Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending the NYSE Arca Equities Schedule of Fees and Charges for Exchange Services To Add an Additional Requirement To Qualify for Step Up Tier 3, 34819-34822 [2014-14201]

Download as PDF Federal Register / Vol. 79, No. 117 / Wednesday, June 18, 2014 / Notices the New Cross-Asset Tier is fair and equitable and not unreasonably discriminatory because it is consistent with the overall goal of enhancing market quality on BATS Options and BATS Equities as described above with respect to volume-based rebates and fees. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. With respect to the proposed new tiers and rebates, the Exchange does not believe that any such changes burden competition, but instead, enhance competition, as they are intended to increase the competitiveness of and draw additional volume to BATS Options, and, in the case of the New Cross-Asset Tier, also to BATS Equities. The Exchange also believes that the changes to the tiers as a whole will enhance competition because they are similar to pricing tiers currently available on other exchanges. As stated above, the Exchange notes that it operates in a highly competitive market in which market participants can readily direct order flow to competing venues if the deem fee structures to be unreasonable or excessive. As such, the proposal is a competitive proposal that is intended to add additional liquidity to the Exchange, which will, in turn, benefit the Exchange and all Exchange participants. emcdonald on DSK67QTVN1PROD with NOTICES C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange has not solicited, and does not intend to solicit, comments on this proposed rule change. The Exchange has not received any written comments from members or other interested parties. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act 14 and paragraph (f) of Rule 19b–4 thereunder.15 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 U.S.C. 78s(b)(3)(A)(ii). 15 17 CFR 240.19b–4(f). public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. 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 (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– BATS–2014–021 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–BATS–2014–021. 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 (https://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–BATS– 2014–021, and should be submitted on or before July 9, 2014. 14 15 VerDate Mar<15>2010 16:35 Jun 17, 2014 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.16 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2014–14198 Filed 6–17–14; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–72381; File No. SR– NYSEARCA–2014–65] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending the NYSE Arca Equities Schedule of Fees and Charges for Exchange Services To Add an Additional Requirement To Qualify for Step Up Tier 3 June 12, 2014. 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 30, 2014, NYSE Arca, Inc. (the ‘‘Exchange’’ or ‘‘NYSE Arca’’) 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. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to proposes to [sic] amend the NYSE Arca Equities Schedule of Fees and Charges for Exchange Services (‘‘Fee Schedule’’) to add an additional requirement to qualify for Step Up Tier 3. The Exchange proposes to implement the fee change effective June 1, 2014. The text of 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. 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 1 15 U.S.C. 78s(b)(1). U.S.C. 78a. 3 17 CFR 240.19b–4. 2 15 16 17 Jkt 232001 PO 00000 CFR 200.30–3(a)(12). Frm 00105 Fmt 4703 Sfmt 4703 34819 E:\FR\FM\18JNN1.SGM 18JNN1 34820 Federal Register / Vol. 79, No. 117 / Wednesday, June 18, 2014 / Notices 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 add an additional requirement to qualify for Step Up Tier 3, which was introduced into the Fee Schedule effective February 1, 2014.4 The Exchange proposes to implement the fee change effective June 1, 2014. Step Up Tier 3 in the Fee Schedule is applicable to an ETP Holder, including a Market Maker, that on a daily basis, measured monthly, directly executes providing volume (‘‘Adding ADV’’) during the billing month that is both (i) at least 0.20% of U.S. consolidated average daily volume (‘‘U.S. CADV’’) for the billing month and (ii) at least 0.125% taken as a percentage of U.S. CADV for the billing month over the ETP Holder’s December 2013 Adding ADV taken as a percentage of U.S. CADV in December 2013 (‘‘Baseline % CADV’’).5 For example, if U.S. CADV during the billing month is 7 billion shares, an ETP Holder’s Adding ADV during the billing month would first need to be at least 14 million shares (i.e., at least 0.20% of U.S. CADV for the billing month). If U.S. CADV in December 2013 was 6 billion shares and an ETP Holder’s December 2013 Adding ADV was 6 million shares, the ETP Holder’s Baseline % CADV would be 0.10% (i.e., the ETP Holder’s December 2013 Adding ADV taken as a percentage of U.S. CADV in December 2013). The ETP Holder’s Adding ADV during the billing month would therefore need to be at least 0.225% of U.S. CADV for the billing month (i.e., Baseline % CADV of 0.10% plus at least 0.125%). This would equate to at least 15.75 million shares of emcdonald on DSK67QTVN1PROD with NOTICES 4 See Securities Exchange Act Release No. 71503 (February 6, 2014), 79 FR 8524 (February 12, 2014) (SR–NYSEArca–2014–13). 5 U.S. CADV means 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. Transactions that are not reported to the Consolidated Tape are not included in U.S. CADV. An ETP Holder with zero Adding ADV in December 2013 (e.g., a firm that became an ETP Holder after December 2013) is treated as having Baseline % CADV of zero for purposes of Step Up Tier 3. VerDate Mar<15>2010 16:35 Jun 17, 2014 Jkt 232001 Adding ADV, which would be a ‘‘step up’’ of 9.75 million shares. A qualifying ETP Holder is eligible to receive a credit of $0.0004 per share for (i) Adding ADV in Tape A securities during the billing month taken as a percentage of U.S. CADV in Tape A securities in the billing month in excess of the Baseline % CADV in Tape A securities and (ii) Adding ADV in Tape C securities during the billing month taken as a percentage of U.S. CADV in Tape C securities in the billing month in excess of the Baseline % CADV in Tape C securities.6 This credit would be in addition to the ETP Holder’s Tiered or Basic Rate credit(s); provided, however, that such combined credit may not exceed $0.0034 per share. The Exchange proposes that, in addition to the existing two requirements described above, to qualify for Step Up Tier 3 an ETP Holder would be required to directly execute Adding ADV during the billing month that is at least 40% over the ETP Holder’s Baseline % CADV as a percentage of U.S. CADV for the billing month.7 Continuing with the example above, if an ETP Holder’s Baseline % CADV was 0.10%, the ETP Holder’s Adding ADV during the billing month would need to be at least 0.14% of U.S. CADV for the billing month. If U.S. CADV for the billing month was 7 billion shares, the ETP Holder’s Adding ADV during the billing month would need to be at least 9.8 million shares (i.e., .0.14% multiplied by 7 billion). For an ETP Holder like this, with relatively low Baseline % CADV, this new requirement would not result in a new threshold that it would need to reach, because the 9.8 million shares would be less than the two existing required thresholds (i.e., 14 million shares and 15.75 million shares, respectively). However, and for further example, if the ETP Holder’s Baseline % CADV instead was 0.60%, the ETP Holder’s Adding ADV during the billing month would need to be at least 0.84% for the billing month. If U.S. CADV for the billing month was 7 billion shares, the ETP Holder’s Adding ADV during the 6 Orders that provide liquidity in Tape B securities count toward the ETP Holder’s qualification for Step Up Tier 3, but such orders are not eligible for a credit under Step Up Tier 3. The Exchange’s Fee Schedule includes a ‘‘Tape B Step Up Tier’’ that provides for a similar credit of $0.0004 per share only for orders in Tape B securities that provide liquidity. 7 An ETP Holder with zero Adding ADV in December 2013 (e.g., a firm that became an ETP Holder after December 2013) would be treated as having a Baseline % CADV of zero for purposes of the proposed new Step Up Tier 3 requirement. This proposed new requirement would therefore have no effect on such an ETP Holder. However, the existing two requirements would continue to apply. PO 00000 Frm 00106 Fmt 4703 Sfmt 4703 billing month would need to be at least 58.8 million shares (i.e., 0.84% multiplied by 7 billion). Under the existing two requirements, this ETP Holder would be required to have Adding ADV during the billing month of 14 million shares or 50.75 million shares, respectively. This proposed new requirement would therefore result in the ETP Holder being required to have Adding ADV of 8.05 million shares greater than the higher of the two existing requirements and an overall ‘‘step up’’ of 22.8 million shares over its December 2013 Adding ADV. No other changes to Step Up Tier 3, or the corresponding credit, would result from this proposed change. The proposed change is not otherwise intended to address any other issues, and the Exchange is not aware of any problems that ETP Holders would have in complying with the proposed change. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,8 in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act,9 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. The existing requirement of Adding ADV during the billing month that is at least 0.20% of U.S. CADV establishes a minimum for any ETP Holder in order to qualify for Step Up Tier 3. The existing requirement of Adding ADV during the billing month of at least 0.125% taken as a percentage of U.S. CADV for the billing month over the ETP Holder’s Baseline % CADV establishes a minimum amount that the ETP Holder must ‘‘step up’’ during the billing month, based on U.S. CADV during the billing month. In other words, as U.S. CADV during a particular billing month increases, the Adding ADV required of an ETP Holder would similarly increase (conversely, required Adding ADV would decrease if U.S. CADV during a particular billing month decreases). The proposed new requirement of Adding ADV during the billing month that is at least 40% over the ETP Holder’s Baseline % CADV as a percentage of U.S. CADV for the billing month is reasonable because it would establish a minimum amount that each ETP Holder must ‘‘step up’’ during the billing month, but based 8 15 9 15 E:\FR\FM\18JNN1.SGM U.S.C. 78f(b). U.S.C. 78f(b)(4) and (5). 18JNN1 Federal Register / Vol. 79, No. 117 / Wednesday, June 18, 2014 / Notices emcdonald on DSK67QTVN1PROD with NOTICES primarily on the ETP Holder’s own activity during the baseline month of December 2013. The Exchange believes that this proposed new requirement is also reasonable because it would further contribute to the goal of Step Up Tier 3—namely, encouraging ETP Holders to send additional orders to the Exchange for execution in order to qualify for an incrementally higher credit for such executions in Tape A and Tape C securities that add liquidity on the Exchange.10 In this regard, the Exchange believes that this may incentivize ETP Holders 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 new requirement is also reasonable because the level at which it would be set, i.e., 40%, is consistent with a threshold within the Fee Schedule that similarly provides for specific pricing based on an ETP Holder’s volume in the billing month compared to a particular ‘‘baseline month.’’ 11 The Exchange also believes that the proposed additional requirement to qualify for Step Up Tier 3 credit is equitable and not unfairly discriminatory because it would incentivize ETP Holders to submit orders to the Exchange and would result in a credit that is reasonably related to an exchange’s market quality that is associated with higher volumes. Moreover, like existing pricing on the Exchange that is tied to ETP Holder volume levels, the Exchange believes that the proposed qualifying threshold for Step Up Tier 3 is equitable and not unfairly discriminatory because it would be available for all ETP Holders, including Market Makers, on an equal and non-discriminatory basis. It is also equitable and not unfairly discriminatory that an ETP Holder with zero Adding ADV in December 2013 (e.g., a firm that became an ETP Holder after December 2013) would be treated as having a Baseline % CADV of zero for purposes of the proposed Step Up Tier 3 because, as discussed above, the existing two requirements would continue to apply and would already require a higher Adding ADV from such an ETP Holder than if the Exchange 10 See supra note 4 at 8525. e.g., the ‘‘Routable Order Tier’’ within the Fee Schedule, pursuant to which an ETP Holder must provide, in part, an ADV of liquidity during the billing month across all Tapes that is equal to at least the ETP Holder’s provide liquidity across all Tapes during a ‘‘baseline’’ month, plus 40%. See also Securities Exchange Act Release No. 69926 (July 3, 2013), 78 FR 41154 (July 9, 2013) (SR– NYSEArca–2013–67). 11 See, VerDate Mar<15>2010 16:35 Jun 17, 2014 Jkt 232001 applied a small, artificial Baseline % CADV for the ETP Holder. 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 these 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,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. Instead, the Exchange believes that the proposed change will encourage competition, including by attracting additional liquidity to the Exchange, which will make the Exchange a more competitive venue for, among other things, order execution and price discovery. In general, ETP Holders impacted by the proposed change may readily adjust their trading behavior to maintain or increase their credits or decrease their fees in a favorable manner, and will therefore not be disadvantaged in their ability to compete. More specifically, an ETP Holder could qualify for Step Up Tier 3 by providing sufficient adding liquidity to satisfy the proposed new volume requirement. Also, the Exchange does not believe that the proposed change will impair the ability of ETP Holders or competing order execution venues to maintain their competitive standing in the financial markets. In this regard, the Exchange notes that existing pricing tiers of other exchanges similarly provide for credits for market participants that provide certain levels of liquidity on those exchanges.13 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 U.S.C. 78f(b)(8). e.g., the ‘‘Investor Support Program’’ under NASDAQ Stock Market, LLC (‘‘NASDAQ’’) Rule 7014. 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 member organizations 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) 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. 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) 16 of the Act to determine whether the proposed rule change should be approved or disapproved. 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 (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NYSEARCA–2014–65 on the subject line. 12 15 13 See, PO 00000 Frm 00107 Fmt 4703 Sfmt 4703 34821 14 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(2). 16 15 U.S.C. 78s(b)(2)(B). 15 17 E:\FR\FM\18JNN1.SGM 18JNN1 34822 Federal Register / Vol. 79, No. 117 / Wednesday, June 18, 2014 / Notices 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–2014–65. 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 (https://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–2014–65 and should be submitted on or before July 9, 2014. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.17 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2014–14201 Filed 6–17–14; 8:45 am] emcdonald on DSK67QTVN1PROD with NOTICES BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–72377; File No. SR–BATS– 2014–024] Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Related to Fees for Use of BATS Exchange, Inc. June 12, 2014. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on June 4, 2014, BATS Exchange, Inc. (the ‘‘Exchange’’ or ‘‘BATS’’) 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 Exchange. The Exchange has designated the proposed rule change as one establishing or changing a member due, fee, or other charge imposed by the Exchange under Section 19(b)(3)(A)(ii) of the Act 3 and Rule 19b–4(f)(2) thereunder,4 which renders the proposed rule change effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange filed a proposal to amend the fees applicable to securities listed on the Exchange pursuant to BATS Rule 14.13. Changes to the Exchange’s fees pursuant to this proposal are effective upon filing. The text of the proposed rule change is available at the Exchange’s Web site at https://www.batstrading.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 Exchange 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 these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set 1 15 17 17 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(ii). 4 17 CFR 240.19b–4(f)(2). CFR 200.30–3(a)(12). VerDate Mar<15>2010 16:35 Jun 17, 2014 Jkt 232001 PO 00000 Frm 00108 Fmt 4703 Sfmt 4703 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 On August 30, 2011, the Exchange received approval of rules applicable to the qualification, listing, and delisting of companies on the Exchange,5 which it modified on February 8, 2012 in order to adopt pricing for the listing of exchange traded products (‘‘ETPs’’) on the Exchange.6 The Exchange proposes to modify Rule 14.13, entitled ‘‘Company Listing Fees’’ to reduce the entry fee for ETPs from $10,000 to $5,000 and to introduce new annual fees for ETPs that are not participating in the competitive liquidity provider program under Interpretation and Policy .02 to Rule 11.8 (the ‘‘CLP Program’’). For ETPs that are participating in the CLP Program, the Exchange proposes that the annual fees continue to be $35,000. Currently, Rule 14.13(a)(A)(1)(C) provides that the entry fee for an ETP is $10,000, a fee that is assessed on the date of listing on the Exchange, except for a $5,000 non-refundable application fee which must be submitted along with the initial listing application. The Exchange proposes to instead charge a reduced entry fee of $5,000, which will continue to be non-refundable and due upon submission of the initial listing application. Consistent with current Rule 14.13 the Exchange is not proposing to charge an entry fee for transfer listings. The Exchange is also proposing to introduce lower annual fees for ETPs. Currently, Rule 14.13 provides that the issuer of an ETP shall pay an annual fee of $35,000 for funds initially listed on the Exchange. Rule 14.13 provides that the issuer of an ETP that is a transfer listing shall pay an annual fee of $15,000. The Exchange is proposing to continue to charge $35,000 per year to the issuer of an ETP that is participating in the CLP Program. For all issuers of ETPs that are not participating in the CLP Program, including transfer listings, the Exchange proposes to charge the issuer on a quarterly basis based on the ETPs consolidated average daily volume (the ‘‘CADV’’), as defined below, during the quarter preceding the billing date. 5 See Securities Exchange Act Release No. 65225 (August 30, 2011) 76 FR 55148 (September 6, 2011) (SR–BATS–2011–018). 6 See Securities Exchange Act Release No. 72020 (April 25, 2014) 79 FR 24807 (May 1, 2014) (SR– BATS–2012–010). E:\FR\FM\18JNN1.SGM 18JNN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 79, Number 117 (Wednesday, June 18, 2014)]
[Notices]
[Pages 34819-34822]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-14201]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72381; File No. SR-NYSEARCA-2014-65]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Amending the NYSE
Arca Equities Schedule of Fees and Charges for Exchange Services To Add
an Additional Requirement To Qualify for Step Up Tier 3

June 12, 2014.
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 30, 2014, NYSE Arca, Inc. (the ``Exchange'' or
``NYSE Arca'') 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.
---------------------------------------------------------------------------

\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

The Exchange proposes to proposes to [sic] amend the NYSE Arca
Equities Schedule of Fees and Charges for Exchange Services (``Fee
Schedule'') to add an additional requirement to qualify for Step Up
Tier 3. The Exchange proposes to implement the fee change effective
June 1, 2014. The text of 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.

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

[[Page 34820]]

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 add an
additional requirement to qualify for Step Up Tier 3, which was
introduced into the Fee Schedule effective February 1, 2014.\4\ The
Exchange proposes to implement the fee change effective June 1, 2014.
---------------------------------------------------------------------------

\4\ See Securities Exchange Act Release No. 71503 (February 6,
2014), 79 FR 8524 (February 12, 2014) (SR-NYSEArca-2014-13).
---------------------------------------------------------------------------

Step Up Tier 3 in the Fee Schedule is applicable to an ETP Holder,
including a Market Maker, that on a daily basis, measured monthly,
directly executes providing volume (``Adding ADV'') during the billing
month that is both (i) at least 0.20% of U.S. consolidated average
daily volume (``U.S. CADV'') for the billing month and (ii) at least
0.125% taken as a percentage of U.S. CADV for the billing month over
the ETP Holder's December 2013 Adding ADV taken as a percentage of U.S.
CADV in December 2013 (``Baseline % CADV'').\5\ For example, if U.S.
CADV during the billing month is 7 billion shares, an ETP Holder's
Adding ADV during the billing month would first need to be at least 14
million shares (i.e., at least 0.20% of U.S. CADV for the billing
month). If U.S. CADV in December 2013 was 6 billion shares and an ETP
Holder's December 2013 Adding ADV was 6 million shares, the ETP
Holder's Baseline % CADV would be 0.10% (i.e., the ETP Holder's
December 2013 Adding ADV taken as a percentage of U.S. CADV in December
2013). The ETP Holder's Adding ADV during the billing month would
therefore need to be at least 0.225% of U.S. CADV for the billing month
(i.e., Baseline % CADV of 0.10% plus at least 0.125%). This would
equate to at least 15.75 million shares of Adding ADV, which would be a
``step up'' of 9.75 million shares.
---------------------------------------------------------------------------

\5\ U.S. CADV means 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. Transactions that are not reported to the Consolidated
Tape are not included in U.S. CADV. An ETP Holder with zero Adding
ADV in December 2013 (e.g., a firm that became an ETP Holder after
December 2013) is treated as having Baseline % CADV of zero for
purposes of Step Up Tier 3.
---------------------------------------------------------------------------

A qualifying ETP Holder is eligible to receive a credit of $0.0004
per share for (i) Adding ADV in Tape A securities during the billing
month taken as a percentage of U.S. CADV in Tape A securities in the
billing month in excess of the Baseline % CADV in Tape A securities and
(ii) Adding ADV in Tape C securities during the billing month taken as
a percentage of U.S. CADV in Tape C securities in the billing month in
excess of the Baseline % CADV in Tape C securities.\6\ This credit
would be in addition to the ETP Holder's Tiered or Basic Rate
credit(s); provided, however, that such combined credit may not exceed
$0.0034 per share.
---------------------------------------------------------------------------

\6\ Orders that provide liquidity in Tape B securities count
toward the ETP Holder's qualification for Step Up Tier 3, but such
orders are not eligible for a credit under Step Up Tier 3. The
Exchange's Fee Schedule includes a ``Tape B Step Up Tier'' that
provides for a similar credit of $0.0004 per share only for orders
in Tape B securities that provide liquidity.
---------------------------------------------------------------------------

The Exchange proposes that, in addition to the existing two
requirements described above, to qualify for Step Up Tier 3 an ETP
Holder would be required to directly execute Adding ADV during the
billing month that is at least 40% over the ETP Holder's Baseline %
CADV as a percentage of U.S. CADV for the billing month.\7\ Continuing
with the example above, if an ETP Holder's Baseline % CADV was 0.10%,
the ETP Holder's Adding ADV during the billing month would need to be
at least 0.14% of U.S. CADV for the billing month. If U.S. CADV for the
billing month was 7 billion shares, the ETP Holder's Adding ADV during
the billing month would need to be at least 9.8 million shares (i.e.,
.0.14% multiplied by 7 billion). For an ETP Holder like this, with
relatively low Baseline % CADV, this new requirement would not result
in a new threshold that it would need to reach, because the 9.8 million
shares would be less than the two existing required thresholds (i.e.,
14 million shares and 15.75 million shares, respectively).
---------------------------------------------------------------------------

\7\ An ETP Holder with zero Adding ADV in December 2013 (e.g., a
firm that became an ETP Holder after December 2013) would be treated
as having a Baseline % CADV of zero for purposes of the proposed new
Step Up Tier 3 requirement. This proposed new requirement would
therefore have no effect on such an ETP Holder. However, the
existing two requirements would continue to apply.
---------------------------------------------------------------------------

However, and for further example, if the ETP Holder's Baseline %
CADV instead was 0.60%, the ETP Holder's Adding ADV during the billing
month would need to be at least 0.84% for the billing month. If U.S.
CADV for the billing month was 7 billion shares, the ETP Holder's
Adding ADV during the billing month would need to be at least 58.8
million shares (i.e., 0.84% multiplied by 7 billion). Under the
existing two requirements, this ETP Holder would be required to have
Adding ADV during the billing month of 14 million shares or 50.75
million shares, respectively. This proposed new requirement would
therefore result in the ETP Holder being required to have Adding ADV of
8.05 million shares greater than the higher of the two existing
requirements and an overall ``step up'' of 22.8 million shares over its
December 2013 Adding ADV.
No other changes to Step Up Tier 3, or the corresponding credit,
would result from this proposed change.
The proposed change is not otherwise intended to address any other
issues, and the Exchange is not aware of any problems that ETP Holders
would have in complying with the proposed change.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\8\ in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\9\ 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.
---------------------------------------------------------------------------

\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

The existing requirement of Adding ADV during the billing month
that is at least 0.20% of U.S. CADV establishes a minimum for any ETP
Holder in order to qualify for Step Up Tier 3. The existing requirement
of Adding ADV during the billing month of at least 0.125% taken as a
percentage of U.S. CADV for the billing month over the ETP Holder's
Baseline % CADV establishes a minimum amount that the ETP Holder must
``step up'' during the billing month, based on U.S. CADV during the
billing month. In other words, as U.S. CADV during a particular billing
month increases, the Adding ADV required of an ETP Holder would
similarly increase (conversely, required Adding ADV would decrease if
U.S. CADV during a particular billing month decreases). The proposed
new requirement of Adding ADV during the billing month that is at least
40% over the ETP Holder's Baseline % CADV as a percentage of U.S. CADV
for the billing month is reasonable because it would establish a
minimum amount that each ETP Holder must ``step up'' during the billing
month, but based

[[Page 34821]]

primarily on the ETP Holder's own activity during the baseline month of
December 2013.
The Exchange believes that this proposed new requirement is also
reasonable because it would further contribute to the goal of Step Up
Tier 3--namely, encouraging ETP Holders to send additional orders to
the Exchange for execution in order to qualify for an incrementally
higher credit for such executions in Tape A and Tape C securities that
add liquidity on the Exchange.\10\ In this regard, the Exchange
believes that this may incentivize ETP Holders 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 new requirement is also reasonable because
the level at which it would be set, i.e., 40%, is consistent with a
threshold within the Fee Schedule that similarly provides for specific
pricing based on an ETP Holder's volume in the billing month compared
to a particular ``baseline month.'' \11\
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\10\ See supra note 4 at 8525.
\11\ See, e.g., the ``Routable Order Tier'' within the Fee
Schedule, pursuant to which an ETP Holder must provide, in part, an
ADV of liquidity during the billing month across all Tapes that is
equal to at least the ETP Holder's provide liquidity across all
Tapes during a ``baseline'' month, plus 40%. See also Securities
Exchange Act Release No. 69926 (July 3, 2013), 78 FR 41154 (July 9,
2013) (SR-NYSEArca-2013-67).
---------------------------------------------------------------------------

The Exchange also believes that the proposed additional requirement
to qualify for Step Up Tier 3 credit is equitable and not unfairly
discriminatory because it would incentivize ETP Holders to submit
orders to the Exchange and would result in a credit that is reasonably
related to an exchange's market quality that is associated with higher
volumes. Moreover, like existing pricing on the Exchange that is tied
to ETP Holder volume levels, the Exchange believes that the proposed
qualifying threshold for Step Up Tier 3 is equitable and not unfairly
discriminatory because it would be available for all ETP Holders,
including Market Makers, on an equal and non-discriminatory basis. It
is also equitable and not unfairly discriminatory that an ETP Holder
with zero Adding ADV in December 2013 (e.g., a firm that became an ETP
Holder after December 2013) would be treated as having a Baseline %
CADV of zero for purposes of the proposed Step Up Tier 3 because, as
discussed above, the existing two requirements would continue to apply
and would already require a higher Adding ADV from such an ETP Holder
than if the Exchange applied a small, artificial Baseline % CADV for
the ETP Holder.
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 these 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,\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. Instead, the Exchange believes that the proposed
change will encourage competition, including by attracting additional
liquidity to the Exchange, which will make the Exchange a more
competitive venue for, among other things, order execution and price
discovery. In general, ETP Holders impacted by the proposed change may
readily adjust their trading behavior to maintain or increase their
credits or decrease their fees in a favorable manner, and will
therefore not be disadvantaged in their ability to compete. More
specifically, an ETP Holder could qualify for Step Up Tier 3 by
providing sufficient adding liquidity to satisfy the proposed new
volume requirement.
---------------------------------------------------------------------------

\12\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

Also, the Exchange does not believe that the proposed change will
impair the ability of ETP Holders or competing order execution venues
to maintain their competitive standing in the financial markets. In
this regard, the Exchange notes that existing pricing tiers of other
exchanges similarly provide for credits for market participants that
provide certain levels of liquidity on those exchanges.\13\
---------------------------------------------------------------------------

\13\ See, e.g., the ``Investor Support Program'' under NASDAQ
Stock Market, LLC (``NASDAQ'') Rule 7014.
---------------------------------------------------------------------------

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 member organizations 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) \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.
---------------------------------------------------------------------------

\14\ 15 U.S.C. 78s(b)(3)(A).
\15\ 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) \16\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
---------------------------------------------------------------------------

\16\ 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 (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-NYSEARCA-2014-65 on the subject line.

[[Page 34822]]

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-2014-65. 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 (https://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-2014-65 and should
be submitted on or before July 9, 2014.
---------------------------------------------------------------------------

\17\ 17 CFR 200.30-3(a)(12).

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-14201 Filed 6-17-14; 8:45 am]
BILLING CODE 8011-01-P

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