[Federal Register Volume 86, Number 103 (Tuesday, June 1, 2021)]
[Notices]
[Pages 29308-29311]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-11409]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92016; File No. SR-NYSEARCA-2021-40]


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 25, 2021.
    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 11, 2021, 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.
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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 adopt reduced fees for Retail Orders that 
are executed in the Exchange's opening and closing auctions. The 
Exchange proposes to implement the fee changes effective May 11, 2021. 
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 adopt reduced 
fees for Retail Orders \4\ that are executed in the Exchange's opening 
and closing auctions.
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    \4\ 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).
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    The proposed changes respond to the current competitive environment 
where order flow providers have a choice of where to direct Retail 
Orders by offering further incentives for ETP Holders \5\ to send such 
orders to the Exchange.
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    \5\ All references to ETP Holders in connection with this 
proposed fee change include Market Makers.
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    The Exchange proposes to implement the fee changes effective May 
11, 2021.\6\
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    \6\ The Exchange originally filed to amend the Fee Schedule on 
May 3, 2021 (SR-NYSEArca-2021-36). SR-NYSEArca-2021-36 was 
subsequently withdrawn and replaced by this filing.
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Background
    As noted above, 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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    While Regulation NMS has enhanced competition, it has also fostered 
a ``fragmented'' market structure where trading in a single stock can 
occur across multiple trading centers. When multiple trading centers 
compete for order flow in the same stock, the Commission has recognized 
that ``such competition can lead to the fragmentation of order flow in 
that stock.'' \8\ Indeed, equity trading is

[[Page 29309]]

currently dispersed across 16 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 17% market share.\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. 61358, 75 FR 3594, 
3597 (January 21, 2010) (File No. S7-02-10) (Concept Release on 
Equity Market Structure).
    \9\ 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.
    \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. The competition for Retail Orders is 
even more stark, particularly as it relates to exchange versus off-
exchange venues.
    The Exchange thus needs to compete in the first instance with non-
exchange venues for Retail Order flow, and with the 16 other exchange 
venues for that Retail Order flow that is not directed off-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.
Proposed Rule Change
    In response to this competitive environment, the Exchange proposes 
to adopt reduced fees for Retail Orders that are executed in the 
Exchange's opening and closing auctions. Specifically, under the Basic 
rates section of the Fee Schedule, the Exchange currently charges a fee 
of $0.0015 per share for Market and Auction-Only Orders in Tape A, Tape 
B and Tape C securities executed in an Early Opening Auction, Core Open 
Auction or Trading Halt Auction with a cap of $20,000 per Equity 
Trading Permit ID. This fee also applies to Retail Orders that are 
executed in such auctions. To attract additional Retail Orders for 
execution in the Exchange's opening auctions, the Exchange proposes to 
adopt a lower fee of $0.0005 per share for Market and Auction-Only 
Orders in Tape A, Tape B and Tape C securities that are designated as 
Retail Orders and executed in the Early Open Auction, Core Open Auction 
or Trading Halt Auction.
    Further, under the Basic rates section of the Fee Schedule, the 
Exchange currently charges a fee of $0.0012 per share for Market, 
Market-On-Close, Limit-On-Close, and Auction-Only Orders in Tape A, 
Tape B and Tape C securities executed in the Closing Auction. This fee 
also applies to Retail Orders executed in the Closing Auction. To 
attract additional Retail Orders for execution on the Exchange, the 
Exchange proposes to adopt a lower fee of $0.0008 per share for Market, 
Market-On-Close, Limit-On-Close, and Auction-Only Orders in Tape A, 
Tape B and Tape C securities that are designated as Retail Orders and 
executed in the Closing Auction.
    The Exchange is not proposing any change to the cap for Market and 
Auction-Only Orders executed in an Early Open Auction, Core Open 
Auction or Trading Halt Auction, which would remain at $20,000 per 
Equity Trading Permit ID.
    The purpose of the proposed rule change is to encourage even 
greater participation from ETP Holders and promote additional liquidity 
in Retail Orders. As described above, ETP Holders have a choice of 
where to send such orders. The Exchange believes that the proposed 
lower fees could lead to more ETP Holders choosing to route their 
Retail Orders to the Exchange for execution in the opening and closing 
auctions rather than to a competing exchange.
    The Exchange does not know how much Retail Order flow ETP Holders 
choose to route to other exchanges or to off-exchange venues. 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 sending more of 
their Retail Orders to the Exchange. The Exchange cannot predict with 
certainty how many ETP Holders would avail themselves of this 
opportunity but additional Retail Orders would benefit all market 
participants because it would provide greater execution opportunities 
in the Exchange's opening and closing auctions.
    The proposed rule change is designed to be available to all ETP 
Holders on the Exchange and is intended to provide ETP Holders a 
greater incentive to direct more of their Retail Orders for execution 
in the Exchange's opening and closing auctions.
    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,\13\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\14\ 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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    \13\ 15 U.S.C. 78f(b).
    \14\ 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.'' \15\
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    \15\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
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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 [sic] reduce use of certain 
categories of products, in response to fee changes. With respect to 
Retail Orders, ETP Holders can choose from any one of the 16 currently 
operating registered exchanges, and numerous off-exchange venues, to 
route such order flow. Accordingly, competitive forces

[[Page 29310]]

reasonably constrain exchange transaction fees that relate to Retail 
Orders 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 Retail Orders to the Exchange.
    The Exchange believes that the proposed change to adopt lower fees 
for Retail Orders executed in the Exchange's opening and closing 
auctions is reasonable because the lower fees would encourage ETP 
Holders to send a greater number of their Retail Orders for execution 
on the Exchange. As noted above, the Exchange operates in a highly 
competitive environment, particularly for attracting Retail Order flow. 
The Exchange believes it is reasonable to offer reduced fees for Retail 
Orders in the opening and closing auctions. 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 and an increased opportunity to trade on the Exchange.
    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 is an equitable allocation of 
its fees among its market participants because all ETP Holders that 
participate on the Exchange may qualify for the proposed reduced fee if 
they elect to send their Retail Orders for execution in the Exchange's 
opening and closing auctions. 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 sending more of their Retail Orders to the Exchange. The 
Exchange cannot predict with certainty how many ETP Holders would avail 
themselves of this opportunity but additional Retail Orders would 
benefit all market participants because it would provide greater 
execution opportunities in the Exchange's opening and closing auctions. 
The Exchange anticipates that multiple ETP Holders that engage in 
retail trading activity would endeavor to send more of their Retail 
Orders for execution in the Exchange's opening and closing auctions and 
pay the proposed lower fee.
    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 that are executed in the opening 
and closing auctions would be lower that fees charged by other 
exchanges that the Exchange competes with for order flow. For example, 
the Nasdaq Stock Market LLC (``Nasdaq'') charges its members a fee of 
$0.0015 per share per share for orders, including Retail Orders, that 
are executed in the Nasdaq Opening Cross, and a fee that ranges between 
$0.0008 per share and $0.0016 per share for orders, including Retail 
Orders, that are executed in the Nasdaq Closing Cross.\16\
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    \16\ See Nasdaq Price List, NASDAQ Crossing Network, at http://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2.
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    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 
believes that recalibrating the fees charged for execution of Retail 
Orders 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.
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 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 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 pay the 
same fee for Retail Orders executed in the Exchange's opening and 
closing auctions. Lastly, 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. 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,\17\ 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 fee change 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.'' \18\
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    \17\ 15 U.S.C. 78f(b)(8).
    \18\ See Securities Exchange Act Release No. 51808, 70 FR 37495, 
37498-99 (June 29, 2005) (S7-10-04) (Final Rule).
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    Intramarket Competition. The Exchange believes the proposed 
amendments to its Fee Schedule would not impose any burden on 
competition that is not necessary or appropriate in

[[Page 29311]]

furtherance of the purposes of the Act. The proposed changes are 
designed to attract additional Retail Orders to the Exchange, in 
particular for execution in the Exchange's opening and closing 
auctions. The Exchange believes that the proposed lower fee would 
incentivize market participants to direct their Retail Orders to the 
Exchange. Greater overall order flow, trading opportunities, and 
pricing transparency benefits all market participants on the Exchange 
by enhancing market quality and continuing to encourage ETP Holders to 
send orders, thereby contributing towards a robust and well-balanced 
market ecosystem.
    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) \19\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \20\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \19\ 15 U.S.C. 78s(b)(3)(A).
    \20\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \21\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \21\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSEARCA-2021-40 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-2021-40. 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-2021-40, and should be 
submitted on or before June 22, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
J. Matthew DeLesDernier,
Assistant Secretary.


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    \22\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2021-11409 Filed 5-28-21; 8:45 am]
BILLING CODE 8011-01-P


