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, 46297-46304 [2021-17667]
Download as PDF
<![CDATA[
Federal Register / Vol. 86, No. 157 / Wednesday, August 18, 2021 / Notices
investors and the public interest
because waiver of the operative delay
will allow ETP Holders that route orders
to non-exchange venues that accept
order flow before 3:30 a.m. Eastern Time
the opportunity to include the Exchange
in its early morning routing
determinations. According to the
Exchange, this proposed rule change
will not change any Exchange trading
functions, including when the Early
Trading Session begins, and the
technology to support this proposed
rule change will be available less than
30 days after filing. Accordingly, the
Commission hereby waives the 30-day
operative delay and designates the
proposal operative upon filing.9
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) 10 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:
jbell on DSKJLSW7X2PROD with NOTICES
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–2021–71 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–2021–71. 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
9 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule change’s impact on efficiency,
competition, and capital formation. 15 U.S.C. 78c(f).
10 15 U.S.C. 78s(b)(2)(B).
VerDate Sep<11>2014
17:34 Aug 17, 2021
Jkt 253001
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–2021–71 and
should be submitted on or before
September 8, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–17673 Filed 8–17–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–92648; File No. SR–
NYSEARCA–2021–70]
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
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 August 2,
2021, 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
11 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
Frm 00124
Fmt 4703
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 (1) modify the
application of the per share fee for Tape
B securities; (2) adopt increased credits
and a cap applicable to the Step Up Tier
4 credit in Tape B securities; (3)
eliminate a requirement to qualify for
the Tape B Tier 2 credit; (4) adopt
increased credits and a cap applicable to
the Tape B Step Up Tier; and (5) adopt
a new pricing tier, MPID Adding Tier,
applicable to Tape A and Tape C
securities. The Exchange proposes to
implement the fee changes effective
August 2, 2021. The proposed rule
change is available on the Exchange’s
website at www.nyse.com, at the
principal office of the Exchange, and at
the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
August 12, 2021.
PO 00000
46297
Sfmt 4703
The Exchange proposes to amend the
Fee Schedule to (1) modify the
application of the per share fee for Tape
B securities; (2) adopt increased credits
and a cap applicable to the Step Up Tier
4 credit in Tape B securities; (3)
eliminate a requirement to qualify for
the Tape B Tier 2 credit; (4) adopt
increased credits and a cap applicable to
the Tape B Step Up Tier; and (5) adopt
a new pricing tier, MPID Adding Tier,
applicable to Tape A and Tape C
securities.
E:\FR\FM\18AUN1.SGM
18AUN1
46298
Federal Register / Vol. 86, No. 157 / Wednesday, August 18, 2021 / Notices
The proposed changes respond to the
current competitive environment where
order flow providers have a choice of
where to direct liquidity-providing
orders by offering further incentives for
ETP Holders 4 to send additional
liquidity to the Exchange.
The Exchange proposes to implement
the fee changes effective August 2, 2021.
jbell on DSKJLSW7X2PROD with NOTICES
Background
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. 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.’’ 5
While Regulation NMS has enhanced
competition, it has also fostered a
‘‘fragmented’’ market structure where
trading in a single stock can occur
across multiple trading centers. When
multiple trading centers compete for
order flow in the same stock, the
Commission has recognized that ‘‘such
competition can lead to the
fragmentation of order flow in that
stock.’’ 6 Indeed, equity trading is
currently dispersed across 16
exchanges,7 numerous alternative
trading systems,8 and broker-dealer
internalizers and wholesalers, all
competing for order flow. Based on
publicly available information, no single
exchange currently has more than 17%
market share.9 Therefore, no exchange
possesses significant pricing power in
the execution of equity order flow. More
specifically, the Exchange currently has
4 All references to ETP Holders in connection
with this proposed fee change include Market
Makers.
5 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(File No. S7–10–04) (Final Rule) (‘‘Regulation
NMS’’).
6 See Securities Exchange Act Release No. 61358,
75 FR 3594, 3597 (January 21, 2010) (File No. S7–
02–10) (Concept Release on Equity Market
Structure).
7 See Cboe U.S Equities Market Volume
Summary, available at https://markets.cboe.com/us/
equities/market_share. See generally https://
www.sec.gov/fast-answers/
divisionsmarketregmrexchangesshtml.html.
8 See FINRA ATS Transparency Data, available at
https://otctransparency.finra.org/otctransparency/
AtsIssueData. A list of alternative trading systems
registered with the Commission is available at
https://www.sec.gov/foia/docs/atslist.htm.
9 See Cboe Global Markets U.S. Equities Market
Volume Summary, available at https://
markets.cboe.com/us/equities/market_share/.
VerDate Sep<11>2014
17:34 Aug 17, 2021
Jkt 253001
less than 10% market share of executed
volume of equities trading.10
The Exchange believes that the evershifting market share among the
exchanges from month to month
demonstrates that market participants
can move order flow, or discontinue or
reduce use of certain categories of
products. While it is not possible to
know a firm’s reason for shifting order
flow, the Exchange believes that one
such reason is because of fee changes at
any of the registered exchanges or nonexchange venues to which a firm routes
order flow. With respect to nonmarketable order flow that would
provide liquidity on an Exchange
against which market makers can quote,
ETP Holders can choose from any one
of the 16 currently operating registered
exchanges to route such order flow.
Accordingly, competitive forces
constrain exchange transaction fees that
relate to orders that would provide
liquidity on an exchange.
Proposed Rule Change
Tape B
Currently, for Exchange Transactions,
under Section III (Standard Rates—
Transactions), the Exchange charges a
fee of $0.0012 per share for Closing
Orders 11 in securities priced at or above
$1.00.12 Pursuant to footnote (f), this fee
currently applies to orders in Tape A
Securities, Tape C Securities and NYSE
Arca primary listed securities (includes
all ETFs/ETNs). The Exchange currently
does not charge this fee for orders in
securities whose primary market is
NYSE American LLC (‘‘NYSE
American’’) or Cboe BZX Exchange, Inc.
(‘‘Cboe BZX’’). The Exchange proposes
to modify the application of this fee by
amending the text of footnote (f) so that
the fee would apply to all securities, i.e.,
Tape A, Tape B and Tape C securities.
The purpose of the proposed fee change
is to simplify the Fee Schedule and
maintain consistency with respect to the
fee charged by the Exchange when it
executes Closing Orders in all securities.
Similarly, for Exchange
Transaction[sic], under Section VI (Tier
Rates—Round Lots and Odd Lots (Per
Share Price $1.00 or Above)), the
Exchange currently charges a fee of
$0.0010 per share for Market, MarketOn-Close, Limit-On-Close, and AuctionOnly Orders executed in a Closing
10 See
id.
11 Under
Section I (Definitions) of the Fee
Schedule, the term Closing Orders means Market,
Market-On-Close, Limit-On-Close, and AuctionOnly Orders executed in a Closing Auction.
12 For Retail Orders in securities priced at or
above $1.00, this fee is $0.0008 per share, and for
securities priced below $1.00, this fee is 0.1% of
Dollar Value.
PO 00000
Frm 00125
Fmt 4703
Sfmt 4703
Auction in NYSE Arca Primary listed
securities (includes all ETFs/ETNs).
This fee is applicable under Tier 1 and
Tier 2 pricing tiers.
The Exchange currently does not
charge this fee for orders in securities
whose primary market is NYSE
American or Cboe BZX. The Exchange
proposes to modify the application of
this fee by deleting the words ‘‘in NYSE
Arca primary listed securities (includes
all ETFs/ETNs)’’ in Tier 1 and Tier 2 so
that the fee would apply to all Tape B
securities. The purpose of the proposed
fee change is to simplify the Fee
Schedule and maintain consistency
with respect to the fee charged by the
Exchange when it executes Closing
Orders in all Tape B securities.
Step Up Tier 4
The proposed rule change is designed
to be available to all ETP Holders on the
Exchange and is intended to provide
ETP Holders an opportunity to receive
enhanced rebates by executing more of
their orders in Tape B securities on the
Exchange.
The Exchange currently has multiple
levels of step-up pricing tiers, Step Up
Tiers 1—5, which are designed to
encourage ETP Holders that provide
displayed liquidity on the Exchange to
increase that order flow, which would
benefit all ETP Holders by providing
greater execution opportunities on the
Exchange. In order to provide an
incentive for ETP Holders to direct
providing displayed order flow to the
Exchange, the credits increase in the
various tiers based on increased levels
of volume directed to the Exchange.
Currently, the following credits are
available to ETP Holders that provide
increased levels of displayed liquidity
on the Exchange:
Tier
Step Up Tier .....
Step Up Tier 2 ..
Step Up Tier 3 ..
Step Up Tier 4 ..
Step Up Tier 5 ..
Credit for providing
displayed liquidity
$0.0030
$0.0023
$0.0031
$0.0028
$0.0022
$0.0025
$0.0022
$0.0033
$0.0034
$0.0032
C).
(Tape
(Tape
(Tape
(Tape
(Tape
(Tape
(Tape
(Tape
(Tape
(Tape
A).
B).
C).
A and C).
B).
A and C).
B).
A and C).
B).
A, B and
Under the Step Up Tier 4, if an ETP
Holder increases its providing liquidity
on the Exchange by a specified
percentage over the level that such ETP
Holder provided liquidity in September
2019, it is eligible to earn higher credits.
Specifically, to qualify for the credits
under Step Up Tier 4, an ETP Holder
E:\FR\FM\18AUN1.SGM
18AUN1
Federal Register / Vol. 86, No. 157 / Wednesday, August 18, 2021 / Notices
jbell on DSKJLSW7X2PROD with NOTICES
must directly execute providing average
daily volume (ADV) per month that is
an increase of no less than 0.40% of US
CADV for that month over the ETP
Holder’s providing ADV in September
2019, taken as a percentage of US
CADV.
If an ETP Holder meets the Step Up
Tier 4 requirement, such ETP Holder is
currently eligible to earn a credit of:
• $0.0033 per share for orders that
provide displayed liquidity in Tape A
and Tape C Securities, and
• $0.0034 per share for orders that
provide displayed liquidity in Tape B
Securities.13
ETP Holders that qualify for Step Up
Tier 4 do not receive any additional
incremental Tape B Tier credits for
providing displayed liquidity, including
any incremental credits associated with
Less Active ETP Securities and are
currently capped at $0.0034 per share.14
With this proposed rule change, the
Exchange proposes to modify the cap
applicable to the Step Up Tier 4 credit
in Tape B securities. As proposed, an
ETP Holder that is registered as a Lead
Market Maker can receive up to a
combined credit of $0.0036 per share on
all its adding volume in Tape B
Securities if that ETP Holder, together
with its affiliates,15 executes providing
ADV in Tape B Securities that is at least
40% over the ETP Holder’s providing
ADV in Q3 2019, as a percentage of US
Tape B CADV.
The purpose of the proposed rule
change is to incentivize ETP Holders to
register as Lead Market Makers and
generally to incentivize order flow
providers to send liquidity-providing
orders to the Exchange while capping
the level of credit that such participants
would receive. The Exchange believes
that, although it is proposing to
continue to limit the financial incentive
for orders that provide displayed
liquidity in Tape B securities, the
current rebate, i.e., $0.0034 per share, is
among one of the highest credits paid by
the Exchange and should continue to
serve as an incentive for ETP Holders to
direct displayed liquidity providing
orders to the Exchange.
13 See Securities Exchange Act Release Nos.
86122 (June 17, 2019), 84 FR 29258 (June 21, 2019)
(SR–NYSEArca-2019–43); 87292 (October 11, 2019),
84 FR 55603 (October 17, 2019) (SR–NYSEArca2019–70); and 88833 (May 7, 2020), 85 FR 28676
(May 13, 2020) (SR–NYSEArca-2020–39).
14 See Securities Exchange Act Release Nos.
88436 (March 20, 2020), 85 FR 17112 (March 26,
2020) (SR–NYSEArca-2020–21); and 88833 (May 7,
2020), 85 FR 28676 (May 13, 2020) (SR–NYSEArca–
2020–39).
15 The term ‘‘affiliate’’ means any ETP Holder
under 75% common ownership or control of that
ETP Holder. See Fee Schedule, NYSE Arca
Marketplace: General, Section II. Aggregate Billing
of Affiliated ETP Holders.
VerDate Sep<11>2014
17:34 Aug 17, 2021
Jkt 253001
46299
Tape B Tier 2
Currently, under the Tape B Tier 2
pricing tier, an ETP Holder could
qualify for a credit of $0.0028 per
share 16 if such ETP Holder, on a daily
basis, measured monthly, directly
executes providing volume in Tape B
Securities during the billing month
(‘‘Tape B Adding ADV’’) that is either
(1) equal to at least 1.0% of the US Tape
B CADV or (2) equal to at least 0.20%
of the US Tape B CADV for the billing
month over the ETP Holder’s or Market
Maker’s Q2 2015 Tape B Adding ADV
taken as a percentage of Tape B CADV
or (3) equal to at least 0.25% of the US
Tape B CADV for the billing month over
the ETP Holder’s or Market Maker’s
April 2020 Tape B Adding ADV taken
as a percentage of Tape B CADV.
The Exchange proposes to eliminate
the second requirement above which
requires an ETP Holder to execute
providing volume in Tape B Securities
equal to at least 0.20% of the US Tape
B CADV for the billing month over the
ETP Holder’s or Market Maker’s Q2
2015 Tape B Adding ADV taken as a
percentage of Tape B CADV. The
Exchange has observed that, over the
last 6 months, not a single ETP Holder
has qualified for the Tape B Tier 2 credit
by utilizing the requirement that the
Exchange is proposing to eliminate.
Given that this requirement has not
served to meaningfully increase activity
on the Exchange, the Exchange has
determined to eliminate it from the Fee
Schedule. The Exchange is not
proposing any other change to the Tape
B Tier 2 pricing tier.
With this proposed rule change, ETP
Holders would continue to be able to
qualify for the Tape B Tier 2 credit of
$0.0028 per share for providing
liquidity in Tape B Securities if such
ETP Holder, on a daily basis, measured
monthly, directly executes Tape B
Adding ADV that is either (1) equal to
at least 1.0% of the US Tape B CADV
or (2) equal to at least 0.25% of the US
Tape B CADV for the billing month over
the ETP Holder’s or Market Maker’s
April 2020 Tape B Adding ADV taken
as a percentage of Tape B CADV.
The Exchange believes that
eliminating a requirement that has
become underutilized will also
streamline the Fee Schedule. The
Exchange further believes that the
remaining requirements will continue to
incentivize ETP Holders to submit
liquidity providing orders in Tape B
Securities to qualify for the Tape B Tier
2 credit. The Exchange is not proposing
any change to the level of Tape B Tier
2 credit.
16 Under the Standard Rates, ETP Holders receive
a credit of $0.0020 per share for Tape B orders that
provide liquidity.
17 See Securities Exchange Act Release No. 87292
(October 11, 2019), 84 FR 55603 (October 17, 2019)
(SR–NYSEArca–2019–70).
PO 00000
Frm 00126
Fmt 4703
Sfmt 4703
Tape B Step Up Tier
Currently, ETP Holders that meet the
requirement under Tape B Step Up Tier
can earn the following incremental
credits:
• An incremental credit of $0.0002
per share when an ETP Holder’s
providing ADV in Tape B Securities
during the billing month is at least
0.50% of the US Tape B CADV and the
ETP Holder’s providing ADV in Tape B
Securities during the billing month as a
percentage of US Tape B CADV is at
least 20% more but less than 30% of the
ETP Holder’s providing ADV as a
percentage of US Tape B CADV in 3Q
2019;
• An incremental credit of $0.0003
per share when an ETP Holder’s
providing ADV in Tape B Securities
during the billing month is at least
0.50% of the US Tape B CADV and the
ETP Holder’s providing ADV in Tape B
Securities during the billing month as a
percentage of US Tape B CADV is at
least 30% more but less than 40% of the
ETP Holder’s providing ADV as a
percentage of US Tape B CADV in 3Q
2019; and
• An incremental credit of $0.0004
per share when an ETP Holder’s
providing ADV in Tape B Securities
during the billing month is at least
0.50% of the US Tape B CADV and the
ETP Holder’s providing ADV in Tape B
Securities during the billing month as a
percentage of US Tape B CADV is at
least 40% more than the ETP Holder’s
providing ADV as a percentage of US
Tape B CADV in 3Q 2019.17
The incremental credits are payable in
addition to the ETP Holder’s Tiered or
Standard credit(s); provided, however,
that such combined credit(s) in Tape B
Securities currently cannot exceed
$0.0032 per share.
The Exchange proposes to adopt an
increased cap applicable under the Tape
B Step Up Tier pricing tier. As
proposed, if an ETP Holder’s providing
ADV increases at least 150% over the
ETP Holder’s providing ADV in Q3
2019, then the ETP Holder can receive
a combined credit of up to:
• $0.0033 per share if the ETP Holder
is registered as a Lead Market Maker or
Market Maker in at least 150 Less Active
ETPs in which it meets at least two
Performance Metrics, and has Tape B
Adding ADV equal to at least 0.65% of
US Tape B CADV, or
• $0.0034 per share if the ETP Holder
or Market Maker is registered as a Lead
E:\FR\FM\18AUN1.SGM
18AUN1
jbell on DSKJLSW7X2PROD with NOTICES
46300
Federal Register / Vol. 86, No. 157 / Wednesday, August 18, 2021 / Notices
Market Maker or Market Maker in at
least 200 Less Active ETPs in which it
meets at least two Performance Metrics,
and has Tape B Adding ADV equal to
at least 0.70% of US Tape B CADV.
For example, assume an ETP Holder
has providing ADV of 1.20% of Tape B
CADV in Tape B securities in the
baseline period of third quarter of 2019.
Further assume that the same ETP
Holder has providing ADV of Tape B
CADV of 1.80% in Tape B securities in
the billing month. The ETP Holder in
this example would qualify for an
incremental credit of $0.0004 per share
because the ETP Holder has providing
ADV in Tape B Securities during the
billing month of 1.80%, which is at least
0.50% of the US Tape B CADV, and
because the ETP Holder has providing
ADV of Tape B CADV of 1.80%, which
is at least 40% more than the ETP
Holder’s baseline ADV of 1.20% of Tape
B CADV. Also assume further that the
ETP Holder is registered as a Lead
Market Maker or Market Maker in 150
Less Active ETPs in which it meets at
least two Performance Metrics.
In the above example, the ETP Holder
would also qualify for the existing Tape
B Tier 1 credit of $0.0030 per share by
meeting the 1.5% of the US Tape B
CADV requirement, for a total credit of
$0.0034 per share ($0.0030 per share
plus $0.0004 per share). Given the cap
currently in place, the ETP Holder’s
combined credit would be reduced to
$0.0032 per share. However, since the
ETP Holder is registered as a Lead
Market Maker or Market Maker in at
least 150 Less Active ETPs in which it
meets at least two Performance Metrics,
under the proposed rule change, the
ETP Holder would receive a combined
credit of $0.0033 per share. If the ETP
Holder was registered as a Lead Market
Maker or Market Maker in 200 Less
Active ETPs in which it met at least two
Performance Metrics, under the
proposed rule change, ETP Holder
would receive a combined credit of
$0.0034 per share. Under both
scenarios, the ETP Holder meets the
Tape B Adding ADV requirement of
0.70% of US Tape B CADV for the
$0.0034 per share cap.
As noted above, the Exchange
operates in a competitive environment,
particularly as it relates to attracting
non-marketable, providing liquidity that
would be displayed on the Exchange.
The purpose of this proposed rule
change is to provide an incentive to ETP
Holders to register as Lead Market
Makers or Market Makers in Less Active
ETPs and to incentivize such liquidity
providers to increase the orders sent to
the Exchange.
VerDate Sep<11>2014
17:34 Aug 17, 2021
Jkt 253001
MPID Adding Tier
The Exchange proposes to adopt a
new pricing tier, MPID Adding Tier,
that would offer a per share credit for
orders that provide liquidity in Tape A
and Tape C securities. As proposed, to
qualify for the proposed pricing tier, an
MPID would be required to execute
providing ADV in all securities that is
at least 2 times more than its providing
ADV in 2Q 2021, as a percentage of US
CADV. A qualifying MPID would
receive a credit for providing liquidity
in Tape A and Tape C securities of
$0.0028 per share if the MPID has least
4 million shares of providing ADV
during the billing month, or $0.0029 per
share if the MPID has at least 9 million
shares of providing ADV during the
billing month.
For example, assume an MPID has
providing ADV of 2 million shares of
Tape A, Tape B and Tape C securities
in the baseline period of 2Q 2021.
Further assume that the same MPID has
providing ADV of 4 million shares in
the billing month, which is 2 times
more than the baseline ADV of 2 million
shares. Under the proposed rule change,
the MPID would receive a credit of
$0.0028 per share for adding liquidity in
Tape A and Tape C securities. If instead
the MPID has providing ADV of 9
million shares in the billing month,
which is 4.5 times more than the
baseline period, then the MPID would
receive a credit of $0.0029 per share for
adding liquidity in Tape A and Tape C
securities.
The proposed rule change is designed
to incentivize ETP Holders to increase
liquidity-providing orders in Tape A
and Tape C securities they send to the
Exchange, which would support the
quality of price discovery on the
Exchange and provide additional
liquidity for incoming orders. As noted
above, the Exchange operates in a
competitive environment, particularly
as it relates to attracting non-marketable,
which add liquidity to the Exchange.
Because the proposed tier requires an
ETP Holder’s MPID to increase the
volume of its trades in orders that add
liquidity over the MPID’s 2Q 2021
baseline, the Exchange believes that the
proposed credits would provide an
incentive for all ETP Holders to send
additional liquidity to the Exchange in
order to qualify for them.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act,18 in general, and
furthers the objectives of Sections
6(b)(4) and (5) of the Act,19 in particular,
because it provides for the equitable
allocation of reasonable dues, fees, and
other charges among its members,
issuers and other persons using its
facilities and does not unfairly
discriminate between customers,
issuers, brokers or dealers.
The Proposed Fee Change Is Reasonable
As discussed above, the Exchange
operates in a highly fragmented and
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.’’ 20
The Exchange believes that the evershifting 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.
With respect to non-marketable order
which provide liquidity on an
Exchange, ETP Holders can choose from
any one of the 16 currently operating
registered exchanges to route such order
flow. Accordingly, competitive forces
reasonably constrain exchange
transaction fees that relate to orders that
would provide displayed liquidity on an
exchange. Stated otherwise, changes to
exchange transaction fees can have a
direct effect on the ability of an
exchange to compete for order flow.
Tape B
The Exchange believes the proposed
amendment to the Tape B fees is
reasonable because it seeks to
standardize the fee for Tape B securities.
The Exchange periodically reviews its
fees and rebates and determined that it
does not currently charge a fee for
Closing Orders in Tape B securities
whose primary market is NYSE
American or Cboe BZX, nor does the
Exchange currently charge for Market,
Market-On-Close, Limit-On-Close, and
Auction-Only Orders executed in a
Closing Auction for securities whose
primary market is NYSE American or
Cboe BZX. The Exchange believes it is
19 15
U.S.C. 78f(b)(4) and (5).
Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005).
20 See
18 15
PO 00000
U.S.C. 78f(b).
Frm 00127
Fmt 4703
Sfmt 4703
E:\FR\FM\18AUN1.SGM
18AUN1
Federal Register / Vol. 86, No. 157 / Wednesday, August 18, 2021 / Notices
reasonable to charge the same fee for all
Tape B securities.
jbell on DSKJLSW7X2PROD with NOTICES
Step Up Tier 4
The Exchange believes the proposed
rule change to adopt an increased cap
on the credit applicable to the Step Up
Tier 4 credit in Tape B securities is
reasonable because the increased credit,
which would be among the highest paid
by the Exchange, outside of Lead Market
Maker credits for adding liquidity,
would serve to incentivize ETP Holders
to increase their participation on the
Exchange as Lead Market Makers and
execute a greater number of orders in
Tape B securities on the Exchange. The
Exchange believes the increased credits
would continue to encourage ETP
Holders to submit additional liquidity to
a national securities exchange and to
participate as a Lead Market Maker or
Market Maker. The Exchange believes it
is reasonable to require ETP Holders to
meet the applicable volume threshold to
qualify for the increased credits.
Submission of additional liquidity to
the Exchange would promote price
discovery and transparency and
enhance order execution opportunities
for ETP Holders from the substantial
amounts of liquidity present on the
Exchange. The Exchange notes that the
requirement to execute providing ADV
that is at least 40% over the ETP
Holder’s or Market Maker’s providing
ADV in Q3 2019 is the same as the
requirement to achieve the top
incremental credit for Tape B Step Up
Tier. The Exchange believes that
adopting an identical requirement
would provide ETP Holders a further
incentive to provide additional liquidity
in Tape B Securities. Additionally, the
Exchange believes that utilizing the
same baseline as Tape B Step Up Tier
would make it easier for firms to
monitor their providing ADV for both
tiers, as opposed introducing a new
baseline. All ETP Holders would benefit
from the greater amounts of liquidity
that will be present on the Exchange,
which would provide greater execution
opportunities.
Tape B Tier 2
The Exchange believes that the
proposed rule change to eliminate one
of the requirements to qualify for the
Tape B Tier 2 credit is reasonable
because the requirement proposed for
deletion has been underutilized and has
generally not incentivized ETP Holders
to bring liquidity and increase trading
on the Exchange.
In the last 6 months, no ETP Holder
has availed itself of the Tape B Tier 2
by meeting the requirement proposed
for deletion. The Exchange does not
VerDate Sep<11>2014
17:34 Aug 17, 2021
Jkt 253001
anticipate any ETP Holder in the near
future to qualify for the Tape B Tier 2
credit by meeting the requirement
proposed for deletion. The Exchange
believes it is reasonable to eliminate
requirements within pricing tiers when
they become underutilized. The
Exchange believes eliminating
underutilized tier requirements would
also simplify the Fee Schedule. The
Exchange further believes that removing
reference to underutilized tier
requirements that the Exchange
proposes to eliminate from the Fee
Schedule would also add clarity to the
Fee Schedule.
Tape B Step Up Tier
The Exchange believes the proposed
rule change to modify the credit and the
cap applicable under the Tape B Step
Up Tier for Tape B securities is a
reasonable means of attracting
additional liquidity to the Exchange.
The Exchange believes the modified
credits, which are among the highest
paid by the Exchange, would continue
to encourage ETP Holders to submit
additional liquidity to a national
securities exchange. The Exchange
believes it is reasonable to require ETP
Holders to meet the applicable volume
threshold to qualify for the increased
credits, given the higher combined
credit of $0.0033 per share and $0.0034
per share the Exchange would pay if the
tier criteria is met. Submission of
additional liquidity to the Exchange
would promote price discovery and
transparency and enhance order
execution opportunities for ETP Holders
from the substantial amounts of
liquidity present on the Exchange. The
Exchange also believes it is reasonable
to require ETP Holders be registered as
a Lead Market Maker or Market Maker
in a minimum number [sic] Less Active
ETPs and to meet at least two
Performance Metrics in such securities
as the Exchange believes this
requirement would enhance market
quality in Less Active ETPs and support
the quality of price discovery in such
securities. All ETP Holders would
benefit from the greater amounts of
liquidity that will be present on the
Exchange, which would provide greater
execution opportunities.
MPID Adding Tier
The Exchange believes the proposed
MPID Adding Tier is a reasonable
means to encourage ETP Holders to
increase their liquidity providing orders
in Tape A and Tape C securities each
month over a predetermined baseline by
offering liquidity providers an
opportunity to receive an enhanced
rebate. Further, the Exchange believes
PO 00000
Frm 00128
Fmt 4703
Sfmt 4703
46301
it’s reasonable to provide the proposed
credit to the qualifying MPID if it meets
the tier’s criteria because this would
encourage individual MPIDs to send
orders that provide liquidity to the
Exchange, thereby contributing to robust
levels of liquidity, which benefits all
market participants, and promoting
price discovery and transparency. Since
the proposed tier would be new, no ETP
Holder’s MPID currently qualifies for
the proposed pricing tier. As previously
noted, without a view of ETP Holder
activity on other exchanges and offexchange venues, the Exchange has no
way of knowing whether the proposed
rule change would result in any ETP
Holder’s MPID qualifying for the tier.
The Exchange believes the proposed
credit is reasonable as it would provide
an additional incentive for an ETP
Holder’s MPID to direct its order flow to
the Exchange and provide meaningful
added levels of liquidity in order to
qualify for the proposed credit, thereby
contributing to depth and market
quality on the Exchange.
As noted above, the Exchange
operates in a highly competitive
environment, particularly for attracting
order flow that provides displayed
liquidity on an exchange. More
specifically, the Exchange notes that
greater add volume order flow may
provide for deeper, more liquid markets
and execution opportunities at
improved prices, which the Exchange
believes incentivizes liquidity providers
to submit additional liquidity and
enhance execution opportunities. This
overall increase in activity would
deepen the Exchange’s liquidity pool,
offer additional cost savings, support
the quality of price discovery, promote
market transparency and improve
market quality, for all investors. The
Exchange believes it is reasonable to
provide higher credits in Tape A and
Tape C securities to incentivize
liquidity adding orders in those
securities, and not in Tape B securities,
because Tape A and Tape C securities
are non-NYSE Arca-listed securities and
do not have Lead Market Makers or
Market Makers to provide additional
liquidity. The Exchange notes that other
markets with which the Exchange
competes currently offer its members an
opportunity to earn rebates based on the
activity of the member’s MPID.21 The
Exchange believes the proposed new
pricing tier continues to be a reasonable
21 See BZX Fee Schedule, Footnote 2, Step Up
Tiers, and Footnote 4, Single Investor MPID Tiers,
at https://www.cboe.com/us/equities/membership/
fee_schedule/bzx/.
E:\FR\FM\18AUN1.SGM
18AUN1
46302
Federal Register / Vol. 86, No. 157 / Wednesday, August 18, 2021 / Notices
means to encourage ETP Holders to
increase their liquidity on the Exchange.
The Proposed Fee Change is an
Equitable Allocation of Fees and Credits
The Exchange believes its proposal
equitably allocates its fees among its
market participants.
jbell on DSKJLSW7X2PROD with NOTICES
Tape B
The Exchange believes that the
proposed rule change constitutes an
equitable allocation of reasonable fees
because the proposed fee is comparable
to the fee charged by the Exchange for
the same activity in NYSE Arca-listed
securities and would apply equally to
all ETP Holders that choose to execute
their orders in Tape B securities on the
Exchange. The proposed change may
impact the submission of orders to a
national securities exchange, and to the
extent that ETP Holders continue to
submit such orders to the Exchange, the
proposed rule change would not have a
negative impact to ETP Holders trading
on the Exchange because the proposed
fee would be in line with the fee
currently charged by the Exchange for
trading in NYSE Arca-listed securities.
However, without having a view of ETP
Holder’s activity on other markets and
off-exchange venues, the Exchange has
no way of knowing whether this
proposed rule change would result in a
change in trading behavior by ETP
Holders.
Step Up Tier 4
The Exchange believes the proposed
amendment to the credit and the cap
under Step Up Tier 4 equitably allocates
its fees and credits among market
participants because it is reasonably
related to the value of the Exchange’s
market quality associated with higher
equities volume. The Exchange believes
the proposed increased credits, which
would be among the highest paid by the
Exchange, would provide an incentive
for ETP Holders to increase their
participation as Lead Market Makers on
the Exchange and execute a greater
amount of their orders in Tape B
securities on the Exchange. The
Exchange believes the proposed
increased credits would continue to
encourage ETP Holders to send orders
that add liquidity to the Exchange,
thereby contributing to robust levels of
liquidity for the benefit all market
participants. The Exchange believes the
proposed rule change would improve
market quality for all market
participants on the Exchange and attract
more liquidity to the Exchange. ETP
Holders that currently qualify for credits
associated with Step Up pricing tiers on
the Exchange will continue to receive
VerDate Sep<11>2014
17:34 Aug 17, 2021
Jkt 253001
credits when they provide liquidity to
the Exchange. The Exchange believes
that recalibrating the requirements for
providing liquidity will continue to
attract order flow and liquidity to the
Exchange for the benefit of investors
generally.
Tape B Tier 2
The Exchange believes that the
proposed rule change to eliminate one
of the requirements to qualify for the
Tape B Tier 2 credit is an equitable
allocation of its fees and credits. The
Exchange believes that eliminating a tier
requirement from the Fee Schedule
when such requirement becomes
underutilized is equitable because the
requirement would be eliminated in its
entirety and would no longer be
available to any ETP Holder.
Tape B Step Up Tier
The Exchange believes the proposed
amendment to the credit and the cap
under the Tape B Step Up Tier equitably
allocates its fees and credits among
market participants because it is
reasonably related to the value of the
Exchange’s market quality associated
with higher equities volume. As
proposed, the Exchange would provide
qualifying ETP Holders with some of the
highest credits payable by the Exchange
provided they participate as Lead
Market Makers and provide increased
Tape B adding ADV. The more an ETP
Holder participates, the greater the
credit they would receive. The
Exchange believes the proposed credits
would encourage ETP Holders to send
orders that add liquidity to the
Exchange, thereby contributing to robust
levels of liquidity, which would benefit
all market participants.
MPID Adding Tier
The Exchange believes that the
proposed adoption of the MPID Adding
Tier represents an equitable allocation
of fees because all ETP Holders will be
eligible for the proposed pricing tier and
have the opportunity to meet the tier’s
criteria and receive the applicable rebate
if such criteria is met. That is, the
proposed pricing tier is designed as an
incentive to any and all liquidity
providers interested in meeting the tier
criteria to submit additional order flow
to the Exchange and each will receive
the proposed rebate if the tier criteria is
met. While the Exchange has no way of
knowing whether this proposed rule
change would definitively result in any
particular ETP Holder qualifying for the
proposed pricing tier, the Exchange
anticipates a number of ETP Holders
would be able to meet, or will
reasonably be able to meet, the proposed
PO 00000
Frm 00129
Fmt 4703
Sfmt 4703
criteria. However, without having a
view of activity on other markets and
off-exchange venues, the Exchange has
no way of knowing whether this
proposed rule change would result in
any ETP Holder qualifying for the
proposed tier. The Exchange also notes
that the proposed change will not
adversely impact any ETP Holder’s
pricing or their ability to qualify for
other rebate tiers. Rather, should an ETP
Holder not meet the proposed criteria,
the ETP Holder will merely not receive
the corresponding rebate.
The Proposed Fee Change Is Not
Unfairly Discriminatory
The Exchange believes that the
proposal is not unfairly discriminatory.
In the prevailing competitive
environment, ETP Holders are free to
disfavor the Exchange’s pricing if they
believe that alternatives offer them
better value.
Tape B
The proposal to amend the Tape B
fees is not unfairly discriminatory
because the fee would be applied on an
equal basis to all ETP Holders that
choose to send their orders in Tape B
securities to the Exchange. Additionally,
the proposed rule change neither targets
nor will it have a disparate impact on
any particular category of market
participant. The proposal does not
permit unfair discrimination because
the proposed fees would be applied to
all ETP Holders, who would all be
charged the same fee on an equal basis.
Accordingly, no ETP Holder already
operating on the Exchange would be
disadvantaged by this allocation of fees.
Step Up Tier 4
The Exchange believes it is not
unfairly discriminatory to cap the
increased credit payable under Step Up
Tier 4 for providing displayed liquidity
in Tape B securities because the
proposed credit and cap would be
applied on an equal basis to all ETP
Holders, who would all be subject to the
proposed change on an equal basis.
Additionally, the proposal neither
targets nor will it have a disparate
impact on any particular category of
market participant. The proposal does
not permit unfair discrimination
because the proposed change would be
applied to all ETP Holders, who would
all be subject to the proposed change on
an equal basis. Accordingly, no ETP
Holder already operating on the
Exchange would be disadvantaged by
this allocation of fees.
E:\FR\FM\18AUN1.SGM
18AUN1
Federal Register / Vol. 86, No. 157 / Wednesday, August 18, 2021 / Notices
Tape B Tier 2
The Exchange believes that the
proposed rule change to eliminate one
of the requirements to qualify for the
Tape B Tier 2 credit is not unfairly
discriminatory. The Exchange believes
that eliminating a tier requirement from
the Fee Schedule when such
requirement becomes underutilized is
equitable and not unfairly
discriminatory because the requirement
would be eliminated in its entirety and
would no longer be available to any ETP
Holder. Additionally, the proposed rule
change neither targets nor will it have
a disparate impact on any particular
category of market participant.
jbell on DSKJLSW7X2PROD with NOTICES
Tape B Step Up Tier
The Exchange believes it is not
unfairly discriminatory to modify and
cap the credit payable under Tape B
Step Up Tier 4 for providing displayed
liquidity in Tape B securities because
the proposed increased cap would be
applied on an equal basis to all ETP
Holders, who would all be subject to the
proposed cap on an equal basis.
Additionally, the proposal neither
targets nor will it have a disparate
impact on any particular category of
market participant. The proposal does
not permit unfair discrimination
because the proposed cap would be
applied to all ETP Holders, who would
all be subject to the cap on an equal
basis.
MPID Adding Tier
The Exchange believes it is not
unfairly discriminatory to provide the
proposed credit as the credit would be
provided on an equal basis to all ETP
Holders that add liquidity by meeting
the new proposed MPID Adding Tier’s
requirements. The Exchange also
believes that the proposed change is not
unfairly discriminatory because it is
reasonably related to the value to the
Exchange’s market quality associated
with higher volume. The proposed new
tier is designed as an incentive to any
and all ETP Holders interested in
meeting the tier criteria to submit
additional order flow to the Exchange
and each will receive the proposed
rebate if the tier criteria is met. The
Exchange also notes that the proposed
change will not adversely impact any
ETP Holder’s pricing or their ability to
qualify for other tiers. Rather, should an
ETP Holder not meet the criteria of the
proposed new pricing tier, the ETP
Holder will merely not receive the
corresponding rebate.
*
*
*
*
*
In the prevailing competitive
environment, ETP Holders are free to
VerDate Sep<11>2014
17:34 Aug 17, 2021
Jkt 253001
disfavor the Exchange’s pricing if they
believe that alternatives offer them
better value. Moreover, this proposed
rule change neither targets nor will it
have a disparate impact on any
particular category of market
participant. The Exchange believes that
this proposal does not permit unfair
discrimination because the changes
described in this proposal would be
applied to all similarly situated ETP
Holders and all ETP Holders would be
subject to the same requirements.
Accordingly, no ETP Holder already
operating on the Exchange would be
disadvantaged by the proposed
allocation of fees. The Exchange further
believes that the proposed changes
would not permit unfair discrimination
among ETP Holders because the
standard and tiered rates are available
equally to all ETP Holders.
Finally, the submission of orders to
the Exchange is optional for ETP
Holders in that they could choose
whether to submit orders to the
Exchange and, if they do, the extent of
its activity in this regard. 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,22 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 changes 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 integrated
competition among orders, which
promotes ‘‘more efficient pricing of
individual stocks for all types of orders,
large and small.’’ 23
Intramarket Competition. The
Exchange believes the proposed
amendments to its Fee Schedule would
not impose any burden on competition
22 15
U.S.C. 78f(b)(8).
Securities Exchange Act Release No. 51808,
70 FR 37495, 37498–99 (June 29, 2005) (S7–10–04)
(Final Rule).
23 See
PO 00000
Frm 00130
Fmt 4703
Sfmt 4703
46303
that is not necessary or appropriate in
furtherance of the purposes of the Act.
The Exchange does not believe that the
proposed change represents a significant
departure from previous pricing offered
by the Exchange or its competitors. The
proposed changes are designed to attract
additional order flow to the Exchange.
The Exchange believes that the
proposed adoption of a new pricing tier
and amending credits associated with
established tiers would incentivize
market participants to direct liquidity
adding order flow to the Exchange,
bringing with it additional execution
opportunities for market participants
and improved price transparency.
Greater overall order flow, trading
opportunities, and pricing transparency
benefits all market participants on the
Exchange by enhancing market quality
and continuing to encourage ETP
Holders to send orders, thereby
contributing towards a robust and wellbalanced market ecosystem. The
Exchange also does not believe the
proposed rule change to eliminate
underutilized requirements to qualify
for a pricing tier will impose any burden
on intramarket competition because the
proposed change would impact all ETP
Holders uniformly (i.e., the requirement
will not be available to any ETP Holder).
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. As noted above, the
Exchange’s market share of intraday
trading (i.e., excluding auctions) is
currently less than 10%. 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 intermarket
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.
E:\FR\FM\18AUN1.SGM
18AUN1
46304
Federal Register / Vol. 86, No. 157 / Wednesday, August 18, 2021 / Notices
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) 24 of the Act and
subparagraph (f)(2) of Rule 19b–4 25
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) 26 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:
jbell on DSKJLSW7X2PROD with NOTICES
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–2021–70 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–2021–70. 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
24 15
U.S.C. 78s(b)(3)(A).
25 17 CFR 240.19b–4(f)(2).
26 15 U.S.C. 78s(b)(2)(B).
VerDate Sep<11>2014
17:34 Aug 17, 2021
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–2021–70, and
should be submitted on or before
September 8, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.27
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–17667 Filed 8–17–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–92655; File No. SR–Phlx–
2021–43]
Self-Regulatory Organizations; Nasdaq
PHLX LLC; Notice of Filing of
Proposed Rule Change To Permit
Monday and Wednesday Expirations
for Options Listed Pursuant to the
Short Term Option Series Program on
the iShares Russell 2000 ETF (‘‘IWM’’)
August 12, 2021.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on August 6,
2021, Nasdaq PHLX LLC (‘‘Phlx’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
27 17
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
Jkt 253001
PO 00000
Frm 00131
Fmt 4703
Sfmt 4703
III below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to permit
Monday and Wednesday expirations for
options listed pursuant to the Short
Term Option Series Program on the
iShares Russell 2000 ETF.
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/phlx/rules, at the principal
office of the Exchange, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend
Phlx Options 4, Section 5 at
Supplementary Material .03 to permit
Monday and Wednesday expirations for
options listed pursuant to the Short
Term Option Series Program
(‘‘Program’’) on the iShares Russell 2000
ETF (‘‘IWM’’).
A Short Term Option Series means a
series in an option class that is
approved for listing and trading on the
Exchange in which the series is opened
for trading on any Monday, Tuesday,
Wednesday, Thursday or Friday that is
a business day and that expires on the
Monday, Wednesday or Friday of the
next business week, or, in the case of a
series that is listed on a Friday and
expires on a Monday, is listed one
business week and one business day
prior to that expiration.3 The Exchange
3 Options 1, Section 1(b)(53) provides the term
‘‘Short Term Option Series’’ a series in an option
class that is approved for listing and trading on the
Exchange in which the series is opened for trading
E:\FR\FM\18AUN1.SGM
18AUN1
]]>Agencies
[Federal Register Volume 86, Number 157 (Wednesday, August 18, 2021)]
[Notices]
[Pages 46297-46304]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-17667]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-92648; File No. SR-NYSEARCA-2021-70]
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
August 12, 2021.
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 August 2, 2021, 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 (1) modify the application of the per
share fee for Tape B securities; (2) adopt increased credits and a cap
applicable to the Step Up Tier 4 credit in Tape B securities; (3)
eliminate a requirement to qualify for the Tape B Tier 2 credit; (4)
adopt increased credits and a cap applicable to the Tape B Step Up
Tier; and (5) adopt a new pricing tier, MPID Adding Tier, applicable to
Tape A and Tape C securities. The Exchange proposes to implement the
fee changes effective August 2, 2021. The proposed rule change is
available on the Exchange's website at www.nyse.com, at the principal
office of the Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend the Fee Schedule to (1) modify the
application of the per share fee for Tape B securities; (2) adopt
increased credits and a cap applicable to the Step Up Tier 4 credit in
Tape B securities; (3) eliminate a requirement to qualify for the Tape
B Tier 2 credit; (4) adopt increased credits and a cap applicable to
the Tape B Step Up Tier; and (5) adopt a new pricing tier, MPID Adding
Tier, applicable to Tape A and Tape C securities.
[[Page 46298]]
The proposed changes respond to the current competitive environment
where order flow providers have a choice of where to direct liquidity-
providing orders by offering further incentives for ETP Holders \4\ to
send additional liquidity to the Exchange.
---------------------------------------------------------------------------
\4\ All references to ETP Holders in connection with this
proposed fee change include Market Makers.
---------------------------------------------------------------------------
The Exchange proposes to implement the fee changes effective August
2, 2021.
Background
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. 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.'' \5\
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005) (File No. S7-10-04) (Final
Rule) (``Regulation NMS'').
---------------------------------------------------------------------------
While Regulation NMS has enhanced competition, it has also fostered
a ``fragmented'' market structure where trading in a single stock can
occur across multiple trading centers. When multiple trading centers
compete for order flow in the same stock, the Commission has recognized
that ``such competition can lead to the fragmentation of order flow in
that stock.'' \6\ Indeed, equity trading is currently dispersed across
16 exchanges,\7\ numerous alternative trading systems,\8\ and broker-
dealer internalizers and wholesalers, all competing for order flow.
Based on publicly available information, no single exchange currently
has more than 17% market share.\9\ Therefore, no exchange possesses
significant pricing power in the execution of equity order flow. More
specifically, the Exchange currently has less than 10% market share of
executed volume of equities trading.\10\
---------------------------------------------------------------------------
\6\ See Securities Exchange Act Release No. 61358, 75 FR 3594,
3597 (January 21, 2010) (File No. S7-02-10) (Concept Release on
Equity Market Structure).
\7\ See Cboe U.S Equities Market Volume Summary, available at
https://markets.cboe.com/us/equities/market_share. See generally
https://www.sec.gov/fast-answers/divisionsmarketregmrexchangesshtml.html.
\8\ See FINRA ATS Transparency Data, available at https://otctransparency.finra.org/otctransparency/AtsIssueData. A list of
alternative trading systems registered with the Commission is
available at https://www.sec.gov/foia/docs/atslist.htm.
\9\ See Cboe Global Markets U.S. Equities Market Volume Summary,
available at https://markets.cboe.com/us/equities/market_share/.
\10\ See id.
---------------------------------------------------------------------------
The Exchange believes that the ever-shifting market share among the
exchanges from month to month demonstrates that market participants can
move order flow, or discontinue or reduce use of certain categories of
products. While it is not possible to know a firm's reason for shifting
order flow, the Exchange believes that one such reason is because of
fee changes at any of the registered exchanges or non-exchange venues
to which a firm routes order flow. With respect to non-marketable order
flow that would provide liquidity on an Exchange against which market
makers can quote, ETP Holders can choose from any one of the 16
currently operating registered exchanges to route such order flow.
Accordingly, competitive forces constrain exchange transaction fees
that relate to orders that would provide liquidity on an exchange.
Proposed Rule Change
Tape B
Currently, for Exchange Transactions, under Section III (Standard
Rates--Transactions), the Exchange charges a fee of $0.0012 per share
for Closing Orders \11\ in securities priced at or above $1.00.\12\
Pursuant to footnote (f), this fee currently applies to orders in Tape
A Securities, Tape C Securities and NYSE Arca primary listed securities
(includes all ETFs/ETNs). The Exchange currently does not charge this
fee for orders in securities whose primary market is NYSE American LLC
(``NYSE American'') or Cboe BZX Exchange, Inc. (``Cboe BZX''). The
Exchange proposes to modify the application of this fee by amending the
text of footnote (f) so that the fee would apply to all securities,
i.e., Tape A, Tape B and Tape C securities. The purpose of the proposed
fee change is to simplify the Fee Schedule and maintain consistency
with respect to the fee charged by the Exchange when it executes
Closing Orders in all securities.
---------------------------------------------------------------------------
\11\ Under Section I (Definitions) of the Fee Schedule, the term
Closing Orders means Market, Market-On-Close, Limit-On-Close, and
Auction-Only Orders executed in a Closing Auction.
\12\ For Retail Orders in securities priced at or above $1.00,
this fee is $0.0008 per share, and for securities priced below
$1.00, this fee is 0.1% of Dollar Value.
---------------------------------------------------------------------------
Similarly, for Exchange Transaction[sic], under Section VI (Tier
Rates--Round Lots and Odd Lots (Per Share Price $1.00 or Above)), the
Exchange currently charges a fee of $0.0010 per share for Market,
Market-On-Close, Limit-On-Close, and Auction-Only Orders executed in a
Closing Auction in NYSE Arca Primary listed securities (includes all
ETFs/ETNs). This fee is applicable under Tier 1 and Tier 2 pricing
tiers.
The Exchange currently does not charge this fee for orders in
securities whose primary market is NYSE American or Cboe BZX. The
Exchange proposes to modify the application of this fee by deleting the
words ``in NYSE Arca primary listed securities (includes all ETFs/
ETNs)'' in Tier 1 and Tier 2 so that the fee would apply to all Tape B
securities. The purpose of the proposed fee change is to simplify the
Fee Schedule and maintain consistency with respect to the fee charged
by the Exchange when it executes Closing Orders in all Tape B
securities.
Step Up Tier 4
The proposed rule change is designed to be available to all ETP
Holders on the Exchange and is intended to provide ETP Holders an
opportunity to receive enhanced rebates by executing more of their
orders in Tape B securities on the Exchange.
The Exchange currently has multiple levels of step-up pricing
tiers, Step Up Tiers 1--5, which are designed to encourage ETP Holders
that provide displayed liquidity on the Exchange to increase that order
flow, which would benefit all ETP Holders by providing greater
execution opportunities on the Exchange. In order to provide an
incentive for ETP Holders to direct providing displayed order flow to
the Exchange, the credits increase in the various tiers based on
increased levels of volume directed to the Exchange.
Currently, the following credits are available to ETP Holders that
provide increased levels of displayed liquidity on the Exchange:
------------------------------------------------------------------------
Credit for providing displayed
Tier liquidity
------------------------------------------------------------------------
Step Up Tier.......................... $0.0030 (Tape A).
$0.0023 (Tape B).
$0.0031 (Tape C).
Step Up Tier 2........................ $0.0028 (Tape A and C).
$0.0022 (Tape B).
Step Up Tier 3........................ $0.0025 (Tape A and C).
$0.0022 (Tape B).
Step Up Tier 4........................ $0.0033 (Tape A and C).
$0.0034 (Tape B).
Step Up Tier 5........................ $0.0032 (Tape A, B and C).
------------------------------------------------------------------------
Under the Step Up Tier 4, if an ETP Holder increases its providing
liquidity on the Exchange by a specified percentage over the level that
such ETP Holder provided liquidity in September 2019, it is eligible to
earn higher credits. Specifically, to qualify for the credits under
Step Up Tier 4, an ETP Holder
[[Page 46299]]
must directly execute providing average daily volume (ADV) per month
that is an increase of no less than 0.40% of US CADV for that month
over the ETP Holder's providing ADV in September 2019, taken as a
percentage of US CADV.
If an ETP Holder meets the Step Up Tier 4 requirement, such ETP
Holder is currently eligible to earn a credit of:
$0.0033 per share for orders that provide displayed
liquidity in Tape A and Tape C Securities, and
$0.0034 per share for orders that provide displayed
liquidity in Tape B Securities.\13\
---------------------------------------------------------------------------
\13\ See Securities Exchange Act Release Nos. 86122 (June 17,
2019), 84 FR 29258 (June 21, 2019) (SR-NYSEArca-2019-43); 87292
(October 11, 2019), 84 FR 55603 (October 17, 2019) (SR-NYSEArca-
2019-70); and 88833 (May 7, 2020), 85 FR 28676 (May 13, 2020) (SR-
NYSEArca-2020-39).
---------------------------------------------------------------------------
ETP Holders that qualify for Step Up Tier 4 do not receive any
additional incremental Tape B Tier credits for providing displayed
liquidity, including any incremental credits associated with Less
Active ETP Securities and are currently capped at $0.0034 per
share.\14\ With this proposed rule change, the Exchange proposes to
modify the cap applicable to the Step Up Tier 4 credit in Tape B
securities. As proposed, an ETP Holder that is registered as a Lead
Market Maker can receive up to a combined credit of $0.0036 per share
on all its adding volume in Tape B Securities if that ETP Holder,
together with its affiliates,\15\ executes providing ADV in Tape B
Securities that is at least 40% over the ETP Holder's providing ADV in
Q3 2019, as a percentage of US Tape B CADV.
---------------------------------------------------------------------------
\14\ See Securities Exchange Act Release Nos. 88436 (March 20,
2020), 85 FR 17112 (March 26, 2020) (SR-NYSEArca-2020-21); and 88833
(May 7, 2020), 85 FR 28676 (May 13, 2020) (SR-NYSEArca-2020-39).
\15\ The term ``affiliate'' means any ETP Holder under 75%
common ownership or control of that ETP Holder. See Fee Schedule,
NYSE Arca Marketplace: General, Section II. Aggregate Billing of
Affiliated ETP Holders.
---------------------------------------------------------------------------
The purpose of the proposed rule change is to incentivize ETP
Holders to register as Lead Market Makers and generally to incentivize
order flow providers to send liquidity-providing orders to the Exchange
while capping the level of credit that such participants would receive.
The Exchange believes that, although it is proposing to continue to
limit the financial incentive for orders that provide displayed
liquidity in Tape B securities, the current rebate, i.e., $0.0034 per
share, is among one of the highest credits paid by the Exchange and
should continue to serve as an incentive for ETP Holders to direct
displayed liquidity providing orders to the Exchange.
Tape B Tier 2
Currently, under the Tape B Tier 2 pricing tier, an ETP Holder
could qualify for a credit of $0.0028 per share \16\ if such ETP
Holder, on a daily basis, measured monthly, directly executes providing
volume in Tape B Securities during the billing month (``Tape B Adding
ADV'') that is either (1) equal to at least 1.0% of the US Tape B CADV
or (2) equal to at least 0.20% of the US Tape B CADV for the billing
month over the ETP Holder's or Market Maker's Q2 2015 Tape B Adding ADV
taken as a percentage of Tape B CADV or (3) equal to at least 0.25% of
the US Tape B CADV for the billing month over the ETP Holder's or
Market Maker's April 2020 Tape B Adding ADV taken as a percentage of
Tape B CADV.
---------------------------------------------------------------------------
\16\ Under the Standard Rates, ETP Holders receive a credit of
$0.0020 per share for Tape B orders that provide liquidity.
---------------------------------------------------------------------------
The Exchange proposes to eliminate the second requirement above
which requires an ETP Holder to execute providing volume in Tape B
Securities equal to at least 0.20% of the US Tape B CADV for the
billing month over the ETP Holder's or Market Maker's Q2 2015 Tape B
Adding ADV taken as a percentage of Tape B CADV. The Exchange has
observed that, over the last 6 months, not a single ETP Holder has
qualified for the Tape B Tier 2 credit by utilizing the requirement
that the Exchange is proposing to eliminate. Given that this
requirement has not served to meaningfully increase activity on the
Exchange, the Exchange has determined to eliminate it from the Fee
Schedule. The Exchange is not proposing any other change to the Tape B
Tier 2 pricing tier.
With this proposed rule change, ETP Holders would continue to be
able to qualify for the Tape B Tier 2 credit of $0.0028 per share for
providing liquidity in Tape B Securities if such ETP Holder, on a daily
basis, measured monthly, directly executes Tape B Adding ADV that is
either (1) equal to at least 1.0% of the US Tape B CADV or (2) equal to
at least 0.25% of the US Tape B CADV for the billing month over the ETP
Holder's or Market Maker's April 2020 Tape B Adding ADV taken as a
percentage of Tape B CADV.
The Exchange believes that eliminating a requirement that has
become underutilized will also streamline the Fee Schedule. The
Exchange further believes that the remaining requirements will continue
to incentivize ETP Holders to submit liquidity providing orders in Tape
B Securities to qualify for the Tape B Tier 2 credit. The Exchange is
not proposing any change to the level of Tape B Tier 2 credit.
Tape B Step Up Tier
Currently, ETP Holders that meet the requirement under Tape B Step
Up Tier can earn the following incremental credits:
An incremental credit of $0.0002 per share when an ETP
Holder's providing ADV in Tape B Securities during the billing month is
at least 0.50% of the US Tape B CADV and the ETP Holder's providing ADV
in Tape B Securities during the billing month as a percentage of US
Tape B CADV is at least 20% more but less than 30% of the ETP Holder's
providing ADV as a percentage of US Tape B CADV in 3Q 2019;
An incremental credit of $0.0003 per share when an ETP
Holder's providing ADV in Tape B Securities during the billing month is
at least 0.50% of the US Tape B CADV and the ETP Holder's providing ADV
in Tape B Securities during the billing month as a percentage of US
Tape B CADV is at least 30% more but less than 40% of the ETP Holder's
providing ADV as a percentage of US Tape B CADV in 3Q 2019; and
An incremental credit of $0.0004 per share when an ETP
Holder's providing ADV in Tape B Securities during the billing month is
at least 0.50% of the US Tape B CADV and the ETP Holder's providing ADV
in Tape B Securities during the billing month as a percentage of US
Tape B CADV is at least 40% more than the ETP Holder's providing ADV as
a percentage of US Tape B CADV in 3Q 2019.\17\
---------------------------------------------------------------------------
\17\ See Securities Exchange Act Release No. 87292 (October 11,
2019), 84 FR 55603 (October 17, 2019) (SR-NYSEArca-2019-70).
---------------------------------------------------------------------------
The incremental credits are payable in addition to the ETP Holder's
Tiered or Standard credit(s); provided, however, that such combined
credit(s) in Tape B Securities currently cannot exceed $0.0032 per
share.
The Exchange proposes to adopt an increased cap applicable under
the Tape B Step Up Tier pricing tier. As proposed, if an ETP Holder's
providing ADV increases at least 150% over the ETP Holder's providing
ADV in Q3 2019, then the ETP Holder can receive a combined credit of up
to:
$0.0033 per share if the ETP Holder is registered as a
Lead Market Maker or Market Maker in at least 150 Less Active ETPs in
which it meets at least two Performance Metrics, and has Tape B Adding
ADV equal to at least 0.65% of US Tape B CADV, or
$0.0034 per share if the ETP Holder or Market Maker is
registered as a Lead
[[Page 46300]]
Market Maker or Market Maker in at least 200 Less Active ETPs in which
it meets at least two Performance Metrics, and has Tape B Adding ADV
equal to at least 0.70% of US Tape B CADV.
For example, assume an ETP Holder has providing ADV of 1.20% of
Tape B CADV in Tape B securities in the baseline period of third
quarter of 2019. Further assume that the same ETP Holder has providing
ADV of Tape B CADV of 1.80% in Tape B securities in the billing month.
The ETP Holder in this example would qualify for an incremental credit
of $0.0004 per share because the ETP Holder has providing ADV in Tape B
Securities during the billing month of 1.80%, which is at least 0.50%
of the US Tape B CADV, and because the ETP Holder has providing ADV of
Tape B CADV of 1.80%, which is at least 40% more than the ETP Holder's
baseline ADV of 1.20% of Tape B CADV. Also assume further that the ETP
Holder is registered as a Lead Market Maker or Market Maker in 150 Less
Active ETPs in which it meets at least two Performance Metrics.
In the above example, the ETP Holder would also qualify for the
existing Tape B Tier 1 credit of $0.0030 per share by meeting the 1.5%
of the US Tape B CADV requirement, for a total credit of $0.0034 per
share ($0.0030 per share plus $0.0004 per share). Given the cap
currently in place, the ETP Holder's combined credit would be reduced
to $0.0032 per share. However, since the ETP Holder is registered as a
Lead Market Maker or Market Maker in at least 150 Less Active ETPs in
which it meets at least two Performance Metrics, under the proposed
rule change, the ETP Holder would receive a combined credit of $0.0033
per share. If the ETP Holder was registered as a Lead Market Maker or
Market Maker in 200 Less Active ETPs in which it met at least two
Performance Metrics, under the proposed rule change, ETP Holder would
receive a combined credit of $0.0034 per share. Under both scenarios,
the ETP Holder meets the Tape B Adding ADV requirement of 0.70% of US
Tape B CADV for the $0.0034 per share cap.
As noted above, the Exchange operates in a competitive environment,
particularly as it relates to attracting non-marketable, providing
liquidity that would be displayed on the Exchange. The purpose of this
proposed rule change is to provide an incentive to ETP Holders to
register as Lead Market Makers or Market Makers in Less Active ETPs and
to incentivize such liquidity providers to increase the orders sent to
the Exchange.
MPID Adding Tier
The Exchange proposes to adopt a new pricing tier, MPID Adding
Tier, that would offer a per share credit for orders that provide
liquidity in Tape A and Tape C securities. As proposed, to qualify for
the proposed pricing tier, an MPID would be required to execute
providing ADV in all securities that is at least 2 times more than its
providing ADV in 2Q 2021, as a percentage of US CADV. A qualifying MPID
would receive a credit for providing liquidity in Tape A and Tape C
securities of $0.0028 per share if the MPID has least 4 million shares
of providing ADV during the billing month, or $0.0029 per share if the
MPID has at least 9 million shares of providing ADV during the billing
month.
For example, assume an MPID has providing ADV of 2 million shares
of Tape A, Tape B and Tape C securities in the baseline period of 2Q
2021. Further assume that the same MPID has providing ADV of 4 million
shares in the billing month, which is 2 times more than the baseline
ADV of 2 million shares. Under the proposed rule change, the MPID would
receive a credit of $0.0028 per share for adding liquidity in Tape A
and Tape C securities. If instead the MPID has providing ADV of 9
million shares in the billing month, which is 4.5 times more than the
baseline period, then the MPID would receive a credit of $0.0029 per
share for adding liquidity in Tape A and Tape C securities.
The proposed rule change is designed to incentivize ETP Holders to
increase liquidity-providing orders in Tape A and Tape C securities
they send to the Exchange, which would support the quality of price
discovery on the Exchange and provide additional liquidity for incoming
orders. As noted above, the Exchange operates in a competitive
environment, particularly as it relates to attracting non-marketable,
which add liquidity to the Exchange. Because the proposed tier requires
an ETP Holder's MPID to increase the volume of its trades in orders
that add liquidity over the MPID's 2Q 2021 baseline, the Exchange
believes that the proposed credits would provide an incentive for all
ETP Holders to send additional liquidity to the Exchange in order to
qualify for them.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\18\ in general, and furthers the
objectives of Sections 6(b)(4) and (5) of the Act,\19\ 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.
---------------------------------------------------------------------------
\18\ 15 U.S.C. 78f(b).
\19\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
The Proposed Fee Change Is Reasonable
As discussed above, the Exchange operates in a highly fragmented
and 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.'' \20\
---------------------------------------------------------------------------
\20\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
---------------------------------------------------------------------------
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. With respect to non-marketable
order which provide liquidity on an Exchange, ETP Holders can choose
from any one of the 16 currently operating registered exchanges to
route such order flow. Accordingly, competitive forces reasonably
constrain exchange transaction fees that relate to orders that would
provide displayed liquidity on an exchange. Stated otherwise, changes
to exchange transaction fees can have a direct effect on the ability of
an exchange to compete for order flow.
Tape B
The Exchange believes the proposed amendment to the Tape B fees is
reasonable because it seeks to standardize the fee for Tape B
securities. The Exchange periodically reviews its fees and rebates and
determined that it does not currently charge a fee for Closing Orders
in Tape B securities whose primary market is NYSE American or Cboe BZX,
nor does the Exchange currently charge for Market, Market-On-Close,
Limit-On-Close, and Auction-Only Orders executed in a Closing Auction
for securities whose primary market is NYSE American or Cboe BZX. The
Exchange believes it is
[[Page 46301]]
reasonable to charge the same fee for all Tape B securities.
Step Up Tier 4
The Exchange believes the proposed rule change to adopt an
increased cap on the credit applicable to the Step Up Tier 4 credit in
Tape B securities is reasonable because the increased credit, which
would be among the highest paid by the Exchange, outside of Lead Market
Maker credits for adding liquidity, would serve to incentivize ETP
Holders to increase their participation on the Exchange as Lead Market
Makers and execute a greater number of orders in Tape B securities on
the Exchange. The Exchange believes the increased credits would
continue to encourage ETP Holders to submit additional liquidity to a
national securities exchange and to participate as a Lead Market Maker
or Market Maker. The Exchange believes it is reasonable to require ETP
Holders to meet the applicable volume threshold to qualify for the
increased credits. Submission of additional liquidity to the Exchange
would promote price discovery and transparency and enhance order
execution opportunities for ETP Holders from the substantial amounts of
liquidity present on the Exchange. The Exchange notes that the
requirement to execute providing ADV that is at least 40% over the ETP
Holder's or Market Maker's providing ADV in Q3 2019 is the same as the
requirement to achieve the top incremental credit for Tape B Step Up
Tier. The Exchange believes that adopting an identical requirement
would provide ETP Holders a further incentive to provide additional
liquidity in Tape B Securities. Additionally, the Exchange believes
that utilizing the same baseline as Tape B Step Up Tier would make it
easier for firms to monitor their providing ADV for both tiers, as
opposed introducing a new baseline. All ETP Holders would benefit from
the greater amounts of liquidity that will be present on the Exchange,
which would provide greater execution opportunities.
Tape B Tier 2
The Exchange believes that the proposed rule change to eliminate
one of the requirements to qualify for the Tape B Tier 2 credit is
reasonable because the requirement proposed for deletion has been
underutilized and has generally not incentivized ETP Holders to bring
liquidity and increase trading on the Exchange.
In the last 6 months, no ETP Holder has availed itself of the Tape
B Tier 2 by meeting the requirement proposed for deletion. The Exchange
does not anticipate any ETP Holder in the near future to qualify for
the Tape B Tier 2 credit by meeting the requirement proposed for
deletion. The Exchange believes it is reasonable to eliminate
requirements within pricing tiers when they become underutilized. The
Exchange believes eliminating underutilized tier requirements would
also simplify the Fee Schedule. The Exchange further believes that
removing reference to underutilized tier requirements that the Exchange
proposes to eliminate from the Fee Schedule would also add clarity to
the Fee Schedule.
Tape B Step Up Tier
The Exchange believes the proposed rule change to modify the credit
and the cap applicable under the Tape B Step Up Tier for Tape B
securities is a reasonable means of attracting additional liquidity to
the Exchange. The Exchange believes the modified credits, which are
among the highest paid by the Exchange, would continue to encourage ETP
Holders to submit additional liquidity to a national securities
exchange. The Exchange believes it is reasonable to require ETP Holders
to meet the applicable volume threshold to qualify for the increased
credits, given the higher combined credit of $0.0033 per share and
$0.0034 per share the Exchange would pay if the tier criteria is met.
Submission of additional liquidity to the Exchange would promote price
discovery and transparency and enhance order execution opportunities
for ETP Holders from the substantial amounts of liquidity present on
the Exchange. The Exchange also believes it is reasonable to require
ETP Holders be registered as a Lead Market Maker or Market Maker in a
minimum number [sic] Less Active ETPs and to meet at least two
Performance Metrics in such securities as the Exchange believes this
requirement would enhance market quality in Less Active ETPs and
support the quality of price discovery in such securities. All ETP
Holders would benefit from the greater amounts of liquidity that will
be present on the Exchange, which would provide greater execution
opportunities.
MPID Adding Tier
The Exchange believes the proposed MPID Adding Tier is a reasonable
means to encourage ETP Holders to increase their liquidity providing
orders in Tape A and Tape C securities each month over a predetermined
baseline by offering liquidity providers an opportunity to receive an
enhanced rebate. Further, the Exchange believes it's reasonable to
provide the proposed credit to the qualifying MPID if it meets the
tier's criteria because this would encourage individual MPIDs to send
orders that provide liquidity to the Exchange, thereby contributing to
robust levels of liquidity, which benefits all market participants, and
promoting price discovery and transparency. Since the proposed tier
would be new, no ETP Holder's MPID currently qualifies for the proposed
pricing tier. As previously noted, without a view of ETP Holder
activity on other exchanges and off-exchange venues, the Exchange has
no way of knowing whether the proposed rule change would result in any
ETP Holder's MPID qualifying for the tier. The Exchange believes the
proposed credit is reasonable as it would provide an additional
incentive for an ETP Holder's MPID to direct its order flow to the
Exchange and provide meaningful added levels of liquidity in order to
qualify for the proposed credit, thereby contributing to depth and
market quality on the Exchange.
As noted above, the Exchange operates in a highly competitive
environment, particularly for attracting order flow that provides
displayed liquidity on an exchange. More specifically, the Exchange
notes that greater add volume order flow may provide for deeper, more
liquid markets and execution opportunities at improved prices, which
the Exchange believes incentivizes liquidity providers to submit
additional liquidity and enhance execution opportunities. This overall
increase in activity would deepen the Exchange's liquidity pool, offer
additional cost savings, support the quality of price discovery,
promote market transparency and improve market quality, for all
investors. The Exchange believes it is reasonable to provide higher
credits in Tape A and Tape C securities to incentivize liquidity adding
orders in those securities, and not in Tape B securities, because Tape
A and Tape C securities are non-NYSE Arca-listed securities and do not
have Lead Market Makers or Market Makers to provide additional
liquidity. The Exchange notes that other markets with which the
Exchange competes currently offer its members an opportunity to earn
rebates based on the activity of the member's MPID.\21\ The Exchange
believes the proposed new pricing tier continues to be a reasonable
[[Page 46302]]
means to encourage ETP Holders to increase their liquidity on the
Exchange.
---------------------------------------------------------------------------
\21\ See BZX Fee Schedule, Footnote 2, Step Up Tiers, and
Footnote 4, Single Investor MPID Tiers, at https://www.cboe.com/us/equities/membership/fee_schedule/bzx/.
---------------------------------------------------------------------------
The Proposed Fee Change is an Equitable Allocation of Fees and Credits
The Exchange believes its proposal equitably allocates its fees
among its market participants.
Tape B
The Exchange believes that the proposed rule change constitutes an
equitable allocation of reasonable fees because the proposed fee is
comparable to the fee charged by the Exchange for the same activity in
NYSE Arca-listed securities and would apply equally to all ETP Holders
that choose to execute their orders in Tape B securities on the
Exchange. The proposed change may impact the submission of orders to a
national securities exchange, and to the extent that ETP Holders
continue to submit such orders to the Exchange, the proposed rule
change would not have a negative impact to ETP Holders trading on the
Exchange because the proposed fee would be in line with the fee
currently charged by the Exchange for trading in NYSE Arca-listed
securities. However, without having a view of ETP Holder's activity on
other markets and off-exchange venues, the Exchange has no way of
knowing whether this proposed rule change would result in a change in
trading behavior by ETP Holders.
Step Up Tier 4
The Exchange believes the proposed amendment to the credit and the
cap under Step Up Tier 4 equitably allocates its fees and credits among
market participants because it is reasonably related to the value of
the Exchange's market quality associated with higher equities volume.
The Exchange believes the proposed increased credits, which would be
among the highest paid by the Exchange, would provide an incentive for
ETP Holders to increase their participation as Lead Market Makers on
the Exchange and execute a greater amount of their orders in Tape B
securities on the Exchange. The Exchange believes the proposed
increased credits would continue to encourage ETP Holders to send
orders that add liquidity to the Exchange, thereby contributing to
robust levels of liquidity for the benefit all market participants. The
Exchange believes the proposed rule change would improve market quality
for all market participants on the Exchange and attract more liquidity
to the Exchange. ETP Holders that currently qualify for credits
associated with Step Up pricing tiers on the Exchange will continue to
receive credits when they provide liquidity to the Exchange. The
Exchange believes that recalibrating the requirements for providing
liquidity will continue to attract order flow and liquidity to the
Exchange for the benefit of investors generally.
Tape B Tier 2
The Exchange believes that the proposed rule change to eliminate
one of the requirements to qualify for the Tape B Tier 2 credit is an
equitable allocation of its fees and credits. The Exchange believes
that eliminating a tier requirement from the Fee Schedule when such
requirement becomes underutilized is equitable because the requirement
would be eliminated in its entirety and would no longer be available to
any ETP Holder.
Tape B Step Up Tier
The Exchange believes the proposed amendment to the credit and the
cap under the Tape B Step Up Tier equitably allocates its fees and
credits among market participants because it is reasonably related to
the value of the Exchange's market quality associated with higher
equities volume. As proposed, the Exchange would provide qualifying ETP
Holders with some of the highest credits payable by the Exchange
provided they participate as Lead Market Makers and provide increased
Tape B adding ADV. The more an ETP Holder participates, the greater the
credit they would receive. The Exchange believes the proposed credits
would encourage ETP Holders to send orders that add liquidity to the
Exchange, thereby contributing to robust levels of liquidity, which
would benefit all market participants.
MPID Adding Tier
The Exchange believes that the proposed adoption of the MPID Adding
Tier represents an equitable allocation of fees because all ETP Holders
will be eligible for the proposed pricing tier and have the opportunity
to meet the tier's criteria and receive the applicable rebate if such
criteria is met. That is, the proposed pricing tier is designed as an
incentive to any and all liquidity providers interested in meeting the
tier criteria to submit additional order flow to the Exchange and each
will receive the proposed rebate if the tier criteria is met. While the
Exchange has no way of knowing whether this proposed rule change would
definitively result in any particular ETP Holder qualifying for the
proposed pricing tier, the Exchange anticipates a number of ETP Holders
would be able to meet, or will reasonably be able to meet, the proposed
criteria. However, without having a view of activity on other markets
and off-exchange venues, the Exchange has no way of knowing whether
this proposed rule change would result in any ETP Holder qualifying for
the proposed tier. The Exchange also notes that the proposed change
will not adversely impact any ETP Holder's pricing or their ability to
qualify for other rebate tiers. Rather, should an ETP Holder not meet
the proposed criteria, the ETP Holder will merely not receive the
corresponding rebate.
The Proposed Fee Change Is Not Unfairly Discriminatory
The Exchange believes that the proposal is not unfairly
discriminatory. In the prevailing competitive environment, ETP Holders
are free to disfavor the Exchange's pricing if they believe that
alternatives offer them better value.
Tape B
The proposal to amend the Tape B fees is not unfairly
discriminatory because the fee would be applied on an equal basis to
all ETP Holders that choose to send their orders in Tape B securities
to the Exchange. Additionally, the proposed rule change neither targets
nor will it have a disparate impact on any particular category of
market participant. The proposal does not permit unfair discrimination
because the proposed fees would be applied to all ETP Holders, who
would all be charged the same fee on an equal basis. Accordingly, no
ETP Holder already operating on the Exchange would be disadvantaged by
this allocation of fees.
Step Up Tier 4
The Exchange believes it is not unfairly discriminatory to cap the
increased credit payable under Step Up Tier 4 for providing displayed
liquidity in Tape B securities because the proposed credit and cap
would be applied on an equal basis to all ETP Holders, who would all be
subject to the proposed change on an equal basis. Additionally, the
proposal neither targets nor will it have a disparate impact on any
particular category of market participant. The proposal does not permit
unfair discrimination because the proposed change would be applied to
all ETP Holders, who would all be subject to the proposed change on an
equal basis. Accordingly, no ETP Holder already operating on the
Exchange would be disadvantaged by this allocation of fees.
[[Page 46303]]
Tape B Tier 2
The Exchange believes that the proposed rule change to eliminate
one of the requirements to qualify for the Tape B Tier 2 credit is not
unfairly discriminatory. The Exchange believes that eliminating a tier
requirement from the Fee Schedule when such requirement becomes
underutilized is equitable and not unfairly discriminatory because the
requirement would be eliminated in its entirety and would no longer be
available to any ETP Holder. Additionally, the proposed rule change
neither targets nor will it have a disparate impact on any particular
category of market participant.
Tape B Step Up Tier
The Exchange believes it is not unfairly discriminatory to modify
and cap the credit payable under Tape B Step Up Tier 4 for providing
displayed liquidity in Tape B securities because the proposed increased
cap would be applied on an equal basis to all ETP Holders, who would
all be subject to the proposed cap on an equal basis. Additionally, the
proposal neither targets nor will it have a disparate impact on any
particular category of market participant. The proposal does not permit
unfair discrimination because the proposed cap would be applied to all
ETP Holders, who would all be subject to the cap on an equal basis.
MPID Adding Tier
The Exchange believes it is not unfairly discriminatory to provide
the proposed credit as the credit would be provided on an equal basis
to all ETP Holders that add liquidity by meeting the new proposed MPID
Adding Tier's requirements. The Exchange also believes that the
proposed change is not unfairly discriminatory because it is reasonably
related to the value to the Exchange's market quality associated with
higher volume. The proposed new tier is designed as an incentive to any
and all ETP Holders interested in meeting the tier criteria to submit
additional order flow to the Exchange and each will receive the
proposed rebate if the tier criteria is met. The Exchange also notes
that the proposed change will not adversely impact any ETP Holder's
pricing or their ability to qualify for other tiers. Rather, should an
ETP Holder not meet the criteria of the proposed new pricing tier, the
ETP Holder will merely not receive the corresponding rebate.
* * * * *
In the prevailing competitive environment, ETP Holders are free to
disfavor the Exchange's pricing if they believe that alternatives offer
them better value. Moreover, this proposed rule change neither targets
nor will it have a disparate impact on any particular category of
market participant. The Exchange believes that this proposal does not
permit unfair discrimination because the changes described in this
proposal would be applied to all similarly situated ETP Holders and all
ETP Holders would be subject to the same requirements. Accordingly, no
ETP Holder already operating on the Exchange would be disadvantaged by
the proposed allocation of fees. The Exchange further believes that the
proposed changes would not permit unfair discrimination among ETP
Holders because the standard and tiered rates are available equally to
all ETP Holders.
Finally, the submission of orders to the Exchange is optional for
ETP Holders in that they could choose whether to submit orders to the
Exchange and, if they do, the extent of its activity in this regard.
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,\22\ 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 changes 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 integrated competition among orders, which promotes ``more
efficient pricing of individual stocks for all types of orders, large
and small.'' \23\
---------------------------------------------------------------------------
\22\ 15 U.S.C. 78f(b)(8).
\23\ See Securities Exchange Act Release No. 51808, 70 FR 37495,
37498-99 (June 29, 2005) (S7-10-04) (Final Rule).
---------------------------------------------------------------------------
Intramarket Competition. The Exchange believes the proposed
amendments to its Fee Schedule would not impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act. The Exchange does not believe that the proposed
change represents a significant departure from previous pricing offered
by the Exchange or its competitors. The proposed changes are designed
to attract additional order flow to the Exchange. The Exchange believes
that the proposed adoption of a new pricing tier and amending credits
associated with established tiers would incentivize market participants
to direct liquidity adding order flow to the Exchange, bringing with it
additional execution opportunities for market participants and improved
price transparency. Greater overall order flow, trading opportunities,
and pricing transparency benefits all market participants on the
Exchange by enhancing market quality and continuing to encourage ETP
Holders to send orders, thereby contributing towards a robust and well-
balanced market ecosystem. The Exchange also does not believe the
proposed rule change to eliminate underutilized requirements to qualify
for a pricing tier will impose any burden on intramarket competition
because the proposed change would impact all ETP Holders uniformly
(i.e., the requirement will not be available to any ETP Holder).
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. As noted
above, the Exchange's market share of intraday trading (i.e., excluding
auctions) is currently less than 10%. 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 intermarket 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.
[[Page 46304]]
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) \24\ of the Act and subparagraph (f)(2) of Rule
19b-4 \25\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
---------------------------------------------------------------------------
\24\ 15 U.S.C. 78s(b)(3)(A).
\25\ 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) \26\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
---------------------------------------------------------------------------
\26\ 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-2021-70 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-2021-70. 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-2021-70, and should be
submitted on or before September 8, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\27\
---------------------------------------------------------------------------
\27\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-17667 Filed 8-17-21; 8:45 am]
BILLING CODE 8011-01-P
