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 To Introduce a New Pricing Tier, Step Up Tier 4
| Citation | 84 FR 10348 |
| Record Number | 2019-05210 |
| Published date | 20 March 2019 |
| Section | Notices |
| Court | Securities And Exchange Commission |
Federal Register, Volume 84 Issue 54 (Wednesday, March 20, 2019)
[Federal Register Volume 84, Number 54 (Wednesday, March 20, 2019)]
[Notices]
[Pages 10348-10350]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-05210]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-85311; File No. SR-NYSEARCA-2019-10]
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 To Introduce a New Pricing Tier, Step Up
Tier 4
March 14, 2019.
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 March 1, 2019, 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 introduce a new pricing tier, Step Up
Tier 4. The Exchange proposes to implement the fee change effective
March 1, 2019. 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 introduce a new
pricing tier, Step Up Tier 4. The Exchange proposes to implement the
fee change effective March 1, 2019.
The Exchange currently has a Step Up Tier pursuant to which
qualifying ETP Holders and Market Makers receive a credit of $0.0030
per share for orders that provide displayed liquidity to the Book in
Tape A Securities, $0.0023 per share for orders that provide displayed
liquidity to the Book in Tape B Securities, and $0.0031 per share for
orders that provide displayed liquidity to the Book in Tape C
Securities if such ETP Holders and Market Makers directly execute
providing average daily volume (``ADV'') per month of 0.50% or more,
but less than 0.70% of the US CADV and directly execute providing ADV
that is an increase of no less than 0.10% of US CADV for that month
over the ETP Holder's or Market Maker's providing ADV in Q1 2018.\3\
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\3\ See Securities Exchange Act Release No. 83032 (April 11,
2018), 83 FR 16909 (April 17, 2018) (SR-NYSEArca-2018-20).
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The Exchange also has a Step Up Tier 2 pricing tier pursuant to
which ETP Holders and Market Makers receive a credit of $0.0028 per
share for orders that provide displayed liquidity to the Book in Tape A
and Tape C Securities, and $0.0022 per share for orders that provide
displayed liquidity to the Book in Tape B Securities if such ETP
Holders and Market Makers directly execute providing ADV per month of
0.22% or more, but less than 0.30% of the US CADV and directly execute
providing ADV that is an increase of no less than 0.06% of US CADV for
that month over the ETP Holder's or Market Maker's providing ADV in May
2018.\4\
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\4\ See Securities Exchange Act Release No. 83418 (June 12,
2018), 83 FR 28282 (June 18, 2018) (SR-NYSEArca-2018-41).
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More recently, the Exchange adopted the Step Up Tier 3 pricing tier
pursuant to which ETP Holders and Market Makers receive a credit of
$0.0025 per share for orders that provide displayed liquidity to the
Book in Tape A and Tape C Securities, and $0.0022 per share for orders
that provide displayed liquidity to the Book in Tape B Securities if
such ETP Holders and Market Makers directly execute providing ADV per
month of 0.15% or more, but less than 0.20% of the US CADV and directly
execute providing ADV that is an increase of no less than 0.075% of US
CADV for that month over the ETP Holder's or Market Maker's providing
ADV in May 2018.\5\
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\5\ See Securities Exchange Act Release No. 84103 (September 12,
2018), 83 FR 47216 (September 18, 2019) (SR-NYSEArca-2018-66).
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The Exchange proposes a new pricing tier--Step Up Tier 4--for
securities with a per share price of $1.00 or above. As proposed, ETP
Holders and Market Makers would qualify for the new Step Up Tier 4 if
they directly execute providing ADV per month that is an increase of no
less than 0.70% of US CADV for that month over the ETP Holder's or
Market Maker's providing ADV in January 2019, taken as a percentage of
US CADV. ETP Holders and Market Makers that qualify for Step Up Tier 4
would receive a credit of $0.0031 per share for orders that provide
displayed liquidity to the Book in Tape A Securities and a credit of
$0.0032 per share for orders that provide displayed liquidity to the
Book in Tape B and Tape C Securities. ETP Holders and Market Makers
that qualify for the Step Up Tier 4 credit in Tape C Securities shall
not receive any additional incremental Tape C Tier credits for
providing displayed liquidity under Tape C Tiers.\6\
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\6\ ETP Holders and Market Makers that meet the requirements
would continue to qualify for the $0.0029 per share (fee) for orders
that take liquidity from the Book in Tape C Securities pursuant to
Tape C Tier 2 and Tape C Tier 3, if they meet the requirements of
those tiers.
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For all other fees and credits, tiered or basic rates apply based
on a firm's qualifying levels.
For example, assume an ETP Holder or Market Maker has an adding ADV
of 0.10% of US CADV in all securities in the baseline month of January
2019 and Tape C adding ADV of 0.05% of the US Tape C CADV in Tape C
Securities. Further assume that the same ETP
[[Page 10349]]
Holder or Market Maker has an adding ADV of 1.10% of US CADV in all
securities and Tape C adding ADV of 0.30% of the US Tape C CADV in the
billing month. The ETP Holder or Market Marker in the above example
would qualify for the proposed Step Up Tier 4 with an adding ADV step
up of 1.00% of US CADV (i.e., 1.10% US CADV minus the 0.10% adding of
US CADV baseline) and would therefore receive the proposed $0.0032 per
share credit in Tape B and Tape C Securities and $0.0031 per share
credit in Tape A Securities. Further, since the ETP Holder or Market
Maker in the above example also meets the qualifications of the current
Tape C Tier 2 pricing tier with an adding ADV of 0.25% of Tape C CADV
above the 0.05% adding Tape C CADV baseline, meeting the Tape C Tier 2
step up requirement of 0.20%, the ETP Holder or Market Maker in the
above example would be charged a lower $0.0029 per share fee for orders
that take liquidity from the Book in Tape C Securities (instead of the
$0.0030 per share fee as provided in the Basic Rates section) but would
not receive the additional $0.0002 per share credit for orders that
provide liquidity to the Book in Tape C Securities.
The goal of the proposed Step Up Tier 4 pricing tier is to
incentivize ETP Holders and Market Makers to increase the orders sent
directly to the Exchange and therefore provide liquidity that supports
the quality of price discovery and promotes market transparency. The
proposed pricing tier, which adopts a higher threshold than the
existing Step Up pricing tiers, i.e., Step Up Tier 1, Step Up Tier 2
and Step Up Tier 3, is intended to allow ETP Holders and Market Makers
to achieve rebates that are not currently available, e.g, the proposed
$0.0032 per share credit in Tape B Securities. Since the proposed new
pricing tier has a singular requirement for ETP Holders and Market
Makers, i.e., providing an increased ADV over the ETP Holder's or
Market Maker's baseline ADV, the Exchange believes that the proposed
new pricing tier would provide an incentive for ETP Holders and Market
Makers to meet this higher step up tier requirement by directing more
of their order flow to the Exchange in order to receive the higher
credit.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\7\ in general, and furthers the
objectives of Sections 6(b)(4) and (5) of the Act,\8\ 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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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange believes the Step Up Tier 4 pricing tier will serve as
an incentive to market participants to increase the orders sent
directly to NYSE Arca and therefore provide liquidity that supports the
quality of price discovery and promotes market transparency. The
Exchange believes the proposed pricing tier, which adopts a higher
threshold, is reasonable and equitable because it would allow ETP
Holders and Market Makers that directly execute providing ADV per month
that is an increase of no less than 0.70% of US CADV to receive
increased credits that were not previously available. Moreover, the
addition of the Step Up Tier 4 would benefit market participants whose
increased order flow provides meaningful added levels of liquidity
thereby contributing to the depth and market quality on the Exchange.
The Exchange believes that the proposed new Step Up Tier 4 is not
unfairly discriminatory because it is open to all ETP Holders and
Market Makers, on an equal basis, that add liquidity at or below the
proposed Step Up Tier 4 requirement. Further, the Exchange believes the
proposed pricing tier would incentivize ETP Holders and Market Makers
that meet the current Tier 1 requirement of 0.70% of US CADV to send
more of their orders to the Exchange to qualify for increased credits
under the proposed new Step Up Tier 4 pricing tier. The proposed
pricing tier would also serve as an incentive to ETP Holders and Market
Makers that do not currently meet the requirement of other pricing
tiers on the Exchange to increase the level of orders sent directly to
NYSE Arca in order to qualify for the proposed new pricing tier and
receive the higher credits associated with Step Up Tier 4. The proposed
pricing tier would apply equally to all ETP Holders and Market Makers
as each would be required to execute providing ADV per month that is an
increase of no less than 0.70% of US CADV over their January baseline
taken as a percentage of US CADV, regardless of whether an ETP Holder
or Market Maker currently meets the requirement of another pricing
tier.
The Exchange believes that the proposed fee change is equitable and
not unfairly discriminatory because providing incentives for 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.
Finally, 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,\9\ 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, the Exchange believes that the proposal
to add a new pricing tier would encourage the submission of additional
liquidity to a public exchange, thereby promoting price discovery and
transparency and enhancing order execution opportunities for ETP
Holders and Market Makers. The Exchange believes that this 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.
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\9\ 15 U.S.C. 78f(b)(8).
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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
[[Page 10350]]
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.
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) \10\ of the Act and subparagraph (f)(2) of Rule
19b-4 \11\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 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) \12\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\12\ 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 [email protected]. Please include
File Number SR-NYSEARCA-2019-10 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-2019-10. 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-2019-10, and should be
submitted on or before April 10, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-05210 Filed 3-19-19; 8:45 am]
BILLING CODE 8011-01-P
