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, 29254-29258 [2019-13118]

Download as PDF 29254 Federal Register / Vol. 84, No. 120 / Friday, June 21, 2019 / Notices Dated: June 18, 2019. Eduardo A. Aleman, Deputy Secretary. 100 F Street NE, Washington, DC 20549–2736 Extension: Rule 13e–1 [FR Doc. 2019–13281 Filed 6–20–19; 8:45 am] jspears on DSK30JT082PROD with NOTICES BILLING CODE 8011–01–P Notice is hereby given that, pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.), the Securities and Exchange Commission (‘‘Commission’’) has submitted to the Office of Management and Budget this request for extension of the previously approved collection of information discussed below. Rule 13e–1 (17 CFR 240.13e–1) under the Securities Exchange Act of 1934 (U.S.C. 78 et seq.) makes it unlawful for an issuer who has received notice that it is the subject of a tender offer made under Section 14(d)(1) of the Exchange Act to purchase any of its equity securities during the tender offer, unless it first files a statement with the Commission containing information required by the rule. This rule is in keeping with the Commission’s statutory responsibility to prescribe rules and regulations that are necessary for the protection of investors. Public companies are the respondents. We estimate that it takes approximately 10 burden hours per response to provide the information required under Rule 13e–1 and that the information is filed by approximately 10 respondents. We estimate that 25% of the 10 hours per response (2.5 hours) is prepared by the company for a total annual reporting burden of 25 hours (2.5 hours per response × 10 responses). An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid control number. The public may view the background documentation for this information collection at the following website, www.reginfo.gov. Comments should be directed to: (i) Desk Officer for the Securities and Exchange Commission, Office of Information and Regulatory Affairs, Office of Management and Budget, Room 10102, New Executive Office Building, Washington, DC 20503, or by sending an email to: Lindsay.M.Abate@omb.eop.gov; and (ii) Charles Riddle, Acting Director/Chief Information Officer, Securities and Exchange Commission, c/o Candace Kenner, 100 F Street NE, Washington, DC 20549 or send an email to: PRA_ Mailbox@sec.gov. Comments must be submitted to OMB within 30 days of this notice. VerDate Sep<11>2014 18:30 Jun 20, 2019 Jkt 247001 SECURITIES AND EXCHANGE COMMISSION [SEC File No. 270–069, OMB Control No. 3235–0069] Submission for OMB Review; Comment Request Upon Written Request Copies Available From: Securities and Exchange Commission, Office of FOIA Services, 100 F Street NE, Washington, DC 20549–2736 Notice is hereby given that, pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.), the Securities and Exchange Commission (‘‘Commission’’) has submitted to the Office of Management and Budget this requests for extension of the previously approved collection of information discussed below. Industries Guides are used by registrants in certain industries as disclosure guidelines to be followed in presenting information to investors in registration statements and reports under the Securities Act (15 U.S.C. 77a et seq.) and Exchange Act (15 U.S.C. 78a et seq.). The paperwork burden from the Industry Guides is imposed through the forms that are subject to the disclosure requirements in the Industry Guides and is reflected in the analysis of these documents. To avoid a Paperwork Reduction Act inventory reflecting duplicative burdens and for administrative convenience, the Commission estimates the total annual burden imposed by the Industry Guides to be one hour. The information required by the Industry Guides is filed on occasion and is mandatory. All information is provided to the public. The Industry Guides do not directly impose any disclosure burden. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid control number. The public may view the background documentation for this information collection at the following website, www.reginfo.gov. Comments should be directed to: (i) Desk Officer for the Securities and Exchange Commission, Office of Information and Regulatory Affairs, Office of Management and Frm 00098 Fmt 4703 Dated: June 18, 2019. Eduardo A. Aleman, Deputy Secretary. [FR Doc. 2019–13283 Filed 6–20–19; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION Extension: Industry Guides PO 00000 Budget, Room 10102, New Executive Office Building, Washington, DC 20503, or by sending an email to: Lindsay.M.Abate@omb.eop.gov; and (ii) Charles Riddle, Acting Director/Chief Information Officer, Securities and Exchange Commission, c/o Candace Kenner, 100 F Street NE, Washington, DC 20549 or send an email to: PRA_ Mailbox@sec.gov. Comments must be submitted to OMB within 30 days of this notice. Sfmt 4703 [Release No. 34–86121; File No. SR– NYSEArca–2019–42] 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 June 17, 2019. 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 June 3, 2019, NYSE Arca, Inc. (‘‘NYSE Arca’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 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 modify the per share credit associated with the Retail Order Step-Up Tier 2. The Exchange proposes to implement the fee change effective June 3, 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. 1 15 U.S.C. 78s(b)(1). U.S.C. 78a. 3 17 CFR 240.19b–4. 2 15 E:\FR\FM\21JNN1.SGM 21JNN1 Federal Register / Vol. 84, No. 120 / Friday, June 21, 2019 / Notices 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 currently provides credits to ETP Holders, including Market Makers, who enter Retail Orders 4 on the Exchange.5 The Exchange has multiple levels of such credits that are based on an ETP Holder’s 6 trading volume of Retail Orders on the Exchange. The Exchange proposes to amend the Fee Schedule to decrease the per share credit under the Retail Order Step-Up Tier 2 for displayed liquidity in Retail Orders. The Exchange proposes to implement the fee change effective June 3, 2019. jspears on DSK30JT082PROD with NOTICES Background The Exchange operates in a highly competitive environment. 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 4 A Retail Order is an agency order or a riskless principal order that meets the criteria of Financial Industry Regulatory Authority, Inc. Rule 5320.03 that originates from a natural person and is submitted to the Exchange by a Retail Member Organization (‘‘RMO’’), provided that no change is made to the terms of the order with respect to price or side of market and the order does not originate from a trading algorithm or any other computerized methodology. See Securities Exchange Act Release No. 74947 (May 13, 2015), 80 FR 28735 (May 19, 2015) (SR–NYSEArca–2015–39). RMO is defined in Rule 7.44–E(a)(2) as an ETP Holder that is approved by the Exchange to submit Retail Orders. This reference to Retail Orders in the Retail Order StepUp Tier 2 qualifications means orders that are not executed in the Retail Liquidity Program. 5 See Retail Order Tier, Retail Order Step-Up Tier 1 and Retail Order Step-Up Tier 2 on the Fee Schedule at https://www.nyse.com/publicdocs/ nyse/markets/nyse-arca/NYSE_Arca_Marketplace_ Fees.pdf. 6 All references to ETP Holders in connection with the Retail Order Step-Up Tiers include Market Makers. VerDate Sep<11>2014 18:30 Jun 20, 2019 Jkt 247001 forces in determining prices and SRO revenues and, also, recognized that current regulation of the market system ‘‘has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.’’ 7 As the Commission itself recognized, the market for trading services in NMS stocks has become ‘‘more fragmented and competitive.’’ 8 Indeed, equity trading is currently dispersed across 13 exchanges,9 32 alternative trading systems,10 and numerous broker-dealer internalizers and wholesalers, all competing for order flow. Based on publicly-available information, no single exchange has more than 18% market share (whether including or excluding auction volume).11 Therefore, no exchange possesses significant pricing power in the execution of equity order flow. More specifically, in the first quarter of 2019, the Exchange averaged less than 9% market share of executed volume of equity trades.12 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 or reduce use of certain categories of products, in response to fee changes. The competition for Retail Order flow is even more stark, particularly as it relates to exchange versus off-exchange venues. For example, the Exchange examined Rule 606 disclosures from three prominent retail brokerages: ETrade, TD Ameritrade and Charles Schwab. For securities listed on the New York Stock Exchange LLC in the first quarter of 2019, TD Ameritrade routed 80% of its limit orders to offexchange venues.13 Similarly, E-Trade 7 See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005). 8 See Securities Exchange Act Release No. 51808, 84 FR 5202, 5253 (February 20, 2019) (File No. S7– 05–18) (Transaction Fee Pilot for NMS Stocks Final Rule) (‘‘Transaction Fee Pilot’’). 9 See Cboe U.S Equities Market Volume Summary at https://markets.cboe.com/us/equities/market_ share. 10 See FINRA ATS Transparency Data (May 6, 2019), available at https://otctransparency. finra.org/otctransparency/AtsIssueData. Although 54 alternative trading systems were registered with the Commission as of April 30, 2019, only 32 are currently trading. A list of alternative trading systems registered with the Commission is available at https://www.sec.gov/foia/docs/atslist.htm. 11 See Cboe Global Markets U.S. Equities Market Volume Summary (May 31, 2019), available at https://markets.cboe.com/us/equities/market_share/. 12 Based on Cboe U.S. Equities Market Volume Summary, the Exchange’s market share of intraday trading (excluding auctions) for the months of January 2019, February 2019 and March 2019 was 9.01%, 8.33% and 9.02%, respectively. 13 See https://www.tdameritrade.com/retailen_us/resources/pdf/AMTD2054.pdf. PO 00000 Frm 00099 Fmt 4703 Sfmt 4703 29255 Financial and Charles Schwab routed more than 77% and more than 90%,14 respectively, of its limit orders to offexchange venues. The Exchange thus needs to compete in the first instance with non-exchange venues for Retail Order flow, and with the 12 other exchange venues for that Retail Order flow that is not directed off-exchange. This competition is particularly acute for non-marketable Retail Orders, i.e., Retail Orders that provide liquidity, and even more fiercely for non-marketable Retail Orders that provide displayed liquidity on an exchange. Accordingly, competitive forces compel the Exchange to use exchange transaction fees and credits, particularly as they relate to competing for Retail Order flow, because market participants can readily trade on competing venues if they deem pricing levels at those other venues to be more favorable. To respond to this competitive environment, the Exchange has established Retail Order Step-Up tiers, which are designed to provide an incentive for ETP Holders to route Retail Orders that provide displayed liquidity to the Exchange by providing higher credits correlated to an ETP Holder’s higher trading volume in Retail Orders on the Exchange. Specifically, to qualify for the Retail Order Step-Up Tier 2, an ETP Holder must: (1) submit an average daily share volume per month of resting limit orders (i.e., provide liquidity) in an amount equal to or greater than 1.10% or more of US CADV,15 and (2) execute during the month, Retail Orders with a time-in-force of Day that is an increase of 0.35% or more of the US CADV from the ETP Holder’s April 2018 ADV, taken as a percentage of US CADV. Currently, if an ETP Holder meets the Retail Order Step-Up Tier 2 qualifications, such ETP Holder is eligible to earn a credit of $0.0038 per share for Retail Orders in Tape A, Tape B and Tape C Securities that provide displayed liquidity to the Book. Proposed Rule Change The Exchange proposes to reduce the credit that would be paid to an ETP 14 See https://content.etrade.com/etrade/ powerpage/pdf/OrderRouting11AC6.pdf. See also https://www.schwab.com/public/schwab/nn/legal_ compliance/important_notices/order_routing.html. 15 US 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 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. E:\FR\FM\21JNN1.SGM 21JNN1 29256 Federal Register / Vol. 84, No. 120 / Friday, June 21, 2019 / Notices Holder that qualifies for the Retail Order Step-Up Tier 2 to $0.0035. To date, only one ETP Holder has qualified for the Retail Order Step-Up Tier 2 rates. The proposed change would reduce the differences in credits available to Retail Orders that provide displayed liquidity on the Exchange from ETP Holders qualifying for this tier versus the credits available to Retail Orders that provide displayed liquidity on the Exchange from other ETP Holders. The Exchange believes that by lowering the credit available under this tier, it would be Tier Credit for providing liquidity Basic Rate .......................................................... Retail Order Tier ................................................. Retail Order Step-Up Tier 1 ............................... Retail Order Step-Up Tier 2 ............................... $0.0030 $0.0033 $0.0033 $0.0035 (all (all (all (all Tapes). Tapes). Tapes). Tapes) (displayed liquidity). 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.’’ 19 As the Commission itself recognized, the market for trading services in NMS stocks has become ‘‘more fragmented and competitive.’’ 20 Indeed, equity trading is currently dispersed across 13 exchanges,21 32 alternative trading systems,22 and numerous broker-dealer internalizers and wholesalers, all 2. Statutory Basis competing for order flow. Based on The Exchange believes that the publicly-available information, no proposed rule change is consistent with single exchange has more than 18% Section 6(b) of the Act,17 in general, and market share (whether including or furthers the objectives of Sections excluding auction volume).23 Therefore, 6(b)(4) and (5) of the Act,18 in particular, no exchange possesses significant because it provides for the equitable pricing power in the execution of equity allocation of reasonable dues, fees, and order flow. More specifically, in the first other charges among its members, quarter of 2019, the Exchange averaged issuers and other persons using its less than 9% market share of executed facilities and does not unfairly volume of equity trades (excluding discriminate between customers, auction volume).24 issuers, brokers or dealers. As noted above, the competition for The Exchange believes that the Retail Order flow is stark given the proposed rule change provides for the amount of retail limit orders that are equitable allocation of reasonable dues routed to non-exchange venues. The and fees and is not unfairly Exchange believes that the ever-shifting discriminatory for the following market share among the exchanges from reasons. month to month demonstrates that As noted above, the Exchange market participants can shift order flow, operates in a highly competitive market. or discontinue to reduce use of certain categories of products, in response to fee changes. This competition is particularly acute for non-marketable, or limit, retail orders, i.e., retail orders that can provide liquidity on an exchange. That competition is even more fierce for retail limit orders that provide displayed liquidity on an exchange. Accordingly, competitive forces constrain exchange transaction fees, particularly as they relate to competing for retail orders. The Exchange believes that the proposed change is reasonable because the new, lower credit under the Retail Order Step-Up Tier 2 would continue to encourage ETP Holders to send Retail Orders to the Exchange to qualify for the pricing tier. As noted above, the Exchange operates in a highly competitive environment, particularly for attracting Retail Order flow that provides displayed liquidity on an exchange. The Exchange believes it is reasonable to continue to provide a higher credit for Retail Orders that provide displayed liquidity if an ETP Holder meets the qualifications for the Retail Order Step-Up Tier 2. The Exchange further believes it is an equitable allocation of reasonable fees to reduce the credit that would be available under the Retail Order StepUp Tier 2 because it would reduce the difference in credits available for Retail Orders that provide liquidity, while still providing an increased credit to provide an incentive for ETP Holders to route displayed liquidity to the Exchange. Further, given the competitive market for attracting Retail Order flow, the Exchange notes that with this proposed rule change, the Exchange’s pricing for 16 The Exchange’s Fee Schedule is available here: https://www.nyse.com/publicdocs/nyse/markets/ nyse-arca/NYSE_Arca_Marketplace_Fees.pdf. 17 15 U.S.C. 78f(b). 18 15 U.S.C. 78f(b)(4) and (5). 19 See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005). 20 See Securities Exchange Act Release No. 51808, 84 FR 5202, 5253 (February 20, 2019) (File No. S7– 05–18) (Final rule). Commission is available at https://www.sec.gov/ foia/docs/atslist.htm. 23 See Cboe Global Markets U.S. Equities Market Volume Summary (May 31, 2019), available at https://markets.cboe.com/us/equities/market_share/. 24 Based on Cboe U.S. Equities Market Volume Summary, the Exchange’s market share of intraday trading (excluding auctions) for the months of January 2019, February 2019 and March 2019 was 9.01%, 8.33% and 9.02%, respectively. As noted above, under the Retail Order Step-Up Tier 1, an ETP Holder that meets the applicable qualifications is eligible for a credit of $0.0033 per share for Retail Orders that provide liquidity to the Book. The Exchange believes that the continued difference in per share credit that would be available under the Retail Order Step-Up Tier 2 ($0.0035) as compared to both the Retail Order Tier ($0.0033) and the Retail Order Step-Up Tier 1 ($0.0033) would continue to promote the display of a greater number of Retail Orders on the Exchange. 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. jspears on DSK30JT082PROD with NOTICES more closely align with the credits available for other Retail Orders that provide liquidity on the Exchange. With this proposed change, the following credits would be available to ETP Holders that provide liquidity in Retail Orders.16 VerDate Sep<11>2014 18:30 Jun 20, 2019 Jkt 247001 21 See Cboe U.S Equities Market Volume Summary at https://markets.cboe.com/us/equities/ market_share. 22 See FINRA ATS Transparency Data (May 6, 2019), available at https:// otctransparency.finra.org/otctransparency/ AtsIssueData. Although 54 alternative trading systems were registered with the Commission as of April 30, 2019, only 32 are currently trading. A list of alternative trading systems registered with the PO 00000 Frm 00100 Fmt 4703 Sfmt 4703 E:\FR\FM\21JNN1.SGM 21JNN1 Federal Register / Vol. 84, No. 120 / Friday, June 21, 2019 / Notices jspears on DSK30JT082PROD with NOTICES Retail Orders would be comparable to credits currently in place on other exchanges that the Exchange competes with for order flow. For example, the Nasdaq Stock Market LLC (‘‘Nasdaq’’) provides its members with a credit of $0.0033 per share if such member has an 85% add to total volume (adding liquidity and removing liquidity) ratio during a billing month.25 Cboe BZX Exchange, Inc. (‘‘BZX’’) provides its members with a credit of $0.0032 per share for retail orders that add liquidity to that market.26 Also, until recently, the Exchange’s current credit of $0.0038 per share was comparable to the Retail Volume Tier that was in place on Cboe EDGX Exchange, Inc. (‘‘EDGX’’), which provided members of that exchange a credit of $0.0037 per share. EDGX recently eliminated the Retail Volume Tier.27 This proposed rule change is a competitive response to the EDGX filing, and lowers the credit by 9% from the current level. The Exchange believes the proposed change is also reasonable because it is designed to attract higher volumes of Retail Orders transacted on the Exchange by ETP Holders which would benefit all market participants by offering greater price discovery, increased transparency, and an increased opportunity to trade on the Exchange. The Exchange believes that the proposed change is equitable and not unfairly discriminatory because it would apply to all ETP Holders on an equal and non-discriminatory basis. The Exchange further believes that the proposed change is equitable and not unfairly discriminatory because it is reasonably related to the value to the Exchange’s market quality associated with higher volume in Retail Orders. The Exchange notes that currently 12 firms submit Retail Orders that add liquidity on the Exchange and of those 12 firms, just one qualifies for the Retail Order Step-Up Tier 2 when one or more of the other 11 firms could achieve the tier and qualify for the same credits and fees if those firms directed more of their Retail Orders to the Exchange. Further, the Exchange notes that, with this proposed rule change, the difference between the highest credit provided for Retail Orders, $0.0035 per 25 See Nasdaq Price List, Rebate to Add Displayed Designated Retail Liquidity, at https:// nasdaqtrader.com/ Trader.aspx?id=PriceListTrading2. 26 See BZX Fee Schedule, Fee Codes and Associated Fees, at https://markets.cboe.com/us/ equities/membership/fee_schedule/bzx/. 27 See Securities Exchange Act Release No. 85852 (May 14, 2019), 84 FR 22919 (May 20, 2019) (SR– CboeEDGX–2019–030). VerDate Sep<11>2014 18:30 Jun 20, 2019 Jkt 247001 share, and the credit for Retail Orders that do not qualify for any of the Retail Order pricing tiers, $0.0030 per share, is $0.0005, or 15%, which the Exchange believes is small given the requirements that ETP Holders are required to meet to qualify for the higher credit. Similarly, with this proposed rule change, the difference in the highest credit for Retail Orders, $0.0035 per share, and the credit provided for Retail Orders to those ETP Holders qualifying for the Retail Order Tier or Retail Order StepUp Tier 1, $0.0033 per share, would only be $0.0002 per share, or 6%. Therefore, the Exchange believes the proposed change to the Retail Order Step-Up Tier 2 pricing tier is equitable and not unfairly discriminatory because it is available to all ETP Holders on an equal basis and provides discounts that are reasonably related to the value to the Exchange’s market quality associated with higher volumes. In today’s competitive marketplace, order flow providers have a choice of where to direct liquidity-providing order flow, and while only one ETP Holder has qualified to date for these rates, the Exchange believes there are additional ETP Holders that could qualify if they chose to direct their order flow to the Exchange. The Exchange believes that recalibrating the credits for providing liquidity will continue to attract order flow and liquidity to the Exchange, thereby contributing to price discovery on the Exchange and benefiting investors generally. The Exchange believes that the proposed rule change is equitable and not unfairly discriminatory because maintaining or increasing the proportion of Retail Orders in exchangelisted securities that are executed on a registered national securities exchange (rather than relying on certain available off-exchange execution methods) would contribute to investors’ confidence in the fairness of their transactions and would benefit all investors by deepening the Exchange’s liquidity pool, supporting the quality of price discovery, promoting market transparency and improving investor protection. This aspect of the proposed rule change also is consistent with the Act because all similarly situated ETP Holders would pay the same rate, as is currently the case, and because all ETP Holders, would be eligible to qualify for the rates by satisfying the related threshold, where applicable. Furthermore, the submission of Retail Orders is optional for ETP Holders in that they could choose whether to submit Retail Orders and, if they do, the extent of its activity in this regard. PO 00000 Frm 00101 Fmt 4703 Sfmt 4703 29257 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,28 the Exchange believes that the proposed rule change would not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. Instead, as discussed above, the Exchange believes that the proposed change would encourage the submission of additional liquidity to a public exchange, thereby promoting market depth, price discovery and transparency and enhancing order execution opportunities for ETP Holders. As a result, the Exchange believes that the proposed change furthers the Commission’s goal in adopting Regulation NMS of fostering competition among orders, which promotes ‘‘more efficient pricing of individual stocks for all types of orders, large and small.’’ 29 Intramarket Competition. The proposed change is designed to attract additional order flow to the Exchange. The Exchange believes that the proposed reduced credit would continue to incentivize market participants to submit orders that qualify as Retail Orders 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. The proposed credits would be available 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. 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 offexchange venues if they deem fee levels at those other venues to be more favorable. The Exchange notes that for the months of January 2019, February 2019 and March 2019, the Exchange’s 28 15 U.S.C. 78f(b)(8). Exchange Act Release No. 51808, 70 FR 37495, 37498–99 (June 29, 2005) (S7–10–04) (Final Rule). 29 Securities E:\FR\FM\21JNN1.SGM 21JNN1 29258 Federal Register / Vol. 84, No. 120 / Friday, June 21, 2019 / Notices market share of intraday trading (excluding auctions) was 9.01%, 8.33% and 9.02%, respectively.30 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 competition. The Exchange believes that the proposed change could promote competition between the Exchange and other execution venues, including those that currently offer similar order types and comparable transaction pricing, by encouraging additional orders to be sent to the Exchange for execution. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. jspears on DSK30JT082PROD with NOTICES 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) 31 of the Act and subparagraph (f)(2) of Rule 19b–4 32 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) 33 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–2019–42 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–2019–42. 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 (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 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–2019–42 and should be submitted on or before July 12, 2019. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.34 Vanessa A. Countryman, Acting Secretary. SECURITIES AND EXCHANGE COMMISSION [Release No. 34–86122; File No. SR– NYSEArca–2019–43] 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 June 17, 2019. 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 June 3, 2019, NYSE Arca, Inc. (‘‘NYSE Arca’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 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 modify the per share credits associated with the Step Up Tier 4. The Exchange proposes to implement the fee changes effective June 3, 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. [FR Doc. 2019–13118 Filed 6–20–19; 8:45 am] 30 See note 12, supra. 31 15 U.S.C. 78s(b)(3)(A). 32 17 CFR 240.19b–4(f)(2). 33 15 U.S.C. 78s(b)(2)(B). VerDate Sep<11>2014 18:30 Jun 20, 2019 BILLING CODE 8011–01–P 1 15 U.S.C. 78s(b)(1). U.S.C. 78a. 3 17 CFR 240.19b–4. 2 15 34 17 Jkt 247001 PO 00000 CFR 200.30–3(a)(12). Frm 00102 Fmt 4703 Sfmt 4703 E:\FR\FM\21JNN1.SGM 21JNN1

Agencies

[Federal Register Volume 84, Number 120 (Friday, June 21, 2019)]
[Notices]
[Pages 29254-29258]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-13118]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-86121; File No. SR-NYSEArca-2019-42]


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

June 17, 2019.
    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 June 3, 2019, NYSE Arca, Inc. (``NYSE Arca'' or the 
``Exchange'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \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 amend the NYSE Arca Equities Fees and 
Charges (``Fee Schedule'') to modify the per share credit associated 
with the Retail Order Step-Up Tier 2. The Exchange proposes to 
implement the fee change effective June 3, 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.

[[Page 29255]]

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 currently provides credits to ETP Holders, including 
Market Makers, who enter Retail Orders \4\ on the Exchange.\5\ The 
Exchange has multiple levels of such credits that are based on an ETP 
Holder's \6\ trading volume of Retail Orders on the Exchange. The 
Exchange proposes to amend the Fee Schedule to decrease the per share 
credit under the Retail Order Step-Up Tier 2 for displayed liquidity in 
Retail Orders. The Exchange proposes to implement the fee change 
effective June 3, 2019.
---------------------------------------------------------------------------

    \4\ A Retail Order is an agency order or a riskless principal 
order that meets the criteria of Financial Industry Regulatory 
Authority, Inc. Rule 5320.03 that originates from a natural person 
and is submitted to the Exchange by a Retail Member Organization 
(``RMO''), provided that no change is made to the terms of the order 
with respect to price or side of market and the order does not 
originate from a trading algorithm or any other computerized 
methodology. See Securities Exchange Act Release No. 74947 (May 13, 
2015), 80 FR 28735 (May 19, 2015) (SR-NYSEArca-2015-39). RMO is 
defined in Rule 7.44-E(a)(2) as an ETP Holder that is approved by 
the Exchange to submit Retail Orders. This reference to Retail 
Orders in the Retail Order Step-Up Tier 2 qualifications means 
orders that are not executed in the Retail Liquidity Program.
    \5\ See Retail Order Tier, Retail Order Step-Up Tier 1 and 
Retail Order Step-Up Tier 2 on the Fee Schedule at https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf.
    \6\ All references to ETP Holders in connection with the Retail 
Order Step-Up Tiers include Market Makers.
---------------------------------------------------------------------------

Background
    The Exchange operates in a highly competitive environment. 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.'' \7\
---------------------------------------------------------------------------

    \7\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
---------------------------------------------------------------------------

    As the Commission itself recognized, the market for trading 
services in NMS stocks has become ``more fragmented and competitive.'' 
\8\ Indeed, equity trading is currently dispersed across 13 
exchanges,\9\ 32 alternative trading systems,\10\ and numerous broker-
dealer internalizers and wholesalers, all competing for order flow. 
Based on publicly-available information, no single exchange has more 
than 18% market share (whether including or excluding auction 
volume).\11\ Therefore, no exchange possesses significant pricing power 
in the execution of equity order flow. More specifically, in the first 
quarter of 2019, the Exchange averaged less than 9% market share of 
executed volume of equity trades.\12\ 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 or reduce use of certain categories of products, in 
response to fee changes.
---------------------------------------------------------------------------

    \8\ See Securities Exchange Act Release No. 51808, 84 FR 5202, 
5253 (February 20, 2019) (File No. S7-05-18) (Transaction Fee Pilot 
for NMS Stocks Final Rule) (``Transaction Fee Pilot'').
    \9\ See Cboe U.S Equities Market Volume Summary at https://markets.cboe.com/us/equities/market_share.
    \10\ See FINRA ATS Transparency Data (May 6, 2019), available at 
https://otctransparency.finra.org/otctransparency/AtsIssueData. 
Although 54 alternative trading systems were registered with the 
Commission as of April 30, 2019, only 32 are currently trading. A 
list of alternative trading systems registered with the Commission 
is available at https://www.sec.gov/foia/docs/atslist.htm.
    \11\ See Cboe Global Markets U.S. Equities Market Volume Summary 
(May 31, 2019), available at https://markets.cboe.com/us/equities/market_share/.
    \12\ Based on Cboe U.S. Equities Market Volume Summary, the 
Exchange's market share of intraday trading (excluding auctions) for 
the months of January 2019, February 2019 and March 2019 was 9.01%, 
8.33% and 9.02%, respectively.
---------------------------------------------------------------------------

    The competition for Retail Order flow is even more stark, 
particularly as it relates to exchange versus off-exchange venues. For 
example, the Exchange examined Rule 606 disclosures from three 
prominent retail brokerages: E-Trade, TD Ameritrade and Charles Schwab. 
For securities listed on the New York Stock Exchange LLC in the first 
quarter of 2019, TD Ameritrade routed 80% of its limit orders to off-
exchange venues.\13\ Similarly, E-Trade Financial and Charles Schwab 
routed more than 77% and more than 90%,\14\ respectively, of its limit 
orders to off-exchange venues.
---------------------------------------------------------------------------

    \13\ See https://www.tdameritrade.com/retail-en_us/resources/pdf/AMTD2054.pdf.
    \14\ See https://content.etrade.com/etrade/powerpage/pdf/OrderRouting11AC6.pdf. See also https://www.schwab.com/public/schwab/nn/legal_compliance/important_notices/order_routing.html.
---------------------------------------------------------------------------

    The Exchange thus needs to compete in the first instance with non-
exchange venues for Retail Order flow, and with the 12 other exchange 
venues for that Retail Order flow that is not directed off-exchange. 
This competition is particularly acute for non-marketable Retail 
Orders, i.e., Retail Orders that provide liquidity, and even more 
fiercely for non-marketable Retail Orders that provide displayed 
liquidity on an exchange. Accordingly, competitive forces compel the 
Exchange to use exchange transaction fees and credits, particularly as 
they relate to competing for Retail Order flow, because market 
participants can readily trade on competing venues if they deem pricing 
levels at those other venues to be more favorable.
    To respond to this competitive environment, the Exchange has 
established Retail Order Step-Up tiers, which are designed to provide 
an incentive for ETP Holders to route Retail Orders that provide 
displayed liquidity to the Exchange by providing higher credits 
correlated to an ETP Holder's higher trading volume in Retail Orders on 
the Exchange. Specifically, to qualify for the Retail Order Step-Up 
Tier 2, an ETP Holder must:

    (1) submit an average daily share volume per month of resting 
limit orders (i.e., provide liquidity) in an amount equal to or 
greater than 1.10% or more of US CADV,\15\ and
---------------------------------------------------------------------------

    \15\ US 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 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.
---------------------------------------------------------------------------

    (2) execute during the month, Retail Orders with a time-in-force 
of Day that is an increase of 0.35% or more of the US CADV from the 
ETP Holder's April 2018 ADV, taken as a percentage of US CADV.

    Currently, if an ETP Holder meets the Retail Order Step-Up Tier 2 
qualifications, such ETP Holder is eligible to earn a credit of $0.0038 
per share for Retail Orders in Tape A, Tape B and Tape C Securities 
that provide displayed liquidity to the Book.
Proposed Rule Change
    The Exchange proposes to reduce the credit that would be paid to an 
ETP

[[Page 29256]]

Holder that qualifies for the Retail Order Step-Up Tier 2 to $0.0035. 
To date, only one ETP Holder has qualified for the Retail Order Step-Up 
Tier 2 rates. The proposed change would reduce the differences in 
credits available to Retail Orders that provide displayed liquidity on 
the Exchange from ETP Holders qualifying for this tier versus the 
credits available to Retail Orders that provide displayed liquidity on 
the Exchange from other ETP Holders. The Exchange believes that by 
lowering the credit available under this tier, it would be more closely 
align with the credits available for other Retail Orders that provide 
liquidity on the Exchange.
    With this proposed change, the following credits would be available 
to ETP Holders that provide liquidity in Retail Orders.\16\
---------------------------------------------------------------------------

    \16\ The Exchange's Fee Schedule is available here: https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf.

------------------------------------------------------------------------
             Tier                    Credit for providing liquidity
------------------------------------------------------------------------
Basic Rate...................  $0.0030 (all Tapes).
Retail Order Tier............  $0.0033 (all Tapes).
Retail Order Step-Up Tier 1..  $0.0033 (all Tapes).
Retail Order Step-Up Tier 2..  $0.0035 (all Tapes) (displayed
                                liquidity).
------------------------------------------------------------------------

    As noted above, under the Retail Order Step-Up Tier 1, an ETP 
Holder that meets the applicable qualifications is eligible for a 
credit of $0.0033 per share for Retail Orders that provide liquidity to 
the Book. The Exchange believes that the continued difference in per 
share credit that would be available under the Retail Order Step-Up 
Tier 2 ($0.0035) as compared to both the Retail Order Tier ($0.0033) 
and the Retail Order Step-Up Tier 1 ($0.0033) would continue to promote 
the display of a greater number of Retail Orders on the Exchange.
    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,\17\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\18\ 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.
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78f(b).
    \18\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change provides for 
the equitable allocation of reasonable dues and fees and is not 
unfairly discriminatory for the following reasons.
    As noted above, the Exchange operates in a highly competitive 
market. The Commission has repeatedly expressed its preference for 
competition over regulatory intervention in determining prices, 
products, and services in the securities markets. 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.'' \19\
---------------------------------------------------------------------------

    \19\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
---------------------------------------------------------------------------

    As the Commission itself recognized, the market for trading 
services in NMS stocks has become ``more fragmented and competitive.'' 
\20\ Indeed, equity trading is currently dispersed across 13 
exchanges,\21\ 32 alternative trading systems,\22\ and numerous broker-
dealer internalizers and wholesalers, all competing for order flow. 
Based on publicly-available information, no single exchange has more 
than 18% market share (whether including or excluding auction 
volume).\23\ Therefore, no exchange possesses significant pricing power 
in the execution of equity order flow. More specifically, in the first 
quarter of 2019, the Exchange averaged less than 9% market share of 
executed volume of equity trades (excluding auction volume).\24\
---------------------------------------------------------------------------

    \20\ See Securities Exchange Act Release No. 51808, 84 FR 5202, 
5253 (February 20, 2019) (File No. S7-05-18) (Final rule).
    \21\ See Cboe U.S Equities Market Volume Summary at https://markets.cboe.com/us/equities/market_share.
    \22\ See FINRA ATS Transparency Data (May 6, 2019), available at 
https://otctransparency.finra.org/otctransparency/AtsIssueData. 
Although 54 alternative trading systems were registered with the 
Commission as of April 30, 2019, only 32 are currently trading. A 
list of alternative trading systems registered with the Commission 
is available at https://www.sec.gov/foia/docs/atslist.htm.
    \23\ See Cboe Global Markets U.S. Equities Market Volume Summary 
(May 31, 2019), available at https://markets.cboe.com/us/equities/market_share/.
    \24\ Based on Cboe U.S. Equities Market Volume Summary, the 
Exchange's market share of intraday trading (excluding auctions) for 
the months of January 2019, February 2019 and March 2019 was 9.01%, 
8.33% and 9.02%, respectively.
---------------------------------------------------------------------------

    As noted above, the competition for Retail Order flow is stark 
given the amount of retail limit orders that are routed to non-exchange 
venues. 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. This competition is 
particularly acute for non-marketable, or limit, retail orders, i.e., 
retail orders that can provide liquidity on an exchange. That 
competition is even more fierce for retail limit orders that provide 
displayed liquidity on an exchange. Accordingly, competitive forces 
constrain exchange transaction fees, particularly as they relate to 
competing for retail orders.
    The Exchange believes that the proposed change is reasonable 
because the new, lower credit under the Retail Order Step-Up Tier 2 
would continue to encourage ETP Holders to send Retail Orders to the 
Exchange to qualify for the pricing tier. As noted above, the Exchange 
operates in a highly competitive environment, particularly for 
attracting Retail Order flow that provides displayed liquidity on an 
exchange. The Exchange believes it is reasonable to continue to provide 
a higher credit for Retail Orders that provide displayed liquidity if 
an ETP Holder meets the qualifications for the Retail Order Step-Up 
Tier 2.
    The Exchange further believes it is an equitable allocation of 
reasonable fees to reduce the credit that would be available under the 
Retail Order Step-Up Tier 2 because it would reduce the difference in 
credits available for Retail Orders that provide liquidity, while still 
providing an increased credit to provide an incentive for ETP Holders 
to route displayed liquidity to the Exchange.
    Further, given the competitive market for attracting Retail Order 
flow, the Exchange notes that with this proposed rule change, the 
Exchange's pricing for

[[Page 29257]]

Retail Orders would be comparable to credits currently in place on 
other exchanges that the Exchange competes with for order flow. For 
example, the Nasdaq Stock Market LLC (``Nasdaq'') provides its members 
with a credit of $0.0033 per share if such member has an 85% add to 
total volume (adding liquidity and removing liquidity) ratio during a 
billing month.\25\ Cboe BZX Exchange, Inc. (``BZX'') provides its 
members with a credit of $0.0032 per share for retail orders that add 
liquidity to that market.\26\ Also, until recently, the Exchange's 
current credit of $0.0038 per share was comparable to the Retail Volume 
Tier that was in place on Cboe EDGX Exchange, Inc. (``EDGX''), which 
provided members of that exchange a credit of $0.0037 per share. EDGX 
recently eliminated the Retail Volume Tier.\27\ This proposed rule 
change is a competitive response to the EDGX filing, and lowers the 
credit by 9% from the current level.
---------------------------------------------------------------------------

    \25\ See Nasdaq Price List, Rebate to Add Displayed Designated 
Retail Liquidity, at https://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2.
    \26\ See BZX Fee Schedule, Fee Codes and Associated Fees, at 
https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/.
    \27\ See Securities Exchange Act Release No. 85852 (May 14, 
2019), 84 FR 22919 (May 20, 2019) (SR-CboeEDGX-2019-030).
---------------------------------------------------------------------------

    The Exchange believes the proposed change is also reasonable 
because it is designed to attract higher volumes of Retail Orders 
transacted on the Exchange by ETP Holders which would benefit all 
market participants by offering greater price discovery, increased 
transparency, and an increased opportunity to trade on the Exchange.
    The Exchange believes that the proposed change is equitable and not 
unfairly discriminatory because it would apply to all ETP Holders on an 
equal and non-discriminatory basis. The Exchange further believes that 
the proposed change is equitable and not unfairly discriminatory 
because it is reasonably related to the value to the Exchange's market 
quality associated with higher volume in Retail Orders. The Exchange 
notes that currently 12 firms submit Retail Orders that add liquidity 
on the Exchange and of those 12 firms, just one qualifies for the 
Retail Order Step-Up Tier 2 when one or more of the other 11 firms 
could achieve the tier and qualify for the same credits and fees if 
those firms directed more of their Retail Orders to the Exchange.
    Further, the Exchange notes that, with this proposed rule change, 
the difference between the highest credit provided for Retail Orders, 
$0.0035 per share, and the credit for Retail Orders that do not qualify 
for any of the Retail Order pricing tiers, $0.0030 per share, is 
$0.0005, or 15%, which the Exchange believes is small given the 
requirements that ETP Holders are required to meet to qualify for the 
higher credit. Similarly, with this proposed rule change, the 
difference in the highest credit for Retail Orders, $0.0035 per share, 
and the credit provided for Retail Orders to those ETP Holders 
qualifying for the Retail Order Tier or Retail Order Step-Up Tier 1, 
$0.0033 per share, would only be $0.0002 per share, or 6%. Therefore, 
the Exchange believes the proposed change to the Retail Order Step-Up 
Tier 2 pricing tier is equitable and not unfairly discriminatory 
because it is available to all ETP Holders on an equal basis and 
provides discounts that are reasonably related to the value to the 
Exchange's market quality associated with higher volumes. In today's 
competitive marketplace, order flow providers have a choice of where to 
direct liquidity-providing order flow, and while only one ETP Holder 
has qualified to date for these rates, the Exchange believes there are 
additional ETP Holders that could qualify if they chose to direct their 
order flow to the Exchange.
    The Exchange believes that recalibrating the credits for providing 
liquidity will continue to attract order flow and liquidity to the 
Exchange, thereby contributing to price discovery on the Exchange and 
benefiting investors generally.
    The Exchange believes that the proposed rule change is equitable 
and not unfairly discriminatory because maintaining or increasing the 
proportion of Retail Orders in exchange-listed securities that are 
executed on a registered national securities exchange (rather than 
relying on certain available off-exchange execution methods) would 
contribute to investors' confidence in the fairness of their 
transactions and would benefit all investors by deepening the 
Exchange's liquidity pool, supporting the quality of price discovery, 
promoting market transparency and improving investor protection. This 
aspect of the proposed rule change also is consistent with the Act 
because all similarly situated ETP Holders would pay the same rate, as 
is currently the case, and because all ETP Holders, would be eligible 
to qualify for the rates by satisfying the related threshold, where 
applicable. Furthermore, the submission of Retail Orders is optional 
for ETP Holders in that they could choose whether to submit Retail 
Orders and, if they do, the extent of its activity in this regard.
    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,\28\ the Exchange 
believes that the proposed rule change would not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. Instead, as discussed above, the Exchange believes 
that the proposed change would encourage the submission of additional 
liquidity to a public exchange, thereby promoting market depth, price 
discovery and transparency and enhancing order execution opportunities 
for ETP Holders. As a result, the Exchange believes that the proposed 
change furthers the Commission's goal in adopting Regulation NMS of 
fostering competition among orders, which promotes ``more efficient 
pricing of individual stocks for all types of orders, large and 
small.'' \29\
---------------------------------------------------------------------------

    \28\ 15 U.S.C. 78f(b)(8).
    \29\ Securities Exchange Act Release No. 51808, 70 FR 37495, 
37498-99 (June 29, 2005) (S7-10-04) (Final Rule).
---------------------------------------------------------------------------

    Intramarket Competition. The proposed change is designed to attract 
additional order flow to the Exchange. The Exchange believes that the 
proposed reduced credit would continue to incentivize market 
participants to submit orders that qualify as Retail Orders 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. The proposed credits 
would be available 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.
    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. The 
Exchange notes that for the months of January 2019, February 2019 and 
March 2019, the Exchange's

[[Page 29258]]

market share of intraday trading (excluding auctions) was 9.01%, 8.33% 
and 9.02%, respectively.\30\ 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 competition.
---------------------------------------------------------------------------

    \30\ See note 12, supra.
---------------------------------------------------------------------------

    The Exchange believes that the proposed change could promote 
competition between the Exchange and other execution venues, including 
those that currently offer similar order types and comparable 
transaction pricing, by encouraging additional orders to be sent to the 
Exchange for execution.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change is effective upon filing pursuant to 
Section 19(b)(3)(A) \31\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \32\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
---------------------------------------------------------------------------

    \31\ 15 U.S.C. 78s(b)(3)(A).
    \32\ 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) \33\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \33\ 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 [email protected]. Please include 
File Number SR-NYSEArca-2019-42 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-2019-42. 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 (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 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-2019-42 and should be submitted 
on or before July 12, 2019.
---------------------------------------------------------------------------

    \34\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\34\
Vanessa A. Countryman,
Acting Secretary.
[FR Doc. 2019-13118 Filed 6-20-19; 8:45 am]
 BILLING CODE 8011-01-P
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