[Federal Register Volume 85, Number 164 (Monday, August 24, 2020)]
[Notices]
[Pages 52179-52185]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-18467]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89607; File No. SR-NYSEArca-2020-75]


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

August 18, 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 August 12, 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 self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the NYSE Arca Equities Fees and 
Charges (``Fee Schedule'') to (1) adopt a step up tier for ETP Holders 
adding liquidity in Non-Displayed Limit Orders in Tapes A, B and C 
securities with a per share price at or above $1.00; (2) adopt a step 
up tier for ETP Holders adding liquidity in Round Lots and Odd Lots in 
Tapes A, B and C securities with a per share price below $1.00; and (3) 
amend the base rate for adding and removing liquidity in Round Lots and 
Odd Lots in Tapes A, B and C securities with a per share price below 
$1.00. The proposed rule change is available on the Exchange's website 
at www.nyse.com, at the principal office of the Exchange, and at the 
Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend the Fee Schedule to (1) adopt a step 
up tier for ETP Holders \4\ adding liquidity in Non-Displayed Limit 
Orders \5\ in Tapes A, B and C securities with a per share price at or 
above $1.00; (2) adopt a step up tier for ETP Holders adding liquidity 
in Round Lots and Odd Lots in Tapes A, B and C securities with a per 
share price below $1.00; and (3) amend the base rate for adding and 
removing liquidity in Round Lots and Odd Lots in Tapes A, B and C 
securities with a per share price below $1.00.
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    \4\ All references to ETP Holders in connection with this 
proposed fee change include Market Makers.
    \5\ A Non-Displayed Limit Order is a limit order that is not 
displayed and does not route. See NYSE Arca Rule 7.31-E(d)(2).
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    The proposed changes respond to the current competitive environment 
where

[[Page 52180]]

order flow providers have a choice of where to direct liquidity-
providing orders by offering further incentives for ETP Holders to send 
additional liquidity to the Exchange.
    The Exchange proposes to implement the fee changes effective August 
12, 2020.\6\
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    \6\ The Exchange originally filed to amend the Fee Schedule on 
August 3, 2020 (SR-NYSEArca-2020-73). SR-NYSEArca-2020-73 was 
subsequently withdrawn and replaced by this filing.
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Background
    The Exchange operates in a highly competitive market. The 
Commission has repeatedly expressed its preference for competition over 
regulatory intervention in determining prices, products, and services 
in the securities markets. In Regulation NMS, the Commission 
highlighted the importance of market forces in determining prices and 
SRO revenues and, also, recognized that current regulation of the 
market system ``has been remarkably successful in promoting market 
competition in its broader forms that are most important to investors 
and listed companies.'' \7\
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    \7\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005) (File No. S7-10-04) (Final 
Rule) (``Regulation NMS'').
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    As the Commission itself recognized, the market for trading 
services in NMS stocks has become ``more fragmented and competitive.'' 
\8\ Indeed, equity trading is currently dispersed across 13 
exchanges,\9\ numerous alternative trading systems,\10\ 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).\11\ Therefore, no exchange possesses significant pricing power 
in the execution of equity order flow. More specifically, the Exchange 
currently has less than 10% market share of executed volume of equities 
trading.\12\
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    \8\ 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'').
    \9\ See Cboe Global Markets, 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.
    \10\ 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.
    \11\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, available at http://markets.cboe.com/us/equities/market_share/.
    \12\ 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 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 liquidity on an exchange.
    In response to the competitive environment described above, the 
Exchange has established incentives for ETP Holders who submit orders 
that provide liquidity on the Exchange. The proposed fee change is 
designed to attract additional order flow to the Exchange by offering a 
new pricing tier to incentivize ETP Holders to step up their liquidity-
providing Non-Displayed Limit Orders in Tapes A, B and C securities, a 
new step up pricing tier for Round Lots and Odd Lots in Tapes A, B and 
C securities with a share price of less than $1.00 (``Sub-Dollar 
Securities''), and by amending the base rate for adding and removing 
liquidity in Sub-Dollar Securities.
Proposed Rule Change
Step Up Tier for Adding Liquidity in Non-Displayed Limit Orders
    The Exchange proposes to adopt a step up tier that would offer 
credits to ETP Holders providing non-displayed liquidity to the 
Exchange in Tapes A, B and C securities.
    As proposed, an ETP Holder that, during the billing month, sends 
orders that add liquidity to the Exchange in Non-Displayed Limit Orders 
and Mid-Point Liquidity Orders (``MPL Orders'') \13\ combined, and that 
has adding average daily volume (``ADV'') in Non-Displayed Limit Orders 
and MPL Orders combined as a percent of US Consolidated ADV (``CADV'') 
\14\ that is at least 0.02% more than the ETP Holder's July 2020 Limit 
Non-Displayed Order ADV and MPL Order ADV combined as a percent of US 
CADV (``Non-Displayed and MPL Baseline'') would receive a credit for 
Non-Displayed Limit Orders, as follows:
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    \13\ An MPL Order is a limit order that is not displayed and 
does not route, with a working price at the midpoint of the PBBO. 
See NYSE Arca Rule 7.31-E(d)(3). The term ``PBBO'' refers to the 
Best Protected Bid and the Best Protected Offer on NYSE Arca.
    \14\ US CADV means the United States Consolidated Average Daily 
Volume for transactions reported to the Consolidated Tape, excluding 
odd lots through January 31, 2014 (except for purposes of Lead 
Market Maker pricing), and excludes volume on days when the market 
closes early and on the date of the annual reconstitution of the 
Russell Investments Indexes. Transactions that are not reported to 
the Consolidated Tape are not included in US CADV. See Fee Schedule, 
footnote 3.
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     $0.0004 per share for ETP Holders with at least 0.02% more 
but less than 0.05% than the ETP Holder's Non-Displayed and MPL 
Baseline;
     $0.0010 per share for ETP Holders with at least 0.05% more 
but less than 0.10% than the ETP Holder's Non-Displayed and MPL 
Baseline;
     $0.0015 per share for ETP Holders with at least 0.10% more 
but less than 0.15% than the ETP Holder's Non-Displayed and MPL 
Baseline; and
     $0.0020 per share for ETP Holders with at least 0.15% more 
than the ETP Holder's Non-Displayed and MPL Baseline.
    For example, assume an ETP Holder has an adding ADV in MPL Orders 
of 0.04% of US CADV and an adding ADV in Limit Non-Displayed Orders of 
0.02% of US CADV, for a combined total of 0.06% of US CADV in the 
baseline month of July 2020. Assume further that the same ETP Holder 
has adding ADV in MPL Orders of 0.06% of US CADV and an adding ADV in 
Limit Non-Displayed Orders of 0.03% of US CADV for a combined total of 
0.09% of US CADV in a billing month. The ETP Holder in the above 
example would then have a combined step up in MPL Orders and Limit Non-
Displayed Orders of 0.03% of US CADV (0.09%-0.06%), which would qualify 
the ETP Holder for a credit of $0.0004 per share for Non-Displayed 
Limit Orders for that billing month.
    The purpose of this proposed change is to incentivize ETP Holders 
to increase the liquidity-providing orders in Non-Displayed Limit 
Orders and MPL Orders they send to the Exchange, which would support 
the quality of price discovery on the Exchange and provide additional 
liquidity for incoming orders. As noted above, the Exchange operates in 
a competitive environment, particularly as it relates to attracting 
non-marketable orders, which add liquidity to the Exchange. Because the 
proposed tier requires an ETP Holder to increase the volume of its 
trades in orders that add liquidity over that ETP Holder's July 2020 
baseline, the Exchange believes that the proposed credits would provide 
an incentive for all ETP Holders to send

[[Page 52181]]

additional liquidity to the Exchange in order to qualify for it.
    The Exchange does not know how much order flow ETP Holders choose 
to route to other exchanges or to off-exchange venues. Since the tier's 
requirements utilize an increase in volume from the most recent month, 
the Exchange does not know how many ETP Holders could qualify for the 
proposed tiered credits based on their current trading profile on the 
Exchange, but the Exchange notes that, since the lowest step up is only 
an Adding ADV of 0.02% of US CADV in Non-Displayed Limit Orders and MPL 
Orders combined, the Exchange believes that a number of ETP Holders 
could qualify if they so choose. However, without having a view of ETP 
Holders' activity on other exchanges and off-exchange venues, the 
Exchange has no way of knowing whether this proposed rule change would 
result in any ETP Holder directing orders to the Exchange in order to 
qualify for the new tier.
Step Up Tier for Adding Liquidity in Sub-Dollar Securities
    As described in greater detail below, the Exchange proposes to 
adopt a step up tier that would offer credits to ETP Holders adding 
liquidity in Sub-Dollar Securities. Currently, the Exchange charges a 
fee equal to 0.3% of the total dollar value for orders that take 
liquidity from the Book. The Exchange does not currently offer any 
credits to ETP Holders for adding liquidity to the Exchange in Sub-
Dollar Securities.
    As proposed, an ETP Holder that, during the billing month, on a 
daily basis, measured monthly, has an Adding ADV of 1 million shares 
with a per share price below $1.00 (``Sub-Dollar Adding Orders''), and 
that directly executes providing volume in Sub-Dollar Adding Orders 
equal to at least 0.20% of the CADV with a per share price below $1.00 
(``Sub-Dollar CADV'') over the ETP Holder's July 2020 Sub-Dollar Adding 
ADV taken as a percentage of Sub Dollar CADV (``Sub-Dollar Baseline''), 
would receive a credit for orders that provide liquidity to the Book in 
Sub-Dollar Adding Orders, as follows:
     0.0005% of the total dollar value for an increase of at 
least 0.20% more but less than 0.50% of Sub-Dollar CADV over the Sub-
Dollar Baseline;
     0.0010% of the total dollar value for an increase of at 
least 0.50% more but less than 0.75% of Sub-Dollar CADV over the Sub-
Dollar Baseline;
     0.00125% of the total dollar value for an increase of at 
least 0.75% more but less than 1.0% of Sub-Dollar CADV over the Sub-
Dollar Baseline; and
     0.0015% of the total dollar value for an increase of at 
least 1.0% more of Sub-Dollar CADV over the Sub-Dollar Baseline.
    For example, assume an ETP Holder has an adding ADV in Sub-Dollar 
Adding Orders of 1 million shares in the baseline month of July 2020 
when the Sub-Dollar CADV was 1 billion shares, for an adding ADV in 
Sub-Dollar Adding Orders of 0.10% of Sub-Dollar CADV. Assume further 
that the same ETP Holder has adding ADV in Sub-Dollar Adding Orders of 
4 million shares in the billing month when the Sub-Dollar CADV was 
again 1 billion shares, for an adding ADV in Sub-Dollar Adding Orders 
of 0.40% of Sub-Dollar CADV. The ETP Holder in the above example would 
then have a step up in Sub-Dollar Adding Orders of 0.30% of Sub-Dollar 
CADV (0.40%-0.10%), which would qualify the ETP Holder to receive a 
credit of 0.0005% of the total dollar value for orders that provide 
liquidity to the Book in Sub-Dollar Adding Orders for that billing 
month.
Base Rate for Adding and Removing Liquidity in Sub-Dollar Securities
    As noted above, the Exchange currently does not provide any credit 
for orders that provide liquidity to the Book and charges a fee equal 
to 0.3% of the total dollar value for orders that take liquidity from 
the Book. With this proposed rule change, the Exchange proposes to 
adopt a base credit of $0.00004 per share for adding liquidity in Sub-
Dollar Securities and lower the base rate for removing liquidity in 
Sub-Dollar Securities to 0.295% of the total dollar value for orders 
that take liquidity from the Book.
    In connection with this proposed fee change, the Exchange also 
proposes the following two changes to the Fee Schedule: (1) Insert the 
word ``fee'' after ``0.295%'' to clarify the application of a fee for 
Sub-Dollar Securities; and (2) amend footnote 4 of the Fee Schedule by 
deleting the entire second sentence which currently states that 
``Rebates will not be paid for executions in securities priced under 
$1.00.''
    Trading in Sub-Dollar Securities has intensified in recent months, 
often affected in some way by the current macroeconomic turmoil. The 
purpose of this proposed change is to incentivize ETP Holders to 
increase the liquidity-providing orders in Sub-Dollar Securities they 
send to the Exchange, which would support the quality of price 
discovery on the Exchange and provide additional liquidity for incoming 
orders. The proposed credit for adding liquidity and lower fee for 
removing liquidity in Sub-Dollar Securities is intended to increase 
order flow that would interact with liquidity present on the Exchange.
    As noted above, the Exchange operates in a competitive environment, 
particularly as it relates to attracting non-marketable orders, which 
add liquidity to the Exchange. Because, as proposed, the step up tier 
requires an ETP Holder to increase the volume of its trades in orders 
that add liquidity over that ETP Holder's July 2020 baseline, the 
Exchange believes that the proposed credits would provide an incentive 
for all ETP Holders to send additional liquidity to the Exchange in 
order to qualify for it. The Exchange believes the proposed credit for 
orders that add liquidity combined with the lower base rate for orders 
that would remove liquidity would also incentivize ETP Holders to 
direct liquidity adding and removing orders in low priced securities to 
the Exchange.
    U.S. equity market volumes have been remarkably high since the end 
of February 2020. Extreme volumes in recent weeks are reportedly driven 
by retail traders, leading to record off-exchange (or TRF) market 
share; 5 of the 8 highest TRF market share days ever occurred in the 5 
consecutive trading sessions between June 3 and June 9.\15\ The 
Exchange does not know how much order flow ETP Holders choose to route 
to other exchanges or to off-exchange venues. The Exchange believes the 
proposed credit for adding liquidity in Sub-Dollar Securities and the 
proposed lower fee for removing liquidity in Sub-Dollar Securities 
should serve as an incentive for ETP Holders to direct more of their 
orders in these securities to the Exchange.
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    \15\ See Data Insights, Market volume & off-exchange trading: 
more than a retail story, at https://www.nyse.com/data-insights/market-volume-and-off-exchange-trading.
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    Additionally, since the proposed step up tier's requirements 
utilize an increase in volume from the most recent month, the Exchange 
does not know how many ETP Holders could qualify for the proposed 
tiered credits based on their current trading profile on the Exchange, 
but the Exchange notes that, since the lowest step up is an Adding ADV 
of 0.20% of Sub-Dollar CADV, the Exchange believes that ETP Holders 
could qualify if they so choose. 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 Holder directing orders to the Exchange in order to 
qualify for the new tier. The Exchange cannot predict with

[[Page 52182]]

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.
    The proposed changes are not otherwise intended to address any 
other issues, and the Exchange is not aware of any significant problems 
that market participants would have in complying with the proposed 
changes.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\16\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\17\ in particular, 
because it provides for the equitable allocation of reasonable dues, 
fees, and other charges among its members, issuers and other persons 
using its facilities and does not unfairly discriminate between 
customers, issuers, brokers or dealers.
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    \16\ 15 U.S.C. 78f(b).
    \17\ 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.'' \18\
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    \18\ See Regulation NMS, 70 FR at 37499.
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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 
orders that 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 for Adding Liquidity in Non-Displayed Limit Orders
    Given the competitive environment, the proposed Step Up Tier for 
Adding Liquidity in Non-Displayed Limit Orders and MPL Orders combined 
would provide an incentive for ETP Holders to route additional 
liquidity providing orders to the Exchange in Tapes A, B and C 
securities.
    As noted above, the Exchange operates in a highly competitive 
environment, particularly for attracting non-marketable order flow that 
provides liquidity on an exchange. The Exchange believes it is 
reasonable to provide a higher credit for orders that provide 
additional liquidity. The Exchange believes that requiring ETP Holders 
to have an Adding ADV in Non-Displayed Limit Orders and MPL Orders 
combined that is at least 0.02% of US CADV over that ETP Holder's July 
2020 adding liquidity in Non-Displayed Limit Orders and MPL Orders 
combined taken as a percentage of US CADV in order to qualify for the 
proposed Step Up Tier is reasonable because it would encourage 
additional non-displayed liquidity on the Exchange and because market 
participants benefit from the greater amounts of liquidity and price 
improvement present on the Exchange.
    Similarly, the Exchange believes that it is reasonable to provide 
an higher credit to ETP Holders that meet the requirements of the Step 
Up Tier that add additional liquidity in Non-Displayed Limit Orders and 
MPL Orders. Since the proposed Step Up Tier would be new with a 
requirement for increased Adding ADV over the baseline month, no ETP 
Holder currently qualifies for the proposed pricing tier. While there 
are a number of ETP Holders that could qualify for the proposed higher 
credit, the Exchange has no way of knowing whether the proposed rule 
change would result in any ETP Holder qualifying for the tier without a 
view of ETP Holder activity on other exchanges and off exchange venues. 
The Exchange believes the proposed higher credit is reasonable as it 
would provide an additional incentive for ETP Holders to direct their 
order flow to the Exchange and provide meaningful added levels of 
liquidity in order to qualify for the higher credit, thereby 
contributing to depth and market quality on the Exchange.
Step Up Tier for Adding Liquidity in Sub-Dollar Securities
    The Exchange believes the proposal to adopt the Step Up Tier for 
Adding Liquidity in Sub-Dollar Securities is reasonable as it would 
serve as an incentive to market participants to increase the orders in 
Sub-Dollar Securities 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 is 
reasonable because it would allow ETP Holders to receive credits that 
were not previously available on the Exchange. Moreover, the addition 
of the proposed pricing tier would benefit market participants whose 
increased order flow would provide meaningful added levels of 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,\19\ including the Exchange,\20\ and 
are reasonable, equitable and non-discriminatory because they are open 
to all ETP Holders on an equal basis and provide additional credits 
that are reasonably related to the value to an exchange's market 
quality and associated higher levels of market activity.
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    \19\ See e.g., Cboe BZX U.S. Equities Exchange (``BZX'') Fee 
Schedule, Footnote 1, Add Volume Tiers which provide enhanced 
rebates between $0.0028 and $0.0032 per share for displayed orders 
where BZX members meet certain volume thresholds.
    \20\ See e.g., Fee Schedule, Step Up Tier, Step Up Tier 2, Step 
Up Tier 3 and Step Up Tier 4, which provide enhanced rebates between 
$0.0025 and $0.0033 per share in Tape A Securities, between $0.0022 
and $0.0034 per share in Tape B Securities, and between $0.0025 and 
$0.0033 per share in Tape C Securities for orders that provide 
displayed liquidity where ETP Holders meet certain volume 
thresholds.
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Base Rate for Adding and Removing Liquidity in Sub-Dollar Securities
    The Exchange believes that the proposed rate change for ETP Holders 
will incentivize submission of additional liquidity in Sub-Dollar 
Securities to a public exchange to qualify for the proposed credit of 
$0.00004 per share for adding liquidity and lower fee of 0.295% of the 
total dollar value for removing liquidity, thereby promoting price 
discovery and transparency and enhancing order execution opportunities 
for ETP Holders. The Exchange believes that the proposed credit for 
orders that add liquidity to the Exchange is reasonable because it 
would incentivize ETP Holders to direct more order flow in

[[Page 52183]]

Sub-Dollar Securities to the Exchange. The Exchange notes that the 
proposed credit would be greater than credits offered on other markets. 
For example, BZX and the Nasdaq Stock Market (``Nasdaq'') do not 
provide any credit for orders in Sub-Dollar Securities that add 
liquidity.\21\ While Cboe EDGX U.S. Equities Exchange (``EDGX'') offers 
a credit of $0.00003 per share for orders in Sub-Dollar Securities that 
add liquidity, the credit proposed by this rule change would be greater 
but comparable than that offered by EDGX.\22\
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    \21\ See BZX Fee Schedule, at https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/. See also Nasdaq Price List, 
at http://www.nasdaqtrader.com/Trader.aspx?id=PriceListTrading2.
    \22\ See EDGX Fee Schedule, at https://markets.cboe.com/us/equities/membership/fee_schedule/edgx/.
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    The Exchange further believes that the proposed revised fee for 
orders that remove liquidity from the Exchange is reasonable because it 
would incentivize ETP Holders to remove additional liquidity from the 
Exchange, thereby increasing the number of orders adding liquidity 
executed on the Exchange and improving overall liquidity on a public 
exchange, resulting in lower costs for ETP Holders that qualify for the 
rates. The Exchange notes that the proposed fee would be lower than 
comparable fees offered on other markets. For example, both BZX and 
Nasdaq currently charge a fee of 0.30% of total dollar value for 
removing liquidity in securities priced below $1.00.\23\
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    \23\ See BZX Fee Schedule, at https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/. See also Nasdaq Price List, 
at http://www.nasdaqtrader.com/Trader.aspx?id=PriceListTrading2.
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    On the backdrop of the competitive environment in which the 
Exchange currently operates, the proposed rule change is a reasonable 
attempt to increase liquidity on the Exchange and improve the 
Exchange's market share relative to its competitors.
The Proposed Fee Change Is an Equitable Allocation of Fees and Credits
    The Exchange believes its proposal equitably allocates its fees 
among its market participants by fostering liquidity provision and 
stability in the marketplace.
Step Up Tier for Adding Liquidity in Non-Displayed Limit Orders
    The Exchange believes that the proposed Step Up Tier is equitable 
because the magnitude of the additional credit is not unreasonably high 
relative to the tiered credits for Non-Displayed Limit orders that add 
liquidity offered by, for example, the New York Stock Exchange, which 
range from $0.0005 per share to $0.0018 per share. The Exchange 
believes the proposed rule change would improve market quality for all 
market participants on the Exchange and, as a consequence, attract more 
liquidity to the Exchange, thereby improving market-wide quality and 
price discovery.
    The Exchange believes that requiring ETP Holders to having an 
Adding ADV in Non-Displayed Limit Orders and MPL Orders combined in 
Tapes A, B and C CADV that is at least 0.02% of US CADV over that ETP 
Holder's July 2020 adding liquidity in Non-Displayed Limit Orders and 
MPL Orders taken as a percentage of US CADV in order to qualify for the 
proposed credits would also encourage additional displayed liquidity on 
the Exchange. Since the proposed Step Up Tier would be new, no ETP 
Holder currently qualifies for it, but without a view of ETP Holder 
activity on other exchanges and off-exchange venues, the Exchange has 
no way of knowing whether this proposed rule change would result in any 
ETP Holder qualifying for the tier.
    The Exchange believes the proposed credit is reasonable as it would 
provide an additional incentive for ETP Holders to direct their order 
flow to the Exchange and provide meaningful added levels of liquidity 
in order to qualify for the higher credit, thereby contributing to 
depth and market quality and increased price improvement on the 
Exchange. The proposal neither targets nor will it have a disparate 
impact on any particular category of market participant. All ETP 
Holders would be eligible to qualify for the proposed credit if they 
increase their Adding ADV in Non-Displayed Limit Orders and MPL Orders 
combined over their own baseline of order flow.
    The Exchange believes that offering a higher step up credit for 
providing liquidity if the step up requirements for Tape A, Tape B and 
Tape C securities are met, will continue to attract order flow and 
liquidity to the Exchange, thereby providing additional price 
improvement opportunities on the Exchange and benefiting investors 
generally. As to those market participants that do not presently 
qualify for the adding liquidity credits, the proposal will not 
adversely impact their existing pricing or their ability to qualify for 
other credits provided by the Exchange.
Step Up Tier for Adding Liquidity in Sub-Dollar Securities
    The Exchange believes the proposed pricing tier is equitable 
because it would allow ETP Holders to receive credits that were not 
previously available on the Exchange. Moreover, the addition of the 
proposed Step Up Tier would benefit market participants whose increased 
order flow in Sub-Dollar Securities would provide meaningful added 
levels of liquidity thereby contributing to the depth and market 
quality on the Exchange. Given that the proposed Step Up Tier would be 
a new pricing tier that requires ETP Holders to step up, 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 pricing tier, which requires an ETP 
Holder to increase the volume of its trades in orders that add 
liquidity over that ETP Holder's July 2020 baseline, 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 in Sub-Dollar 
Securities 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 that offering higher step up credits for 
providing liquidity if the step up requirements for Sub-Dollar 
securities are met, will attract increased order flow and liquidity to 
the Exchange, thereby providing additional price improvement 
opportunities on the Exchange and benefiting investors generally. As to 
those market participants that do not qualify for the adding liquidity 
credits by increasing order flow and liquidity, the proposal will not 
adversely impact their existing pricing or their ability to qualify for 
other credits provided by the Exchange.
Base Rate for Adding and Removing Liquidity in Sub-Dollar Securities
    The Exchange believes that, for the reasons discussed above, the 
proposed change to the base rate for adding and removing liquidity in 
Sub-Dollar Securities would incentivize ETP Holders to direct a greater 
amount of liquidity to the Exchange to qualify for the proposed credit 
of $0.00004 per share when adding liquidity and lower

[[Page 52184]]

removing fee of 0.295% of total dollar value, thereby increasing the 
number of orders that are executed on the Exchange and improving 
overall liquidity on a public exchange. A number of ETP Holders 
currently transact in Sub-Dollar Securities and they would all qualify 
for the proposed increased credit for adding liquidity and lower fee 
for removing liquidity based on their current trading profile on the 
Exchange. The Exchange believes additional ETP Holders could qualify 
for the new rates if they choose to direct order flow in Sub-Dollar 
Securities to the Exchange.
    The Exchange believes that the proposed rule change is equitable 
because maintaining or increasing the proportion of Sub-Dollar 
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.
The Proposed Fee Change Is Not Unfairly Discriminatory
    The Exchange believes that the proposal is not unfairly 
discriminatory. In the prevailing competitive environment, ETP Holders 
are free to disfavor the Exchange's pricing if they believe that 
alternatives offer them better value.
    The proposal is not unfairly discriminatory because it neither 
targets nor will it have a disparate impact on any particular category 
of market participant.
Step Up Tier for Adding Liquidity in Non-Displayed Limit Orders
    The Exchange believes it is not unfairly discriminatory to provide 
additional per share step up credits for adding liquidity in Non-
Displayed Limit Orders and MPL Orders, as the proposed credits would be 
provided on an equal basis to all ETP Holders that add liquidity by 
meeting the new proposed Step Up Tier's requirements. For the same 
reason, the Exchange believes it is not unfairly discriminatory to 
provide additional incrementally higher credits for increased adding 
ADV over the ETP Holder's July 2020 adding liquidity in Non-Displayed 
Limit Orders and MPL Orders combined taken as a percentage of US CADV 
because the proposed higher credits would equally encourage all ETP 
Holders to provide additional liquidity on the Exchange in Non-
Displayed Limit Orders and MPL Orders. As noted, the Exchange believes 
that the proposed credit would provide an incentive for ETP Holders to 
send additional liquidity to the Exchange in order to qualify for the 
additional credits. The Exchange also believes that the proposed change 
is not unfairly discriminatory because it is reasonably related to the 
value to the Exchange's market quality associated with higher volume. 
Finally, the submission of orders to the Exchange is optional for ETP 
Holders in that they could choose whether to submit orders to the 
Exchange and, if they do, the extent of its activity in this regard.
Step Up Tier for Adding Liquidity in Sub-Dollar Securities
    The Exchange believes it is not unfairly discriminatory to provide 
additional per share step up credits for adding liquidity in Sub-Dollar 
Securities, as the proposed credits would be provided on an equal basis 
to all ETP Holders that add liquidity by meeting the new proposed Step 
Up Tier's requirements. For the same reason, the Exchange believes it 
is not unfairly discriminatory to provide additional incrementally 
higher credits for increased adding ADV over the ETP Holder's July 2020 
adding liquidity in Sub-Dollar Securities taken as a percentage of US 
CADV because the proposed higher credits would equally encourage all 
ETP Holders to provide additional liquidity on the Exchange in Sub-
Dollar Securities.
    The proposed pricing tier would also serve as an incentive to ETP 
Holders to increase the level of orders sent directly to NYSE Arca in 
order to qualify for, and receive the proposed credits that were not 
previously available on the Exchange. The Exchange believes that the 
proposed pricing tier would provide an incentive for ETP Holders to 
send additional liquidity to the Exchange in order to qualify for the 
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 Exchange believes that the proposed rule change is not unfairly 
discriminatory because maintaining or increasing the proportion of Sub-
Dollar 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. Finally, the submission of orders in Sub-Dollar Securities 
to the Exchange is optional for ETP Holders in that they could choose 
whether to submit such orders to the Exchange and, if they do, the 
extent of its activity in this regard.
Base Rate for Adding and Removing Liquidity in Sub-Dollar Securities
    The proposed credit for orders that add liquidity and revised fees 
for orders that remove liquidity from the Exchange are also not 
unfairly discriminatory because proposed increased credit and lower fee 
would be applied to all similarly situated ETP Holders who would all be 
eligible for the same fee and credit on an equal basis. Accordingly, no 
ETP Holder already operating on the Exchange would be disadvantaged by 
this allocation of fees and credits. Further, the Exchange believes the 
proposal would provide an incentive for ETP Holders to direct 
additional order flow in Sub-Dollar Securities to the Exchange, to the 
benefit of all market participants.
    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 Exchange 
believes the proposed increased credit and lower fee would incentivize 
ETP Holders to send more orders to the Exchange, which would support 
the quality of price discovery on the Exchange and provide additional 
liquidity for incoming orders. Further, 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.
    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,\24\ 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

[[Page 52185]]

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.'' \25\
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    \24\ 15 U.S.C. 78f(b)(8).
    \25\ See Regulation NMS, 70 FR at 37498-99.
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    Intramarket Competition. The proposed changes are designed to 
respond to the current competitive environment and to attract 
additional order flow to the Exchange. The Exchange believes that the 
proposed changes would continue to incentivize market participants to 
direct order flow 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 on the Exchange. The proposed credits and lower fees would 
be available to all similarly-situated market participants, and, as 
such, the proposed change would not impose a disparate burden on 
competition among market participants on the Exchange. As such, the 
Exchange believes the proposed amendments to its Fee Schedule would not 
impose any burden on intramarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act.
    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 10%. 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) \26\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \27\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
---------------------------------------------------------------------------

    \26\ 15 U.S.C. 78s(b)(3)(A).
    \27\ 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) \28\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \28\ 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-2020-75 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-2020-75. 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-2020-75 and should be submitted 
on or before September 14, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\29\
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    \29\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-18467 Filed 8-21-20; 8:45 am]
BILLING CODE 8011-01-P


