[Federal Register Volume 85, Number 59 (Thursday, March 26, 2020)]
[Notices]
[Pages 17112-17119]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-06298]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88436; File No. SR-NYSEArca-2020-21]


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

March 20, 2020.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act''),\2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that on March 11, 2020, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I, II, and III below, which 
Items have been prepared by the 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) amend the requirement to qualify for 
the Tape B Tier 1 pricing tier; (2) amend the per share fee for PO 
Orders routed to the Nasdaq Stock Market LLC; (3) adopt a per share fee 
for PO Orders routed to Cboe BZX Exchange, Inc.; (4) adopt a cap 
applicable to the Step Up Tier 4 credit in Tape B securities; and (5) 
amend the requirement to qualify for the tiered-rebate structure 
applicable to Lead Market Makers and to ETP Holders affiliated with 
such Lead Market Makers. 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend the Fee Schedule to (1) amend the 
requirement to qualify for the Tape B Tier 1 pricing tier; (2) amend 
the per share fee for Primary Only (``PO'') Orders \4\ routed to the 
Nasdaq Stock

[[Page 17113]]

Market LLC (``Nasdaq''); (3) adopt a per share fee for PO Orders routed 
to Cboe BZX Exchange, Inc. (``Cboe BZX''); (4) adopt a cap applicable 
to the Step Up Tier 4 credit in Tape B securities; and (5) amend the 
requirement to qualify for the tiered-rebate structure applicable to 
Lead Market Makers (``LMMs''),\5\ and to ETP Holders \6\ affiliated 
with such LMMs, that provide displayed liquidity in Tape B securities 
to the NYSE Arca Book.
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    \4\ A PO Order is a Market or Limit Order that on arrival is 
routed directly to the primary listing market without being assigned 
a working time or interacting with interest on the NYSE Arca Book. 
See NYSE Arca Rule 7.31-E(f)(1).
    \5\ The term ``Lead Market Maker'' is defined in Rule 1.1(w) to 
mean a registered Market Maker that is the exclusive Designated 
Market Maker in listings for which the Exchange is the primary 
market.
    \6\ All references to ETP Holders in connection with this 
proposed fee change include Market Makers.
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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 and 
LMMs to send additional displayed liquidity to the Exchange.
    The Exchange proposes to implement the fee changes effective March 
11, 2020.\7\
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    \7\ The Exchange originally filed to amend the Fee Schedule on 
March 2, 2020 (SR-NYSEArca-2020-19). SR-NYSEArca-2020-19 was 
subsequently withdrawn and replaced by this filing.
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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.'' \8\
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    \8\ 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.'' 
\9\ Indeed, equity trading is currently dispersed across 13 
exchanges,\10\ numerous alternative trading systems,\11\ and broker-
dealer internalizers and wholesalers, all competing for order flow. 
Based on publicly-available information, no single exchange currently 
has more than 20% market share (whether including or excluding auction 
volume).\12\ Therefore, no exchange possesses significant pricing power 
in the execution of equity order flow. More specifically, the Exchange 
currently has less than 12% market share of executed volume of 
equity.\13\
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    \9\ See Securities Exchange Act Release No. 51808, 84 FR 5202, 
5253 (February 20, 2019) (File No. S7-05-18) (Final Rule).
    \10\ 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.
    \11\ 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.
    \12\ See Cboe Global Markets U.S. Equities Market Volume 
Summary, available at http://markets.cboe.com/us/equities/market_share/.
    \13\ 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 and LMMs can choose from any 
one of the 13 currently operating registered exchanges to route such 
order flow. Accordingly, competitive forces constrain exchange 
transaction fees and credits 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 with respect to the LMM credits, the 
proposed rule change is designed to be available to all LMMs on the 
Exchange, and is intended to provide ETP Holders and LMMs an 
opportunity to receive enhanced rebates by quoting and trading more on 
the Exchange.
Tape B Tier 1
    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.
    Currently, a Tape B Tier 1 credit of $0.0030 \14\ per share applies 
to ETP Holders that, on a daily basis, measured monthly, directly 
execute providing volume in Tape B securities that is equal to at least 
1.50% of US Tape B CADV \15\ for the billing month.\16\ Alternatively, 
ETP Holders could qualify for the Tape B Tier 1 credit if an ETP Holder 
who is affiliated with an OTP Holder or OTP Firm that provides an ADV 
of electronic posted executions for the account of a market maker in 
all issues on NYSE Arca Options (excluding mini options) of at least 
0.55% of total Customer equity and ETF option ADV as reported by The 
Options Clearing Corporation (``OCC'') and the ETP Holder directly 
executes providing volume in Tape B securities during the billing month 
that is equal to
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    \14\ Under the Basic Rate, ETP Holders receive a credit of 
$0.0020 per share for Tape B orders that provide liquidity to the 
Book.
    \15\ 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.
    \16\ See Securities Exchange Act Release No. 76084 (October 6, 
2015), 80 FR 61529 (October 13, 2015) (SR-NYSEArca-2015-87).
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     at least 1.00% of US Tape B CADV for the billing month of 
February 2020.
     at least 1.15% of US Tape B CADV for the billing month of 
March 2020.
     at least 1.25% of US Tape B CADV for the billing month of 
April 2020 and each billing month thereafter.\17\
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    \17\ See Securities Exchange Act Release No. 88194 (February 13, 
2020), 85 FR 9820 (February 20, 2020) (SR-NYSEArca-2020-12).
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    The Exchange proposes to amend the 1.00% CADV requirement so that 
it would continue to apply for an additional three months, i.e., for 
each of March, April and May 2020; amend the 1.15% CADV requirement so 
that it would apply during each of June, July and August 2020, rather 
than March 2020; and amend the 1.25% CADV requirement so that it would 
apply during the billing month of September 2020 and each month 
thereafter, rather than April 2020.
    The Exchange is not proposing any change to the level of credits 
applicable under the Tape B Tier 1 pricing tier.
    The proposed rule change would allow a greater number of ETP 
Holders to qualify for the pricing tier as the lower CADV requirement 
would remain in place for an additional period of time. The proposed 
rule change would continue to encourage ETP Holders to promote price 
discovery and market quality for the benefit of all market 
participants. As noted above, the Exchange operates in a competitive 
environment, particularly as it relates to attracting non-marketable 
orders, which

[[Page 17114]]

add liquidity to the Exchange. Because, as proposed, the tier requires 
an ETP Holder increase the volume of its trades against orders that add 
liquidity in Tape B securities at increasing levels, the Exchange 
believes the current credit provides an incentive for ETP Holders to 
route additional liquidity to the Exchange in order to qualify for it.
Routing Fees
    Currently, under Tier 1, Tier 2 and Basic Rates sections of the Fee 
Schedule, the Exchange currently charges a per share fee of $0.0010 for 
PO Orders in Tape C securities that are routed to Nasdaq and execute in 
the opening or closing auction.\18\ The Exchange proposes to increase 
the fee to $0.0030 per share and proposes to streamline the Fee 
Schedule by eliminating reference to this routing fee from Tier 1 and 
Tier 2 because the routing fee is not a tier-based fee and therefore 
should not be in Tier 1 and Tier 2.
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    \18\ See Securities Exchange Act Release No. 62843 (September 3, 
2010), 75 FR 55624 (September 13, 2010) (SR-NYSEArca-2010-81).
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    Additionally, the Exchange proposes to adopt a fee of $0.0030 per 
share in the Basic Rates section of the Fee Schedule for PO Orders in 
Tape B securities that are routed to Cboe BZX for execution in the 
opening or closing auction on that market. The Exchange currently does 
not charge a fee for routing PO Orders to Cboe BZX. The purpose of the 
proposed fee is to simplify the Fee Schedule and maintain consistency 
with respect to the fee charged by the Exchange when it routes orders 
for execution in an away market's auction.
Step Up Tier 4
    The Exchange currently has multiple levels of step-up pricing 
tiers, 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 displayed
                 Tier                               liquidity
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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 September 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 0.55% of US CADV for that month over the 
ETP Holder's providing ADV in September 2019, taken as a percentage of 
US CADV.
    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.\19\
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    \19\ See Securities Exchange Act Release Nos. 86122 (June 17, 
2019), 84 FR 29258 (June 21, 2019) (SR-NYSEArca-2019-43); and 87292 
(October 11, 2019), 84 FR 55603 (October 17, 2019) (SR-NYSEArca-
2019-70).
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    With this proposed rule change, the Exchange proposes to adopt a 
cap applicable to the Step Up Tier 4 credit in Tape B securities. As 
proposed, ETP Holders that qualify for Step Up Tier 4 would not receive 
any additional incremental Tape B Tier credits for providing displayed 
liquidity, including any incremental credits associated with Less 
Active ETP Securities.\20\
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    \20\ Under Step Up Tier 4, ETP Holders currently do not receive 
any incremental Tape C Tier credits for providing displayed 
liquidity.
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    The purpose of the proposed rule change is to continue to 
incentivize order flow providers to send liquidity-providing orders to 
the Exchange while capping the level of credit that such participants 
would receive. The Exchange believes that, although it is proposing to 
limit the financial incentive for orders that provide displayed 
liquidity in Tape B securities, the current rebate, i.e., $0.0034 per 
share, is among one of the higher credits paid by the Exchange and 
should continue to serve as an incentive for ETP Holders to direct 
displayed liquidity providing orders to the Exchange.
    The Exchange is not proposing any change to the level of credits 
applicable under the Step Up Tier 4.
LMM Credits
    The Exchange currently provides tier-based incremental credits for 
orders that provide displayed liquidity in Tape B securities to the 
NYSE Arca Book.\21\ Specifically, LMMs that are registered as the LMM 
in Tape B securities that have a consolidated average daily volume 
(``CADV'') in the previous month of less than 100,000 shares, or 0.010% 
of Consolidated Tape B ADV, whichever is greater (``Less Active ETP 
Securities''), and the ETP Holders affiliated with such LMMs, currently 
receive an incremental credit for orders that provide displayed 
liquidity to the Book in any Tape B securities that trade on the 
Exchange.\22\ The current incremental credits and volume thresholds are 
as follows:
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    \21\ See Securities Exchange Act Release Nos. 76084 (October 6, 
2015), 80 FR 61529 (October 13, 2015) (SR-NYSEArca-2015-87); 79597 
(December 19, 2016), 81 FR 94460 (December 23, 2016) (SR-NYSEArca-
2016-165); and 85094 (February 11, 2019), 84 FR 4579 (February 15, 
2019) (SR-NYSEArca-2019-05).
    \22\ The Exchange defines ``affiliate'' to ``mean any ETP Holder 
under 75% common ownership or control of that ETP Holder.'' See Fee 
Schedule, NYSE Arca Marketplace: General.
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     An additional credit of $0.0004 per share if an LMM is 
registered as the LMM in at least 400 Less Active ETP Securities or at 
least 300 Less Active ETP Securities if the LMM and ETP Holders and 
Market Makers affiliated with such LMM add liquidity in all securities 
of at least 1.00% of US CADV.
     An additional credit of $0.0003 per share if an LMM is 
registered as the LMM in at least 200 but less than 400 Less Active ETP 
Securities or in at least 200 but less than 300 Less Active ETP 
Securities if the LMM and ETP Holders and Market Makers affiliated with 
such LMM add liquidity in all securities of at least 1.00% of US CADV.
     An additional credit of $0.0002 per share if an LMM is 
registered as the LMM in at least 100 but less than 200 Less Active ETP 
Securities.
     An additional credit of $0.0001 per share if an LMM is 
registered as the LMM in at least 75 but less than 100 Less Active ETP 
Securities.
     An additional credit of $0.00005 per share if an LMM is 
registered as the LMM in at least 50 but less than 75 Less Active ETP 
Securities.
    The number of Less Active ETP Securities for the billing month is 
based on the number of Less Active ETP Securities in which an LMM is

[[Page 17115]]

registered as the LMM on the average of the first and last business day 
of the previous month.
    With this proposed rule change, the Exchange proposes that the CADV 
requirement of less than 100,000 shares, or 0.010% of Consolidated Tape 
B ADV, which is currently determined on a previous month basis, would 
instead be determined on a prior calendar quarter basis.
    The purpose of the proposed rule change is to encourage LMMs and 
ETP Holders to enhance the market quality in Tape B securities that are 
listed and traded on the Exchange and the Exchange believes that 
amending the benchmark from previous month to prior calendar quarter 
would serve to stabilize the number of Less Active ETP Securities and 
provide LMMs more consistency in the number of Less Active ETP 
Securities in which it is registered as the LMM, and should therefore 
provide LMMs increased opportunities to earn incremental credits. The 
Exchange believes the proposal would also encourage competition in Tape 
B securities quoted and traded on the Exchange. To illustrate, for the 
billing month of March 2020, the CADV requirement would currently be 
measured based on February 2020 volume. With this proposed rule change, 
the CADV requirement would now be measured based on volume from the 
prior calendar quarter, i.e., October 2019, November 2019 and December 
2019.
    The Exchange does not know how much order flow LMMs and ETP Holders 
choose to route to other exchanges or to off-exchange venues. The 
incremental credits in NYSE Arca-listed securities are available to all 
LMMs that are registered as the LMM in a security, and to ETP Holders 
that are affiliated with a LMM. Currently, there are no LMMs that 
qualify for the $0.0003 per share credit and 2 LMMs that qualify for 
the $0.0004 per share credit.\23\ Without having a view of a LMM's 
activity on other markets and off-exchange venues, the Exchange has no 
way of knowing whether this proposed rule change would result in more 
LMMs sending their orders in NYSE Arca-listed securities to the 
Exchange to qualify for the existing credits or whether this proposed 
rule change would result in LMMs to send more of their orders in NYSE 
Arca-listed securities to the Exchange to qualify for such credits. The 
Exchange cannot predict with certainty how many LMMs 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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    \23\ As of February 28, 2020, there are 18 registered LMMs on 
the Exchange that could qualify for the incremental rebates for Less 
Active ETP Securities, all of whom are affiliated with one or more 
ETP holders.
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    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,\24\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\25\ 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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    \24\ 15 U.S.C. 78f(b).
    \25\ 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.'' \26\
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    \26\ 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.'' 
\27\ Indeed, equity trading is currently dispersed across 13 
exchanges,\28\ numerous alternative trading systems,\29\ and broker-
dealer internalizers and wholesalers, all competing for order flow. As 
noted above, no exchange possesses significant pricing power in the 
execution of equity order flow.
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    \27\ See Securities Exchange Act Release No. 51808, 84 FR 5202, 
5253 (February 20, 2019) (File No. S7-05-18) (Final rule).
    \28\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, available at https://markets.cboe.com/us/equities/market_share/.
    \29\ 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.
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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 
products, in response to fee changes. With respect to non-marketable 
order which provide liquidity on an Exchange, LMMs and 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.
Tape B Tier 1
    The Exchange believes the proposed amendment to Tape B Tier 1 is 
reasonable because it would maintain the current threshold in place for 
an additional three months before increasing levels of activity is 
implemented to qualify for the Tape B Tier 1 credits. The Exchange 
believes that keeping the current requirement in place would allow a 
greater number of ETP Holders to qualify for the pricing tier. The 
Exchange believes the proposed rule change would continue to 
incentivize ETP Holders to bring additional order flow to a public 
exchange, thereby encouraging greater participation and liquidity.
    The Exchange notes that volume-based incentives and discounts have 
been widely adopted by exchanges, including the Exchange, and are 
reasonable, equitable and not unfairly discriminatory because they are 
available to all ETP Holders on an equal basis. They also provide 
additional benefits or discounts that are reasonably related to the 
value of the Exchange's market quality and associated higher levels of 
market activity, such as higher levels of liquidity provision and/or 
growth patterns. Additionally, as noted above, the Exchange operates in 
a highly competitive market. The Exchange is one of several venues and 
off-exchange venues to which market participants may direct their order 
flow, and it represents a small percentage of the overall market. 
Competing exchanges

[[Page 17116]]

offer similar tiered pricing structures to that of the Exchange, 
including schedules of rebates and fees that apply based on members 
achieving certain volume thresholds.
    Moreover, the Exchange believes the proposed amendment to Tape B 
Tier 1 is a reasonable means to encourage ETP Holders to increase their 
liquidity on the Exchange and their participation on NYSE Arca Options. 
Increased liquidity benefits all investors by deepening the Exchange's 
liquidity pool, offering additional flexibility for all investors to 
enjoy cost savings, supporting the quality of price discovery, 
promoting market transparency and improving investor protection.
Routing Fees
    The Exchange believes the proposed amendment to the routing fees is 
reasonable because it seeks to standardize the fee for routing PO 
Orders to away markets that conduct an opening and closing auction. The 
Exchange periodically reviews its fees and rebates and determined that 
it does not currently charge a fee for routing orders to Cboe BZX. The 
Exchange believes it is reasonable to adopt a fee when it routes orders 
to away markets. The Exchange also considered the fees charged by its 
affiliates, NYSE,\30\ NYSE Chicago,\31\ NYSE National \32\ and NYSE 
American,\33\ all of whom have a fee comparable to that proposed by the 
Exchange. In determining the routing fees, the Exchange considered 
transaction fees assessed by Nasdaq and Cboe BZX to which the Exchange 
routes orders for execution on those markets' opening and closing 
auctions. The Exchange believes that because the proposed fees are 
comparable to fees charged by the Exchange's affiliates, ETP Holders 
may choose to continue to send routable orders to the Exchange, thereby 
directing order flow to be entered on the Exchange. The Exchange 
believes it is reasonable to increase the fee for orders routed to 
Nasdaq for execution in that market's opening or closing auction as the 
proposed fee would be uniform with those charged by the Exchange's 
affiliates, who similarly charge $0.0030 per share for routing orders 
to away markets for execution.
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    \30\ See New York Stock Exchange Price List, Routing Fee, at 
https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf. NYSE charges a routing fee of $0.0035 per 
share, except that for member organizations that have adding ADV in 
Tapes A, B, and C combined that is at least 0.20% of Tapes A, B and 
C CADV combined, the routing fee is $0.0030 per share.
    \31\ See Fee Schedule of NYSE Chicago, Inc., Section E.1., 
Routing Fee, at https://www.nyse.com/publicdocs/nyse/NYSE_Chicago_Fee_Schedule.pdf.
    \32\ See NYSE National Schedule of Fees and Rebates, Section II, 
Routing Fees, at https://www.nyse.com/publicdocs/nyse/regulation/nyse/NYSE_National_Schedule_of_Fees.pdf.
    \33\ See NYSE American Equities Price List, Section III, Fees 
for Routing for all ETP Holders, at https://www.nyse.com/publicdocs/nyse/markets/nyseamerican/NYSE_America_Equities_Price_List.pdf.
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    As noted above, the Exchange's proposal to charge a fee of $0.0030 
per share for orders in securities priced at or above $1.00 that are 
routed to Nasdaq and Cboe BZX for execution in the opening auction or 
closing auction on those markets is consistent with fees charged by the 
Exchange's affiliates NYSE, NYSE Chicago, NYSE National and NYSE 
American.
Step Up Tier 4
    The Exchange believes the proposed rule change to cap the credit 
applicable to the Step Up Tier 4 credit in Tape B securities is 
reasonable because the current credit is among the highest paid by the 
Exchange, and the Exchange believes the level of the current rebate 
would continue to encourage ETP Holders to submit 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.
LMM Credits
    The Exchange believes the proposed rule change to amend the 
requirement to qualify for the incremental LMM credits is reasonable 
because it is intended to continue to encourage LMMs, and ETP Holders 
affiliated with such LMMs, to promote price discovery and market 
quality in Less Active ETP Securities for the benefit of all market 
participants. The Exchange believes that amending the benchmark from 
previous month to prior calendar quarter would serve to stabilize the 
number of Less Active ETP Securities and provide LMMs more consistency 
in the number of Less Active ETP Securities in which it is registered 
as the LMM, and should therefore provide LMMs increased opportunities 
to earn incremental credits. The Exchange believes the proposed 
amendment to qualify for the current incremental credit for adding 
liquidity is also reasonable because it would encourage liquidity and 
competition in all securities quoted and traded on the Exchange. 
Moreover, the Exchange believes that the proposed change could 
incentivize LMMs to register as an LMM in Less Active ETP Securities 
and thus, add more liquidity in all securities, and in particular Tape 
B securities, to the benefit of all market participants.
    Submission of additional liquidity to the Exchange would promote 
price discovery and transparency and enhance order execution 
opportunities for LMMs from the substantial amounts of liquidity 
present on the Exchange. All participants, including LMMs, would 
benefit from the greater amounts of liquidity that will be present on 
the Exchange, which would provide greater execution opportunities.
    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
Tape B Tier 1
    The Exchange believes the proposed amendment to Tape B Tier 1 
equitably allocates its fees and credits among market participants 
because it is reasonably related to the value of the Exchange's market 
quality associated with higher equities and options volume. 
Additionally, a number of ETP Holders have a reasonable opportunity to 
satisfy the pricing tier's criteria.\34\
---------------------------------------------------------------------------

    \34\ There are currently 54 firms that are both ETP Holders and 
OTP Holders.
---------------------------------------------------------------------------

    The Exchange does not know how much order flow ETP Holders choose 
to route to other exchanges or to off-exchange venues. The current 
pricing tier is available to all ETP Holders that are also OTP Holders 
or OTP Firms. There are currently 3 ETP Holders that qualify for the 
Tape B Tier 1 credit and would continue to receive the credit under the 
pricing tier if they maintain the same level of trading activity for 
the next three months. And as noted above, there are 54 firms that are 
both ETP Holders and OTP Holders and a number of such firms could 
qualify for Tape B Tier 1 credits. Without having a view of an ETP 
Holder's 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 Holder to increase participation in the Exchange's 
equities and options markets to qualify for the existing credits. The 
Exchange cannot predict with certainty how many ETP Holders would avail 
themselves of this opportunity. The Exchange believes that maintaining 
the current

[[Page 17117]]

requirement for an additional three months could provide an incentive 
for other ETP Holders to submit additional liquidity on the Exchange 
and on NYSE Arca Options to qualify for the rebate. To the extent an 
ETP Holder participates on the Exchange but not on NYSE Arca Options, 
the Exchange believes that the proposal is still reasonable, equitable 
and not unfairly discriminatory with respect to such ETP Holder based 
on the overall benefit to the Exchange resulting from the success of 
NYSE Arca Options. In particular, such success would allow the Exchange 
to continue to provide and potentially expand its existing incentive 
programs to the benefit of all participants on the Exchange, whether 
they participate on NYSE Arca Options or not.
Routing Fees
    The Exchange believes that the proposed rule change constitutes an 
equitable allocation of reasonable fees because the proposed fee is 
designed to reflect the costs incurred by the Exchange for orders 
submitted by ETP Holders that remove liquidity from auctions conducted 
on away markets and would apply equally to all ETP Holders that choose 
to use the Exchange to route PO Orders to Nasdaq and Cboe BZX. 
Furthermore, the Exchange notes that routing through the Exchange is 
voluntary, and, because the Exchange operates in a highly competitive 
environment as discussed below, ETP Holders that do not favor the 
Exchange's pricing can readily direct order flow directly to Nasdaq or 
Cboe BZX or through competing venues or providers of routing services. 
The proposed change may impact the submission of orders to a national 
securities exchange, and to the extent that ETP Holders continue to 
submit PO Orders to the Exchange, the proposed rule change would not 
have a negative impact to ETP Holders trading on the Exchange because 
the proposed fee would be in line with the routing fee charged by the 
Exchange's affiliates. However, without having a view of ETP Holder's 
activity on other markets and off-exchange venues, the Exchange has no 
way of knowing whether this proposed rule change would result in a 
change in trading behavior by ETP Holders.
Step Up Tier 4
    The Exchange believes the proposed amendment to Step Up Tier 4 
equitably allocates its fees and credits among market participants 
because it is reasonably related to the value of the Exchange's market 
quality associated with higher equities volume. 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 caps an already high level of the credit paid for displayed 
liquidity in Tape B securities and is similar to the cap currently in 
place for Tape C securities that provide displayed liquidity. The 
Exchange believes the current level of credit would continue to 
encourage ETP Holders to send orders that add liquidity to the 
Exchange, thereby contributing to robust levels of liquidity, which 
benefit all market participants.
LMM Credits
    The Exchange believes the proposed rule change to amend the 
benchmark threshold to qualify for the incremental LMM credits is 
equitable because it provides discounts that are reasonably related to 
the value to the Exchange's market quality associated with higher 
volumes. The Exchange further believes that amending the benchmark from 
previous month to prior calendar quarter would serve to stabilize the 
number of Less Active ETP Securities and provide LMMs more consistency 
in the number of Less Active ETP Securities in which it is registered 
as the LMM, and should therefore provide LMMs increased opportunities 
to earn incremental credits.
The Proposed Fee Change Is Not Unfairly Discriminatory
    The Exchange believes that the proposed rule change is not unfairly 
discriminatory. In the prevailing competitive environment, LMMs and ETP 
Holders are free to disfavor the Exchange's pricing if they believe 
that alternatives offer them better value.
Tape B Tier 1
    The Exchange believes it is not unfairly discriminatory to extend 
the current CADV requirement for an additional three months for ETP 
Holders to qualify for per share credits, as the proposed change would 
be applied on an equal basis to all ETP Holders. Further, the Exchange 
believes that maintaining the current requirement for an additional 
period of time could provide an incentive for other ETP Holders to 
submit additional liquidity on the Exchange and on NYSE Arca Options to 
qualify for the rebate. 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.
    The proposal to maintain the CADV requirement at current levels to 
qualify for the Tape B Tier 1 credit neither targets nor will it have a 
disparate impact on any particular category of market participant. The 
proposal does not permit unfair discrimination because the amended 
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.
Routing Fees
    The proposal to amend the routing fee for PO Orders routed to 
Nasdaq and adopting routing fees for PO Orders routed to Cboe BZX for 
execution in each market's opening or closing auction is not unfairly 
discriminatory because the fee would be applied on an equal basis to 
all ETP Holders that choose to send PO Orders to the Exchange. 
Additionally, the proposed rule change neither targets nor will it have 
a disparate impact on any particular category of market participant. 
The proposal does not permit unfair discrimination because the proposed 
fees would be applied to all ETP Holders, who would all be charged the 
same fee on an equal basis. Accordingly, no ETP Holder already 
operating on the Exchange would be disadvantaged by this allocation of 
fees.
Step Up Tier 4
    The Exchange believes it is not unfairly discriminatory to cap the 
credit payable under Step Up Tier 4 for providing displayed liquidity 
in Tape B securities because the proposed cap would be applied on an 
equal basis to all ETP Holders, who would all be subject to the 
proposed cap on an equal basis. Additionally, the proposal neither 
targets nor will it have a disparate impact on any particular category 
of market participant. The proposal does not permit unfair 
discrimination because the proposed cap would be applied to all ETP 
Holders, who would all be subject to the proposed cap on an equal 
basis. Accordingly, no ETP Holder already operating on the Exchange 
would be disadvantaged by this allocation of fees.
LMM Credits
    The Exchange believes it is not unfairly discriminatory to amend 
the benchmark threshold to qualify for the incremental LMM credits, as 
the amended requirements would apply on an equal basis to all LMMs. 
Further, the Exchange believes that amending the benchmark from 
previous month to prior calendar quarter would serve to stabilize the 
number of Less Active ETP Securities and provide LMMs more

[[Page 17118]]

consistency in the number of Less Active ETP Securities in which it is 
registered as the LMM, and should therefore incentivize LMMs to send 
more orders to the Exchange resulting in increased opportunities to 
earn incremental 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.
    The proposal to amend the benchmark threshold to qualify for the 
incremental rebates neither targets nor will it have a disparate impact 
on any particular category of market participant. The proposal does not 
permit unfair discrimination because the proposed threshold would be 
applied to all similarly situated LMMs, who would all be eligible for 
the same credit on an equal basis. Accordingly, no LMM already 
operating on the Exchange would be disadvantaged by this allocation of 
fees.
    Finally, the submission of orders to the Exchange is optional for 
LMMs and 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,\35\ 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 LMMs and 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.'' \36\
---------------------------------------------------------------------------

    \35\ 15 U.S.C. 78f(b)(8).
    \36\ 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 amendment to the volume requirement under Tape B Tier 1 and 
the proposed cap to the credit payable under Step Up Tier 4 would 
continue to incentivize market participants to direct providing 
displayed order flow to the Exchange. Further, as noted above, the 
Exchange would uniformly assess the routing fee on all ETP Holders who 
choose to route orders through the Exchange to Nasdaq or Cboe BZX for 
execution in an auction conducted on those markets. Finally, the 
Exchange believes that the amended benchmark to qualify for the 
incremental credit applicable to LMMs, and ETP Holders affiliated with 
such LMMs, would continue to incentivize market participants to direct 
their displayed order flow to the Exchange. Greater liquidity benefits 
all market participants on the Exchange by providing more trading 
opportunities and encourages LMMs, to send orders to the Exchange, 
thereby contributing to robust levels of liquidity, which benefits all 
market participants. The proposed rule change 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 
above, the Exchange's current market share of intraday trading (i.e., 
excluding auctions) is less than 12%. 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) \37\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \38\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
---------------------------------------------------------------------------

    \37\ 15 U.S.C. 78s(b)(3)(A).
    \38\ 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) \39\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \39\ 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-2020-21 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-2020-21. 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/

[[Page 17119]]

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-2020-21, and should 
be submitted on or before April 16, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\40\
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    \40\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-06298 Filed 3-25-20; 8:45 am]
BILLING CODE 8011-01-P


