaged by this allocation of fees.
    The Exchange believes it is not unfairly discriminatory to adopt 
lower volume requirements for ETP Holders to qualify for the Step Up 
Tier 4 pricing tier as the proposed change would apply on an equal 
basis to all ETP Holders that add liquidity by meeting the lower volume 
requirements. Further, the Exchange believes the proposed lower volume 
requirements would incentivize ETP Holders to execute more of their 
liquidity-providers orders on the Exchange to qualify for the increased 
credits payable under Step Up Tier 4. 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 lower volume requirements 
would apply equally to all ETP Holders as each would be required to 
execute providing volume in Tapes A, B and C Securities during the 
billing month that is at least 0.55% of US CADV over its providing ADV 
in September 2019, taken as a percentage of US CADV, regardless of 
whether an ETP Holder currently meets the requirement of another 
pricing tier.
    The Exchange believes it is not unfairly discriminatory to provide 
a higher per share step up credit, as the proposed credit would be 
provided on an equal basis to all ETP Holders that add liquidity by 
meeting the new proposed Tape B Step Up Tier's requirements. For the 
same reason, the Exchange believes it is not unfairly discriminatory to 
provide an additional incremental credit to ETP Holders that satisfy 
the Tape B Step Up Tier requirements and add liquidity in Tape B 
Securities. Further, the Exchange believes the proposed Tape B Step Up 
Tier credit would incentivize ETP Holders that meet the current tiered 
requirements to send more orders to the Exchange to qualify for higher 
credits. The Exchange also believes that the proposed change is not 
unfairly discriminatory because it is reasonably related to the value 
to the Exchange's market quality associated with higher volume.
    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,\28\ 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.'' \29\
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    \28\ 15 U.S.C. 78f(b)(8).
    \29\ See Securities Exchange Act Release No. 51808, 70 FR 37495, 
37498-99 (June 29, 2005) (S7-10-04) (Final Rule).
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    Intramarket Competition. The proposed change is designed to attract 
additional order flow to the Exchange. The Exchange believes that the 
proposed lower volume requirements would continue to incentivize market 
participants to direct providing displayed order flow to the Exchange. 
Greater liquidity benefits all market

[[Page 55608]]

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. The 
proposed volume requirements would be applicable 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. As noted, 
the Exchange's market share of intraday trading (i.e., excluding 
auctions) was 8.2% in August 2019. 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.
    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) \30\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \31\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \30\ 15 U.S.C. 78s(b)(3)(A).
    \31\ 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) \32\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \32\ 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-2019-70 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-2019-70. 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-2019-70, and should be 
submitted on or before November 7, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\33\
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    \33\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-22700 Filed 10-16-19; 8:45 am]
 BILLING CODE 8011-01-P


