[Federal Register Volume 88, Number 96 (Thursday, May 18, 2023)]
[Notices]
[Pages 31835-31838]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-10685]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97504; File No. SR-NYSEARCA-2023-36]


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 15, 2023.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on May 1, 2023, NYSE Arca, Inc. (``NYSE Arca'' or the ``Exchange'') 
filed with the Securities and Exchange Commission (``SEC'' or 
``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 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 amend the fee for orders routed that 
remove liquidity in away markets in Round Lots and Odd Lots in Tapes A, 
B and C securities with a per share price below $1.00, and eliminate an 
incremental credit associated with the Tier 4 pricing tier under Adding 
Tiers. The Exchange proposes to implement the fee changes effective May 
1, 2023. 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 amend the fee 
for orders routed that remove liquidity in away markets in Round Lots 
and Odd Lots in Tapes A, B and C securities with a per share price 
below $1.00 (``Sub-Dollar Securities''), and eliminate an incremental 
credit associated with the Tier 4 pricing tier under Adding Tiers. The 
Exchange proposes to implement the fee changes effective May 1, 2023.
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.'' \3\
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    \3\ 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.'' \4\ Indeed, equity trading is currently dispersed across 
16 exchanges,\5\ numerous alternative trading systems,\6\ 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.\7\ 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.\8\
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    \4\ 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).
    \5\ See Cboe U.S Equities Market Volume Summary, available at 
https://markets.cboe.com/us/equities/market_share.
    \6\ 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.
    \7\ See Cboe Global Markets U.S. Equities Market Volume Summary, 
available at http://markets.cboe.com/us/equities/market_share/.
    \8\ 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. ETP Holders can choose from any one 
of the 16 currently operating registered exchanges to route such order 
flow. Accordingly,

[[Page 31836]]

competitive forces constrain exchange transaction fees that relate to 
orders that would provide and take liquidity on an exchange or that are 
routed to another venue for execution.
Proposed Rule Change
Routing Fee
    The Exchange currently charges a standard fee of 0.3% of Dollar 
Value for orders routed that remove liquidity in away markets in Sub-
Dollar Securities across all Tapes.\9\ The Exchange now proposes to 
increase the fee from 0.3% to 0.35% of Dollar Value for orders routed 
that remove liquidity in away markets in Sub-Dollar Securities across 
all Tapes. The purpose of the proposed rule change is for business and 
competitive reasons. U.S equity market volumes have been remarkably 
high in Sub-Dollar Securities since the beginning of 2023, driven in 
part by retail traders, leading to increased off-exchange (or Trade 
Reporting Facility (TRF)) trading volumes.\10\ Without having a view of 
ETP Holders' activity on other exchanges and off-exchange venues, the 
Exchange has no way of knowing whether this modest increase would 
result in any ETP Holder altering its trading activity in Sub-Dollar 
Securities. 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.
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    \9\ Footnote (a) under the Standard Rates--Routing table 
provides that the fee applies to orders of listed and Nasdaq 
securities routed away and executed by another market center or 
participant. See Fee Schedule, available at https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf.
    \10\ In the first quarter of 2023, the TRF represented about 
60.2% market share in Sub-Dollar Securities. See Cboe Insights, 
available at https://www.cboe.com/insights/posts/how-subdollar-securities-are-trading-now/.
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Eliminate Unused Credit
    Currently, under the Adding Tiers table in Section VII. Tier 
Rates--Round Lots and Odd Lots (Per Share Price $1.00 or Above), the 
Exchange provides multiple tiers and associated credits for Adding 
liquidity on the Exchange. Specifically, under Tier 4, if an ETP Holder 
has Adding ADV that is equal to at least 0.20% of CADV then that ETP 
Holder receives a credit of $0.0025 per share for Adding in Tape A 
securities, $0.0022 per share for Adding in Tape B securities and 
$0.0025 per share for Adding in Tape C securities. Additionally, ETP 
Holders that qualify for Tier 4 and have Adding ADV that is equal to 
0.05% of CADV above May 2019 receive an incremental credit of $0.0002 
per share for Tape A and Tape C Adding. This incremental credit is 
currently denoted on the Fee Schedule under footnote ** and is appended 
to the credits applicable under Tier 4.
    The Exchange proposes to eliminate the incremental credit of 
$0.0002 per share for Tape A and Tape C Adding and remove the credit 
from the Fee Schedule because the pricing incentive has been 
underutilized by ETP Holders. The Exchange has observed that not a 
single ETP Holder has qualified for the incremental credit in the last 
six months. Since the incremental credit has not been effective in 
accomplishing its intended purpose, which is to incent ETP Holders to 
increase their liquidity adding activity on the Exchange, the Exchange 
has determined to eliminate the incremental credit and remove it from 
the Fee Schedule.
    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,\11\ in general, and furthers the 
objectives of sections 6(b)(4) and (5) of the Act,\12\ 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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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(4) and (5).
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    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.'' \13\
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    \13\ 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. Accordingly, competitive forces 
reasonably constrain exchange transaction rates that relate to orders 
that would add or remove liquidity on an exchange or that are routed 
away from an exchange. Stated otherwise, changes to exchange 
transaction fees and credits can have a direct effect on the ability of 
an exchange to compete for order flow.
Routing Fee
    The Exchange believes that the proposed change to increase the 
standard fee for routing orders in Sub-Dollar Securities away from the 
Exchange is reasonable, equitable and consistent with the Act because 
it represents a modest increase from the current standard fee (change 
from 0.3% to 0.35% of Dollar Value). The Exchange further believes that 
the proposal to increase the standard fee for routing orders in Sub-
Dollar Securities away from the Exchange is equitably allocated and not 
unfairly discriminatory because it would apply to all ETP Holders in an 
equivalent manner.
    The Exchange believes that the proposed rule change is equitable 
and not unfairly discriminatory because ETP Holders will continue to 
have the option to elect to route their orders in the same manner as 
they do today and will be automatically and uniformly assessed the 
applicable standard rates. Further, if ETP Holders do not favor the 
Exchange's pricing for routed orders, they can send their routable 
orders directly to other markets instead of utilizing routing 
functionality provided by the Exchange. Routing through the Exchange is 
optional, and the Exchange operates in a competitive environment where 
market participants can readily direct order flow to competing venues 
or providers of routing services if they believe 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.
    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.
Eliminate Unused Credit
    The Exchange believes that the proposed rule change to eliminate 
the incremental credit associated with the Tier 4 pricing tier under 
Adding Tiers is reasonable because the pricing incentive that is the 
subject of this proposed rule change has been

[[Page 31837]]

underutilized and has not incentivized ETP Holders to bring liquidity 
and increase trading on the Exchange as anticipated. No ETP Holder has 
availed itself of the incremental credit in the last six months. The 
Exchange also does not anticipate any ETP Holder in the near future 
will qualify for the pricing incentive that is the subject of this 
proposed rule change. The Exchange believes it is reasonable to 
eliminate requirements and credits, and even entire pricing tiers, when 
such incentives become underutilized. The Exchange believes eliminating 
underutilized incentive programs would also simplify the Fee Schedule. 
The Exchange further believes that removing reference to the 
incremental credit that the Exchange proposes to eliminate from the Fee 
Schedule would also add clarity to the Fee Schedule. The Exchange 
believes that eliminating requirements and credits, and even entire 
pricing tiers, from the Fee Schedule when such incentives become 
ineffective is equitable and not unfairly discriminatory because the 
requirements, and credits, and even entire pricing tiers, would be 
eliminated in their entirety and would no longer be available to any 
ETP Holder. All ETP Holders would continue to be subject to the same 
fee structure, and access to the Exchange's market would continue to be 
offered on fair and non-discriminatory terms. The Exchange also 
believes that the proposed change would protect investors and the 
public interest because the deletion of underutilized pricing 
incentives would make the Fee Schedule more accessible and transparent 
and facilitate market participants' understanding of the fees charged 
for services currently offered by the Exchange.
    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,\14\ 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. The Exchange believes that the proposed change to 
modestly increase a routing fee would continue to encourage ETP Holders 
to maintain their order flow on the Exchange, thereby promoting market 
depth, price discovery and transparency. As a result, the Exchange 
believes that the proposed changes further 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.'' \15\
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    \14\ 15 U.S.C. 78f(b)(8).
    \15\ 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. The Exchange believes 
that the proposed change to modestly increase a routing fee 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 fee would be applicable to all similarly-situated market 
participants, and, as such, the proposed change would not impose a 
disparate burden on competition among market participants on the 
Exchange. The Exchange's proposal to eliminate an incremental credit 
will not place any undue burden on intramarket competition that is not 
necessary or appropriate in furtherance of the purposes of the Act 
given that not a single ETP Holder has qualified for the credit 
proposed for deletion for the last six months. To the extent the 
proposed rule change places a burden on competition, any such burden 
would be outweighed by the fact that the pricing incentive proposed for 
deletion has not served its intended purpose of incentivizing ETP 
Holders to more broadly participate on the Exchange.
    As such, the Exchange believes the proposed amendment 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.

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 has become effective upon filing pursuant 
to section 19(b)(3)(A) \16\ of the Act and paragraph (f) thereunder. At 
any time within 60 days of the filing of the 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.
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    \16\ 15 U.S.C. 78s(b)(3)(A).
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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 [email protected]. Please include 
File Number SR-NYSEARCA-2023-36 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-2023-36. 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

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proposed rule change between the Commission and any person, other than 
those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for website viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE, 
Washington, DC 20549 on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal offices of the Exchange. Do 
not include personal identifiable information in submissions; you 
should submit only information that you wish to make available 
publicly. We may redact in part or withhold entirely from publication 
submitted material that is obscene or subject to copyright protection. 
All submissions should refer to File Number SR-NYSEARCA-2023-36, and 
should be submitted on or before June 8, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-10685 Filed 5-17-23; 8:45 am]
BILLING CODE 8011-01-P


