[Federal Register Volume 85, Number 93 (Wednesday, May 13, 2020)]
[Notices]
[Pages 28676-28685]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-10219]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88833; File No. SR-NYSEARCA-2020-39]


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

May 7, 2020.
    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 May 1, 2020, NYSE Arca, Inc. (``NYSE Arca'' or the 
``Exchange'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

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

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the NYSE Arca Equities Fees and 
Charges (``Fee Schedule'') to (1) adopt a new pricing tier, Step Up 
Tier 5; (2) modify the requirements associated with the Step Up Tier 4 
pricing tier; (3) increase the per share credit applicable to Retail 
Orders; (4) adopt an alternative requirement to qualify for the Tape B 
Tier 2 pricing tier; and (5) adopt an incremental per share credit 
payable under the Cross-Asset Tier 2 pricing tier. The Exchange 
proposes to implement the fee changes effective May 1, 2020. 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) adopt a new 
pricing tier, Step Up Tier 5; (2) modify the requirements associated 
with the Step Up Tier 4 pricing tier; (3) increase the per share credit 
applicable to Retail Orders; (4) adopt an alternative requirement to 
qualify for the Tape B Tier 2 pricing tier; and (5) adopt an 
incremental per share credit payable under the Cross-Asset Tier 2 
pricing tier.
    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 \4\ to 
send additional displayed liquidity to the Exchange.
---------------------------------------------------------------------------

    \4\ All references to ETP Holders in connection with this 
proposed fee change include Market Makers.

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

[[Page 28677]]

    The Exchange proposes to implement the fee changes effective May 1, 
2020.
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.'' \5\
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
---------------------------------------------------------------------------

    As the Commission itself recognized, the market for trading 
services in NMS stocks has become ``more fragmented and competitive.'' 
\6\ Indeed, equity trading is currently dispersed across 13 
exchanges,\7\ numerous alternative trading systems,\8\ 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).\9\ 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 equities 
trading.\10\
---------------------------------------------------------------------------

    \6\ See Securities Exchange Act Release No. 51808, 84 FR 5202, 
5253 (February 20, 2019) (File No. S7-05-18) (Final Rule).
    \7\ 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.
    \8\ 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.
    \9\ See Cboe Global Markets U.S. Equities Market Volume Summary, 
available at http://markets.cboe.com/us/equities/market_share/.
    \10\ See id.
---------------------------------------------------------------------------

    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
Step Up Tier 5
    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.
    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).
------------------------------------------------------------------------

    The Exchange proposes to amend the Fee Schedule to introduce a new 
pricing tier--Step Up Tier 5--for securities with a per share price of 
$1.00 or above.
    As proposed, ETP Holders would qualify for the new Step Up Tier 5 
if they directly execute providing ADV per month that is at least 0.20% 
of US CADV \11\ and execute providing ADV per month as a percentage of 
US CADV that is at least two times more than that ETP Holder's 
providing ADV in April 2020 as a percentage of US CADV. ETP Holders 
that qualify for Step Up Tier 5 would receive a credit of $0.0032 per 
share for orders that provide displayed liquidity to the Book in Tape 
A, Tape B and Tape C securities.
---------------------------------------------------------------------------

    \11\ 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.
---------------------------------------------------------------------------

    For all other fees and credits, tiered or basic rates apply based 
on a firm's qualifying levels.
    For example, assume an ETP Holder has an adding ADV of 0.10% of US 
CADV in all securities in the baseline month of April 2020. Assume 
further that the same ETP Holder has an adding ADV of 0.20% of US CADV 
in all securities in the billing month. The ETP Holder in the above 
example would qualify for the proposed Step Up Tier 5 with an adding 
ADV step up of 0.10% of US CADV (i.e., 0.20% US CADV) and an adding ADV 
that is at least two times the ETP Holder's April 2020 Baseline of 
0.10%. If instead, the ETP holder had an adding ADV of 0.12% of US CADV 
in the baseline month of April 2020, that ETP Holder would then need an 
adding ADV of at least 0.24%, which is two times the 0.12% adding ADV 
in the baseline month. ETP Holders with less than 0.10% in the baseline 
month would need to add 0.20% of US CADV, as that is more than two 
times any adding ADV baseline under 0.10%.
    The goal of the proposed Step Up Tier 5 pricing tier is to 
incentivize ETP Holders to increase the orders sent directly to the 
Exchange and therefore provide liquidity that supports the quality of 
price discovery and promotes market transparency.
    While the proposed pricing tier would pay a credit that is lower 
than that available to ETP Holders under Step Up Tier 4, the proposed 
pricing tier also adopts lower volume thresholds than that required to 
qualify for Step Up Tier 4. The proposed pricing tier, however, pays a 
credit that is higher than the Step Up Tier, Step Up Tier 2 and Step Up 
Tier 3. While the Adding ADV of 0.20% requirement in proposed Step Up 
Tier 5 is less than the adding ADV requirement in Step Up Tier (0.50% 
of US CADV and an adding ADV step up of 0.10% US CADV) and Step Up Tier 
2 (0.22% of US CADV and an adding ADV step up of 0.06%), proposed Step 
Up Tier 5 has the

[[Page 28678]]

additional higher requirement for ETP Holders to double their adding 
ADV as a percent of US CADV. An ETP Holder that has 0.40% US CADV can 
increase their adding ADV by 0.10% to reach the 0.50% CADV requirement 
to qualify for Step Up Tier, which is only an increase of 25% over the 
ETP Holder's 0.40% baseline.
Step Up Tier 4
    As described in greater detail below, the Exchange proposes to 
modify the volume requirements applicable to ETP Holders to qualify for 
the Step Up Tier 4 pricing tier by lowering the percentage threshold 
that an ETP Holder must meet.\12\
---------------------------------------------------------------------------

    \12\ See Securities Exchange Act Release Nos. 85311 (March 14, 
2019), 84 FR 10348 (March 20, 2019) (SR-NYSEArca-2019-10); and 87292 
(October 11, 2019), 84 FR 55603 (October 17, 2019) (SR-NYSEArca-
2019-70).
---------------------------------------------------------------------------

    Under 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 pricing tier, 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.\13\
---------------------------------------------------------------------------

    \13\ See Securities Exchange Act Release No. 86122 (June 17, 
2019), 84 FR 29258 (June 21, 2019) (SR-NYSEArca-2019-43).
---------------------------------------------------------------------------

    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 0.55% of US CADV for the billing month to a 
minimum of 0.40% of US CADV for the billing month.
    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, two 
ETP Holder have 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 more 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.
---------------------------------------------------------------------------

    \14\ As of April 27, 2020, there is one ETP Holder on the 
Exchange that qualifies for the Exchange's Step Up Tier 4 pricing 
tier.
---------------------------------------------------------------------------

    The Exchange is not proposing to amend any of the credits payable 
under the Step Up Tier 4.
    Additionally, in a recent filing related to the Step Up Tier 4 
pricing tier, the Exchange adopted a cap applicable to the Step Up Tier 
4 credit in Tape B securities and noted in such filing that 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.\15\ The Fee Schedule currently states that ``ETP Holders 
and Market Makers that qualify for Step Up Tier 4 shall not receive any 
additional incremental Tape B Tier credits for providing displayed 
liquidity.'' The Exchange proposes to clarify the applicability of the 
cap by adding ``including any incremental credits associated with Less 
Active ETP Securities'' at the end of the sentence. The Exchange 
believes codifying the cap language into the Fee Schedule will provide 
clarity to the Fee Schedule and avoid investor confusion.
---------------------------------------------------------------------------

    \15\ See Securities Exchange Act Release No. 88436 (March 20, 
2020), 85 FR 17112 (March 26, 2020) (SR-NYSEArca-2020-21).
---------------------------------------------------------------------------

Retail Orders
    As noted above, the market for trading services in NMS stocks has 
become ``more fragmented and competitive.'' \16\ The competition for 
Retail Order flow is even more stark, particularly as it relates to 
exchange versus off-exchange venues. For example, the Exchange examined 
Rule 606 disclosures from two prominent retail brokerages: E-Trade and 
TD Ameritrade. For securities listed on the New York Stock Exchange LLC 
in the fourth quarter of 2019, TD Ameritrade routed 95% of its limit 
orders to off-exchange venues.\17\ Similarly, E-Trade Financial routed 
more than 73% of its limit orders to off-exchange venues.\18\
---------------------------------------------------------------------------

    \16\ See Securities Exchange Act Release No. 51808, 84 FR 5202, 
5253 (February 20, 2019) (File No. S7-05-18) (Transaction Fee Pilot 
for NMS Stocks Final Rule) (``Transaction Fee Pilot'').
    \17\ See https://www.tdameritrade.com/retail-en_us/resources/pdf/AMTD2054.pdf.
    \18\ See https://content.etrade.com/etrade/powerpage/pdf/OrderRouting11AC6.pdf.
---------------------------------------------------------------------------

    The Exchange thus needs to compete in the first instance with non-
exchange venues for Retail Order flow, and with the 13 other exchange 
venues for that Retail Order flow that is not directed off-exchange. 
This competition is particularly acute for non-marketable Retail 
Orders, i.e., Retail Orders that provide liquidity, and even more 
fiercely for non-marketable Retail Orders that provide displayed 
liquidity on an exchange. Accordingly, competitive forces compel the 
Exchange to use exchange transaction fees and credits, particularly as 
they relate to competing for Retail Order flow, because market 
participants can readily trade on competing venues if they deem pricing 
levels at those other venues to be more favorable.
    In response to this competitive environment, the Exchange currently 
provides credits to ETP Holders who enter Retail Orders \19\ on the 
Exchange. The Exchange has multiple levels of such credits that are 
based on an ETP Holder's trading volume of Retail Orders on the 
Exchange.\20\ ETP Holders that do not qualify for tiered pricing 
currently receive, under the Basic Rates section of the Fee Schedule, a 
credit of $0.0030 per share for Retail Orders in Tape A, Tape B and 
Tape C securities that provide liquidity to the Book. With this 
proposed rule change, the Exchange proposes to increase the base credit 
from $0.0030 per share to $0.0032 per share.
---------------------------------------------------------------------------

    \19\ A Retail Order is an agency order that originates from a 
natural person and is submitted to the Exchange by an ETP Holder, 
provided that no change is made to the terms of the order to price 
or side of market and the order does not originate from a trading 
algorithm or any other computerized methodology. See Securities 
Exchange Act Release No. 67540 (July 30, 2012), 77 FR 46539 (August 
3, 2012) (SR-NYSEArca-2012-77).
    \20\ See Retail Order Tier, Retail Order Step-Up Tier 1 and 
Retail Order Step-Up Tier 2 on the Fee Schedule at https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf.
---------------------------------------------------------------------------

    The proposed change would reduce the difference in credits 
available to Retail Orders that provide displayed

[[Page 28679]]

liquidity on the Exchange from ETP Holders qualifying for the base 
credit versus the tiered credits available to Retail Orders that 
provide displayed liquidity on the Exchange. The Exchange believes that 
by increasing the base credit, it would be more closely align with the 
credits available for other Retail Orders that provide liquidity on the 
Exchange.
Tape B Tier 2
    Currently, under the Tape B Tier 2 pricing tier, an ETP Holder 
could qualify for a credit of $0.0028 per share \21\ if such ETP 
Holders, on a daily basis, measured monthly, directly executes 
providing volume in Tape B Securities during the billing month (``Tape 
B Adding ADV'') that is either (1) equal to at least 1.0% of the US 
Tape B CADV or (2) equal to at least 0.20% of the US Tape B CADV for 
the billing month over the ETP Holder's Q2 2015 Tape B Adding ADV taken 
as a percentage of Tape B CADV. The Exchange proposes to introduce a 
third method of qualifying for Tape B Tier 2 credits.
---------------------------------------------------------------------------

    \21\ Under the Basic Rate, ETP Holders receive a credit of 
$0.0020 per share for Tape B orders that provide liquidity to the 
Book.
---------------------------------------------------------------------------

    As proposed, ETP Holders could qualify for the Tape B Tier 2 credit 
of $0.0028 per share for providing liquidity to the Book in Tape B 
Securities if such ETP Holder, on a daily basis, measured monthly, 
directly executes Tape B Adding ADV that is equal to at least 0.25% of 
the US Tape B CADV for the billing month over the ETP Holder's April 
2020 Tape B Adding ADV taken as a percentage of Tape B CADV.
    The Exchange believes that, by providing for an additional method 
of qualifying for Tape B Tier 2, this proposed change will provide a 
greater incentive to attract additional liquidity from additional ETP 
Holders in Tape B Securities so as to qualify for the Tape B Tier 2 
credit.
    The Exchange is not proposing any change to the level of Tape B 
Tier 2 credits.
Cross-Asset Tier 2
    The Exchange proposes to adopt an incremental credit under a 
current pricing tier, Cross-Asset Tier 2, that would provide an 
additional incentive for all ETP Holders to provide liquidity in Tapes 
A, B and C Securities.
    The purpose of this proposed rule change is to introduce a new 
incremental credit of $0.0001 per share under Cross-Asset Tier 2 if an 
ETP Holder meets both the existing Cross-Asset Tier 2 requirements \22\ 
and executes a designated percentage of volume of its US CADV, as 
described below.
---------------------------------------------------------------------------

    \22\ To qualify for credits under Cross-Asset Tier 2, ETP 
Holders are required to (a) provide liquidity of 0.30% or more of 
the US CADV per month, and (b) have an affiliation with an OTP 
Holder or OTP Firm that provides an ADV of electronic posted 
Customer and Professional Customer executions in all issues on NYSE 
Arca Options (excluding mini options) of at least 0.80% of total 
Customer equity and ETF option ADV as reported by OCC, of which at 
least 0.20% of total Customer equity and ETF option ADV as reported 
by OCC is from Customer and Professional Customer executions in non-
Penny Pilot issues on NYSE Arca Options. See Fee Schedule, Cross-
Asset Tier 2.
---------------------------------------------------------------------------

    The Exchange currently offers tiered pricing that provides ETP 
Holders opportunities to qualify for higher rebates or reduced fees 
where certain volume criteria and thresholds are met. Tiered pricing 
provides an incremental incentive for ETP Holders to strive for higher 
tier levels, which provides increasingly higher discounts for 
satisfying more stringent criteria. More specifically, the Exchange 
currently has multiple levels of credits designed to incentivize ETP 
Holders to achieve certain levels of participation on both the 
Exchange's equities and options platform (``NYSE Arca Options''). Under 
Cross-Asset Tier 1, ETP Holders can currently receive the following 
credits for orders that provide liquidity, i.e., resting limit orders 
available for execution on the Exchange, in Tapes A, B and C 
Securities: $0.0031 per share in Tape A Securities; $0.0030 per share 
in Tape B Securities; and $0.0032 per share in Tape C Securities.\23\ 
Additionally, under Cross-Asset Tier 2, ETP Holders can currently 
receive a credit of $0.0030 per share for orders that provide 
liquidity.
---------------------------------------------------------------------------

    \23\ See Fee Schedule, Cross-Asset Tier 1.
---------------------------------------------------------------------------

    The Exchange proposes to provide an increased incentive for ETP 
Holders that otherwise qualify for the current Cross-Asset Tier 2 to 
send liquidity-providing orders to the Exchange in Tapes A, B and C 
Securities. As proposed, if an ETP Holder meets the requirements of 
Cross-Asset Tier 2 and increases adding and removing liquidity in Tape 
A, Tape B and Tape C Securities combined during the billing month equal 
to at least 0.40% of US CADV above its adding and removing liquidity in 
Tape A, Tape B and Tape C Securities combined of US CADV in Q1 2020 
would be eligible for an incremental credit of $0.0001 per share for 
orders that provide liquidity to the Book in Tape A, Tape B, and Tape C 
Securities.
    For example, if an ETP Holder that qualifies for Cross-Asset Tier 2 
has an adding ADV of 18 million shares and a removing ADV of 12 million 
shares, or 30 million shares combined ADV in Q1 2020. If US CADV for Q1 
2020 was 6 billion shares, the ETP Holder would have an adding and 
removing ADV of 0.50% of US CADV in the baseline period. If the same 
ETP Holder had an adding and removing ADV of 54 million shares combined 
in a month where US CADV was also 6 billion shares, for an adding and 
removing ADV of 0.90% of US CADV, that ETP Holder would meet the 
additional requirement because the ETP Holder would have a step up of 
0.40% of adding and removing ADV over its baseline month. The ETP 
Holder would then qualify for an incremental credit of $0.0001 per 
share for providing liquidity, for a combined credit of $0.0031 per 
share.
    The proposed rule change is designed to be available to all ETP 
Holders on the Exchange and is intended to provide ETP Holders an 
additional opportunity to receive an enhanced rebate by executing more 
of their orders on the Exchange.
    The Exchange proposes to increase the credits available under the 
Cross-Asset Tier 2 pricing tier to provide an incentive for ETP Holders 
to send increased order flow. If an ETP Holder qualifies for Cross-
Asset Tier 2 and meets the additional proposed requirement, that ETP 
Holder would be eligible for an incremental credit as compared to the 
current credit for qualifying for Cross-Asset Tier 2, which is $0.0030 
per share credit for orders that provide liquidity in Tapes A, B and C 
Securities.
    The Exchange does not know how much order flow ETP Holders choose 
to route to other exchanges or to off-exchange venues. No ETP Holder 
currently qualifies for the credit under the current Cross-Asset Tier 1 
pricing tier and one ETP Holder currently qualifies for the credits 
under the current Cross-Asset Tier 2 pricing tier.\24\ However, without 
having a view of ETP Holders' activity on other markets and off-
exchange venues, the Exchange has no way of knowing whether this 
proposed rule change would result in any ETP Holders qualifying for the 
incremental credit. The Exchange believes the proposed increased credit 
for Cross-Asset Tier 2 would provide an incentive for ETP Holders to 
submit additional liquidity-providing orders to the Exchange to qualify 
for the incremental credit.
---------------------------------------------------------------------------

    \24\ As of April 14, 2020, there are 53 firms that are both ETP 
Holders and OTP Holders.
---------------------------------------------------------------------------

    The proposed changes are not otherwise intended to address any 
other issues, and the Exchange is not aware of

[[Page 28680]]

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,\25\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\26\ 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.
---------------------------------------------------------------------------

    \25\ 15 U.S.C. 78f(b).
    \26\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

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.'' \27\
---------------------------------------------------------------------------

    \27\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
---------------------------------------------------------------------------

    As the Commission itself recognized, the market for trading 
services in NMS stocks has become ``more fragmented and competitive.'' 
\28\ Indeed, equity trading is currently dispersed across 13 
exchanges,\29\ 31 alternative trading systems,\30\ and numerous 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).\31\ Therefore, no exchange possesses significant pricing power 
in the execution of equity order flow. More specifically, as noted 
earlier, the Exchange currently has less than 12% market share of 
executed volume of equities trading.\32\
---------------------------------------------------------------------------

    \28\ See Securities Exchange Act Release No. 51808, 84 FR 5202, 
5253 (February 20, 2019) (File No. S7-05-18) (Final rule).
    \29\ See Cboe Global Markets, U.S Equities Market Volume 
Summary, available at https://markets.cboe.com/us/equities/market_share/.
    \30\ 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.
    \31\ See Cboe Global Markets U.S. Equities Market Volume 
Summary, available at http://markets.cboe.com/us/equities/market_share/.
    \32\ See id.
---------------------------------------------------------------------------

    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, 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.
Step Up Tier 5
    The Exchange believes the proposal to adopt the Step Up Tier 5 
pricing tier is reasonable as it would serve as an incentive to market 
participants to increase the orders sent directly to NYSE Arca and 
therefore provide liquidity that supports the quality of price 
discovery and promotes market transparency. The Exchange believes the 
proposed pricing tier, which adopts a lower threshold, is reasonable 
and equitable because it would allow ETP Holders to receive increased 
credits from those currently available under Step Up Tiers 1, 2 and 3. 
Moreover, the addition of the Step Up Tier 5 pricing tier would benefit 
market participants whose increased order flow provides meaningful 
added levels of liquidity thereby contributing to the depth and market 
quality on the Exchange. Further, the Exchange believes the proposed 
pricing tier is reasonable as it requires ETP Holders to double their 
adding ADV as a percent of US CADV in addition to meeting the 0.20% 
adding ADV requirement to qualify for the proposed credit. A firm with 
an adding ADV of 0.25% of US CADV would need to increase it to 0.50% to 
qualify.
Step Up Tier 4
    The Exchange believes the proposed change to lower the volume 
requirements under the Step Up Tier 4 pricing tier 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.
    Because only two ETP Holders to date have 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 more 
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 notes that volume-based incentives and discounts have 
been widely adopted by exchanges,\33\ including the Exchange,\34\ 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.
---------------------------------------------------------------------------

    \33\ 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 $0.0033 per share for displayed orders 
where BZX members meet certain volume thresholds.
    \34\ 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.
---------------------------------------------------------------------------

    The Exchange believes its proposal to amend the Fee Schedule to 
codify the fee cap applicable to the Step Up Tier 4 pricing tier is 
reasonable as it would add clarity and result in a more transparent Fee 
Schedule. The Exchange believes the proposed change would allow ETP 
Holders to more easily validate the bills that they receive from the 
Exchange, thus alleviating potential confusion.
Retail Orders
    The Exchange believes that the proposed change is reasonable 
because the increased credit for Retail Orders would continue to 
encourage ETP

[[Page 28681]]

Holders to send Retail Orders to the Exchange. As noted above, the 
Exchange operates in a highly competitive environment, particularly for 
attracting Retail Order flow that provides displayed liquidity on an 
exchange. The Exchange believes it is reasonable to continue to provide 
an increased credit for Retail Orders that provide displayed liquidity. 
The Exchange believes the proposed change is also reasonable because it 
is designed to attract higher volumes of Retail Orders transacted on 
the Exchange by ETP Holders which would benefit all market participants 
by offering greater price discovery, increased transparency, and an 
increased opportunity to trade on the Exchange.
Tape B Tier 2
    The Exchange believes the proposed change to the Tape B Tier 2 
pricing tier is reasonable because it would apply to ETP Holders that 
provide liquidity to the Exchange and is designed to incentivize ETP 
Holders to increase the orders sent directly to the Exchange and 
therefore provide liquidity that supports the quality of price 
discovery and promotes market transparency.
    The Exchange believes that the proposed new threshold for 
qualifying for Tape B Tier 2 is reasonable because it is designed to 
encourage increased trading activity on the NYSE Arca equity market. 
The Exchange believes it is reasonable to require ETP Holders to meet 
the applicable volume threshold to qualify for the Tape B Tier 2 
credit. Further, the proposed change is reasonable as it would allow 
ETP Holders an additional method to qualify for the credit payable 
under the pricing tier if ETP Holders are unable to meet either of the 
two existing requirements. Additionally, ETP Holders that cannot meet 
the higher threshold for the Tape B Tier 1 credits would be able to 
qualify for the Tape B Tier 2 credit, which while providing for a lower 
credit, also has lower requirements to qualify for such credit.
Cross-Asset Tier 2
    The Exchange believes the proposed increased credit is reasonable 
as it would provide an additional incentive for ETP Holders to qualify 
for the new incremental credit and direct their order flow to the 
Exchange and provide meaningful added levels of liquidity, thereby 
contributing to the depth and market quality on the Exchange. As noted 
above, the Exchange operates in a highly competitive environment, 
particularly for attracting order flow that provides liquidity on an 
exchange. The Exchange believes it is reasonable to continue to provide 
a higher credit for orders that provide liquidity if an ETP Holder 
meets the heightened volume requirements to qualify for the new 
incremental credit.
    Because the proposed amendment to the Cross-Asset Tier 2 pricing 
tier would be new with a requirement to increase liquidity providing 
orders, no ETP Holder currently qualifies for the proposed new 
incremental credit.
    As noted above, volume-based incentives and discounts have been 
widely adopted by exchanges, 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.
    As noted previously, there are a small number of firms that 
currently qualify or could qualify for the credits under the current 
Cross-Asset Tier 1 and Cross-Asset Tier 2 pricing tiers and if these 
firms were to submit more of their liquidity-providing orders to the 
Exchange, each could qualify for the proposed new incremental credit. 
However, without having a view of ETP Holders' activity on other 
markets and off-exchange venues, the Exchange has no way of knowing 
whether this proposed rule change would result in any ETP Holders 
qualifying for the new incremental credit. The Exchange believes the 
proposed incremental credit would provide an incentive for ETP Holders 
to submit additional adding and removing liquidity to qualify for the 
additional credit.
    The Exchange believes that the proposed new credit for liquidity 
providing orders in Tapes A, B and C Securities under the current 
Cross-Asset Tier 2 pricing tier is reasonable because it provides an 
incentive for ETP Holders to route additional liquidity-providing and 
removing order flow to the Exchange, which would promote price 
discovery and increase execution opportunities for all ETP Holders. The 
proposed pricing is structured similarly to the incremental credit the 
Exchange currently provides under current Cross-Asset Tier 2, which 
likewise provides ETP Holders an incremental credit of $0.0004 per 
share (above the tiered rate of $0.0030 per share) if the ETP Holder 
meets the qualifying requirements.\35\ The Exchange believes that the 
proposed change to the Cross-Asset Tier 2 pricing tier is reasonable 
because an ETP Holder that otherwise qualifies for the tier would still 
be eligible for the current per share credit of $0.0030 per share for 
orders that provide liquidity. The proposed additional credit is 
designed to provide an incentive for such ETP Holder to route 
additional providing and removing liquidity to the Exchange, which 
would be eligible for the higher credit.
---------------------------------------------------------------------------

    \35\ See Fee Schedule, Cross-Asset Tier 2. See also Securities 
and Exchange Act Release No. 80920 (June 14, 2017), 82 FR 28106 
(June 20, 2017) (SR-NYSEArca-2017-64).
---------------------------------------------------------------------------

    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.
Step Up Tier 5
    The Exchange believes the proposed pricing tier is equitable 
because it would allow ETP Holders to receive increased credits from 
those currently available under Step Up Tiers 1, 2 and 3. Moreover, the 
addition of the Step Up Tier 5 pricing tier would benefit market 
participants whose increased order flow provides meaningful added 
levels of liquidity thereby contributing to the depth and market 
quality on the Exchange. Given that Step Up Tier 5 would be a new 
pricing tier, no ETP Holder currently qualifies for the proposed 
credit. And 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 would 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.
Step Up Tier 4
    First, the Exchange is not proposing to adjust the amount of the 
Step Up Tier 4 credits, which will remain at the

[[Page 28682]]

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 by more ETP 
Holders 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, only one 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 
additional 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.
    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. 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 only one ETP Holder presently qualifies for the credits 
associated with Step Up Tier 4, the proposal will not adversely impact 
such ETP Holder's existing pricing or its ability to qualify for other 
credits provided by the Exchange.
    Finally, the Exchange believes its proposal to amend the Fee 
Schedule to codify the fee cap applicable to the Step Up Tier 4 pricing 
tier is equitable as it would add clarity and result in a more 
transparent Fee Schedule. The Exchange believes the proposed change 
would allow ETP Holders to more easily validate the bills that they 
receive from the Exchange, thus alleviating potential confusion.
Retail Orders
    The Exchange believes it is an equitable allocation of reasonable 
fees to increase the credit that would be available for Retail Orders 
because it would reduce the difference in credits available for Retail 
Orders that provide liquidity, while still providing increased credits 
under the Retail Order Tiers to provide an incentive for ETP Holders to 
route displayed liquidity to the Exchange.
    Further, given the competitive market for attracting Retail Order 
flow, the Exchange notes that with this proposed rule change, the 
Exchange's pricing for Retail Orders would be comparable to credits 
currently in place on other exchanges that the Exchange competes with 
for order flow. For example, the Nasdaq Stock Market LLC (``Nasdaq'') 
provides its members with a non-tier credit of $0.00325 per share for 
Retail Orders that provide liquidity on that market,\36\ while BZX 
provides its members with a credit of $0.0032 per share for retail 
orders that add liquidity to that market.\37\
---------------------------------------------------------------------------

    \36\ See Nasdaq Price List, Rebate to Add Displayed Designated 
Retail Liquidity, at http://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2.
    \37\ See BZX Fee Schedule, Fee Codes and Associated Fees, at 
https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/.
---------------------------------------------------------------------------

    The Exchange further believes that the proposed change is equitable 
because it is reasonably related to the value to the Exchange's market 
quality associated with higher volume in Retail Orders. The Exchange 
notes that currently only 11 firms submit Retail Orders that add 
liquidity on the Exchange and of those 11 firms, 9 qualify for the base 
Retail Order credit, while the other 2 qualify for higher tiered Retail 
Order credits. More firms could receive the base Retail Order credit of 
$0.0032 if those firms directed their Retail Orders to the Exchange.
    Further, the Exchange notes that, with this proposed rule change, 
the difference between the highest credit provided for Retail Orders, 
$0.0035 per share, and the credit for Retail Orders that do not qualify 
for any of the Retail Order pricing tiers, $0.0032 per share, would be 
$0.0003, or 9%, which the Exchange believes is small given the 
requirements that ETP Holders are required to meet to qualify for the 
higher credit. Therefore, the Exchange believes the proposed change to 
the base credit for Retail Orders is equitable, as it would provide 
discounts that are reasonably related to the value to the Exchange's 
market quality associated with higher volumes associated with the 
submission of Retail Orders to the Exchange.
    The Exchange believes that recalibrating the credits for providing 
liquidity will continue to attract order flow and liquidity to the 
Exchange, thereby contributing to price discovery on the Exchange and 
benefiting investors generally.
    The Exchange believes that the proposed rule change is equitable 
because maintaining or increasing the proportion of Retail Orders in 
exchange-listed securities that are executed on a registered national 
securities exchange (rather than relying on certain available off-
exchange execution methods) would contribute to investors' confidence 
in the fairness of their transactions and would benefit all investors 
by deepening the Exchange's liquidity pool, supporting the quality of 
price discovery, promoting market transparency and improving investor 
protection.
Tape B Tier 2
    The Exchange believes the proposed change to the Tape B Tier 2 
pricing tier is equitably allocated because it would apply to ETP 
Holders that provide liquidity to the Exchange and is designed to 
incentivize these market participants to increase the orders sent 
directly to the Exchange and therefore, provide liquidity that supports 
the quality of price discovery and promotes market transparency.
    The Exchange believes the Tape B Tier 2 pricing tier is equitable 
because it is open to all similarly situated ETP Holders on an equal 
basis and provide a per share credit that is reasonably related to the 
value of an exchange's market quality associated with higher volumes. 
The Exchange believes it is equitable to require ETP Holders to meet 
the applicable volume thresholds to qualify for the Tape B Tier 2 
credit. Further, the proposed change is equitable as it would allow ETP 
Holders an additional method to qualify for the credit payable under 
the pricing tier if

[[Page 28683]]

ETP Holders are unable to meet either of the two existing requirements.
    The Exchange believes the Tape B Tier 2 pricing tier is equitable 
because it is open to all similarly situated ETP Holders on an equal 
basis and provides a credit that is reasonably related to the value of 
an exchange's market quality associated with higher volumes.
Cross-Asset Tier 2
    The Exchange believes that the proposed increased credit under the 
Cross-Asset Tier 2 pricing tier is equitable because the magnitude of 
the additional credit is not unreasonably high in comparison to the 
credit paid with respect to other pricing tiers on the Exchange, and in 
comparison to the credits paid by other exchanges for orders that 
provide liquidity. For example, ETP Holders currently receive credits 
in Tape A, Tape B and Tape C Securities that range between $0.0022 per 
share and $0.0034 per share under Step Up Tier, Step Up Tier 2, Step Up 
Tier 3, Step Up Tier 4, and proposed Step Up Tier 5.
    With respect to credits paid by the Exchange's competitors, BZX 
provides a credit of $0.0031 per share in Tape B Securities under that 
market's Cross-Asset pricing tier.\38\
---------------------------------------------------------------------------

    \38\ See BZX Fee Schedule, Cross-Asset Tape B Tier, at https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/.
---------------------------------------------------------------------------

    The Exchange believes that the proposed new incremental credit for 
liquidity providing orders in Tapes A, B and C Securities under current 
Cross-Asset Tier 2 is also equitable because the proposal would 
continue to encourage ETP Holders to route liquidity-providing orders 
to the Exchange in Tapes A, B and C Securities, thereby contributing to 
robust levels of liquidity, which benefits all market participants.
    As noted above, there are a small number of firms that currently 
qualify or could qualify for the credits under the current Cross-Asset 
Tier 1 and Cross-Asset Tier 2 pricing tiers and if these firms were to 
submit more of their liquidity-providing orders to the Exchange, each 
could qualify for the proposed new incremental credit. However, without 
having a view of an ETP Holder's activity on other markets and off-
exchange venues, the Exchange believes the proposed new incremental 
credit would provide an incentive for market participants to increase 
liquidity in order to qualify for the proposed new incremental credit, 
thereby encouraging submission of additional liquidity to the Exchange. 
The proposed change will thereby encourage the submission of additional 
liquidity to a national securities exchange, thus promoting price 
discovery and transparency and enhancing order execution opportunities 
for ETP Holders from the substantial amounts of liquidity present on 
the Exchange. All ETP Holders would benefit from the greater amounts of 
liquidity that will be present on the Exchange, which would provide 
greater execution opportunities.
    The Exchange believes the proposed rule change would improve market 
quality for all market participants on the Exchange and, as a 
consequence, attract more liquidity to the Exchange thereby improving 
market-wide quality. ETP Holders that currently qualify for credits 
associated with Cross-Asset pricing tiers on the Exchange will continue 
to receive credits when they provide liquidity to the Exchange. The 
Exchange believes that recalibrating the credits for providing 
liquidity will continue to attract order flow and liquidity to the 
Exchange for the benefit of investors generally. As to those market 
participants that do not presently qualify for the credits associated 
with Cross-Asset Tier 2, 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.
Step Up Tier 5
    The Exchange believes that the proposed new Step Up Tier 5 pricing 
tier is not unfairly discriminatory because it is open to all ETP 
Holders, on an equal basis, that meet the requirements to qualify for 
the tier. The proposed pricing tier would also serve as an incentive to 
ETP Holders and Market Makers that do not currently meet the 
requirement of other pricing tiers on the Exchange to increase the 
level of orders sent directly to NYSE Arca in order to qualify for, and 
receive the higher credits associated with proposed Step Up Tier 5. The 
proposed pricing tier would apply equally to all ETP Holders as each 
would be required to execute providing ADV per month that is at least 
0.20% of US CADV and execute providing ADV per month as a percentage of 
US CADV that is at least two times more than that ETP Holders and 
Market Makers providing ADV in April 2020 as a percentage of US CADV, 
regardless of whether an ETP Holder currently meets the requirement of 
another pricing tier.
Step Up Tier 4
    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 and adopt clarifying language with respect to the 
cap currently applicable for ETP Holders that qualify for the Step Up 
Tier 4 pricing tier as the proposed change would apply on an equal 
basis to all ETP Holders. 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 0.40% 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.
Retail Orders
    The Exchange believes that the proposed change is not unfairly 
discriminatory because it would apply to all ETP Holders on an equal 
and non-discriminatory basis. The Exchange further 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 in Retail Orders. Further, the Exchange notes that, with 
this proposed rule change, the difference between the highest credit 
provided for Retail Orders, $0.0035 per share, and the credit for 
Retail Orders that do not qualify for any of the Retail Order pricing 
tiers, $0.0032 per share,

[[Page 28684]]

would be $0.0003, or 9%, which the Exchange believes is small given the 
requirements that ETP Holders are required to meet to qualify for the 
higher credit. Therefore, the Exchange believes the proposed change to 
the base credit for Retail Orders is not unfairly discriminatory, as it 
would continue to provide discounts that are reasonably related to the 
value to the Exchange's market quality associated with higher volumes 
under the current Retail Order tiers.
    The Exchange believes that recalibrating the credits for providing 
liquidity will continue to attract order flow and liquidity to the 
Exchange, thereby contributing to price discovery on the Exchange and 
benefiting investors generally.
    The Exchange believes that the proposed rule change is not unfairly 
discriminatory because maintaining or increasing the proportion of 
Retail Orders in exchange-listed securities that are executed on a 
registered national securities exchange (rather than relying on certain 
available off-exchange execution methods) would contribute to 
investors' confidence in the fairness of their transactions and would 
benefit all investors by deepening the Exchange's liquidity pool, 
supporting the quality of price discovery, promoting market 
transparency and improving investor protection. This aspect of the 
proposed rule change also is consistent with the Act because all 
similarly situated ETP Holders would be eligible to qualify for the 
credit. Furthermore, the submission of Retail Orders is optional for 
ETP Holders in that they could choose whether to submit Retail Orders 
and, if they do, the extent of its activity in this regard.
Tape B Tier 2
    The Exchange believes that the proposed new method of qualifying 
for the Tape B Tier 2 credit is not unfairly discriminatory because it 
would be available to all ETP Holders on an equal and non-
discriminatory basis. In this regard, the Exchange notes that ETP 
Holders that do not meet the proposed alternative method would continue 
to have the opportunity to qualify for the Tape B Tier 2 credit by 
satisfying either of the two existing requirements, which would not 
change as a result of this proposal.
    Further, the Exchange believes the proposed additional method to 
qualify for the Tape B Tier 2 credit would incentivize ETP Holders that 
do not meet the current requirements to execute more of their 
liquidity-providers orders on the Exchange to qualify under the 
proposed method. 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 additional method to qualify for the Tape B Tier 2 credit 
would apply equally to all ETP Holders as each would be required to 
meet the new criteria regardless of whether an ETP Holder currently 
meets the requirement of another pricing tier.
Cross-Asset Tier 2
    The Exchange believes it is not unfairly discriminatory to provide 
an incremental per share credit as the proposed increased credit would 
be provided on an equal basis to all ETP Holders that add liquidity by 
meeting the increased volume requirements under the Cross-Asset Tier 2 
pricing tier. Further, the Exchange believes the proposed incremental 
per share credit would incentivize ETP Holders that meet the current 
Cross-Asset Tier 2 pricing tier requirements to execute more of their 
liquidity-providers orders on the Exchange to qualify for the proposed 
incremental credit. 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 incremental per share credit would apply equally to all 
ETP Holders as each would be required to meet the additional criteria 
regardless of whether an ETP Holder currently meets the requirement of 
another pricing tier.
    Similarly, the Exchange believes it is not unfairly discriminatory 
to provide an incremental credit for liquidity providing orders in 
Tapes A, B and C Securities under the current Cross-Asset Tier 2 
pricing tier because the proposed credit would be provided on an equal 
basis to all ETP Holders that add liquidity by meeting the proposed new 
volume requirements.
    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,\39\ 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.'' \40\
---------------------------------------------------------------------------

    \39\ 15 U.S.C. 78f(b)(8).
    \40\ See Securities Exchange Act Release No. 51808, 70 FR 37495, 
37498-99 (June 29, 2005) (S7-10-04) (Final Rule).
---------------------------------------------------------------------------

    Intramarket Competition. The Exchange believes its proposed 
amendments to its Fee Schedule would not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. The Exchange does not believe that the proposed 
change represents a significant departure from previous pricing offered 
by the Exchange or its competitors. The proposed changes are designed 
to attract additional order flow to the Exchange. The Exchange believes 
that the proposed lower volume requirements and alternative criteria to 
qualify for existing pricing tiers would continue to incentivize market 
participants to direct providing displayed order flow to the Exchange. 
The Exchange's proposal to adopt an increased credit for Retail Orders 
would also continue to incentivize ETP Holders to direct more of their 
Retail Orders to the Exchange. Greater liquidity benefits all market 
participants on the Exchange by providing more trading opportunities 
and encourages ETP Holders, to send orders, thereby contributing to 
robust levels of liquidity, which benefits all market participants. 
Moreover, the proposal to modify the Fee Schedule to make clear the 
applicability of the cap under the Step Up Tier 4 pricing tier would 
not pose an undue burden on competition but would instead add clarity 
and transparency to the Fee Schedule regarding the amount of credit 
payable under the Step Up Tier 4 pricing tier.

[[Page 28685]]

    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 market share of intraday trading (i.e., excluding 
auctions) is currently 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) \41\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \42\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
---------------------------------------------------------------------------

    \41\ 15 U.S.C. 78s(b)(3)(A).
    \42\ 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) \43\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \43\ 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-2020-39 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-2020-39. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NYSEARCA-2020-39, and should be 
submitted on or before June 3, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\44\
---------------------------------------------------------------------------

    \44\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-10219 Filed 5-12-20; 8:45 am]
 BILLING CODE 8011-01-P


