Self-Regulatory Organizations; NYSE Arca, Inc.; Suspension of and Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change To Amend the NYSE Arca Equities Fees and Charges, 44116-44118 [2021-17087]
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44116
Federal Register / Vol. 86, No. 152 / Wednesday, August 11, 2021 / Notices
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–MEMX–2021–09 and
should be submitted on or before
September 1, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.37
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2021–17085 Filed 8–10–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–92583; File No. SR–
NYSEArca–2021–52]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Suspension of and Order
Instituting Proceedings To Determine
Whether To Approve or Disapprove a
Proposed Rule Change To Amend the
NYSE Arca Equities Fees and Charges
August 5, 2021.
I. Introduction
On June 14, 2021, NYSE Arca, Inc.
(‘‘NYSE Arca’’ or the ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (the ‘‘Commission’’),
pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a
proposed rule change (File No. SR–
NYSEArca–2021–52) to amend the
NYSE Arca Equities Fees and Charges
(‘‘Fee Schedule’’).3 The proposed rule
change was immediately effective upon
filing with the Commission pursuant to
Section 19(b)(3)(A) of the Act.4 The
37 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 92291
(June 29, 2021), 86 FR 35551 (July 6, 2021)
(‘‘Notice’’).
4 15 U.S.C. 78s(b)(3)(A). A proposed rule change
may take effect upon filing with the Commission if
it is designated by the exchange as ‘‘establishing or
changing a due, fee, or other charge imposed by the
self-regulatory organization on any person, whether
or not the person is a member of the self-regulatory
organization.’’ 15 U.S.C. 78s(b)(3)(A)(ii).
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proposed rule change was published for
comment in the Federal Register on July
6, 2021.5 The Commission received no
comment letters regarding the proposed
rule change. Pursuant to Section
19(b)(3)(C) of the Act,6 the Commission
is hereby: (1) Temporarily suspending
File No. SR–NYSEArca–2021–52; and
(2) instituting proceedings to determine
whether to approve or disapprove File
No. SR–NYSEArca–2021–52.
II. Description of the Proposed Rule
Change
The Exchange proposes to establish a
new category of Retail Order executions
for purposes of the Fee Schedule.
Specifically, the Exchange proposes that
no fees or credits would apply for Retail
Order executions that are denoted
‘‘internalized’’ executions under certain
circumstances.7 The Exchange proposes
that no fees will be charged nor credits
paid for Retail Orders where (i) each
side of the executed order shares the
same MPID, (ii) each side of the
executed order is a Retail Order with a
time-in-force of Day, and (iii) the above
executed orders have an Average Daily
Volume (‘‘ADV’’) of at least 150,000
shares.
Prior to the proposed rule change,
Retail Orders that were internalized 8 on
the Exchange were not identified in the
Fee Schedule and were treated the like
other Retail Orders, regardless of
whether they were internalized
executions, and regardless of ADV.
Specifically, the Exchange provides a
credit ranging from $0.0035 to $0.0038,
depending on the step-up tier, to Retail
Orders that provide liquidity, and
charges no fee for Retail Orders that
remove liquidity. Therefore, the
proposal carves out a particular group of
Retail Orders—internalized orders when
such orders have an ADV of at least
150,000 shares—and eliminates the
credits for those Retail Orders that
provide liquidity. ETP Holders with an
ADV under 150,000 of internalized
Retail Orders would continue to receive
the relevant credit for Retail Orders that
provide liquidity.
III. Suspension of the Proposed Rule
Change
Pursuant to Section 19(b)(3)(C) of the
Act,9 at any time within 60 days of the
5 See
Notice, supra note 3.
U.S.C. 78s(b)(3)(C).
7 The Exchange defines internalized executions as
an execution where two orders presented to the
Exchange from the same ETP Holder (i.e., MPID) are
presented separately and not in a paired manner,
but nonetheless inadvertently match with one
another. See Notice, supra note 3, at 35552 note 13.
8 See id.
9 15 U.S.C. 78s(b)(3)(C).
6 15
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date of filing of an immediately effective
proposed rule change pursuant to
Section 19(b)(1) of the Act,10 the
Commission summarily may
temporarily suspend the change in the
rules of a self-regulatory organization
(‘‘SRO’’) 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. As discussed below, the
Commission believes a temporary
suspension of the proposed rule change
is necessary and appropriate to allow for
additional analysis of the proposed rule
change’s consistency with the Act and
the rules thereunder.
When exchanges file their proposed
rule changes with the Commission,
including fee filings like the Exchange’s
present proposal, they are required to
provide a statement supporting the
proposal’s basis under the Act and the
rules and regulations thereunder
applicable to the exchange.11 The
instructions to Form 19b–4, on which
exchanges file their proposed rule
changes, specify that such statement
‘‘should be sufficiently detailed and
specific to support a finding that the
proposed rule change is consistent with
[those] requirements.’’ 12
Section 6 of the Act, including
Sections 6(b)(4), (5), and (8), require the
rules of an exchange to: (1) Provide for
the equitable allocation of reasonable
fees among members, issuers, and other
persons using the exchange’s
facilities; 13 (2) perfect the mechanism of
a free and open market and a national
market system, protect investors and the
public interest, and not be designed to
permit unfair discrimination between
customers, issuers, brokers, or
dealers; 14 and (3) not impose any
burden on competition not necessary or
appropriate in furtherance of the
purposes of the Act.15
In justifying its proposal, the
Exchange stated in its filing that its
proposal is reasonable because it ‘‘is a
reasonable attempt to increase liquidity
on the Exchange and improve the
Exchange’s market share relative to its
competitors.’’ 16 The Exchange also
states that the proposal is an equitable
allocation of fees and credits because
‘‘all ETP Holder that participate on the
10 15
U.S.C. 78s(b)(1).
17 CFR 240.19b–4 (Item 3 entitled ‘‘SelfRegulatory Organization’s Statement of the Purpose
of, and Statutory Basis for, the Proposed Rule
Change’’).
12 See id.
13 15 U.S.C. 78f(b)(4).
14 15 U.S.C. 78f(b)(5).
15 15 U.S.C. 78f(b)(8).
16 See Notice, supra note 3, at 35552.
11 See
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Federal Register / Vol. 86, No. 152 / Wednesday, August 11, 2021 / Notices
Exchange will be able to internalize
their Retail Orders on the Exchange at
no cost, i.e., they would not receive a
credit or pay any fee for the execution
of Retail Orders that are internalized.’’ 17
Further, the Exchange states that the
proposal is an equitable allocation of
fees and credits because it would benefit
all investors by deepening the
Exchange’s liquidity pool, supporting
the quality of price discovery,
promoting market transparency, and
improving investor protection.18 The
Exchange states that the proposal is not
unfairly discriminatory because ETP
Holders are free to transact on other
exchanges if they believe those
exchanges offer better value.19 Finally,
the Exchange states that the proposal is
not unfairly discriminatory because it is
available to all ETP holders on an equal
and non-discriminatory basis and that
‘‘all similarly situated ETP Holders
would be charged the same fee for
executing Retail Orders that are
internalized.’’ 20
In temporarily suspending the
Exchange’s proposed rule change, the
Commission intends to further consider
whether the proposal to amend the
NYSE Arca Fee Schedule is consistent
with the statutory requirements
applicable to a national securities
exchange under the Act. In particular,
the Commission will consider whether
the proposed rule change satisfies the
standards under the Act and the rules
thereunder requiring, among other
things, that an exchange’s rules provide
for the equitable allocation of reasonable
fees among members, issuers, and other
persons using its facilities; not permit
unfair discrimination between
customers, issuers, brokers or dealers;
and do not impose any burden on
competition not necessary or
appropriate in furtherance of the
purposes of the Act.21
Therefore, the Commission finds that
it is appropriate in the public interest,
for the protection of investors, and
otherwise in furtherance of the purposes
of the Act, to temporarily suspend the
proposed rule change.22
17 See
id. at 35553.
id.
19 See id.
20 See id.
21 See 15 U.S.C. 78f(b)(4), (5), and (8),
respectively.
22 For purposes of temporarily suspending the
proposed rule change, the Commission has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
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18 See
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IV. Proceedings To Determine Whether
To Approve or Disapprove the
Proposed Rule Change
In addition to temporarily suspending
the proposal, the Commission also
hereby institutes proceedings pursuant
to Sections 19(b)(3)(C) 23 and 19(b)(2)(B)
of the Act 24 to determine whether the
Exchange’s proposed rule change
should be approved or disapproved.
Institution of proceedings does not
indicate that the Commission has
reached any conclusions with respect to
any of the issues involved. Rather, the
Commission seeks and encourages
interested persons to provide additional
comment on the proposed rule change
to inform the Commission’s analysis of
whether to approve or disapprove the
proposed rule change.
Pursuant to Section 19(b)(2)(B) of the
Act,25 the Commission is providing
notice of the grounds for possible
disapproval under consideration:
• Whether the Exchange has
demonstrated how its proposed fee is
consistent with Section 6(b)(4) of the
Act, which requires that the rules of a
national securities exchange ‘‘provide
for the equitable allocation of reasonable
dues, fees, and other charges among its
members and issuers and other persons
using its facilities;’’ 26;
• Whether the Exchange has
demonstrated how its proposed fee is
consistent with Section 6(b)(5) of the
Act, which requires, among other
things, that the rules of a national
securities exchange not be ‘‘designed to
permit unfair discrimination between
customers, issuers, brokers, or
dealers’’ 27; and
• Whether the Exchange has
demonstrated how its proposed fee is
consistent with Section 6(b)(8) of the
Act, which requires that the rules of a
national securities exchange ‘‘not
impose any burden on competition not
necessary or appropriate in furtherance
of the purposes of [the Act].’’ 28
23 15 U.S.C. 78s(b)(3)(C). Once the Commission
temporarily suspends a proposed rule change,
Section 19(b)(3)(C) of the Act requires that the
Commission institute proceedings under Section
19(b)(2)(B) to determine whether a proposed rule
change should be approved or disapproved.
24 15 U.S.C. 78s(b)(2)(B).
25 15 U.S.C. 78s(b)(2)(B). Section 19(b)(2)(B) of the
Act also provides that proceedings to determine
whether to disapprove a proposed rule change must
be concluded within 180 days of the date of
publication of notice of the filing of the proposed
rule change. See id. The time for conclusion of the
proceedings may be extended for up to 60 days if
the Commission finds good cause for such
extension and publishes its reasons for so finding,
or if the exchange consents to the longer period. See
id.
26 15 U.S.C. 78f(b)(4).
27 15 U.S.C. 78f(b)(5).
28 15 U.S.C. 78f(b)(8).
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44117
As noted above, the proposal purports
to amend the NYSE Arca Fee Schedule
to eliminate the credits for providing
liquidity for certain internalized Retail
Orders when such orders have an ADV
of at least 150,000 shares. However, the
Exchange’s statements in support of the
proposed rule change lack specificity
and are at times contradictory. For
example, the Exchange provides only
broad general statements that the
proposal is not unfairly discriminatory
because all ETP Holders will be treated
the same. However, this explanation
fails to address why it is not unfairly
discriminatory for ETP Holders with
under 150,000 ADV of internalized
Retail Orders to continue to receive a
credit for providing liquidity while
those with over 150,000 ADV of
internalized Retail Orders no longer
receive the same credit. Furthermore,
the Exchange contends that the proposal
is consistent with the Act because it will
incentivize more Retail Order flow to
the Exchange, thereby benefitting all
investors. However, the Exchange does
not explain how a proposal to eliminate
an existing credit would achieve these
goals.
Under the Commission’s Rules of
Practice, the ‘‘burden to demonstrate
that a proposed rule change is
consistent with the [Act] and the rules
and regulations issued thereunder . . .
is on the [SRO] that proposed the rule
change.’’ 29 The description of a
proposed rule change, its purpose and
operation, its effect, and a legal analysis
of its consistency with applicable
requirements must all be sufficiently
detailed and specific to support an
affirmative Commission finding,30 and
any failure of an SRO to provide this
information may result in the
Commission not having a sufficient
basis to make an affirmative finding that
a proposed rule change is consistent
with the Act and the applicable rules
and regulations.31
The Commission is instituting
proceedings to allow for additional
consideration and comment on the
issues raised herein, including as to
whether the proposed fees are
consistent with the Act, and
specifically, with its requirements that
exchange fees be reasonable and
equitably allocated, not be unfairly
discriminatory, and not impose a
burden on competition.32
29 17
CFR 201.700(b)(3).
id.
31 See id.
32 See 15 U.S.C. 78f(b)(4), (5), and (8).
30 See
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44118
Federal Register / Vol. 86, No. 152 / Wednesday, August 11, 2021 / Notices
V. Commission’s Solicitation of
Comments
The Commission requests written
views, data, and arguments with respect
to the concerns identified above as well
as any other relevant concerns. Such
comments should be submitted by
September 1, 2021. Rebuttal comments
should be submitted by September 15,
2021. Although there do not appear to
be any issues relevant to approval or
disapproval which would be facilitated
by an oral presentation of views, data,
and arguments, the Commission will
consider, pursuant to Rule 19b–4, any
request for an opportunity to make an
oral presentation.33
The Commission asks that
commenters address the sufficiency and
merit of the Exchange’s statements in
support of the proposal, in addition to
any other comments they may wish to
submit about the proposed rule change.
Interested persons are invited to
submit written data, views, and
arguments concerning the proposed rule
changes, 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 No. SR–
NYSEArca–2021–52 on the subject line.
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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 No.
SR–NYSEArca–2021–52. The 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
33 15 U.S.C. 78s(b)(2). Section 19(b)(2) of the Act
grants the Commission flexibility to determine what
type of proceeding—either oral or notice and
opportunity for written comments—is appropriate
for consideration of a particular proposal by an
SRO. See Securities Acts Amendments of 1975,
Report of the Senate Committee on Banking,
Housing and Urban Affairs to Accompany S. 249,
S. Rep. No. 75, 94th Cong., 1st Sess. 30 (1975).
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proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such
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 publicly available. All
submissions should refer to File No.
SR–NYSEArca–2021–52 and should be
submitted on or before September 1,
2021. Rebuttal comments should be
submitted by September 15, 2021.
VI. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(3)(C) of the Act,34 that File
No. SR–NYSEArca–2021–52, be and
hereby is, temporarily suspended. In
addition, the Commission is instituting
proceedings to determine whether the
proposed rule change should be
approved or disapproved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.35
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2021–17087 Filed 8–10–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–92581; File No. SR–CBOE–
2021–029]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Filing of
Amendment No. 1 and Order Instituting
Proceedings To Determine Whether To
Approve or Disapprove a Proposed
Rule Change, as Modified by
Amendment No. 1, To Increase
Position Limits for Options on Certain
Exchange-Traded Funds and an
Exchange-Traded Note
August 5, 2021.
I. Introduction
On April 21, 2021, Cboe Exchange,
Inc. (‘‘Exchange’’) filed with the
34 15
35 17
PO 00000
U.S.C. 78s(b)(3)(C).
CFR 200.30–3(a)(57) and (58).
Frm 00131
Fmt 4703
Sfmt 4703
Securities and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
amend Interpretation and Policy .07 of
Exchange Rule 8.30, Position Limits, to
increase the position limits for options
on the following exchange traded funds
(‘‘ETFs’’) and exchange traded note
(‘‘ETN’’) (collectively, ‘‘Exchange
Traded Products’’ or ‘‘ETP(s)’’): SPDR
Gold Shares (‘‘GLD’’), iShares iBoxx $
Investment Grade Corporate Bond ETF
(‘‘LQD’’), iShares Silver Trust (‘‘SLV’’),
iPath S&P 500 VIX Short-Term Futures
ETN (‘‘VXX’’), ProShares Ultra VIX
Short-Term Futures ETF (‘‘UVXY’’), and
VanEck Vectors Gold Miners ETF
(‘‘GDX’’). The proposed rule change was
published for comment in the Federal
Register on May 10, 2021.3 On June 17,
2021, pursuant to Section 19(b)(2) of the
Act,4 the Commission designated a
longer period within which to approve
the proposed rule change, disapprove
the proposed rule change, or institute
proceedings to determine whether to
approve or disapprove the proposed
rule change.5 On July 27, 2021, the
Exchange submitted Amendment No. 1
to the proposed rule change, which
replaced and superseded the proposed
rule change as originally filed.6 The
Commission is publishing this notice
and order to solicit comments on the
proposed rule change, as modified by
Amendment No. 1, from interested
persons and to institute proceedings
pursuant to Section 19(b)(2)(B) of the
Act 7 to determine whether to approve
or disapprove the proposed rule change,
as modified by Amendment No. 1.
II. Description of the Proposal, as
Modified by Amendment No. 1
Currently, position limits for options
on ETFs and ETNs traded on the
Exchange, such as those subject to this
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 91767
(May 4, 2021), 86 FR 25026.
4 15 U.S.C. 78s(b)(2).
5 See Securities Exchange Act Release No. 92204,
86 FR 33395 (June 24, 2021). The Commission
designated August 8, 2021, as the date by which the
Commission shall approve or disapprove, or
institute proceedings to determine whether to
approve or disapprove, the proposed rule change.
6 In Amendment No. 1, the Exchange: (1) Reduced
the proposed position limit for GLD options from
1,000,000 contracts to 500,000 contracts; and (2)
provided additional justification and analysis in
support of the proposal. The additional justification
and analysis provided by Amendment No. 1 is
included in the description below of the proposal
as amended. The full text of Amendment No. 1 is
available on the Commission’s website at: https://
www.sec.gov/comments/sr-cboe-2021-029/
srcboe2021029-9094584-246812.pdf.
7 15 U.S.C. 78s(b)(2)(B).
2 17
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]]>Agencies
[Federal Register Volume 86, Number 152 (Wednesday, August 11, 2021)]
[Notices]
[Pages 44116-44118]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-17087]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-92583; File No. SR-NYSEArca-2021-52]
Self-Regulatory Organizations; NYSE Arca, Inc.; Suspension of and
Order Instituting Proceedings To Determine Whether To Approve or
Disapprove a Proposed Rule Change To Amend the NYSE Arca Equities Fees
and Charges
August 5, 2021.
I. Introduction
On June 14, 2021, NYSE Arca, Inc. (``NYSE Arca'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change (File No. SR-NYSEArca-2021-52) to amend the NYSE
Arca Equities Fees and Charges (``Fee Schedule'').\3\ The proposed rule
change was immediately effective upon filing with the Commission
pursuant to Section 19(b)(3)(A) of the Act.\4\ The proposed rule change
was published for comment in the Federal Register on July 6, 2021.\5\
The Commission received no comment letters regarding the proposed rule
change. Pursuant to Section 19(b)(3)(C) of the Act,\6\ the Commission
is hereby: (1) Temporarily suspending File No. SR-NYSEArca-2021-52; and
(2) instituting proceedings to determine whether to approve or
disapprove File No. SR-NYSEArca-2021-52.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 92291 (June 29,
2021), 86 FR 35551 (July 6, 2021) (``Notice'').
\4\ 15 U.S.C. 78s(b)(3)(A). A proposed rule change may take
effect upon filing with the Commission if it is designated by the
exchange as ``establishing or changing a due, fee, or other charge
imposed by the self-regulatory organization on any person, whether
or not the person is a member of the self-regulatory organization.''
15 U.S.C. 78s(b)(3)(A)(ii).
\5\ See Notice, supra note 3.
\6\ 15 U.S.C. 78s(b)(3)(C).
---------------------------------------------------------------------------
II. Description of the Proposed Rule Change
The Exchange proposes to establish a new category of Retail Order
executions for purposes of the Fee Schedule. Specifically, the Exchange
proposes that no fees or credits would apply for Retail Order
executions that are denoted ``internalized'' executions under certain
circumstances.\7\ The Exchange proposes that no fees will be charged
nor credits paid for Retail Orders where (i) each side of the executed
order shares the same MPID, (ii) each side of the executed order is a
Retail Order with a time-in-force of Day, and (iii) the above executed
orders have an Average Daily Volume (``ADV'') of at least 150,000
shares.
---------------------------------------------------------------------------
\7\ The Exchange defines internalized executions as an execution
where two orders presented to the Exchange from the same ETP Holder
(i.e., MPID) are presented separately and not in a paired manner,
but nonetheless inadvertently match with one another. See Notice,
supra note 3, at 35552 note 13.
---------------------------------------------------------------------------
Prior to the proposed rule change, Retail Orders that were
internalized \8\ on the Exchange were not identified in the Fee
Schedule and were treated the like other Retail Orders, regardless of
whether they were internalized executions, and regardless of ADV.
Specifically, the Exchange provides a credit ranging from $0.0035 to
$0.0038, depending on the step-up tier, to Retail Orders that provide
liquidity, and charges no fee for Retail Orders that remove liquidity.
Therefore, the proposal carves out a particular group of Retail
Orders--internalized orders when such orders have an ADV of at least
150,000 shares--and eliminates the credits for those Retail Orders that
provide liquidity. ETP Holders with an ADV under 150,000 of
internalized Retail Orders would continue to receive the relevant
credit for Retail Orders that provide liquidity.
---------------------------------------------------------------------------
\8\ See id.
---------------------------------------------------------------------------
III. Suspension of the Proposed Rule Change
Pursuant to Section 19(b)(3)(C) of the Act,\9\ at any time within
60 days of the date of filing of an immediately effective proposed rule
change pursuant to Section 19(b)(1) of the Act,\10\ the Commission
summarily may temporarily suspend the change in the rules of a self-
regulatory organization (``SRO'') 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. As discussed below, the Commission believes a temporary
suspension of the proposed rule change is necessary and appropriate to
allow for additional analysis of the proposed rule change's consistency
with the Act and the rules thereunder.
---------------------------------------------------------------------------
\9\ 15 U.S.C. 78s(b)(3)(C).
\10\ 15 U.S.C. 78s(b)(1).
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When exchanges file their proposed rule changes with the
Commission, including fee filings like the Exchange's present proposal,
they are required to provide a statement supporting the proposal's
basis under the Act and the rules and regulations thereunder applicable
to the exchange.\11\ The instructions to Form 19b-4, on which exchanges
file their proposed rule changes, specify that such statement ``should
be sufficiently detailed and specific to support a finding that the
proposed rule change is consistent with [those] requirements.'' \12\
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\11\ See 17 CFR 240.19b-4 (Item 3 entitled ``Self-Regulatory
Organization's Statement of the Purpose of, and Statutory Basis for,
the Proposed Rule Change'').
\12\ See id.
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Section 6 of the Act, including Sections 6(b)(4), (5), and (8),
require the rules of an exchange to: (1) Provide for the equitable
allocation of reasonable fees among members, issuers, and other persons
using the exchange's facilities; \13\ (2) perfect the mechanism of a
free and open market and a national market system, protect investors
and the public interest, and not be designed to permit unfair
discrimination between customers, issuers, brokers, or dealers; \14\
and (3) not impose any burden on competition not necessary or
appropriate in furtherance of the purposes of the Act.\15\
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\13\ 15 U.S.C. 78f(b)(4).
\14\ 15 U.S.C. 78f(b)(5).
\15\ 15 U.S.C. 78f(b)(8).
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In justifying its proposal, the Exchange stated in its filing that
its proposal is reasonable because it ``is a reasonable attempt to
increase liquidity on the Exchange and improve the Exchange's market
share relative to its competitors.'' \16\ The Exchange also states that
the proposal is an equitable allocation of fees and credits because
``all ETP Holder that participate on the
[[Page 44117]]
Exchange will be able to internalize their Retail Orders on the
Exchange at no cost, i.e., they would not receive a credit or pay any
fee for the execution of Retail Orders that are internalized.'' \17\
Further, the Exchange states that the proposal is an equitable
allocation of fees and credits because it would benefit all investors
by deepening the Exchange's liquidity pool, supporting the quality of
price discovery, promoting market transparency, and improving investor
protection.\18\ The Exchange states that the proposal is not unfairly
discriminatory because ETP Holders are free to transact on other
exchanges if they believe those exchanges offer better value.\19\
Finally, the Exchange states that the proposal is not unfairly
discriminatory because it is available to all ETP holders on an equal
and non-discriminatory basis and that ``all similarly situated ETP
Holders would be charged the same fee for executing Retail Orders that
are internalized.'' \20\
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\16\ See Notice, supra note 3, at 35552.
\17\ See id. at 35553.
\18\ See id.
\19\ See id.
\20\ See id.
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In temporarily suspending the Exchange's proposed rule change, the
Commission intends to further consider whether the proposal to amend
the NYSE Arca Fee Schedule is consistent with the statutory
requirements applicable to a national securities exchange under the
Act. In particular, the Commission will consider whether the proposed
rule change satisfies the standards under the Act and the rules
thereunder requiring, among other things, that an exchange's rules
provide for the equitable allocation of reasonable fees among members,
issuers, and other persons using its facilities; not permit unfair
discrimination between customers, issuers, brokers or dealers; and do
not impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.\21\
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\21\ See 15 U.S.C. 78f(b)(4), (5), and (8), respectively.
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Therefore, the Commission finds that it is appropriate in the
public interest, for the protection of investors, and otherwise in
furtherance of the purposes of the Act, to temporarily suspend the
proposed rule change.\22\
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\22\ For purposes of temporarily suspending the proposed rule
change, the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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IV. Proceedings To Determine Whether To Approve or Disapprove the
Proposed Rule Change
In addition to temporarily suspending the proposal, the Commission
also hereby institutes proceedings pursuant to Sections 19(b)(3)(C)
\23\ and 19(b)(2)(B) of the Act \24\ to determine whether the
Exchange's proposed rule change should be approved or disapproved.
Institution of proceedings does not indicate that the Commission has
reached any conclusions with respect to any of the issues involved.
Rather, the Commission seeks and encourages interested persons to
provide additional comment on the proposed rule change to inform the
Commission's analysis of whether to approve or disapprove the proposed
rule change.
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\23\ 15 U.S.C. 78s(b)(3)(C). Once the Commission temporarily
suspends a proposed rule change, Section 19(b)(3)(C) of the Act
requires that the Commission institute proceedings under Section
19(b)(2)(B) to determine whether a proposed rule change should be
approved or disapproved.
\24\ 15 U.S.C. 78s(b)(2)(B).
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Pursuant to Section 19(b)(2)(B) of the Act,\25\ the Commission is
providing notice of the grounds for possible disapproval under
consideration:
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\25\ 15 U.S.C. 78s(b)(2)(B). Section 19(b)(2)(B) of the Act also
provides that proceedings to determine whether to disapprove a
proposed rule change must be concluded within 180 days of the date
of publication of notice of the filing of the proposed rule change.
See id. The time for conclusion of the proceedings may be extended
for up to 60 days if the Commission finds good cause for such
extension and publishes its reasons for so finding, or if the
exchange consents to the longer period. See id.
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Whether the Exchange has demonstrated how its proposed fee
is consistent with Section 6(b)(4) of the Act, which requires that the
rules of a national securities exchange ``provide for the equitable
allocation of reasonable dues, fees, and other charges among its
members and issuers and other persons using its facilities;'' \26\;
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\26\ 15 U.S.C. 78f(b)(4).
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Whether the Exchange has demonstrated how its proposed fee
is consistent with Section 6(b)(5) of the Act, which requires, among
other things, that the rules of a national securities exchange not be
``designed to permit unfair discrimination between customers, issuers,
brokers, or dealers'' \27\; and
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\27\ 15 U.S.C. 78f(b)(5).
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Whether the Exchange has demonstrated how its proposed fee
is consistent with Section 6(b)(8) of the Act, which requires that the
rules of a national securities exchange ``not impose any burden on
competition not necessary or appropriate in furtherance of the purposes
of [the Act].'' \28\
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\28\ 15 U.S.C. 78f(b)(8).
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As noted above, the proposal purports to amend the NYSE Arca Fee
Schedule to eliminate the credits for providing liquidity for certain
internalized Retail Orders when such orders have an ADV of at least
150,000 shares. However, the Exchange's statements in support of the
proposed rule change lack specificity and are at times contradictory.
For example, the Exchange provides only broad general statements that
the proposal is not unfairly discriminatory because all ETP Holders
will be treated the same. However, this explanation fails to address
why it is not unfairly discriminatory for ETP Holders with under
150,000 ADV of internalized Retail Orders to continue to receive a
credit for providing liquidity while those with over 150,000 ADV of
internalized Retail Orders no longer receive the same credit.
Furthermore, the Exchange contends that the proposal is consistent with
the Act because it will incentivize more Retail Order flow to the
Exchange, thereby benefitting all investors. However, the Exchange does
not explain how a proposal to eliminate an existing credit would
achieve these goals.
Under the Commission's Rules of Practice, the ``burden to
demonstrate that a proposed rule change is consistent with the [Act]
and the rules and regulations issued thereunder . . . is on the [SRO]
that proposed the rule change.'' \29\ The description of a proposed
rule change, its purpose and operation, its effect, and a legal
analysis of its consistency with applicable requirements must all be
sufficiently detailed and specific to support an affirmative Commission
finding,\30\ and any failure of an SRO to provide this information may
result in the Commission not having a sufficient basis to make an
affirmative finding that a proposed rule change is consistent with the
Act and the applicable rules and regulations.\31\
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\29\ 17 CFR 201.700(b)(3).
\30\ See id.
\31\ See id.
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The Commission is instituting proceedings to allow for additional
consideration and comment on the issues raised herein, including as to
whether the proposed fees are consistent with the Act, and
specifically, with its requirements that exchange fees be reasonable
and equitably allocated, not be unfairly discriminatory, and not impose
a burden on competition.\32\
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\32\ See 15 U.S.C. 78f(b)(4), (5), and (8).
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[[Page 44118]]
V. Commission's Solicitation of Comments
The Commission requests written views, data, and arguments with
respect to the concerns identified above as well as any other relevant
concerns. Such comments should be submitted by September 1, 2021.
Rebuttal comments should be submitted by September 15, 2021. Although
there do not appear to be any issues relevant to approval or
disapproval which would be facilitated by an oral presentation of
views, data, and arguments, the Commission will consider, pursuant to
Rule 19b-4, any request for an opportunity to make an oral
presentation.\33\
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\33\ 15 U.S.C. 78s(b)(2). Section 19(b)(2) of the Act grants the
Commission flexibility to determine what type of proceeding--either
oral or notice and opportunity for written comments--is appropriate
for consideration of a particular proposal by an SRO. See Securities
Acts Amendments of 1975, Report of the Senate Committee on Banking,
Housing and Urban Affairs to Accompany S. 249, S. Rep. No. 75, 94th
Cong., 1st Sess. 30 (1975).
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The Commission asks that commenters address the sufficiency and
merit of the Exchange's statements in support of the proposal, in
addition to any other comments they may wish to submit about the
proposed rule change.
Interested persons are invited to submit written data, views, and
arguments concerning the proposed rule changes, 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 No. SR-NYSEArca-2021-52 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 No. SR-NYSEArca-2021-52. The 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 such 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 publicly available. All submissions
should refer to File No. SR-NYSEArca-2021-52 and should be submitted on
or before September 1, 2021. Rebuttal comments should be submitted by
September 15, 2021.
VI. Conclusion
It is therefore ordered, pursuant to Section 19(b)(3)(C) of the
Act,\34\ that File No. SR-NYSEArca-2021-52, be and hereby is,
temporarily suspended. In addition, the Commission is instituting
proceedings to determine whether the proposed rule change should be
approved or disapproved.
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\34\ 15 U.S.C. 78s(b)(3)(C).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\35\
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\35\ 17 CFR 200.30-3(a)(57) and (58).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2021-17087 Filed 8-10-21; 8:45 am]
BILLING CODE 8011-01-P
