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, 57228-57233 [2022-20145]
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Federal Register / Vol. 87, No. 180 / Monday, September 19, 2022 / Notices
with the policies of title 39. For
request(s) that the Postal Service states
concern market dominant product(s),
applicable statutory and regulatory
requirements include 39 U.S.C. 3622, 39
U.S.C. 3642, 39 CFR part 3030, and 39
CFR part 3040, subpart B. For request(s)
that the Postal Service states concern
competitive product(s), applicable
statutory and regulatory requirements
include 39 U.S.C. 3632, 39 U.S.C. 3633,
39 U.S.C. 3642, 39 CFR part 3035, and
39 CFR part 3040, subpart B. Comment
deadline(s) for each request appear in
section II.
II. Docketed Proceeding(s)
1. Docket No(s).: CP2021–68; Filing
Title: USPS Notice of Amendment to
Priority Mail Express, Priority Mail,
First-Class Package Service & Parcel
Select Contract 8, Filed Under Seal;
Filing Acceptance Date: September 13,
2022; Filing Authority: 39 CFR
3035.105; Public Representative:
Kenneth R. Moeller; Comments Due:
September 21, 2022.
2. Docket No(s).: MC2022–105 and
CP2022–109; Filing Title: USPS Request
to Add Priority Mail Contract 761 to
Competitive Product List and Notice of
Filing Materials Under Seal; Filing
Acceptance Date: September 13, 2022;
Filing Authority: 39 U.S.C. 3642, 39 CFR
3040.130 through 3040.135, and 39 CFR
3035.105; Public Representative:
Christopher C. Mohr; Comments Due:
September 21, 2022.
This Notice will be published in the
Federal Register.
Dated: September 15, 2022.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2022–20310 Filed 9–15–22; 4:15 pm]
Erica A. Barker,
Secretary.
BILLING CODE 8011–01–P
[FR Doc. 2022–20213 Filed 9–16–22; 8:45 am]
SECURITIES AND EXCHANGE
COMMISSION
BILLING CODE 7710–FW–P
Sunshine Act Meetings
12 p.m. on Thursday,
September 22, 2022.
PLACE: The meeting will be held via
remote means and/or at the
Commission’s headquarters, 100 F
Street NE, Washington, DC 20549.
STATUS: This meeting will be closed to
the public.
MATTERS TO BE CONSIDERED:
Commissioners, Counsel to the
Commissioners, the Secretary to the
Commission, and recording secretaries
will attend the closed meeting. Certain
staff members who have an interest in
the matters also may be present.
In the event that the time, date, or
location of this meeting changes, an
TIME AND DATE:
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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 amend the Retail
Tiers. 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
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
The Exchange proposes to amend the
Fee Schedule to amend the Retail Tiers.
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 to send additional
displayed liquidity to the Exchange.
The Exchange proposes to implement
the fee changes effective September 1,
2022.
September 13, 2022.
Background
[Release No. 34–95760; File No. SR–
NYSEARCA–2022–59]
SECURITIES AND EXCHANGE
COMMISSION
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announcement of the change, along with
the new time, date, and/or place of the
meeting will be posted on the
Commission’s website at https://
www.sec.gov.
The General Counsel of the
Commission, or his designee, has
certified that, in his opinion, one or
more of the exemptions set forth in 5
U.S.C. 552b(c)(3), (5), (6), (7), (8), 9(B)
and (10) and 17 CFR 200.402(a)(3),
(a)(5), (a)(6), (a)(7), (a)(8), (a)(9)(ii) and
(a)(10), permit consideration of the
scheduled matters at the closed meeting.
The subject matter of the closed
meeting will consist of the following
topics:
Institution and settlement of
injunctive actions;
Institution and settlement of
administrative proceedings;
Resolution of litigation claims; and
Other matters relating to examinations
and enforcement proceedings.
At times, changes in Commission
priorities require alterations in the
scheduling of meeting agenda items that
may consist of adjudicatory,
examination, litigation, or regulatory
matters.
CONTACT PERSON FOR MORE INFORMATION:
For further information; please contact
Vanessa A. Countryman from the Office
of the Secretary at (202) 551–5400.
Authority: 5 U.S.C. 552b.
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 on
September 1, 2022, NYSE Arca, Inc.
(‘‘NYSE Arca’’ or the ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (‘‘SEC’’ or ‘‘Commission’’)
the proposed rule change as described
in Items I, II, and III below, which Items
have been prepared by the Exchange.
1 15
2 17
PO 00000
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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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
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broader forms that are most important to
investors and listed companies.’’ 3
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.’’ 4 Indeed, equity trading is
currently dispersed across 16
exchanges,5 numerous alternative
trading systems,6 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.7 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.8
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. The competition for Retail
Orders 9 is even more stark, particularly
3 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’’).
4 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).
5 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/divisionsmarketregmr
exchangesshtml.html.
6 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.
7 See Cboe Global Markets U.S. Equities Market
Volume Summary, available at https://
markets.cboe.com/us/equities/market_share/.
8 See id.
9 A Retail Order is an agency order that originates
from a natural person and is submitted to the
Exchange by an ETP Holder, provided that no
change is made to the terms of the order to price
or side of market and the order does not originate
from a trading algorithm or any other computerized
methodology. See Securities Exchange Act Release
No. 67540 (July 30, 2012), 77 FR 46539 (August 3,
2012) (SR–NYSEArca–2012–77).
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as it relates to exchange versus offexchange venues.
The Exchange thus needs to compete
in the first instance with non-exchange
venues for Retail Order flow, and with
the 15 other exchange venues for that
Retail Order flow that is not directed
off-exchange. Accordingly, competitive
forces compel the Exchange to use
exchange transaction fees and credits,
particularly as they relate to competing
for Retail Order flow, because market
participants can readily trade on
competing venues if they deem pricing
levels at those other venues to be more
favorable.
To respond to this competitive
environment, the Exchange has
established a number of Retail Tiers,
which are designed to provide an
incentive for ETP Holders to route Retail
Orders to the Exchange by providing
higher credits for adding liquidity
correlated to an ETP Holder’s higher
trading volume in Retail Orders on the
Exchange. Under three of these four
tiers, ETP Holders also do not pay a fee
when such Retail Orders have a time-inforce of Day that remove liquidity from
the Exchange.
Proposed Rule Change
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 quoting and trading
more on the Exchange.
The Exchange currently provides
tiered credits for Retail Orders that
provide liquidity on the Exchange.
Specifically, Section VI. Tier Rates—
Round Lots and Odd Lots (Per Share
Price $1.00 or Above), provides a base
Retail Order Tier credit of $0.0033 per
share for Adding. Additionally, the
Exchange has established Retail Order
Step-Up Tier 1, Retail Order Step-Up
Tier 2 and Retail Order Step-Up Tier 3
that provide a credit of $0.0038 per
share, $0.0035 per share, and $0.0036
per share, respectively, for Adding.10
The Retail Tiers are designed to
encourage ETP Holders that provide
displayed liquidity in Retail Orders 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 Retail
Order flow to the Exchange, the credits
increase in the various tiers based on
10 See Retail Tiers table under Section VI. Tier
Rates—Round Lots and Odd Lots (Per Share Price
$1.00 or Above).
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57229
increased levels of volume directed to
the Exchange.
As described in greater detail below,
the Exchange proposes to amend the
requirements and the associated per
share credit payable under the current
pricing tiers applicable to Retail Orders
that provide liquidity in Tape A, Tape
B and Tape C securities.
Currently, to qualify for the Retail
Order Tier, an ETP Holder must have
Retail Adding ADV of 0.15% or more of
CADV. ETP Holders that meet the
current Retail Order Tier requirement
are eligible to earn a credit of $0.0033
per share for Retail Orders that add
liquidity in Tape A, B and C securities.
The Exchange proposes the following
changes to the current pricing tier:
• Rename the Retail Order Tier to
Retail Tier 3;
• Modify the requirement to qualify
for the renamed tier; and
• Increase the credit applicable to the
renamed tier.
More specifically, to qualify for
proposed Retail Tier 3, an ETP Holder
must execute Retail Orders with a timein-force of Day that add or remove
liquidity equal to 0.10% of CADV. ETP
Holders that meet the proposed Retail
Tier 3 requirement would be eligible to
earn an increased credit of $0.0034 per
share for Retail Orders that add liquidity
in Tape A, B and C securities.
Next, to qualify for current Retail
Order Step-Up Tier 1, an ETP Holder
must execute an ADV of Retail Orders
with a time-in-force of Day that add or
remove liquidity that is an increase of
0.40% or more of CADV above its April
2018 ADV taken as a percentage of
CADV and have Adding ADV of 1.00%
or more of CADV. Alternatively, in
addition to providing an ADV of 1.00%
or more of CADV, an ETP Holder can
qualify for the current fees and credits
by executing an ADV of 55 million
shares of Retail Orders with a time-inforce of Day that add or remove
liquidity. ETP Holders that meet the
current Retail Order Step-Up Tier 1
requirement are eligible to earn a credit
of $0.0038 per share for Retail Orders
that add liquidity in Tape A, B and C
securities.11 Under the Retail Order
Step-Up Tier 1, the Exchange also does
not charge a fee for Retail Removing
with a time-in-force of Day.
The Exchange proposes the following
changes to the current pricing tier:
11 Pursuant to footnote (d) under Retail Tiers, ETP
Holders that qualify for Retail Order Step-Up Tier
1 are subject to the following rates in Tape C:
($0.0035) for Adding displayed liquidity; $0.0027
for Removing; and Additional ($0.0002) for Adding
non-displayed liquidity. See Fee Schedule. With
this proposed rule change, the Exchange proposes
to rename Retail Order Step-Up Tier 1 to Retail Tier
1 in footnote (d) under the Retail Tiers table.
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• Rename Retail Order Step-Up Tier 1
to Retail Tier 1; and
• Modify the percentage requirement
to qualify for the renamed tier.
More specifically, to qualify for
proposed Retail Tier 1, an ETP Holder
must execute an ADV of Retail Orders
with a time-in-force of Day that add or
remove liquidity that is 0.50% or more
of CADV and have Adding ADV of
1.00% or more of CADV. ETP Holders
may also alternatively qualify for
proposed Retail Tier 1 by executing an
ADV of 55 million shares of Retail
Orders with a time-in-force of Day that
add or remove liquidity and have
Adding ADV of 1.00% or more of
CADV.12 With this proposed rule
change, to qualify for proposed Retail
Tier 1, ETP Holders would no longer be
required to ‘step-up’ above their April
2018 CADV and would instead qualify
for the proposed tier by meeting the
amended volume requirement during
the billing month. ETP Holders that
meet the proposed Retail Tier 1
requirement will continue to be eligible
to earn a credit of $0.0038 per share for
Retail Orders that add liquidity in Tape
A, B and C securities. The Exchange is
not proposing any change to the level of
the credit payable under proposed
Retail Tier 1. ETP Holders that qualify
for the proposed Retail Tier 1 would
also not be a charged a fee for Retail
Orders with a time-in-force of Day that
remove liquidity.13
Next, to qualify for current Retail
Order Step-Up Tier 2, an ETP Holder
must execute an ADV of Retail Orders
with a time-in-force of Day that add or
remove liquidity that is an increase of
0.10% or more of CADV above its April
2018 ADV taken as a percentage of
CADV. ETP Holders that meet the
current Retail Order Step-Up Tier 2
requirement are eligible to earn a credit
of $0.0035 per share for Retail Orders
that add liquidity in Tape A, B and C
securities.
The Exchange proposes the following
changes to the current pricing tier:
12 To streamline the Fee Schedule, the Exchange
proposes a non-substantive change to delete the
words ‘‘of Retail Orders with a time-in-force of Day
that add or remove’’ from the proposed Retail Tier
1 table because these words are repetitive as they
currently appear in the heading for that column
under Minimum Requirement of CADV.
13 Pursuant to footnote (e) under Retail Tiers, ETP
Holders that qualify for current Retail Order StepUp Tier 1, Retail Order Step-Up Tier 2 and Retail
Order Step-Up Tier 3 are not charged a fee or
provided a credit for Retail Orders where each side
of the executed order (1) shares the same MPID and
(2) is a Retail Order with a time-in-force of Day. See
Fee Schedule. With this proposed rule change, the
Exchange proposes to rename Retail Order Step-Up
Tier 1 to Retail Tier 1, Retail Order Step-Up Tier
2 as Retail Step-Up Tier and Retail Order Step-Up
Tier 3 as Retail Tier 2 in footnote (e) under the
Retail Tiers table.
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• Rename Retail Order Step-Up Tier 2
to Retail Step-Up Tier; and
• Modify the requirement to qualify
for the renamed tier.
More specifically, to qualify for
proposed Retail Step-Up Tier, an ETP
Holder must execute an ADV of Retail
Orders with a time-in-force of Day that
add or remove liquidity that is an
increase of 0.075% or more of CADV
above its April 2018 ADV taken as a
percentage of CADV. ETP Holders that
meet the proposed Retail Step-Up Tier
requirement will continue to be eligible
to earn a credit of $0.0035 per share for
Retail Orders that add liquidity in Tape
A, B and C securities. The Exchange is
not proposing any change to the level of
the credit payable under proposed
Retail Step-Up Tier. ETP Holders that
qualify for the proposed Retail Step-Up
Tier would also not be charged a fee for
Retail Orders with a time-in-force of Day
that remove liquidity.14
Finally, to qualify for current Retail
Order Step-Up Tier 3, an ETP Holder
must execute an ADV of Retail Orders
with a time-in-force of Day that add or
remove liquidity that is an increase of
0.20% or more of CADV above its April
2018 ADV taken as a percentage of
CADV. ETP Holders that meet the
current Retail Order Step-Up Tier 3
requirement are eligible to earn a credit
of $0.0036 per share for Retail Orders
that add liquidity in Tape A, B and C
securities.
The Exchange proposes the following
changes to the current pricing tier:
• Rename Retail Order Step-Up Tier 3
to Retail Tier 2; and
• Modify the requirement to qualify
for the renamed tier.
More specifically, to qualify for
proposed Retail Tier 2, an ETP Holder
must execute an ADV of Retail Orders
with a time-in-force of Day that add or
remove liquidity that is 0.20% or more
of CADV. With this proposed rule
change, ETP Holders would no longer
be required to ‘step-up’ above their
April 2018 CADV and would instead
qualify for the proposed tier by meeting
the volume requirement during the
billing month. ETP Holders that meet
the proposed Retail Tier 2 requirement
will continue to be eligible to earn a
credit of $0.0036 per share for Retail
Orders that add liquidity in Tape A, B
and C securities. ETP Holders that
qualify for proposed Retail Tier 2 would
also not be charged a fee for Retail
Orders with a time-in-force of Day that
remove liquidity.15
With this proposed rule change, the
Exchange proposes to reformat the
14 See
15 See
PO 00000
id.
id.
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credits payable under the Retail Tiers
such that the tier that pays the highest
credit would appear at the top of the
table followed by the tier that pays the
second highest credit, then the tier that
pays the lowest credit, followed by the
tier that requires ETP Holders to ‘stepup’ from their baseline CADV.
Accordingly, the Retail Tiers table
would appear as follows:
Tier
Retail Tier 1 ..........
Retail Tier 2 ..........
Retail Tier 3 ..........
Retail Step-Up Tier
Credit for retail adding
$0.0038 (Tape A, Tape B and
Tape C).
0.0036 (Tape A, Tape B and
Tape C).
0.0034 (Tape A, Tape B and
Tape C).
0.0035 (Tape A, Tape B and
Tape C).
The purpose of the proposed rule
change is to encourage greater
participation from ETP Holders and
promote additional liquidity in Retail
Orders. The Exchange notes that the
current Retail Tiers have been
underutilized by ETP Holders. The
Exchange believes that modifying the
requirement of the existing tiers should
incentivize ETP Holders to direct more
of their Retail Orders to the Exchange
and thus qualify for the credits payable
under the Retail Tiers. As described
above, ETP Holders with liquidityproviding orders have a choice of where
to send those orders. The Exchange
believes that the proposed amendment
to the volume requirement and credit
payable for Retail Orders could lead to
more ETP Holders choosing to route
their liquidity-providing Retail Orders
to the Exchange rather than to a
competing exchange.
The Exchange does not know how
much Retail Order flow ETP Holders
choose to route to other exchanges or to
off-exchange venues. Without having a
view of ETP Holders’ 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 Holders
sending more of their Retail Orders to
the Exchange to qualify for the proposed
Retail Order credits. The Exchange
cannot predict with certainty how many
ETP Holders would avail themselves of
this opportunity, but additional
liquidity-providing Retail Orders would
benefit all market participants because it
would provide greater execution
opportunities on the Exchange.
The proposed changes are not
otherwise intended to address any other
issues, and the Exchange is not aware of
any significant problems that market
participants would have in complying
with the proposed changes.
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In particular, the Exchange believes
that
the proposed modification of the
The Exchange believes that the
proposed rule change is consistent with volume requirement to qualify for the
Section 6(b) of the Act,16 in general, and proposed Retail Tiers is reasonable
because it is designed to encourage
furthers the objectives of Sections
greater participation from ETP Holders
17
6(b)(4) and (5) of the Act, in particular,
and promote additional liquidity in
because it provides for the equitable
Retail Orders. The Exchange believes it
allocation of reasonable dues, fees, and
is reasonable to require ETP Holders to
other charges among its members,
meet the applicable volume threshold to
issuers and other persons using its
qualify for the Retail Tier credits, which
facilities and does not unfairly
the Exchange proposes to increase to
discriminate between customers,
encourage ETP Holders to direct more of
issuers, brokers or dealers.
their liquidity-providing Retail Orders
The Proposed Fee Change Is Reasonable to the Exchange. Further, the proposed
change is reasonable as it would allow
As discussed above, the Exchange
ETP Holders additional opportunities to
operates in a highly fragmented and
qualify for the credit payable under the
competitive market. The Commission
various pricing tiers. The Exchange
has repeatedly expressed its preference
believes it is reasonable to modify two
for competition over regulatory
of the existing three Retail Tiers, from
intervention in determining prices,
a ‘step-up,’ to a straight volume
products, and services in the securities
requirement, without significantly
markets. Specifically, in Regulation
modifying the volume requirement to
NMS, the Commission highlighted the
qualify for each of the proposed Retail
importance of market forces in
Tiers. The Exchange believes it is
determining prices and SRO revenues
reasonable to replace the ‘step-up’ tiers
and, also, recognized that current
to ‘straight’ tiers as the revised criteria
regulation of the market system ‘‘has
would allow ETP Holders that may have
been remarkably successful in
been unable to meet the existing
promoting market competition in its
requirement to reach the proposed
broader forms that are most important to volume requirement more easily,
investors and listed companies.’’ 18
particularly when there has been an
Given this competitive environment,
overall decline of Retail Orders as a
the proposal represents a reasonable
percentage of total volume in the equity
attempt to attract additional order flow
markets, and yet sustained high
to the Exchange.
consolidated daily volumes.
As noted above, the competition for
The Exchange believes that the
Retail Order flow is stark given the
proposal represents a reasonable effort
amount of retail limit orders that are
to provide enhanced order execution
routed to non-exchange venues. The
opportunities for ETP Holders. All ETP
Exchange believes that the ever-shifting Holders would benefit from the greater
market share among the exchanges from amounts of liquidity on the Exchange,
month to month demonstrates that
which would represent a wider range of
market participants can shift order flow, execution opportunities. The Exchange
or discontinue or reduce use of certain
notes that market participants are free to
categories of products, in response to fee shift their order flow to competing
changes. This competition is
venues if they believe other markets
particularly acute for non-marketable, or offer more favorable fees and credits.
limit, retail orders, i.e., retail orders that
The Exchange believes the proposed
can provide liquidity on an exchange.
change is also reasonable because the
That competition is even more fierce for increased credits proposed herein
retail limit orders that provide
would continue to encourage ETP
displayed liquidity on an exchange.
Holders to send Retail Orders to the
With respect to such orders, ETP
Exchange to qualify for the proposed
Holders can choose from any one of the
pricing tiers. As noted above, the
Exchange operates in a highly
16 currently operating registered
competitive environment, particularly
exchanges to route such order flow.
for attracting Retail Order flow that
Accordingly, competitive forces
provides displayed liquidity on an
constrain exchange transaction fees,
exchange. The Exchange believes it is
particularly as they relate to competing
reasonable to continue to provide
for retail orders. Stated otherwise,
credits for adding liquidity, in general,
changes to exchange transaction fees
and higher credits for Retail Orders that
can have a direct effect on the ability of
provide displayed liquidity if an ETP
an exchange to compete for order flow.
Holder meets the amended requirement
16 15 U.S.C. 78f(b).
for the Retail Tiers.
17 15 U.S.C. 78f(b)(4) and (5).
Further, given the competitive market
18 See supra note 3.
for attracting Retail Orders, the
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2. Statutory Basis
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57231
Exchange notes that with this proposed
rule change, the Exchange’s pricing for
Retail Orders would be comparable, and
in some cases, higher, to credits
currently in place on other exchanges
that the Exchange competes with for
order flow. For example, the Nasdaq
Stock Market LLC (‘‘Nasdaq’’) provides
its members with a credit of $0.0033 per
share if such member has an 85% add
to total volume (adding and removing)
ratio during a billing month.19 Cboe
BZX Exchange, Inc. (‘‘BZX’’) provides
its members with a credit of $0.0032 per
share for retail orders that add liquidity
to that market.20 In addition, Cboe
EDGX Exchange, Inc. (‘EDGX’’) provides
its members with a credit of $0.0037 per
share for retail orders that add liquidity
to that market if an EDGX member adds
liquidity in Retail Orders of 0.45% of
CADV or more and a credit of $0.0034
per share for retail orders that add
liquidity to that market if an EDGX
member adds liquidity in Retail Orders
of 0.35% of CADV or more.21
The Exchange believes the proposed
change is also reasonable because it is
designed to attract higher volumes of
Retail Orders transacted on the
Exchange by ETP Holders which would
benefit all market participants by
offering greater price discovery,
increased transparency, and an
increased opportunity to trade on the
Exchange.
On the backdrop of the competitive
environment in which the Exchange
currently operates, the proposed rule
change is a reasonable attempt to
increase liquidity on the Exchange and
improve the Exchange’s market share
relative to its competitors.
The Proposed Fee Change Is an
Equitable Allocation of Fees and Credits
The Exchange believes that the
proposed rule change to modify the
requirement and credit payable under
the proposed Retail Tiers equitably
allocates fees and credits among its
market participants because it is
reasonably related to the value of the
Exchange’s market quality associated
with higher volume in Retail Orders.
The Exchange believes that pricing is
just one of the factors that ETP Holders
consider when determining where to
direct their order flow. Among other
19 See Nasdaq Price List, Rebate to Add Displayed
Designated Retail Liquidity, at https://
nasdaqtrader.com/
Trader.aspx?id=PriceListTrading2.
20 See BZX Fee Schedule, Fee Codes and
Associated Fees, at https://markets.cboe.com/us/
equities/membership/fee_schedule/bzx/.
21 See EDGX Fee Schedule, Fee Codes and
Associated Fees, at https://markets.cboe.com/us/
equities/membership/fee_schedule/edgx/.
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lotter on DSK11XQN23PROD with NOTICES1
things, factors such as execution quality,
fill rates, and volatility, are important
and deterministic to ETP Holders in
deciding where to send their order flow.
Further, the Exchange notes that, with
this proposed rule change, the
difference between the highest credit
provided for Retail Orders, $0.0038 per
share, as proposed, and the credit for
Retail Orders that do not qualify for any
Retail Order pricing tiers, $0.0032 per
share, is $0.0006, or 15%, which the
Exchange believes is relatively small
given the heightened requirements that
ETP Holders must meet to qualify for
the higher credit. Similarly, with this
proposed rule change, the difference in
the highest credit for Retail Orders,
$0.0038 per share under proposed Retail
Tier 1 and the credit provided for Retail
Orders to those ETP Holders qualifying
for Retail Tier 3, $0.0034 per share,
would only be $0.0004 per share, or
11%. Therefore, the Exchange believes
the proposed amendment to the
proposed Retail Tiers is equitably
allocated and provides credits that are
reasonably related to the value to the
Exchange’s market quality associated
with higher volumes.
Finally, the Exchange believes that
the proposed amendment to the Retail
Tiers is equitable because the magnitude
of the proposed credits is not
unreasonably high relative to credits
paid by other exchanges for orders that
provide additional liquidity in Retail
Orders.22 The Exchange believes the
proposed rule change would improve
market quality for all market
participants on the Exchange and, as a
consequence, attract more Retail Orders
to the Exchange, thereby improving
market-wide quality and price
discovery.
The Exchange believes that the
proposed rule change equitably
allocates its fees and credits because
maintaining the proportion of Retail
Orders in exchange-listed securities that
are executed on a registered national
securities exchange (rather than relying
on certain available off-exchange
execution methods) would contribute to
investors’ confidence in the fairness of
their transactions and would benefit all
investors by deepening the Exchange’s
liquidity pool, supporting the quality of
price discovery, promoting market
transparency and improving investor
protection.
The Proposed Fee Change Is Not
Unfairly Discriminatory
The Exchange believes that the
proposed rule change to modify the
requirement and credit payable under
22 See
supra notes 19–21.
VerDate Sep<11>2014
17:37 Sep 16, 2022
the proposed Retail Tiers 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. Moreover, the
proposal neither targets nor will it have
a disparate impact on any particular
category of market participant. The
Exchange believes that the proposal
does not permit unfair discrimination
because the proposal would be applied
to all similarly situated ETP Holders
and all ETP Holders would be similarly
subject to the proposed volume
requirement to qualify for the proposed
modified Retail Tiers. 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 general and tiered
rates are available equally to all ETP
Holders.
As described above, in today’s
competitive marketplace, order flow
providers have a choice of where to
direct liquidity-providing order flow,
and the Exchange believes the proposed
modification of the requirement and the
credit payable under the proposed
Retail Tiers will incentivize greater
number of ETP Holders to direct their
order flow to the Exchange. Lastly, the
submission of Retail Orders is optional
for ETP Holders in that they could
choose whether to submit Retail Orders
and, if they do, the extent of its activity
in this regard. 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,23 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
23 15
Jkt 256001
PO 00000
U.S.C. 78f(b)(8).
Frm 00065
Fmt 4703
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.’’ 24
Intramarket Competition. The
Exchange believes the proposed rule
change does not impose any burden on
intramarket 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 change is designed to attract
Retail Orders to the Exchange. The
Exchange believes that amending
criteria of established tiers and
associated credits would incentivize
market participants to direct liquidity
adding retail 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 would benefit all market
participants on the Exchange by
enhancing market quality and would
continue to encourage ETP Holders to
send their orders to the Exchange,
thereby contributing towards a robust
and well-balanced market ecosystem.
Additionally, the proposed changes
would apply to all ETP Holders equally
in that all ETP Holders would be
eligible for the proposed Retail Tiers,
have a reasonable opportunity to meet
each tier’s criteria and would all receive
the proposed credit if such criteria is
met.
Intermarket Competition. The
Exchange believes the proposed rule
change does not impose any burden on
intermarket competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange operates in a highly
competitive market in which market
participants can readily choose to send
their orders to other exchanges 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
24 See
Sfmt 4703
E:\FR\FM\19SEN1.SGM
supra note 3.
19SEN1
Federal Register / Vol. 87, No. 180 / Monday, September 19, 2022 / Notices
order routing practices, the Exchange
does not believe this proposed fee
change would 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
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) 25 of the Act and
subparagraph (f)(2) of Rule 19b–4 26
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) 27 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:
lotter on DSK11XQN23PROD with NOTICES1
Electronic Comments
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–2022–59. 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
offices 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–2022–59, and
should be submitted on or before
October 11, 2022.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.28
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022–20145 Filed 9–16–22; 8:45 am]
BILLING CODE 8011–01–P
• 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–2022–59 on the subject
line.
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(2).
27 15 U.S.C. 78s(b)(2)(B).
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–95761; File No. SR–NYSE–
2022–42]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend Its
Price List
September 13, 2022.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on
September 1, 2022, New York Stock
Exchange LLC (‘‘NYSE’’ or the
‘‘Exchange’’) filed with the Securities
and Exchange Commission (the
‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend its
Price List to (1) increase the credit for
orders designated as ‘‘retail’’ that add
liquidity to the Exchange, and (2)
amend the requirements for charges that
remove liquidity from the Exchange.
The Exchange proposes to implement
the fee changes effective September 1,
2022. 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.
25 15
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26 17
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U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
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]]>Agencies
[Federal Register Volume 87, Number 180 (Monday, September 19, 2022)]
[Notices]
[Pages 57228-57233]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-20145]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-95760; File No. SR-NYSEARCA-2022-59]
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
September 13, 2022.
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 on September 1, 2022, NYSE Arca, Inc. (``NYSE Arca'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I, II, and III below, which Items have been prepared by the
Exchange. The Commission is publishing this notice to solicit comments
on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 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 amend the Retail Tiers. 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 amend the Retail
Tiers. 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 to send additional displayed liquidity to the Exchange.
The Exchange proposes to implement the fee changes effective
September 1, 2022.
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
[[Page 57229]]
broader forms that are most important to investors and listed
companies.'' \3\
---------------------------------------------------------------------------
\3\ 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.'' \4\ Indeed, equity trading is currently dispersed across
16 exchanges,\5\ numerous alternative trading systems,\6\ 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.\7\ 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.\8\
---------------------------------------------------------------------------
\4\ 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).
\5\ 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.
\6\ 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.
\7\ See Cboe Global Markets U.S. Equities Market Volume Summary,
available at https://markets.cboe.com/us/equities/market_share/.
\8\ 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. The competition for Retail Orders
\9\ is even more stark, particularly as it relates to exchange versus
off-exchange venues.
---------------------------------------------------------------------------
\9\ A Retail Order is an agency order that originates from a
natural person and is submitted to the Exchange by an ETP Holder,
provided that no change is made to the terms of the order to price
or side of market and the order does not originate from a trading
algorithm or any other computerized methodology. See Securities
Exchange Act Release No. 67540 (July 30, 2012), 77 FR 46539 (August
3, 2012) (SR-NYSEArca-2012-77).
---------------------------------------------------------------------------
The Exchange thus needs to compete in the first instance with non-
exchange venues for Retail Order flow, and with the 15 other exchange
venues for that Retail Order flow that is not directed off-exchange.
Accordingly, competitive forces compel the Exchange to use exchange
transaction fees and credits, particularly as they relate to competing
for Retail Order flow, because market participants can readily trade on
competing venues if they deem pricing levels at those other venues to
be more favorable.
To respond to this competitive environment, the Exchange has
established a number of Retail Tiers, which are designed to provide an
incentive for ETP Holders to route Retail Orders to the Exchange by
providing higher credits for adding liquidity correlated to an ETP
Holder's higher trading volume in Retail Orders on the Exchange. Under
three of these four tiers, ETP Holders also do not pay a fee when such
Retail Orders have a time-in-force of Day that remove liquidity from
the Exchange.
Proposed Rule Change
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 quoting and trading more on
the Exchange.
The Exchange currently provides tiered credits for Retail Orders
that provide liquidity on the Exchange. Specifically, Section VI. Tier
Rates--Round Lots and Odd Lots (Per Share Price $1.00 or Above),
provides a base Retail Order Tier credit of $0.0033 per share for
Adding. Additionally, the Exchange has established Retail Order Step-Up
Tier 1, Retail Order Step-Up Tier 2 and Retail Order Step-Up Tier 3
that provide a credit of $0.0038 per share, $0.0035 per share, and
$0.0036 per share, respectively, for Adding.\10\ The Retail Tiers are
designed to encourage ETP Holders that provide displayed liquidity in
Retail Orders 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 Retail Order flow to the Exchange, the
credits increase in the various tiers based on increased levels of
volume directed to the Exchange.
---------------------------------------------------------------------------
\10\ See Retail Tiers table under Section VI. Tier Rates--Round
Lots and Odd Lots (Per Share Price $1.00 or Above).
---------------------------------------------------------------------------
As described in greater detail below, the Exchange proposes to
amend the requirements and the associated per share credit payable
under the current pricing tiers applicable to Retail Orders that
provide liquidity in Tape A, Tape B and Tape C securities.
Currently, to qualify for the Retail Order Tier, an ETP Holder must
have Retail Adding ADV of 0.15% or more of CADV. ETP Holders that meet
the current Retail Order Tier requirement are eligible to earn a credit
of $0.0033 per share for Retail Orders that add liquidity in Tape A, B
and C securities.
The Exchange proposes the following changes to the current pricing
tier:
Rename the Retail Order Tier to Retail Tier 3;
Modify the requirement to qualify for the renamed tier;
and
Increase the credit applicable to the renamed tier.
More specifically, to qualify for proposed Retail Tier 3, an ETP
Holder must execute Retail Orders with a time-in-force of Day that add
or remove liquidity equal to 0.10% of CADV. ETP Holders that meet the
proposed Retail Tier 3 requirement would be eligible to earn an
increased credit of $0.0034 per share for Retail Orders that add
liquidity in Tape A, B and C securities.
Next, to qualify for current Retail Order Step-Up Tier 1, an ETP
Holder must execute an ADV of Retail Orders with a time-in-force of Day
that add or remove liquidity that is an increase of 0.40% or more of
CADV above its April 2018 ADV taken as a percentage of CADV and have
Adding ADV of 1.00% or more of CADV. Alternatively, in addition to
providing an ADV of 1.00% or more of CADV, an ETP Holder can qualify
for the current fees and credits by executing an ADV of 55 million
shares of Retail Orders with a time-in-force of Day that add or remove
liquidity. ETP Holders that meet the current Retail Order Step-Up Tier
1 requirement are eligible to earn a credit of $0.0038 per share for
Retail Orders that add liquidity in Tape A, B and C securities.\11\
Under the Retail Order Step-Up Tier 1, the Exchange also does not
charge a fee for Retail Removing with a time-in-force of Day.
---------------------------------------------------------------------------
\11\ Pursuant to footnote (d) under Retail Tiers, ETP Holders
that qualify for Retail Order Step-Up Tier 1 are subject to the
following rates in Tape C: ($0.0035) for Adding displayed liquidity;
$0.0027 for Removing; and Additional ($0.0002) for Adding non-
displayed liquidity. See Fee Schedule. With this proposed rule
change, the Exchange proposes to rename Retail Order Step-Up Tier 1
to Retail Tier 1 in footnote (d) under the Retail Tiers table.
---------------------------------------------------------------------------
The Exchange proposes the following changes to the current pricing
tier:
[[Page 57230]]
Rename Retail Order Step-Up Tier 1 to Retail Tier 1; and
Modify the percentage requirement to qualify for the
renamed tier.
More specifically, to qualify for proposed Retail Tier 1, an ETP
Holder must execute an ADV of Retail Orders with a time-in-force of Day
that add or remove liquidity that is 0.50% or more of CADV and have
Adding ADV of 1.00% or more of CADV. ETP Holders may also alternatively
qualify for proposed Retail Tier 1 by executing an ADV of 55 million
shares of Retail Orders with a time-in-force of Day that add or remove
liquidity and have Adding ADV of 1.00% or more of CADV.\12\ With this
proposed rule change, to qualify for proposed Retail Tier 1, ETP
Holders would no longer be required to `step-up' above their April 2018
CADV and would instead qualify for the proposed tier by meeting the
amended volume requirement during the billing month. ETP Holders that
meet the proposed Retail Tier 1 requirement will continue to be
eligible to earn a credit of $0.0038 per share for Retail Orders that
add liquidity in Tape A, B and C securities. The Exchange is not
proposing any change to the level of the credit payable under proposed
Retail Tier 1. ETP Holders that qualify for the proposed Retail Tier 1
would also not be a charged a fee for Retail Orders with a time-in-
force of Day that remove liquidity.\13\
---------------------------------------------------------------------------
\12\ To streamline the Fee Schedule, the Exchange proposes a
non-substantive change to delete the words ``of Retail Orders with a
time-in-force of Day that add or remove'' from the proposed Retail
Tier 1 table because these words are repetitive as they currently
appear in the heading for that column under Minimum Requirement of
CADV.
\13\ Pursuant to footnote (e) under Retail Tiers, ETP Holders
that qualify for current Retail Order Step-Up Tier 1, Retail Order
Step-Up Tier 2 and Retail Order Step-Up Tier 3 are not charged a fee
or provided a credit for Retail Orders where each side of the
executed order (1) shares the same MPID and (2) is a Retail Order
with a time-in-force of Day. See Fee Schedule. With this proposed
rule change, the Exchange proposes to rename Retail Order Step-Up
Tier 1 to Retail Tier 1, Retail Order Step-Up Tier 2 as Retail Step-
Up Tier and Retail Order Step-Up Tier 3 as Retail Tier 2 in footnote
(e) under the Retail Tiers table.
---------------------------------------------------------------------------
Next, to qualify for current Retail Order Step-Up Tier 2, an ETP
Holder must execute an ADV of Retail Orders with a time-in-force of Day
that add or remove liquidity that is an increase of 0.10% or more of
CADV above its April 2018 ADV taken as a percentage of CADV. ETP
Holders that meet the current Retail Order Step-Up Tier 2 requirement
are eligible to earn a credit of $0.0035 per share for Retail Orders
that add liquidity in Tape A, B and C securities.
The Exchange proposes the following changes to the current pricing
tier:
Rename Retail Order Step-Up Tier 2 to Retail Step-Up Tier;
and
Modify the requirement to qualify for the renamed tier.
More specifically, to qualify for proposed Retail Step-Up Tier, an
ETP Holder must execute an ADV of Retail Orders with a time-in-force of
Day that add or remove liquidity that is an increase of 0.075% or more
of CADV above its April 2018 ADV taken as a percentage of CADV. ETP
Holders that meet the proposed Retail Step-Up Tier requirement will
continue to be eligible to earn a credit of $0.0035 per share for
Retail Orders that add liquidity in Tape A, B and C securities. The
Exchange is not proposing any change to the level of the credit payable
under proposed Retail Step-Up Tier. ETP Holders that qualify for the
proposed Retail Step-Up Tier would also not be charged a fee for Retail
Orders with a time-in-force of Day that remove liquidity.\14\
---------------------------------------------------------------------------
\14\ See id.
---------------------------------------------------------------------------
Finally, to qualify for current Retail Order Step-Up Tier 3, an ETP
Holder must execute an ADV of Retail Orders with a time-in-force of Day
that add or remove liquidity that is an increase of 0.20% or more of
CADV above its April 2018 ADV taken as a percentage of CADV. ETP
Holders that meet the current Retail Order Step-Up Tier 3 requirement
are eligible to earn a credit of $0.0036 per share for Retail Orders
that add liquidity in Tape A, B and C securities.
The Exchange proposes the following changes to the current pricing
tier:
Rename Retail Order Step-Up Tier 3 to Retail Tier 2; and
Modify the requirement to qualify for the renamed tier.
More specifically, to qualify for proposed Retail Tier 2, an ETP
Holder must execute an ADV of Retail Orders with a time-in-force of Day
that add or remove liquidity that is 0.20% or more of CADV. With this
proposed rule change, ETP Holders would no longer be required to `step-
up' above their April 2018 CADV and would instead qualify for the
proposed tier by meeting the volume requirement during the billing
month. ETP Holders that meet the proposed Retail Tier 2 requirement
will continue to be eligible to earn a credit of $0.0036 per share for
Retail Orders that add liquidity in Tape A, B and C securities. ETP
Holders that qualify for proposed Retail Tier 2 would also not be
charged a fee for Retail Orders with a time-in-force of Day that remove
liquidity.\15\
---------------------------------------------------------------------------
\15\ See id.
---------------------------------------------------------------------------
With this proposed rule change, the Exchange proposes to reformat
the credits payable under the Retail Tiers such that the tier that pays
the highest credit would appear at the top of the table followed by the
tier that pays the second highest credit, then the tier that pays the
lowest credit, followed by the tier that requires ETP Holders to `step-
up' from their baseline CADV. Accordingly, the Retail Tiers table would
appear as follows:
------------------------------------------------------------------------
Tier Credit for retail adding
------------------------------------------------------------------------
Retail Tier 1......................... $0.0038 (Tape A, Tape B and Tape
C).
Retail Tier 2......................... 0.0036 (Tape A, Tape B and Tape
C).
Retail Tier 3......................... 0.0034 (Tape A, Tape B and Tape
C).
Retail Step-Up Tier................... 0.0035 (Tape A, Tape B and Tape
C).
------------------------------------------------------------------------
The purpose of the proposed rule change is to encourage greater
participation from ETP Holders and promote additional liquidity in
Retail Orders. The Exchange notes that the current Retail Tiers have
been underutilized by ETP Holders. The Exchange believes that modifying
the requirement of the existing tiers should incentivize ETP Holders to
direct more of their Retail Orders to the Exchange and thus qualify for
the credits payable under the Retail Tiers. As described above, ETP
Holders with liquidity-providing orders have a choice of where to send
those orders. The Exchange believes that the proposed amendment to the
volume requirement and credit payable for Retail Orders could lead to
more ETP Holders choosing to route their liquidity-providing Retail
Orders to the Exchange rather than to a competing exchange.
The Exchange does not know how much Retail Order flow ETP Holders
choose to route to other exchanges or to off-exchange venues. Without
having a view of ETP Holders' 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 Holders sending more of
their Retail Orders to the Exchange to qualify for the proposed Retail
Order credits. The Exchange cannot predict with certainty how many ETP
Holders would avail themselves of this opportunity, but additional
liquidity-providing Retail Orders would benefit all market participants
because it would provide greater execution opportunities on the
Exchange.
The proposed changes are not otherwise intended to address any
other issues, and the Exchange is not aware of any significant problems
that market participants would have in complying with the proposed
changes.
[[Page 57231]]
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\16\ in general, and furthers the
objectives of Sections 6(b)(4) and (5) of the Act,\17\ 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.
---------------------------------------------------------------------------
\16\ 15 U.S.C. 78f(b).
\17\ 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.'' \18\
---------------------------------------------------------------------------
\18\ See supra note 3.
---------------------------------------------------------------------------
Given this competitive environment, the proposal represents a
reasonable attempt to attract additional order flow to the Exchange.
As noted above, the competition for Retail Order flow is stark
given the amount of retail limit orders that are routed to non-exchange
venues. The Exchange believes that the ever-shifting market share among
the exchanges from month to month demonstrates that market participants
can shift order flow, or discontinue or reduce use of certain
categories of products, in response to fee changes. This competition is
particularly acute for non-marketable, or limit, retail orders, i.e.,
retail orders that can provide liquidity on an exchange. That
competition is even more fierce for retail limit orders that provide
displayed liquidity on an exchange. With respect to such orders, 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, particularly as they relate
to competing for retail orders. Stated otherwise, changes to exchange
transaction fees can have a direct effect on the ability of an exchange
to compete for order flow.
In particular, the Exchange believes that the proposed modification
of the volume requirement to qualify for the proposed Retail Tiers is
reasonable because it is designed to encourage greater participation
from ETP Holders and promote additional liquidity in Retail Orders. The
Exchange believes it is reasonable to require ETP Holders to meet the
applicable volume threshold to qualify for the Retail Tier credits,
which the Exchange proposes to increase to encourage ETP Holders to
direct more of their liquidity-providing Retail Orders to the Exchange.
Further, the proposed change is reasonable as it would allow ETP
Holders additional opportunities to qualify for the credit payable
under the various pricing tiers. The Exchange believes it is reasonable
to modify two of the existing three Retail Tiers, from a `step-up,' to
a straight volume requirement, without significantly modifying the
volume requirement to qualify for each of the proposed Retail Tiers.
The Exchange believes it is reasonable to replace the `step-up' tiers
to `straight' tiers as the revised criteria would allow ETP Holders
that may have been unable to meet the existing requirement to reach the
proposed volume requirement more easily, particularly when there has
been an overall decline of Retail Orders as a percentage of total
volume in the equity markets, and yet sustained high consolidated daily
volumes.
The Exchange believes that the proposal represents a reasonable
effort to provide enhanced order execution opportunities for ETP
Holders. All ETP Holders would benefit from the greater amounts of
liquidity on the Exchange, which would represent a wider range of
execution opportunities. The Exchange notes that market participants
are free to shift their order flow to competing venues if they believe
other markets offer more favorable fees and credits.
The Exchange believes the proposed change is also reasonable
because the increased credits proposed herein would continue to
encourage ETP Holders to send Retail Orders to the Exchange to qualify
for the proposed pricing tiers. As noted above, the Exchange operates
in a highly competitive environment, particularly for attracting Retail
Order flow that provides displayed liquidity on an exchange. The
Exchange believes it is reasonable to continue to provide credits for
adding liquidity, in general, and higher credits for Retail Orders that
provide displayed liquidity if an ETP Holder meets the amended
requirement for the Retail Tiers.
Further, given the competitive market for attracting Retail Orders,
the Exchange notes that with this proposed rule change, the Exchange's
pricing for Retail Orders would be comparable, and in some cases,
higher, to credits currently in place on other exchanges that the
Exchange competes with for order flow. For example, the Nasdaq Stock
Market LLC (``Nasdaq'') provides its members with a credit of $0.0033
per share if such member has an 85% add to total volume (adding and
removing) ratio during a billing month.\19\ Cboe BZX Exchange, Inc.
(``BZX'') provides its members with a credit of $0.0032 per share for
retail orders that add liquidity to that market.\20\ In addition, Cboe
EDGX Exchange, Inc. (`EDGX'') provides its members with a credit of
$0.0037 per share for retail orders that add liquidity to that market
if an EDGX member adds liquidity in Retail Orders of 0.45% of CADV or
more and a credit of $0.0034 per share for retail orders that add
liquidity to that market if an EDGX member adds liquidity in Retail
Orders of 0.35% of CADV or more.\21\
---------------------------------------------------------------------------
\19\ See Nasdaq Price List, Rebate to Add Displayed Designated
Retail Liquidity, at https://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2.
\20\ See BZX Fee Schedule, Fee Codes and Associated Fees, at
https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/.
\21\ See EDGX Fee Schedule, Fee Codes and Associated Fees, at
https://markets.cboe.com/us/equities/membership/fee_schedule/edgx/.
---------------------------------------------------------------------------
The Exchange believes the proposed change is also reasonable
because it is designed to attract higher volumes of Retail Orders
transacted on the Exchange by ETP Holders which would benefit all
market participants by offering greater price discovery, increased
transparency, and an increased opportunity to trade on the Exchange.
On the backdrop of the competitive environment in which the
Exchange currently operates, the proposed rule change is a reasonable
attempt to increase liquidity on the Exchange and improve the
Exchange's market share relative to its competitors.
The Proposed Fee Change Is an Equitable Allocation of Fees and Credits
The Exchange believes that the proposed rule change to modify the
requirement and credit payable under the proposed Retail Tiers
equitably allocates fees and credits among its market participants
because it is reasonably related to the value of the Exchange's market
quality associated with higher volume in Retail Orders. The Exchange
believes that pricing is just one of the factors that ETP Holders
consider when determining where to direct their order flow. Among other
[[Page 57232]]
things, factors such as execution quality, fill rates, and volatility,
are important and deterministic to ETP Holders in deciding where to
send their order flow.
Further, the Exchange notes that, with this proposed rule change,
the difference between the highest credit provided for Retail Orders,
$0.0038 per share, as proposed, and the credit for Retail Orders that
do not qualify for any Retail Order pricing tiers, $0.0032 per share,
is $0.0006, or 15%, which the Exchange believes is relatively small
given the heightened requirements that ETP Holders must meet to qualify
for the higher credit. Similarly, with this proposed rule change, the
difference in the highest credit for Retail Orders, $0.0038 per share
under proposed Retail Tier 1 and the credit provided for Retail Orders
to those ETP Holders qualifying for Retail Tier 3, $0.0034 per share,
would only be $0.0004 per share, or 11%. Therefore, the Exchange
believes the proposed amendment to the proposed Retail Tiers is
equitably allocated and provides credits that are reasonably related to
the value to the Exchange's market quality associated with higher
volumes.
Finally, the Exchange believes that the proposed amendment to the
Retail Tiers is equitable because the magnitude of the proposed credits
is not unreasonably high relative to credits paid by other exchanges
for orders that provide additional liquidity in Retail Orders.\22\ The
Exchange believes the proposed rule change would improve market quality
for all market participants on the Exchange and, as a consequence,
attract more Retail Orders to the Exchange, thereby improving market-
wide quality and price discovery.
---------------------------------------------------------------------------
\22\ See supra notes 19-21.
---------------------------------------------------------------------------
The Exchange believes that the proposed rule change equitably
allocates its fees and credits because maintaining the proportion of
Retail Orders in exchange-listed securities that are executed on a
registered national securities exchange (rather than relying on certain
available off-exchange execution methods) would contribute to
investors' confidence in the fairness of their transactions and would
benefit all investors by deepening the Exchange's liquidity pool,
supporting the quality of price discovery, promoting market
transparency and improving investor protection.
The Proposed Fee Change Is Not Unfairly Discriminatory
The Exchange believes that the proposed rule change to modify the
requirement and credit payable under the proposed Retail Tiers 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. Moreover, the proposal
neither targets nor will it have a disparate impact on any particular
category of market participant. The Exchange believes that the proposal
does not permit unfair discrimination because the proposal would be
applied to all similarly situated ETP Holders and all ETP Holders would
be similarly subject to the proposed volume requirement to qualify for
the proposed modified Retail Tiers. 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 general and tiered rates are available equally to all ETP
Holders.
As described above, in today's competitive marketplace, order flow
providers have a choice of where to direct liquidity-providing order
flow, and the Exchange believes the proposed modification of the
requirement and the credit payable under the proposed Retail Tiers will
incentivize greater number of ETP Holders to direct their order flow to
the Exchange. Lastly, the submission of Retail Orders is optional for
ETP Holders in that they could choose whether to submit Retail Orders
and, if they do, the extent of its activity in this regard. 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,\23\ 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.'' \24\
---------------------------------------------------------------------------
\23\ 15 U.S.C. 78f(b)(8).
\24\ See supra note 3.
---------------------------------------------------------------------------
Intramarket Competition. The Exchange believes the proposed rule
change does not impose any burden on intramarket 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 change is designed to attract Retail
Orders to the Exchange. The Exchange believes that amending criteria of
established tiers and associated credits would incentivize market
participants to direct liquidity adding retail 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 would
benefit all market participants on the Exchange by enhancing market
quality and would continue to encourage ETP Holders to send their
orders to the Exchange, thereby contributing towards a robust and well-
balanced market ecosystem. Additionally, the proposed changes would
apply to all ETP Holders equally in that all ETP Holders would be
eligible for the proposed Retail Tiers, have a reasonable opportunity
to meet each tier's criteria and would all receive the proposed credit
if such criteria is met.
Intermarket Competition. The Exchange believes the proposed rule
change does not impose any burden on intermarket competition that is
not necessary or appropriate in furtherance of the purposes of the Act.
The Exchange operates in a highly competitive market in which market
participants can readily choose to send their orders to other exchanges
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
[[Page 57233]]
order routing practices, the Exchange does not believe this proposed
fee change would 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
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) \25\ of the Act and subparagraph (f)(2) of Rule
19b-4 \26\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
---------------------------------------------------------------------------
\25\ 15 U.S.C. 78s(b)(3)(A).
\26\ 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) \27\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
---------------------------------------------------------------------------
\27\ 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-2022-59 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-2022-59. 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 offices 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-2022-59, and should
be submitted on or before October 11, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\28\
---------------------------------------------------------------------------
\28\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-20145 Filed 9-16-22; 8:45 am]
BILLING CODE 8011-01-P
