Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amend the NYSE Arca Equities Fees and Charges, 69356-69360 [2022-25088]

Download as PDF 69356 Federal Register / Vol. 87, No. 222 / Friday, November 18, 2022 / Notices SECURITIES AND EXCHANGE COMMISSION [Release No. 34–96305; File No. SR– NYSEARCA–2022–75] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amend the NYSE Arca Equities Fees and Charges November 14, 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 November 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. 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 adopt a new pricing tier, Retail Tier 2. The Exchange proposes to implement the fee changes effective November 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. khammond on DSKJM1Z7X2PROD with NOTICES II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend the Fee Schedule to adopt a new pricing 1 15 2 17 U.S.C. 78s(b)(1). CFR 240.19b–4. VerDate Sep<11>2014 16:46 Nov 17, 2022 Jkt 259001 tier, Retail Tier 2. 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 November 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 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 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/divisionsmarket regmrexchangesshtml.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/. PO 00000 Frm 00119 Fmt 4703 Sfmt 4703 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 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, e.g., Retail Tier 1, Retail Tier 2, Retail Tier 3 and Retail Step-Up Tier, 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 VII. Tier Rates— Round Lots and Odd Lots (Per Share 8 See id. 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). 9A E:\FR\FM\18NON1.SGM 18NON1 Federal Register / Vol. 87, No. 222 / Friday, November 18, 2022 / Notices Price $1.00 or Above), provides a credit of $0.0038 per share for Adding under Retail Tier 1, a credit of $0.0036 per share for Adding under Retail Tier 2, a credit of $0.0034 per share for Adding under Retail Tier 3, and a credit of $0.0035 per share for Adding under Retail Step-Up Tier.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. The Exchange proposes to adopt a new pricing tier, Retail Tier 2,11 which would provide a credit of $0.0037 per share to ETP Holders that execute an ADV of Retail Orders with a time-inforce of Day that add or remove liquidity during the month that is equal Tier khammond on DSKJM1Z7X2PROD with NOTICES Retail Retail Retail Retail Retail 69357 to at least 0.35% of CADV. As with current Retail Tier 1, Retail Tier 2 and Retail Step-Up Tier, under the proposed Retail Tier 2, 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.12 With this proposed rule change, the following credits would be available to ETP Holders that provide increased levels of displayed liquidity in Retail Orders on the Exchange: Credit for retail adding Tier 1 ........................................................ Tier 2 ........................................................ Tier 3 ........................................................ Tier 4 ........................................................ Step-Up Tier ............................................. $0.0038 $0.0037 $0.0036 $0.0034 $0.0035 (Tape (Tape (Tape (Tape (Tape A, A, A, A, A, Tape Tape Tape Tape Tape B B B B B and and and and and Tape Tape Tape Tape Tape C). C). C). C). C). The purpose of the proposed rule change is to encourage greater participation from ETP Holders and promote additional liquidity in Retail Orders. As described above, ETP Holders with liquidity-providing orders have a choice of where to send those orders. The Exchange believes that the proposed new increased credit should encourage more ETP Holders to route their liquidity-providing Retail Order 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. While the proposed Retail Tier 2 pricing tier would be available to all ETP Holders, no ETP Holder currently qualifies given the pricing tier is new. 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 credit. 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. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,13 in general, and furthers the objectives of Sections 6(b)(4) and (5) of the Act,14 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.’’ 15 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. The Exchange believes the proposed change to adopt the Retail Tier 2 pricing tier is reasonable because it would provide ETP Holders with additional incentives to send a greater number of Retail Orders to the Exchange. 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 10 See Fee Schedule, Retail Tiers table under Section VII. Tier Rates—Round Lots and Odd Lots (Per Share Price $1.00 or Above). 11 With this proposed rule change to adopt new Retail Tier 2, the Exchange proposes to rename current Retail Tier 2 to Retail Tier 3 and rename current Retail Tier 3 to Retail Tier 4. 12 Pursuant to footnote (e) under Retail Tiers, ETP Holders that qualify for current Retail Tier 1, Retail Tier 2 and Retail Step-Up Tier 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 the proposed renaming of current Retail Tier 2 to Retail Tier 3, the Exchange also proposes to add Retail Tier 3 to current footnote (e) to reflect its applicability to the renamed tier. 13 15 U.S.C. 78f(b). 14 15 U.S.C. 78f(b)(4) and (5). 15 See supra note 3. VerDate Sep<11>2014 16:46 Nov 17, 2022 Jkt 259001 PO 00000 Frm 00120 Fmt 4703 Sfmt 4703 E:\FR\FM\18NON1.SGM 18NON1 khammond on DSKJM1Z7X2PROD with NOTICES 69358 Federal Register / Vol. 87, No. 222 / Friday, November 18, 2022 / Notices 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 credit proposed herein would continue to encourage ETP Holders to send Retail Orders to the Exchange to qualify for the proposed pricing tier. As noted above, the Exchange operates in a highly competitive environment, particularly for attracting Retail Order flow that provides displayed liquidity on an exchange. The Exchange believes it is reasonable to continue to provide credits for adding liquidity, in general, and higher credits for Retail Orders that provide displayed liquidity if an ETP Holder meets the 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 to credits currently in place on other exchanges that the Exchange competes with for order flow. For example, 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 at least 0.45% of CADV.16 Additionally, MIAX PEARL, LLC (‘‘MIAX’’) provides is member with a similar credit of $0.0037 per share for Retail Orders that add liquidity to that market.17 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. 16 See EDGX Fee Schedule, Fee Codes and Associated Fees, at https://markets.cboe.com/us/ equities/membership/fee_schedule/edgx/. 17 See MIAX Fee Schedule, at https:// www.miaxoptions.com/sites/default/files/fee_ schedule-files/MIAX_Pearl_Equities_Fee_Schedule_ 09012022.pdf. VerDate Sep<11>2014 16:46 Nov 17, 2022 Jkt 259001 The Proposed Fee Change Is an Equitable Allocation of Fees and Credits The Exchange believes that the proposed rule change to adopt new Retail Tier 2 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 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 under Retail Tier 1, 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 Retail Tier 1 and the credit provided for Retail Orders to those ETP Holders qualifying for proposed Retail Tier 2, $0.0037 per share, would only be $0.0001 per share, or less than 3%. Therefore, the Exchange believes the proposed new Retail Tier 2 pricing tier 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 adoption of new Retail Tier 2 is equitable because the magnitude of the proposed credit is not unreasonably high relative to credits paid by other exchanges for orders that provide additional liquidity in Retail Orders.18 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 18 See PO 00000 supra notes 16–17. Frm 00121 Fmt 4703 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 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 new Retail Tier 2. 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 change 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 adoption of an increased credit under the proposed new pricing tier 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,19 the Exchange believes that the proposed rule change would not impose 19 15 Sfmt 4703 E:\FR\FM\18NON1.SGM U.S.C. 78f(b)(8). 18NON1 khammond on DSKJM1Z7X2PROD with NOTICES Federal Register / Vol. 87, No. 222 / Friday, November 18, 2022 / Notices 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.’’ 20 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. Particularly, the proposed change applies to all ETP Holders equally in that all ETP Holders are eligible for the proposed pricing tier, have a reasonable opportunity to meet the proposed pricing tier’s criteria and will all receive the proposed rebate if such criteria is met. 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 additional order flow to the Exchange. The Exchange believes the proposed new pricing tier would continue to incentivize market participants to submit orders that qualify as Retail Order to the Exchange. 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 rule change would apply to all ETP Holders equally in that all ETP Holders would be eligible for the proposed pricing tier, have a reasonable opportunity to meet the proposed pricing 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 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) 21 of the Act and subparagraph (f)(2) of Rule 19b–4 22 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) 23 of the Act to determine whether the proposed rule change should be approved or disapproved. 21 15 U.S.C. 78s(b)(3)(A). CFR 240.19b 4(f)(2). 23 15 U.S.C. 78s(b)(2)(B). 22 17 20 See supra note 3. VerDate Sep<11>2014 16:46 Nov 17, 2022 Jkt 259001 PO 00000 Frm 00122 Fmt 4703 Sfmt 4703 69359 IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NYSEARCA–2022–75 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–2022–75. 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–2022–75, and should be submitted on or before December 9, 2022. E:\FR\FM\18NON1.SGM 18NON1 69360 Federal Register / Vol. 87, No. 222 / Friday, November 18, 2022 / Notices For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.24 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2022–25088 Filed 11–17–22; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–96311; File No. SR– NASDAQ–2022–063] Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Its Schedule of Credits at Equity 7, Section 118(a) November 15, 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 November 4, 2022, The Nasdaq Stock Market LLC (‘‘Nasdaq’’ or ‘‘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. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend the Exchange’s schedule of credits at Equity 7, Section 118(a), as described further below. The text of the proposed rule change is available on the Exchange’s website at https://listingcenter.nasdaq.com/ rulebook/nasdaq/rules, at the principal office of the Exchange, and at the Commission’s Public Reference Room. khammond on DSKJM1Z7X2PROD with NOTICES II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the 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 24 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 VerDate Sep<11>2014 18:44 Nov 17, 2022 Jkt 259001 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 purpose of the proposed rule change is to amend the Exchange’s schedule of credits, at Equity 7, Section 118(a).3 Specifically, with respect to its schedule of credits for non-displayed midpoint orders (other than Supplemental Orders) that provide liquidity, the Exchange proposes to add a new supplemental credit in Tapes A, B and C and make conforming changes to its schedule of credits. The Exchange proposes to provide a new supplemental credit for midpoint orders (excluding buy (sell) orders with midpoint pegging that receive an execution price that is lower (higher) than the midpoint of the NBBO) that provide liquidity to the Exchange. Specifically, the Exchange proposes to provide a supplemental credit of $0.0001 per share executed for midpoint orders (excluding buy (sell) orders with midpoint pegging that receive an execution price that is lower (higher) than the midpoint of the NBBO) if the member executes at least 0.35% of Consolidated Volume through providing midpoint orders and through Midpoint Extended Life Orders (‘‘M–ELO’’) during the month, and (ii) executes at least 0.20% of Consolidated Volume through providing midpoint orders during the month. The proposed credit will be in addition to other credits otherwise available to members for adding nondisplayed liquidity to the Exchange, meaning that this supplemental credit is cumulative. Members that receive this new supplemental credit will be entitled to a combined credit (regular and supplemental) up to a maximum of $0.0028 per share executed for midpoint orders. Members that do not receive this new supplemental credit are entitled to a combined credit (regular and supplemental) up to a maximum of $0.0027 per share executed for midpoint orders. The purpose of the new credit is to provide extra incentive to members that provide non-displayed liquidity to the Exchange to do so through midpoint orders. The Exchange believes that if such incentive is effective, then any ensuing increase in liquidity to the Exchange will improve market quality, to the benefit of all participants. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,4 in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act,5 in particular, in that it provides for the equitable allocation of reasonable dues, fees and other charges among members and issuers and other persons using any facility, and is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. The Proposal Is Reasonable The Exchange’s proposed changes to its schedule of credits are reasonable in several respects. As a threshold matter, the Exchange is subject to significant competitive forces in the market for equity securities transaction services that constrain its pricing determinations in that market. The fact that this market is competitive has long been recognized by the courts. In NetCoalition v. Securities and Exchange Commission, the D.C. Circuit stated as follows: ‘‘[n]o one disputes that competition for order flow is ‘fierce.’ . . . As the SEC explained, ‘[i]n the U.S. national market system, buyers and sellers of securities, and the broker-dealers that act as their order-routing agents, have a wide range of choices of where to route orders for execution’; [and] ‘no exchange can afford to take its market share percentages for granted’ because ‘no exchange possesses a monopoly, regulatory or otherwise, in the execution of order flow from broker dealers’ . . . .’’ 6 The Commission and the courts have repeatedly expressed their preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. In Regulation NMS, while adopting a series of steps to improve the current market model, 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 4 15 3 The Exchange initially filed the proposed pricing changes on November 1, 2022 (SR– NASDAQ–2022–062). The instant filing replaces SR–NASDAQ–2022–062, which was withdrawn on November 4, 2022. PO 00000 Frm 00123 Fmt 4703 Sfmt 4703 U.S.C. 78f(b). U.S.C. 78f(b)(4) and (5). 6 NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) (quoting Securities Exchange Act Release No. 59039 (December 2, 2008), 73 FR 74770, 74782–83 (December 9, 2008) (SR–NYSEArca–2006–21)). 5 15 E:\FR\FM\18NON1.SGM 18NON1

Agencies

[Federal Register Volume 87, Number 222 (Friday, November 18, 2022)]
[Notices]
[Pages 69356-69360]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-25088]



[[Page 69356]]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96305; File No. SR-NYSEARCA-2022-75]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amend the NYSE Arca 
Equities Fees and Charges

November 14, 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 November 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 adopt a new pricing tier, Retail Tier 2. 
The Exchange proposes to implement the fee changes effective November 
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.

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 adopt a new 
pricing tier, Retail Tier 2. 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 
November 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 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, e.g., Retail Tier 1, Retail Tier 
2, Retail Tier 3 and Retail Step-Up Tier, 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 VII. Tier 
Rates--Round Lots and Odd Lots (Per Share

[[Page 69357]]

Price $1.00 or Above), provides a credit of $0.0038 per share for 
Adding under Retail Tier 1, a credit of $0.0036 per share for Adding 
under Retail Tier 2, a credit of $0.0034 per share for Adding under 
Retail Tier 3, and a credit of $0.0035 per share for Adding under 
Retail Step-Up Tier.\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 Fee Schedule, Retail Tiers table under Section VII. 
Tier Rates--Round Lots and Odd Lots (Per Share Price $1.00 or 
Above).
---------------------------------------------------------------------------

    The Exchange proposes to adopt a new pricing tier, Retail Tier 
2,\11\ which would provide a credit of $0.0037 per share to ETP Holders 
that execute an ADV of Retail Orders with a time-in-force of Day that 
add or remove liquidity during the month that is equal to at least 
0.35% of CADV. As with current Retail Tier 1, Retail Tier 2 and Retail 
Step-Up Tier, under the proposed Retail Tier 2, 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.\12\
---------------------------------------------------------------------------

    \11\ With this proposed rule change to adopt new Retail Tier 2, 
the Exchange proposes to rename current Retail Tier 2 to Retail Tier 
3 and rename current Retail Tier 3 to Retail Tier 4.
    \12\ Pursuant to footnote (e) under Retail Tiers, ETP Holders 
that qualify for current Retail Tier 1, Retail Tier 2 and Retail 
Step-Up Tier 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 the proposed renaming of current Retail Tier 2 to 
Retail Tier 3, the Exchange also proposes to add Retail Tier 3 to 
current footnote (e) to reflect its applicability to the renamed 
tier.
---------------------------------------------------------------------------

    With this proposed rule change, the following credits would be 
available to ETP Holders that provide increased levels of displayed 
liquidity in Retail Orders on the Exchange:

------------------------------------------------------------------------
             Tier                       Credit for retail adding
------------------------------------------------------------------------
Retail Tier 1................  $0.0038 (Tape A, Tape B and Tape C).
Retail Tier 2................  $0.0037 (Tape A, Tape B and Tape C).
Retail Tier 3................  $0.0036 (Tape A, Tape B and Tape C).
Retail Tier 4................  $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. As described above, ETP Holders with liquidity-providing 
orders have a choice of where to send those orders. The Exchange 
believes that the proposed new increased credit should encourage more 
ETP Holders to route their liquidity-providing Retail Order 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. While the 
proposed Retail Tier 2 pricing tier would be available to all ETP 
Holders, no ETP Holder currently qualifies given the pricing tier is 
new. 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 credit. 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.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\13\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\14\ 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.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78f(b).
    \14\ 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.'' \15\
---------------------------------------------------------------------------

    \15\ 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.
    The Exchange believes the proposed change to adopt the Retail Tier 
2 pricing tier is reasonable because it would provide ETP Holders with 
additional incentives to send a greater number of Retail Orders to the 
Exchange. 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

[[Page 69358]]

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 credit proposed herein would continue to 
encourage ETP Holders to send Retail Orders to the Exchange to qualify 
for the proposed pricing tier. As noted above, the Exchange operates in 
a highly competitive environment, particularly for attracting Retail 
Order flow that provides displayed liquidity on an exchange. The 
Exchange believes it is reasonable to continue to provide credits for 
adding liquidity, in general, and higher credits for Retail Orders that 
provide displayed liquidity if an ETP Holder meets the 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 to credits currently in 
place on other exchanges that the Exchange competes with for order 
flow. For example, 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 at least 0.45% of CADV.\16\ Additionally, MIAX PEARL, LLC 
(``MIAX'') provides is member with a similar credit of $0.0037 per 
share for Retail Orders that add liquidity to that market.\17\
---------------------------------------------------------------------------

    \16\ See EDGX Fee Schedule, Fee Codes and Associated Fees, at 
https://markets.cboe.com/us/equities/membership/fee_schedule/edgx/.
    \17\ See MIAX Fee Schedule, at https://www.miaxoptions.com/sites/default/files/fee_schedule-files/MIAX_Pearl_Equities_Fee_Schedule_09012022.pdf.
---------------------------------------------------------------------------

    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 adopt new 
Retail Tier 2 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 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 under Retail Tier 1, 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 Retail Tier 1 and the credit provided for Retail Orders 
to those ETP Holders qualifying for proposed Retail Tier 2, $0.0037 per 
share, would only be $0.0001 per share, or less than 3%. Therefore, the 
Exchange believes the proposed new Retail Tier 2 pricing tier 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 adoption of new 
Retail Tier 2 is equitable because the magnitude of the proposed credit 
is not unreasonably high relative to credits paid by other exchanges 
for orders that provide additional liquidity in Retail Orders.\18\ 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.
---------------------------------------------------------------------------

    \18\ See supra notes 16-17.
---------------------------------------------------------------------------

    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 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 new Retail Tier 2. 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 
change 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 adoption of an increased 
credit under the proposed new pricing tier 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,\19\ the Exchange 
believes that the proposed rule change would not impose

[[Page 69359]]

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.'' \20\
---------------------------------------------------------------------------

    \19\ 15 U.S.C. 78f(b)(8).
    \20\ 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. 
Particularly, the proposed change applies to all ETP Holders equally in 
that all ETP Holders are eligible for the proposed pricing tier, have a 
reasonable opportunity to meet the proposed pricing tier's criteria and 
will all receive the proposed rebate if such criteria is met. 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 additional 
order flow to the Exchange. The Exchange believes the proposed new 
pricing tier would continue to incentivize market participants to 
submit orders that qualify as Retail Order to the Exchange. 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 rule change 
would apply to all ETP Holders equally in that all ETP Holders would be 
eligible for the proposed pricing tier, have a reasonable opportunity 
to meet the proposed pricing 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 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) \21\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \22\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
---------------------------------------------------------------------------

    \21\ 15 U.S.C. 78s(b)(3)(A).
    \22\ 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) \23\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \23\ 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-2022-75 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-2022-75. 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-2022-75, and should be 
submitted on or before December 9, 2022.


[[Page 69360]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
---------------------------------------------------------------------------

    \24\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022-25088 Filed 11-17-22; 8:45 am]
BILLING CODE 8011-01-P
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.