Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the NYSE Arca Equities Schedule of Fees and Charges for Exchange Services Related to Tier 1 and Cross Asset Tier 2 Fees and Credits for Orders Executed on the Exchange, and Eliminate the Routable Retail Order Tier
Federal Register, Volume 81 Issue 159 (Wednesday, August 17, 2016)
Federal Register Volume 81, Number 159 (Wednesday, August 17, 2016)
Notices
Pages 54891-54893
From the Federal Register Online via the Government Publishing Office www.gpo.gov
FR Doc No: 2016-19576
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SECURITIES AND EXCHANGE COMMISSION
Release No. 34-78545; File No. SR-NYSEArca-2016-111
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the NYSE Arca Equities Schedule of Fees and Charges for Exchange Services Related to Tier 1 and Cross Asset Tier 2 Fees and Credits for Orders Executed on the Exchange, and Eliminate the Routable Retail Order Tier
August 11, 2016.
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 July 29, 2016, NYSE Arca, Inc. (the ``Exchange'' or ``NYSE Arca'') 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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Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
The Exchange proposes to amend the NYSE Arca Equities Schedule of Fees and Charges for Exchange Services (the ``Fee Schedule'') related to Tier 1 and Cross Asset Tier 2 fees and credits for orders executed on the Exchange, and eliminate the Routable Retail Order Tier. The proposed rule change is available on the Exchange's Web site at www.nyse.com, at the principal office of the Exchange, and at the Commission's Public Reference Room.
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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.
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Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
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Purpose
The Exchange proposes to amend the Fee Schedule related to Tier 1 and Cross Asset Tier 2 fees and credits for orders executed on the Exchange.\4\ The Exchange also proposes to eliminate the Routable Retail Order Tier. The Exchange proposes to implement the fee change effective August 1, 2016.
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\4\ The Tier 2 sic fees and credits are available for round lots and odd lots with a per share price $1.00 or above.
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Tier 1
Currently, ETP Holders and Market Makers qualify for Tier 1 fees and credits by providing liquidity an average daily share volume per month of 0.70% or more of the United States consolidated average daily volume (``US CADV'').\5\ In Tape C Securities, ETP Holders and Market Makers currently receive a credit of $0.0033 per share for orders that provide liquidity to the Book and pay a fee of $0.0029 per share for orders that take liquidity from the Book. The Exchange proposes to amend the fees and credits applicable to ETP Holders and Market Makers for orders executed in Tape C Securities. As proposed, ETP Holders and Market Makers would receive a credit of $0.0032 per share for orders that provide liquidity to the Book in Tape C Securities and would pay a fee of $0.0030 per share for orders that take liquidity from the Book in Tape C Securities. The Exchange is not proposing any other pricing change in Tier 1.
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\5\ US CADV would mean 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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Cross Asset Tier 2
Additionally, Cross Asset Tier 2 fees and credits currently apply to ETP Holders and Market Makers that either (1) provide liquidity an average daily volume share per month of 0.30% or more of the US CADV and are affiliated with an OTP Holder or OTP Firm that provides an ADV of electronic posted executions for the account of a market maker in Penny Pilot issues on NYSE Arca Options (excluding mini options) of at least 0.75% of total Customer equity and ETF option ADV as reported by The Options Clearing Corporation (``OCC''), or (2) provide liquidity an average daily volume share per month of 0.40% or more of the US CADV and are affiliated with an OTP Holder or OTP Firm that provides an ADV of electronic posted executions for the account of a market maker in Penny Pilot issues on NYSE Arca Options (excluding mini options) of at least 0.65% of total Customer equity and ETF option ADV as reported by OCC. Such ETP Holders and Market Makers receive a credit of $0.0033 per share for orders that provide liquidity to the Book in Tape C Securities and pay a fee of $0.0029 per share for orders that take liquidity from the Book in Tape C Securities. The Exchange proposes to amend the fees and credits applicable to ETP Holders and Market Makers for orders executed in Tape C Securities. As proposed, ETP Holders and Market Makers would receive a credit of $0.0032 per share for orders that provide liquidity to the Book in Tape C Securities and pay a fee of $0.0030 per share for orders that take liquidity from the Book in Tape C Securities.
Elimination of Obsolete Pricing
The Fee Schedule currently includes a pricing tier, Routable Retail Order Tier, that has not encouraged ETP Holders and Market Makers to increase their activity to qualify for this pricing tier as significantly as the Exchange had anticipated it would. As a result, the Exchange proposes to remove this pricing tier from the Fee Schedule.
The proposed changes are not otherwise intended to address any other problem, and the Exchange is not aware of any significant problem that the affected market participants would have
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in complying with the proposed changes.
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Statutory Basis
The Exchange believes that the proposed rule change is consistent with section 6(b) of the Act,\6\ in general, and furthers the objectives of sections 6(b)(4) and 6(b)(5) of the Act,\7\ 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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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(4) and (5).
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Tier 1
The Exchange believes that the proposed change to increase the fee from $0.0029 per share to $0.0030 per share and to lower the credit from $0.0033 per share to $0.0032 per share for Tier 1 customers in Tape C Securities is reasonable as it is comparable to fees charged and credits paid by at least one other exchange, specifically, Bats BZX Exchange, which charges a fee of $0.0030 per share for orders that remove liquidity in Tape C Securities on that market,\8\ and provides a credit that ranges between $0.0020 per share and $0.0032 per share, depending on the amount of volume transacted.\9\ The Exchange believes that the proposed fee change is equitable and not unfairly discriminatory because the proposed fees and credits would apply uniformly to all similarly situated ETP Holders and Market Makers and would apply to all Tier 1 orders that add or take liquidity from the Book in Tape C Securities. The Exchange believes that recalibrating the fees and credits will continue to attract order flow to the Exchange, thereby contributing to price discovery on the Exchange and benefiting investors generally.
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\8\ See Fee Codes and Associated Fees, Bats BZX Exchange Fee Schedule, at https://batstrading.com/support/fee_schedule/bzx/.
\9\ See Add Volume Tiers, Bats BZX Exchange Fee Schedule, at https://batstrading.com/support/fee_schedule/bzx/.
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Cross Asset Tier 2
The Exchange believes that the proposed change to increase the fee from $0.0029 per share to $0.0030 per share and to lower the credit from $0.0033 per share to $0.0032 per share for Cross Asset Tier 2 customers in Tape C Securities is reasonable as it is comparable to fees charged and credits paid by at least one other exchange, specifically, Bats BZX Exchange, which charges a fee of $0.0030 per share for orders that remove liquidity from that exchange in Tape C Securities,\10\ and provides a lower cross-asset tier rebate of $0.0029 sic per share in Tape C Securities.\11\ The Exchange believes that the proposed fee change is equitable and not unfairly discriminatory because the proposed fees and credits would apply uniformly to all similarly situated ETP Holders and Market Makers and would apply to all Cross Asset Tier 2 orders that add or take liquidity from the Book in Tape C Securities. The Exchange believes that recalibrating the fees and credits will continue to attract order flow to the Exchange, thereby contributing to price discovery on the Exchange and benefiting investors generally.
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\10\ See Fee Codes and Associated Fees, Bats BZX Exchange Fee Schedule, at https://batstrading.com/support/fee_schedule/bzx/.
\11\ See Add Volume Tiers, Bats BZX Exchange Fee Schedule, at https://batstrading.com/support/fee_schedule/bzx/.
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Elimination of Obsolete Pricing
The Exchange believes that it is reasonable to eliminate the obsolete pricing tier from the Fee Schedule because ETP Holders and Market Makers have not increased their activity to qualify for the Routable Retail Order Tier as significantly as the Exchange anticipated they would. The Exchange believes that it is equitable and not unfairly discriminatory to eliminate the Routable Retail Order Tier because, as proposed, the pricing tier would be eliminated entirely--ETP Holders and Market Makers would no longer be able to qualify for this pricing tier. This aspect of the proposed change would therefore result in a more streamlined Fee Schedule.
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.
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Self-Regulatory Organization's Statement on Burden on Competition
In accordance with section 6(b)(8) of the Act,\12\ 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 proposal to amend the level of fees and credits applicable to Tier 1 customers in Tape C Securities and to Cross Asset Tier 2 customers in Tape C Securities would not place a burden on competition as the proposed changes are comparable to fees and credits for Tape C Securities provided by at least one other exchange.\13\ The Exchange believes that the proposed fee changes could promote competition between the Exchange and other execution venues, including those that currently offer comparable transaction pricing, by encouraging additional orders to be sent to the Exchange for execution.
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\12\ 15 U.S.C. 78f(b)(8).
\13\ See supra, notes 8-11.
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Finally, the Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive or rebate opportunities available at other venues to be more favorable. In such an environment, the Exchange must continually adjust its fees and rebates to remain competitive with other exchanges and with alternative trading systems that have been exempted from compliance with the statutory standards applicable to exchanges. 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 believes that the degree to which fee changes in this market may impose any burden on competition is extremely limited. As a result of all of these considerations, the Exchange does not believe that the proposed changes will impair the ability of ETP Holders or competing order execution venues to maintain their competitive standing in the financial markets.
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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.
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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) \14\ of the Act and subparagraph (f)(2) of Rule 19b-4 \15\ thereunder, because it establishes a due, fee, or other charge imposed by the Exchange.
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\14\ 15 U.S.C. 78s(b)(3)(A).
\15\ 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
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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) \16\ of the Act to determine whether the proposed rule change should be approved or disapproved.
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\16\ 15 U.S.C. 78s(b)(2)(B).
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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-2016-111 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-2016-111. 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 Web site (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 Web site 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; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NYSEArca-2016-111 and should be submitted on or before September 7, 2016.
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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Robert W. Errett,
Deputy Secretary.
FR Doc. 2016-19576 Filed 8-16-16; 8:45 am
BILLING CODE 8011-01-P
