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, 52153-52156 [2024-13552]

Download as PDF Federal Register / Vol. 89, No. 120 / Friday, June 21, 2024 / Notices A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change SECURITIES AND EXCHANGE COMMISSION [Release No. 34–100350; File No. SR– NYSEARCA–2024–50] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the NYSE Arca Equities Fees and Charges June 14, 2024. 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 June 3, 2024, 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 provide an additional calculation for purposes of determining whether an ETP Holder qualifies for fees and credits that pertain to providing liquidity under certain pricing tiers. The Exchange proposes to implement the fee change effective June 3, 2024. 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. ddrumheller on DSK120RN23PROD with NOTICES1 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. 1 15 2 17 U.S.C. 78s(b)(1). CFR 240.19b–4. VerDate Sep<11>2014 17:46 Jun 20, 2024 Jkt 262001 1. Purpose The Exchange proposes to amend the Fee Schedule to provide an additional calculation for purposes of determining whether an ETP Holder qualifies for fees and credits that pertain to providing liquidity under certain pricing tiers. More specifically, the proposed additional calculation would apply to the following pricing tiers in Section VII. of the Fee Schedule: Adding Tiers,3 Limit Non-Display Step Up Tier and Tape C Tiers for Adding.4 The Exchange proposes to implement the fee change effective June 3, 2024. Background The Exchange operates in a highly competitive market. The Commission has repeatedly expressed its preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. In Regulation NMS, the Commission highlighted the importance of market forces in determining prices and SRO revenues and, also, recognized that current regulation of the market system ‘‘has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.’’ 5 While Regulation NMS has enhanced competition, it has also fostered a ‘‘fragmented’’ market structure where trading in a single stock can occur across multiple trading centers. When multiple trading centers compete for order flow in the same stock, the Commission has recognized that ‘‘such competition can lead to the fragmentation of order flow in that stock.’’ 6 Indeed, equity trading is currently dispersed across 16 exchanges,7 numerous alternative trading systems,8 and broker-dealer 3 Adding Tiers refers to Tiers 1 through 5 under the Adding Tiers pricing tier table on the Fee Schedule. 4 Tape C Tiers for Adding refers to Tiers 1 through 3 under the Tape C Tiers for Adding pricing tier table on the Fee Schedule. 5 See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005) (File No. S7–10–04) (Final Rule) (‘‘Regulation NMS’’). 6 See Securities Exchange Act Release No. 61358, 75 FR 3594, 3597 (January 21, 2010) (File No. S7– 02–10) (Concept Release on Equity Market Structure). 7 See Cboe U.S Equities Market Volume Summary, available at https://markets.cboe.com/us/ equities/market_share. 8 See FINRA ATS Transparency Data, available at https://otctransparency.finra.org/otctransparency/ AtsIssueData. A list of alternative trading systems PO 00000 Frm 00144 Fmt 4703 Sfmt 4703 52153 internalizers and wholesalers, all competing for order flow. Based on publicly available information, no single exchange currently has more than 20% market share.9 Therefore, no exchange possesses significant pricing power in the execution of equity order flow. More specifically, the Exchange currently has less than 12% market share of executed volume of equities trading.10 The Exchange believes that the evershifting market share among the exchanges from month to month demonstrates that market participants can move order flow, or discontinue or reduce use of certain categories of products. While it is not possible to know a firm’s reason for shifting order flow, the Exchange believes that one such reason is because of fee changes at any of the registered exchanges or nonexchange venues to which the firm routes order flow. Accordingly, competitive forces compel the Exchange to use exchange transaction fees and credits because market participants can readily trade on competing venues if they deem pricing levels at those other venues to be more favorable. Proposed Rule Change The Exchange currently provides ETP Holders with various tiered credits for executing orders that add liquidity to the Exchange and charges them various fees for executing orders that remove liquidity from the Exchange, as set forth in Section VII. of the Fee Schedule, titled ‘‘Tier Rates—Round Lots and Odd Lots. The fees and credits enumerated in Section VII. apply all securities priced at $1 or more that are executed on the Exchange. ETP Holders may qualify for tiers of discounted fees and premium credits based, in part, upon the volume of their activities on the Exchange as a percentage of total ‘‘Consolidated Average Daily Volume’’ or ‘‘CADV.’’ Pursuant to Section I. of the Fee Schedule, the term ‘‘CADV’’ means, unless otherwise stated, the United States consolidated average daily volume of transactions reported to a securities information processor (‘‘SIP’’). Transactions that are not reported to a SIP are not included in the CADV. If CADV is preceded by a reference to a Tape or to Sub-Dollar, then CADV would refer to all consolidated average daily volume of transactions reported to a SIP for all securities in that Tape or to all Sub-Dollar securities. Per the Fee Schedule, trade activity on days when registered with the Commission is available at https://www.sec.gov/foia/docs/atslist.htm. 9 See Cboe Global Markets U.S. Equities Market Volume Summary, available at https:// markets.cboe.com/us/equities/market_share/. 10 See id. E:\FR\FM\21JNN1.SGM 21JNN1 ddrumheller on DSK120RN23PROD with NOTICES1 52154 Federal Register / Vol. 89, No. 120 / Friday, June 21, 2024 / Notices the market closes early and on the date of the annual reconstitution of the Russell Investment Indexes does not count toward volume tiers.11 For purposes of determining trade related fees and credits based on CADV, the Exchange may exclude any day that (1) the Exchange is not open for the entire trading day and/or (2) a disruption affects an Exchange system that lasts for more than 60 minutes during regular trading hours.12 Generally, the ratio of consolidated volumes in securities priced at or above $1 (‘‘dollar plus volume’’) relative to consolidated volumes inclusive of securities priced below a dollar is usually stable from month to month, such that ‘‘CADV’’ has been a reasonable baseline for determining tiered incentives for ETP Holders that execute dollar plus volume on the Exchange. However, there have been a few months where volumes in securities priced below a dollar (‘‘sub-dollar volume’’) have been elevated, thereby impacting the ratio mentioned above. Anomalous rises in sub-dollar volume stand to have a material adverse impact on ETP Holders’ qualifications for pricing tiers/incentives because such qualifications depend upon ETP Holders achieving threshold percentages of volumes as a percentage of CADV, and an extraordinary rise in sub-dollar volume stands to elevate CADV. As a result, ETP Holders may find it more difficult, if not practically impossible, to qualify for or to continue to qualify for their existing incentives during months where there are such rises in sub-dollar volumes, even if their dollar plus volumes have not diminished relative to prior months. The Exchange believes that it would be unfair for ETP Holders that execute significant dollar plus volumes on the Exchange to fail to achieve or to lose their existing incentives for such volumes due to anomalous behavior that is extraneous to them. Therefore, the Exchange wishes to amend the Fee Schedule to help avoid extraordinary spikes in sub-dollar volumes from adversely affecting an ETP Holder’s qualification of incentives for their dollar plus stock executions. Accordingly, the Exchange proposes to amend footnote 1 of the Fee Schedule to state that, for purposes of calculating an ETP Holder’s qualifications for fees and credits that pertain to providing liquidity, the Exchange will calculate an ETP Holder’s equity volume and total equity CADV twice for the following tiers: Adding Tiers, Limit Non-Display 11 See 12 Id. 17:46 Jun 20, 2024 issuers and other persons using its facilities and does not unfairly discriminate between customers, issuers, brokers or dealers. 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.’’ 16 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. Numerous indicia demonstrate the competitive nature of this market. For example, clear substitutes to the Exchange exist in the market for equity security transaction services. The Exchange is only one of several equity venues to which market participants may direct their order flow. Competing equity exchanges offer similar tiered pricing structures to that of the Exchange, including credits and fees that apply based upon members achieving certain volume thresholds. The Exchange believes that the evershifting market share among the exchanges from month to month demonstrates that market participants can shift order flow, or discontinue or reduce use of certain categories of products, in response to fee changes. Accordingly, the Exchange’s fees are reasonably constrained by competitive alternatives and market participants can readily trade on competing venues if they deem pricing levels at those other venues to be more favorable. The Exchange believes that the 2. Statutory Basis proposal to amend the Fee Schedule is The Exchange believes that the reasonable and equitable because, in its proposed rule change is consistent with absence, ETP Holders may experience Section 6(b) of the Act,14 in general, and material adverse impacts on their ability furthers the objectives of Sections to qualify for certain incentives during 6(b)(4) and (5) of the Act,15 in particular, a month with an anomalous rise in subbecause it provides for the equitable dollar volumes. The Exchange does not allocation of reasonable dues, fees, and wish to penalize ETP Holders that other charges among its members, execute significant volumes on the Exchange due to anomalous and 13 See Securities Exchange Act Release No. 99535 extraneous trading activities of a small (February 14, 2024), 89 FR 13125 (SR–NASDAQ– number of firms in sub-dollar securities. 2024–005) (Notice of Filing and Immediate The proposed rule would seek to Effectiveness of Proposed Rule Change To Amend Equity 7, Section 118). 14 15 U.S.C. 78f(b). 15 15 U.S.C. 78f(b)(4) and (5). Fee Schedule, Footnote 1. VerDate Sep<11>2014 Step Up Tier and Tape C Tiers for Adding. First, the Exchange will calculate an ETP Holder’s equity volume and total equity CADV inclusive of volume that consists of executions in securities priced less than $1. Second, the Exchange will calculate an ETP Holder’s equity volume and total equity CADV exclusive of volume that consists of executions in securities priced less than $1. As proposed, the Exchange will then assess which of these two calculations would qualify the ETP Holder for the most advantageous fees and credits for the month and then the Exchange will apply those to the ETP Holder. Another market recently amended its rules to provide its members with a similar remedy.13 Although the Exchange wishes to avoid extraordinary spikes in sub-dollar volumes from adversely affecting an ETP Holder’s qualification of incentives for their dollar plus stock executions, the Exchange proposes to limit the application of the proposed calculation to efficiently allocate the Exchange’s limited resources for incentives. Specifically, as noted above, the Exchange proposes to apply the proposed calculation excluding subdollar volumes to the incentives that pertain to providing liquidity under the Adding Tiers, the Limit Non-Display Step Up Tier and the Tape C Tiers for Adding. The Exchange wishes to impose such limitations in order to limit the cost impact on the Exchange, while still providing some relief to ETP Holders in months with extraordinary spikes in sub-dollar volumes. It is appropriate for the Exchange to devote to incentive programs in a meaningful way and to reallocate these incentives periodically in a manner that best achieves the Exchange’s overall mix of objectives. 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. Jkt 262001 PO 00000 Frm 00145 Fmt 4703 Sfmt 4703 16 See Regulation NMS, supra note 6, 70 FR at 37499. E:\FR\FM\21JNN1.SGM 21JNN1 ddrumheller on DSK120RN23PROD with NOTICES1 Federal Register / Vol. 89, No. 120 / Friday, June 21, 2024 / Notices provide a means for ETP Holders that provide liquidity to avoid such a penalty by determining whether calculating ETP Holder equity volume and total equity CADV to include or exclude sub-dollar volume would result in ETP Holders qualifying for the most advantageous fees and credits, and then applying the calculations that would result in the incentives for providing liquidity that are most advantageous to each ETP Holder. The Exchange believes it is reasonable to limit the proposal by applying the proposed calculation to incentives that pertain to providing liquidity to a limited number of pricing tiers because the pricing tiers that are the subject of this proposed rule change are those that are the most impacted by anomalous spikes in subdollar volumes, and by applying the additional calculation to those specified pricing tiers would alleviate burden on ETP Holders from being disadvantaged by trading over which it has little or no control. The Exchange believes that the proposed rule change is an equitable allocation and is not unfairly discriminatory because the Exchange does not intend for the proposal to advantage any particular ETP Holders and the Exchange will apply the proposed calculation to all similarly situated ETP Holders. On the backdrop of the competitive environment in which the Exchange currently operates, the proposed rule change is a reasonable attempt by the Exchange to maintain, if not improve its market share relative to its competitors. Finally, the submission of orders to the Exchange is optional for ETP Holders in that they could choose whether to submit orders to the Exchange and, if they do, the extent of its activity in this regard. The Exchange believes that it is subject to significant competitive forces, as described below in the Exchange’s statement regarding the burden on competition. For the foregoing reasons, the Exchange believes that the proposal is consistent with the Act. its proposed changes to the fees and credits to reallocate its limited resources more efficiently and to align them with the Exchange’s overall mix of objectives. The proposed rule change is intended to help avoid pricing disadvantages due to anomalous spikes in sub-dollar volumes and is not intended to provide a competitive advantage to any one particular ETP Holder. The proposed calculation would be available to all similarly-situated market participants, and, as such, the proposed changes would not impose a disparate burden on competition among market participants on the Exchange. Intermarket Competition. The Exchange operates in a highly competitive market in which market participants can readily choose to send their orders to other 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 12%. In such an environment, the Exchange must continually review, and consider adjusting its fees and credits to remain competitive with other exchanges and with off-exchange venues. Because competitors are free to modify their own fees and credits in response, the Exchange does not believe its proposed fee change can impose any burden on intermarket competition. The Exchange believes that the proposed change could promote competition between the Exchange and other execution venues, including those that currently offer comparable transaction pricing, by encouraging additional orders to be sent to the Exchange for execution. B. Self-Regulatory Organization’s Statement on Burden on Competition In accordance with Section 6(b)(8) of the Act,17 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. Intramarket Competition. The Exchange does not believe that its proposal would place any category of Exchange participant at a competitive disadvantage. The Exchange intends for III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective upon filing pursuant to Section 19(b)(3)(A) 18 of the Act and paragraph (f) thereunder. At any time within 60 days of the filing of the 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 17 15 U.S.C. 78f(b)(8). VerDate Sep<11>2014 17:46 Jun 20, 2024 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. 18 15 Jkt 262001 PO 00000 U.S.C. 78s(b)(3)(A). Frm 00146 Fmt 4703 Sfmt 4703 52155 investors, or otherwise in furtherance of the purposes of the Act. 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–2024–50 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–2024–50. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s internet website (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. Do not include personal identifiable information in submissions; you should submit only information that you wish to make available publicly. We may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection. All submissions should refer to file number SR–NYSEARCA–2024– 50, and should be submitted on or before July 12, 2024. E:\FR\FM\21JNN1.SGM 21JNN1 52156 Federal Register / Vol. 89, No. 120 / Friday, June 21, 2024 / Notices For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.19 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2024–13552 Filed 6–20–24; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change [Release No. 34–100345; File No. SR– NYSEAMER–2024–38] Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of Proposed Change Amending the Connectivity Fee Schedule June 14, 2024. 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 June 3, 2024, NYSE American LLC (‘‘NYSE American’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend the Connectivity Fee Schedule (‘‘Fee Schedule’’) regarding colocation services and fees to provide Users with wireless connectivity to an additional market data feed. 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, ddrumheller on DSK120RN23PROD with NOTICES1 19 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 1 15 VerDate Sep<11>2014 17:46 Jun 20, 2024 Jkt 262001 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. 1. Purpose The Exchange proposes to amend the Fee Schedule regarding colocation services and fees to provide Users 4 with wireless connectivity to an additional market data feed. The Exchange currently provides Users with wireless connections to nine market data feeds or combinations of feeds from third-party markets (the ‘‘Existing Third Party Data’’), and wired connections to more than 45 market data feeds or combinations of feeds.5 The Exchange proposes to add to the Fee Schedule wireless connections (‘‘Connectivity’’) to the Nasdaq CXC and Nasdaq CX2 market data feeds.6 As there would be limited bandwidth available on the wireless network from the TR2 data center in Toronto, Canada, where the two feeds are generated, the Exchange would not transport 4 For purposes of the Exchange’s colocation services, a ‘‘User’’ means any market participant that requests to receive colocation services directly from the Exchange. See Securities Exchange Act Release No. 76009 (September 29, 2015), 80 FR 60213 (October 5, 2015) (SR–NYSEMKT–2015–67). As specified in the Fee Schedule, a User that incurs colocation fees for a particular colocation service pursuant thereto would not be subject to colocation fees for the same colocation service charged by the Exchange’s affiliates the New York Stock Exchange LLC, NYSE Arca, Inc., NYSE Chicago, Inc., and NYSE National, Inc. (together, the ‘‘Affiliate SROs’’). Each Affiliate SRO has submitted substantially the same proposed rule change to propose the changes described herein. See SR– NYSE–2024–33, SR–NYSEARCA–2024–49, SR– NYSECHX–2024–21, and SR–NYSENAT–2024–18. 5 See Securities Exchange Act Release No. 99807 (March 20, 2024), 89 FR 21072 (March 26, 2024) (SR–NYSEAmer–2024–18). 6 According to the Nasdaq Canada website, ‘‘CXC is a lit book providing clients with a reliable platform for trading Canadian equities, offering the benefits of anonymous or attributed trading and price/broker/time priority’’ and ‘‘[t]he CX2 trading book is designed to provide additional cost savings and trading efficiencies. Through a unique pricing model and broker preferencing functionality, this lit book helps to improve investment performance and to drive positive market structure change.’’ https:// www.nasdaq.com/solutions/nasdaq-canada. PO 00000 Frm 00147 Fmt 4703 Sfmt 4703 information for all the symbols included in the Nasdaq CXC and Nasdaq CX2 market data feeds. Rather, FIDS would provide connectivity to a selection of symbols from the two market data feeds, which would include those symbols for which there is demand (the ‘‘Proposed Third Party Data’’).7 As with most other Existing Third Party Data,8 the monthly charge for the Connectivity to Proposed Third Party Data would be subject to a 30-day testing period, during which the monthly charge per connection would be waived. Consistent with that fact, the Exchange proposes to amend the Fee Schedule to clarify that this provision is applicable to wireless connections to the Proposed Third Party Data. The Exchange expects that the proposed Connectivity to Proposed Third Party Data would become operative by the end of 2024. The Exchange will announce the date or dates that Connectivity to Proposed Third Party Data will be available through a customer notice. Users would be offered Connectivity to the Proposed Third Party Data through connections into the colocation center in the Mahwah, New Jersey data center (‘‘MDC’’).9 To receive either market data feed in the Proposed Third Party Data, the User would enter into an agreement with a third party for permission to receive the data, if required. The User would pay this third party any fees for the data content. In order to implement the proposed change, the Exchange proposes to add the following item to the Connectivity Fee Schedule under ‘‘A. Co-Location Fees’’: 7 When a User requested a wireless connection to Nasdaq CXC or Nasdaq CX2 market data feeds, it would receive connectivity to the Proposed Market Data. The User would then determine the symbols for which it would receive data. The Exchange would not have visibility into which portions of the Proposed Market Data a given customer chooses to receive. 8 See Securities Exchange Act Release No. 76748 (December 23, 2015), 80 FR 81648 (December 30, 2015) (SR–NYSEMKT–2015–85). 9 Through its Fixed Income and Data Services (‘‘FIDS’’) (previously ICE Data Services) business, Intercontinental Exchange, Inc. (‘‘ICE’’) operates the MDC. The Exchange and the Affiliate SROs are indirect subsidiaries of ICE. The proposed services would be provided by FIDS pursuant to an agreement with a non-ICE entity. FIDS does not own the wireless network that would be used to provide the services. E:\FR\FM\21JNN1.SGM 21JNN1

Agencies

[Federal Register Volume 89, Number 120 (Friday, June 21, 2024)]
[Notices]
[Pages 52153-52156]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-13552]



[[Page 52153]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100350; File No. SR-NYSEARCA-2024-50]


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

June 14, 2024.
    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 June 3, 2024, 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.
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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 provide an additional calculation for 
purposes of determining whether an ETP Holder qualifies for fees and 
credits that pertain to providing liquidity under certain pricing 
tiers. The Exchange proposes to implement the fee change effective June 
3, 2024. 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 provide an 
additional calculation for purposes of determining whether an ETP 
Holder qualifies for fees and credits that pertain to providing 
liquidity under certain pricing tiers. More specifically, the proposed 
additional calculation would apply to the following pricing tiers in 
Section VII. of the Fee Schedule: Adding Tiers,\3\ Limit Non-Display 
Step Up Tier and Tape C Tiers for Adding.\4\ The Exchange proposes to 
implement the fee change effective June 3, 2024.
---------------------------------------------------------------------------

    \3\ Adding Tiers refers to Tiers 1 through 5 under the Adding 
Tiers pricing tier table on the Fee Schedule.
    \4\ Tape C Tiers for Adding refers to Tiers 1 through 3 under 
the Tape C Tiers for Adding pricing tier table on the Fee Schedule.
---------------------------------------------------------------------------

Background
    The Exchange operates in a highly competitive market. The 
Commission has repeatedly expressed its preference for competition over 
regulatory intervention in determining prices, products, and services 
in the securities markets. In Regulation NMS, the Commission 
highlighted the importance of market forces in determining prices and 
SRO revenues and, also, recognized that current regulation of the 
market system ``has been remarkably successful in promoting market 
competition in its broader forms that are most important to investors 
and listed companies.'' \5\
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005) (File No. S7-10-04) (Final 
Rule) (``Regulation NMS'').
---------------------------------------------------------------------------

    While Regulation NMS has enhanced competition, it has also fostered 
a ``fragmented'' market structure where trading in a single stock can 
occur across multiple trading centers. When multiple trading centers 
compete for order flow in the same stock, the Commission has recognized 
that ``such competition can lead to the fragmentation of order flow in 
that stock.'' \6\ Indeed, equity trading is currently dispersed across 
16 exchanges,\7\ numerous alternative trading systems,\8\ and broker-
dealer internalizers and wholesalers, all competing for order flow. 
Based on publicly available information, no single exchange currently 
has more than 20% market share.\9\ Therefore, no exchange possesses 
significant pricing power in the execution of equity order flow. More 
specifically, the Exchange currently has less than 12% market share of 
executed volume of equities trading.\10\
---------------------------------------------------------------------------

    \6\ See Securities Exchange Act Release No. 61358, 75 FR 3594, 
3597 (January 21, 2010) (File No. S7-02-10) (Concept Release on 
Equity Market Structure).
    \7\ See Cboe U.S Equities Market Volume Summary, available at 
https://markets.cboe.com/us/equities/market_share.
    \8\ See FINRA ATS Transparency Data, available at https://otctransparency.finra.org/otctransparency/AtsIssueData. A list of 
alternative trading systems registered with the Commission is 
available at https://www.sec.gov/foia/docs/atslist.htm.
    \9\ See Cboe Global Markets U.S. Equities Market Volume Summary, 
available at https://markets.cboe.com/us/equities/market_share/.
    \10\ See id.
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    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 the firm routes order flow. Accordingly, competitive forces 
compel the Exchange to use exchange transaction fees and credits 
because market participants can readily trade on competing venues if 
they deem pricing levels at those other venues to be more favorable.
Proposed Rule Change
    The Exchange currently provides ETP Holders with various tiered 
credits for executing orders that add liquidity to the Exchange and 
charges them various fees for executing orders that remove liquidity 
from the Exchange, as set forth in Section VII. of the Fee Schedule, 
titled ``Tier Rates--Round Lots and Odd Lots. The fees and credits 
enumerated in Section VII. apply all securities priced at $1 or more 
that are executed on the Exchange. ETP Holders may qualify for tiers of 
discounted fees and premium credits based, in part, upon the volume of 
their activities on the Exchange as a percentage of total 
``Consolidated Average Daily Volume'' or ``CADV.''
    Pursuant to Section I. of the Fee Schedule, the term ``CADV'' 
means, unless otherwise stated, the United States consolidated average 
daily volume of transactions reported to a securities information 
processor (``SIP''). Transactions that are not reported to a SIP are 
not included in the CADV. If CADV is preceded by a reference to a Tape 
or to Sub-Dollar, then CADV would refer to all consolidated average 
daily volume of transactions reported to a SIP for all securities in 
that Tape or to all Sub-Dollar securities. Per the Fee Schedule, trade 
activity on days when

[[Page 52154]]

the market closes early and on the date of the annual reconstitution of 
the Russell Investment Indexes does not count toward volume tiers.\11\ 
For purposes of determining trade related fees and credits based on 
CADV, the Exchange may exclude any day that (1) the Exchange is not 
open for the entire trading day and/or (2) a disruption affects an 
Exchange system that lasts for more than 60 minutes during regular 
trading hours.\12\
---------------------------------------------------------------------------

    \11\ See Fee Schedule, Footnote 1.
    \12\ Id.
---------------------------------------------------------------------------

    Generally, the ratio of consolidated volumes in securities priced 
at or above $1 (``dollar plus volume'') relative to consolidated 
volumes inclusive of securities priced below a dollar is usually stable 
from month to month, such that ``CADV'' has been a reasonable baseline 
for determining tiered incentives for ETP Holders that execute dollar 
plus volume on the Exchange. However, there have been a few months 
where volumes in securities priced below a dollar (``sub-dollar 
volume'') have been elevated, thereby impacting the ratio mentioned 
above.
    Anomalous rises in sub-dollar volume stand to have a material 
adverse impact on ETP Holders' qualifications for pricing tiers/
incentives because such qualifications depend upon ETP Holders 
achieving threshold percentages of volumes as a percentage of CADV, and 
an extraordinary rise in sub-dollar volume stands to elevate CADV. As a 
result, ETP Holders may find it more difficult, if not practically 
impossible, to qualify for or to continue to qualify for their existing 
incentives during months where there are such rises in sub-dollar 
volumes, even if their dollar plus volumes have not diminished relative 
to prior months.
    The Exchange believes that it would be unfair for ETP Holders that 
execute significant dollar plus volumes on the Exchange to fail to 
achieve or to lose their existing incentives for such volumes due to 
anomalous behavior that is extraneous to them. Therefore, the Exchange 
wishes to amend the Fee Schedule to help avoid extraordinary spikes in 
sub-dollar volumes from adversely affecting an ETP Holder's 
qualification of incentives for their dollar plus stock executions.
    Accordingly, the Exchange proposes to amend footnote 1 of the Fee 
Schedule to state that, for purposes of calculating an ETP Holder's 
qualifications for fees and credits that pertain to providing 
liquidity, the Exchange will calculate an ETP Holder's equity volume 
and total equity CADV twice for the following tiers: Adding Tiers, 
Limit Non-Display Step Up Tier and Tape C Tiers for Adding. First, the 
Exchange will calculate an ETP Holder's equity volume and total equity 
CADV inclusive of volume that consists of executions in securities 
priced less than $1. Second, the Exchange will calculate an ETP 
Holder's equity volume and total equity CADV exclusive of volume that 
consists of executions in securities priced less than $1. As proposed, 
the Exchange will then assess which of these two calculations would 
qualify the ETP Holder for the most advantageous fees and credits for 
the month and then the Exchange will apply those to the ETP Holder. 
Another market recently amended its rules to provide its members with a 
similar remedy.\13\
---------------------------------------------------------------------------

    \13\ See Securities Exchange Act Release No. 99535 (February 14, 
2024), 89 FR 13125 (SR-NASDAQ-2024-005) (Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change To Amend Equity 7, 
Section 118).
---------------------------------------------------------------------------

    Although the Exchange wishes to avoid extraordinary spikes in sub-
dollar volumes from adversely affecting an ETP Holder's qualification 
of incentives for their dollar plus stock executions, the Exchange 
proposes to limit the application of the proposed calculation to 
efficiently allocate the Exchange's limited resources for incentives. 
Specifically, as noted above, the Exchange proposes to apply the 
proposed calculation excluding sub-dollar volumes to the incentives 
that pertain to providing liquidity under the Adding Tiers, the Limit 
Non-Display Step Up Tier and the Tape C Tiers for Adding. The Exchange 
wishes to impose such limitations in order to limit the cost impact on 
the Exchange, while still providing some relief to ETP Holders in 
months with extraordinary spikes in sub-dollar volumes. It is 
appropriate for the Exchange to devote to incentive programs in a 
meaningful way and to reallocate these incentives periodically in a 
manner that best achieves the Exchange's overall mix of objectives.
    The proposed changes are not otherwise intended to address any 
other issues, and the Exchange is not aware of any significant problems 
that market participants would have in complying with the proposed 
changes.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\14\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\15\ 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.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    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.'' \16\ 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.
---------------------------------------------------------------------------

    \16\ See Regulation NMS, supra note 6, 70 FR at 37499.
---------------------------------------------------------------------------

    Numerous indicia demonstrate the competitive nature of this market. 
For example, clear substitutes to the Exchange exist in the market for 
equity security transaction services. The Exchange is only one of 
several equity venues to which market participants may direct their 
order flow. Competing equity exchanges offer similar tiered pricing 
structures to that of the Exchange, including credits and fees that 
apply based upon members achieving certain volume thresholds. 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. Accordingly, the Exchange's fees 
are reasonably constrained by competitive alternatives and market 
participants can readily trade on competing venues if they deem pricing 
levels at those other venues to be more favorable.
    The Exchange believes that the proposal to amend the Fee Schedule 
is reasonable and equitable because, in its absence, ETP Holders may 
experience material adverse impacts on their ability to qualify for 
certain incentives during a month with an anomalous rise in sub-dollar 
volumes. The Exchange does not wish to penalize ETP Holders that 
execute significant volumes on the Exchange due to anomalous and 
extraneous trading activities of a small number of firms in sub-dollar 
securities. The proposed rule would seek to

[[Page 52155]]

provide a means for ETP Holders that provide liquidity to avoid such a 
penalty by determining whether calculating ETP Holder equity volume and 
total equity CADV to include or exclude sub-dollar volume would result 
in ETP Holders qualifying for the most advantageous fees and credits, 
and then applying the calculations that would result in the incentives 
for providing liquidity that are most advantageous to each ETP Holder. 
The Exchange believes it is reasonable to limit the proposal by 
applying the proposed calculation to incentives that pertain to 
providing liquidity to a limited number of pricing tiers because the 
pricing tiers that are the subject of this proposed rule change are 
those that are the most impacted by anomalous spikes in sub-dollar 
volumes, and by applying the additional calculation to those specified 
pricing tiers would alleviate burden on ETP Holders from being 
disadvantaged by trading over which it has little or no control. The 
Exchange believes that the proposed rule change is an equitable 
allocation and is not unfairly discriminatory because the Exchange does 
not intend for the proposal to advantage any particular ETP Holders and 
the Exchange will apply the proposed calculation to all similarly 
situated ETP Holders.
    On the backdrop of the competitive environment in which the 
Exchange currently operates, the proposed rule change is a reasonable 
attempt by the Exchange to maintain, if not improve its market share 
relative to its competitors.
    Finally, the submission of orders to the Exchange is optional for 
ETP Holders in that they could choose whether to submit orders to the 
Exchange and, if they do, the extent of its activity in this regard. 
The Exchange believes that it is subject to significant competitive 
forces, as described below in the Exchange's statement regarding the 
burden on competition.
    For the foregoing reasons, the Exchange believes that the proposal 
is consistent with the Act.

B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act,\17\ 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.
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    Intramarket Competition. The Exchange does not believe that its 
proposal would place any category of Exchange participant at a 
competitive disadvantage. The Exchange intends for its proposed changes 
to the fees and credits to reallocate its limited resources more 
efficiently and to align them with the Exchange's overall mix of 
objectives. The proposed rule change is intended to help avoid pricing 
disadvantages due to anomalous spikes in sub-dollar volumes and is not 
intended to provide a competitive advantage to any one particular ETP 
Holder. The proposed calculation would be available to all similarly-
situated market participants, and, as such, the proposed changes would 
not impose a disparate burden on competition among market participants 
on the Exchange.
    Intermarket Competition. The Exchange operates in a highly 
competitive market in which market participants can readily choose to 
send their orders to other 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 12%. In such an environment, the 
Exchange must continually review, and consider adjusting its fees and 
credits to remain competitive with other exchanges and with off-
exchange venues. Because competitors are free to modify their own fees 
and credits in response, the Exchange does not believe its proposed fee 
change can impose any burden on intermarket competition.
    The Exchange believes that the proposed change could promote 
competition between the Exchange and other execution venues, including 
those that currently offer 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 has become effective upon filing pursuant 
to Section 19(b)(3)(A) \18\ of the Act and paragraph (f) thereunder. At 
any time within 60 days of the filing of the 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.
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78s(b)(3)(A).
---------------------------------------------------------------------------

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-2024-50 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-2024-50. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for website viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE, 
Washington, DC 20549 on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. Do 
not include personal identifiable information in submissions; you 
should submit only information that you wish to make available 
publicly. We may redact in part or withhold entirely from publication 
submitted material that is obscene or subject to copyright protection. 
All submissions should refer to file number SR-NYSEARCA-2024-50, and 
should be submitted on or before July 12, 2024.


[[Page 52156]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
---------------------------------------------------------------------------

    \19\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-13552 Filed 6-20-24; 8:45 am]
BILLING CODE 8011-01-P
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