[Federal Register Volume 83, Number 111 (Friday, June 8, 2018)]
[Notices]
[Pages 26719-26724]
[FR Doc No: 2018-12319]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83367; File No. SR-BOX-2018-14]

Self-Regulatory Organizations; BOX Options Exchange LLC; Notice
of Filing of Proposed Rule Change To Adopt Rules Governing the Trading
of Complex Qualified Contingent Cross and Complex Customer Cross Orders

June 4, 2018.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on May 22, 2018, BOX Options Exchange LLC (the ``Exchange'') filed
with the Securities and Exchange Commission (``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.
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    \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 the
Substance of the Proposed Rule Change

    The Exchange proposes to adopt rules governing the trading of
Complex Qualified Contingent Cross and Complex Customer Cross Orders.
The text of the proposed rule change is available from the principal
office of the Exchange, at the Commission's Public Reference Room and
also on the

Exchange's internet website at http://boxoptions.com.

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 these statements may be examined at
the places specified in Item IV below. The self-regulatory organization
has prepared summaries, set forth in Sections A, B, and C below, of the
most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange is proposing rules that will make existing
functionality available to additional order types on BOX. Specifically,
the Exchange is proposing rules to codify Complex Customer Cross Orders
and Complex Qualified Contingent Cross (``QCC'') Orders on the
Exchange.\3\ The Exchange notes that the proposed changes are similar
to the rules of another exchange.\4\ In addition, the Exchange is
proposing to expand certain Complex Order protections to the newly
codified QCC Order and Complex Customer Cross Orders.\5\
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    \3\ See https://boxoptions.com/assets/RC-2017-11-CC_QCC_cNBBO-July-10-Implementation-1.pdf.
    \4\ See MIAX Rules 518(b)(5), 515(h)(3), 515(h)(4) and
518(b)(6).
    \5\ See SR-BOX-2018-13.
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Complex Customer Cross Orders
    First, the Exchange is proposing to add text related to Complex
Customer Cross Orders. Proposed Rule 7240(b)(4)(iii) defines a Complex
Customer Cross Order as a type of Complex Order which is comprised of
one Public Customer Complex Order to buy and one Public Customer
Complex Order to sell (the same strategy) at the same price and for the
same quantity.\6\
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    \6\ Proposed Rule 7240(b)(4)(iii) is based on MIAX Rule
518(b)(5).
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    The Exchange uses the same crossing mechanism for the processing
and execution of Complex Customer Cross Orders that is used for
Customer Cross Orders in the regular market. Accordingly, proposed Rule
7110(c)(7) shall govern the trading of Complex Customer Cross Orders,
as defined in Rule 7240(b)(4)(iii), on BOX. Proposed Rule 7110(c)(7)
describes the execution price requirements that are specific to Complex
Customer Cross Orders.\7\ Specifically, Complex Customer Cross Orders
are automatically executed upon entry provided that the execution (i)
is at least $0.01 better than (inside) the cBBO \8\ and any Public
Customer Complex Order on the Complex Order Book; \9\ (ii) is at or
better than any non-Public Customer Complex Order on the Complex Order
Book; and (iii) is at or between the cNBBO.\10\ The purpose of the
requirement that the execution must be at least $0.01 better than the
cBBO is to ensure that there is no interference between the regular and
complex markets. The purpose of the requirement that the execution must
be at least $0.01 better than any Public Customer Complex Order on the
Complex Order Book is to ensure that the Complex Customer Cross Order
does not trade in front of any resting Public Customer Complex Orders.
The purpose of the requirement that the Complex Customer Cross Order be
executed at or between the cNBBO is to ensure that net execution price
is within the best net price available in the market and is in line
with the requirement that simple Customer Cross Orders must execute at
or within the NBBO.
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    \7\ Proposed Rule 7110(c)(7) is based on MIAX Rule 515(h)(3).
    \8\ The term ``cBBO'' means the best net bid and offer price for
a Complex Order Strategy based on the BBO on the BOX Book for the
individual options components of such Strategy. See Rule 7240(a)(1).
    \9\ The term ``Complex Order Book'' means the electronic book of
Complex Orders maintained by the BOX Trading Host. See Rule
7240(a)(8).
    \10\ The term ``cNBBO'' means the best net bid and offer price
for a Complex Order Strategy based on the NBBO for the individual
options components of such Strategy. See Rule 7240(a)(3).
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    The system will reject a Complex Customer Cross Order if, at the
time of receipt of the Complex Customer Cross Order, the strategy is
subject to an ongoing auction (including COPIP, Facilitation, and
Solicitation auctions) or there is an exposed order on the strategy
pursuant to Rule 7240(b)(3)(B). The purpose of this provision is to
maintain an orderly market by avoiding the execution of Complex
Customer Cross Orders with components that are involved in other system
functions that could affect the execution price of the Complex Customer
Cross Order, and by avoiding concurrent processing on the Exchange
involving the same strategy.
    Proposed Rule 7110(c)(7)(i) states that Complex Customer Cross
Orders will be automatically cancelled if they cannot be executed.
Proposed Rule 7110(c)(7)(ii) provides that Complex Customer Cross
Orders may only be entered in the minimum trading increments applicable
to Complex Orders under Rule 7240(b)(1).
    As a regulatory matter, proposed Rule 7110(c)(7)(iii) states that
IM-7140-1 applies to the entry and execution of Complex Customer Cross
Orders.\11\
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    \11\ Rule 7140(b) prevents an Options Participant executing
agency orders to increase its economic gain from trading against the
order without first giving other trading interest on BOX an
opportunity to trade with the agency order pursuant to Rule 7150
(Price Improvement Period), Rule 7245 (Complex Order Price
Improvement Period) or Rule 7270 (Block Trades). However, the
Exchange recognizes that it may be possible for an Options
Participant to establish a relationship with a Customer or other
person (including affiliates) to deny agency orders the opportunity
to interact on BOX and to realize similar economic benefits as it
would achieve by executing agency orders as principal. It will be a
violation of this Rule for an Options Participant to circumvent this
Rule by providing an opportunity for a Customer or other person
(including affiliates) to execute against agency orders handled by
the Options Participant immediately upon their entry into the
Trading Host. See IM-7140-1.
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    The following example illustrates the execution of a Complex
Customer Cross Order:

Example 1--Execution of a Complex Customer Cross Order

BOX Leg A Book: 6.00-6.50
BOX Leg B Book: 3.00-3.30

Strategy: Buy A Call, Sell B Call

The cNBBO is 2.70-3.20
The cBBO is 3.00-3.20

    The Complex Order Book contains a Public Customer order to sell
the strategy at 3.20.
    The Exchange receives a Complex Customer Cross Order
representing Public Customers on both sides for the simultaneous
purchase and sale of the strategy at a price of 3.19.
    The order price is at least $0.01 better than (inside) the cBBO
and the Public Customer Complex Order on the Complex Order Book.
Additionally, the order price is at or between the cNBBO. Therefore,
the Complex Customer Cross Order is automatically executed upon
entry.

    The Exchange notes that the proposed rules for Complex Customer
Cross Orders are based on the rules of another exchange with certain
minor differences.\12\ First, the MIAX Rule requires the execution
price to be better than the best net price of a complex order. The
proposal requires the execution price to be better than any Public
Customer Complex Orders on the Complex Order Book and no worse than the
price of any non-Public Customer Complex Orders. The Exchange believes
this difference is minor because the execution price must respect the
orders on the Complex Order Book and not trade ahead of Public Customer
Orders on the Complex Order Book, which is in line with regular
Customer Cross

Orders. Pursuant to Rule 7110(c)(5) a Customer Cross Order must execute
at a price that is at or between the best bid and offer on BOX and is
not at the same price as a Public Customer Order on the BOX Book.
Additionally, the Exchange is proposing to have the execution price be
within the cNBBO, which MIAX does not provide. The Exchange believes
this difference is minor because the Exchange is simply ensuring that
the execution price respect the best net prices available in the
market. Additionally, similarly to the above, regular Complex Cross
Orders may not trade through the NBBO.
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    \12\ See MIAX Rules 515(h)(3) and 518(b)(5).
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    Next, although both the proposed Rule and MIAX's Rule require the
execution to be at least $0.01 better than best price based on orders
on the regular books, MIAX includes non-displayed trading interest when
determining the best price based on the regular books, which the
Exchange is not proposing because the Exchange does not have non-
displayed interest.
    Lastly, MIAX rejects a Complex Customer Cross Order if, at the time
of receipt, any component of the strategy is subject to a PRIME
Auction, a Route Timer, or liquidity refresh pause. The Exchange is not
proposing the same conditions.\13\ With respect to not rejecting when a
component is subject to an auction, the Exchange notes that this
approach is in line with the treatment of a COPIP when there is an
ongoing PIP on a component of the Complex Order. Specifically, the
Exchange will accept Complex Orders designated for the COPIP where
there is a PIP on an individual component.\14\ Further, in order to
ensure orderly markets involving multiple Complex Orders with common
components, the Exchange is proposing additional circumstances in which
a Complex Customer Cross Order will be rejected, specifically, when
there is an exposed order on the strategy pursuant to rule
7240(b)(4)(iii), or there is an ongoing Facilitation or Solicitation
auction on the strategy.
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    \13\ BOX notes that it does not have either the Route Timer or
liquidity refresh pause features on the Exchange. As such, BOX is
not proposing to include these features under the Proposal.
    \14\ See IM-7245-2.
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Complex QCC Orders
    Next, the Exchange is proposing to add text related to Complex QCC
Orders. Pursuant to proposed Rule 7240(b)(4)(iv), a Complex QCC Order
is comprised of an originating Complex Order to buy or sell where each
component is at least 1,000 contracts that is identified as being part
of a qualified contingent trade \15\ coupled with a contra-side Complex
Order or orders totaling an equal number of contracts.\16\
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    \15\ A ``qualified contingent trade'' is a transaction
consisting of two or more component orders, executed as agent or
principal, where: (1) At least one component is an NMS Stock, as
defined in Rule 600 of Regulation NMS under the Exchange Act; (2)
all components are effected with a product or price contingency that
either has been agreed to by all the respective counterparties or
arranged for by a broker-dealer as principal or agent; (3) the
execution of one component is contingent upon the execution of all
other components at or near the same time; (4) the specific
relationship between the component orders (e.g., the spread between
the prices of the component orders) is determined by the time the
contingent order is placed; (5) the component orders bear a
derivative relationship to one another, represent different classes
of shares of the same issuer, or involve the securities of
participants in mergers or with intentions to merge that have been
announced or cancelled; and (6) the transaction is fully hedged
(without regard to any prior existing position) as a result of other
components of the contingent trade. See IM-7110-2.
    \16\ Proposed Rule 7240(b)(4)(iv) is based on MIAX Rule
518(b)(6).
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    The Exchange uses the same crossing mechanism for the processing
and execution of Complex QCC Orders that is used for QCC Orders in the
regular market.\17\ Accordingly, proposed Rule 7110(c)(8) shall govern
trading of Complex QCC Orders, as defined in Rule 7240(b)(4)(iv), on
BOX. Proposed Rule 7110(c)(8) describes the execution price
requirements that are specific for Complex QCC Orders.\18\
Specifically, Complex QCC Orders are automatically executed upon entry
provided that the execution (i) is not at the same price as a Public
Customer Complex Order; (ii) is at least $0.01 better than (inside) the
cBBO; (iii) is at or better than any non-Public Customer Complex on the
Complex Order Book; and (iv) each option leg executes at or between the
NBBO. The purpose of the requirement that the execution must be at
least $0.01 better than the cBBO is to ensure that there is no
interference between the regular and complex markets. The purpose of
the requirement that the execution must not be at the same price as any
Public Customer Complex Order on the Complex Order Book is to ensure
that the Complex Customer Cross Order does not trade in front of any
resting Public Customer Complex Orders. The purpose of the requirement
that the individual options legs of the Complex QCC Order be executed
at or between the NBBO is to ensure that the execution price of each
option leg is within the best price available in the market and is in
line with the requirement that simple QCC Orders must execute at or
within the NBBO.
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    \17\ See Securities Exchange Act Release No. 80661 (May 11,
2017), 82 FR 22682 (May 17, 2017) (SR-BOX-2017-14). The Exchange
notes that regular QCC Orders on BOX are allowed to execute
automatically on entry without exposure provided the execution: (i)
Is not at the same price as a Public Customer Order on the BOX Book;
and (2) is at or between the NBBO.
    \18\ Proposed Rule 7110(c)(8) is based on MIAX Rule 515(h)(4).
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    The system does not consider the NBBO price for the stock component
because the Exchange does not execute the stock component; the Exchange
executes the option components at a net price and ensures that, among
other things, the execution price of (i) the strategy is at least $0.01
better than the cBBO; and (ii) each option leg is at or between the
NBBO.
    The Exchange believes the proposed Complex QCC pricing methodology
aligns with the Qualified Contingent Trade (``QCT'') Exemption, as
defined below. The parties to a contingent trade are focused on the
spread or ratio between the transaction prices for each of the
component instruments (i.e., the net price of the entire contingent
trade), rather than on the absolute price of any single component.
Pursuant to the requirements of the NMS QCT Exemption, the spread or
ratio stands regardless of the market prices of the individual orders
at their time of execution. As the Commission noted in the Original QCT
Exemption, ``the difficulty of maintaining a hedge, and the risk of
falling out of hedge, could dissuade participants from engaging in
contingent trades, or at least raise the cost of such trades.'' Thus,
the Commission found that, if each stock leg of a qualified contingent
trade were required to meet the trade-through provisions of Rule 611 of
Regulation NMS, such trades could become too risky and costly to be
employed successfully and noted that the elimination or reduction of
this trading strategy potentially could remove liquidity from the
market.\19\ This is also true for QCC Orders in options, and thus the
Exchange believes that its proposal is consistent with the Original QCT
Exemption.\20\
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    \19\ See Securities Exchange Act Release No. 54389 (August 31,
2006), 71 FR 52829 (September 7, 2006) (``Original QCT Exemption'').
    \20\ The Exchange represents that QCTs will be subject to
existing trading surveillance administered by the Financial Industry
Regulatory Authority (``FINRA'') on behalf of the Exchange, which
are designated to detect violations of Exchange rules and applicable
federal securities laws. The Exchange believes the existing
surveillance of QCTs is sufficient to ensure compliance with the
proposed rule.
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    The system will reject a Complex QCC Order if, at the time of
receipt of the Complex QCC Order, the strategy is subject to an ongoing
auction (including COPIP, Facilitation, and Solicitation

auctions) or there is an exposed order on the strategy pursuant to Rule
7240(b)(3)(B). The purpose of this provision is to maintain an orderly
market by avoiding the execution of Complex QCC Order with components
that are involved in other system functions that could affect the
execution price of the Complex QCC Order, and by avoiding concurrent
processing on the Exchange involving the same strategy.
    Proposed Rule 7110(c)(8)(i) states that Complex QCC Orders will be
automatically cancelled if they cannot be executed. Proposed Rule
7110(c)(8)(ii) provides that Complex QCC Orders may only be entered in
the minimum trading increments applicable to Complex Orders under Rule
7240(b)(1).
    The following example illustrates the execution of a Complex QCC
Order:

Example 2--Execution of a Complex QCC Order

BOX Leg A Book: 6.00-6.60
BOX Leg B Book: 3.00-3.30
Leg A NBBO: 6.00-6.60
Leg B NBBO: 3.00-3.30

Strategy: Buy A Call, Sell B Call

The cBBO is 2.70-3.30
The cNBBO is 2.70-3.30
    The Complex Order Book contains a broker-dealer order to sell
the strategy at 3.29.

    The Exchange receives a Complex QCC Order for the simultaneous
purchase and sale of the strategy at a net price of 3.29, 1,000 times.
Since the order can be executed at or between the NBBO for each leg of
the strategy, is not at a worse price than the non-Public Customer
Order on the Complex Order Book, is at least $0.01 better than the cBBO
and the order size is met, the Complex QCC Order is automatically
executed upon entry.
    The proposed rules governing Complex QCC Orders are based on the
rules of another exchange with certain differences.\21\ First, MIAX
requires the individual legs be executed not at the same price as a
Priority Customer Order on the book. The Exchange does not propose to
include this provision of MIAX's rule as the BOX system handles Complex
Orders differently. Specifically, Complex Orders on BOX are executed at
a net debit or credit, and therefore it is understandable that the
execution parameters would be controlled by the net price of the
strategy rather than the individual legs. A Complex Order may execute
as a net credit or debit with one other Participant; provided, the
price of at least one leg of the Complex Order must trade at a price
that is better than the corresponding bid or offer in the marketplace
by at least one minimum trading increment (i.e., one cent) as set forth
in Rule 7240(b)(1).\22\ As such, and to stay in line with how Complex
Orders are handled on BOX, the Exchange is proposing that the net
execution price of the Complex QCC Order be better than the cBBO. As
discussed above, this is in line with the approach to Complex Orders in
general on the Exchange. Further, the Exchange believes it is important
to respect all interest in the regular Book and not only Public
Customer interest, as is the case with MIAX, which is why the Exchange
requires the Complex QCC Order to be better than the cBBO.
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    \21\ See MIAX Rules 515(h)(4) and 518(b)(6).
    \22\ See Rule 7240(b)(2)(1)(i). In addition, Complex Qualified
Open Outcry Orders may be executed at a price without giving
priority to equivalent bids or offers in the individual series legs
on the initiating side, provided at least one options leg betters
the corresponding bid or offer on the BOX Book by at least one
minimum trading increment (i.e., one cent) as set forth in Rule
7240(b)(1). See 7600(c).
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    To illustrate this, assume a Complex QCC Order at $2.01 is received
by the system for strategy A+B. There is a Public Customer Order to buy
leg A on the Book for $1.00 and a Public Customer Order to buy leg B on
the Book for $1.00. Under the proposal, the Complex QCC Order would be
accepted by the system because the execution price is at least $0.01
better than the cBBO.\23\ The Exchange does not believe that this
result harms the resting Public Customer Orders.\24\ Specifically,
given the execution price of $2.01, the sell side of the Complex QCC
Order could not interact with the resting Public Customer Orders
because there is no interest on the individual legs that, when
combined, equal the execution price of $2.01. If, however, in addition
to the Public Customer order to buy leg B at $1.00 there is a non-
Public Customer order to buy leg B at $1.01, the Complex QCC Order at
$2.01 would be rejected. This is because the execution price is no
longer better than the cBBO.\25\ As such, the Public Customer Order on
leg A is protected because there is interest on the individual leg
Books that, when combined, equal the proposed execution price of the
Complex QCC Order. Further, since the agreed upon price between market
participants was $2.01, it would be detrimental to require the order to
be executed at a worse price than is necessary. While the BOX proposal
does not have the same price protection for Public Customers as MIAX
Complex QCC rule, the Exchange believes the proposal, which provides a
level of price protection to all Participants, remains consistent with
the Act.
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    \23\ Assume for the example that the cBBO is 2.00-5.00. The 2.00
bid is comprised of the Public Customer Orders on the individual leg
books and 5.00 is a resting Complex Order.
    \24\ As outlined in the proposal, this is consistent with how
the system currently handles the interaction between Complex Orders
and the individual leg Books. The Exchange notes that the same
behavior occurs regardless of the account of the order on the
individual leg Books. For example, if the orders on the leg Books
were for the account of a broker-dealer, the execution price of the
Complex QCC would still need to be $0.01 better than the cBBO.
    \25\ The cBBO would now be 2.01-5.00.
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    The Exchange is proposing the additional requirements that the
execution price is not at the same price as a Public Customer Complex
Order and at or better than any non-Public Customer Complex Order on
the Complex Order Book as compared to MIAX. The Exchange believes that
these additional requirements are reasonable because the Exchange is
respecting resting Complex Orders.
    Lastly, MIAX rejects a Complex QCC Order if, at the time of
receipt, any component of the strategy is subject to a PRIME Auction, a
Route Timer, or liquidity refresh pause. The Exchange is not proposing
the same conditions.\26\ With respect to not rejecting when a component
is subject to an auction, the Exchange notes that this approach is in
line with the treatment of a COPIP when there is an ongoing PIP on a
component of the Complex Order. Specifically, the Exchange will accept
Complex Orders designated for the COPIP where there is a PIP on an
individual component.\27\ Further, the Exchange notes that orders on
the regular book are protected by the fact that the execution price
must be at least $0.01 better than the cBBO. Additionally, in order to
ensure orderly markets involving multiple Complex Orders with common
components, the Exchange is proposing additional circumstances in which
a Complex QCC Order will be rejected, specifically, when there is an
exposed order on the strategy, or there is an ongoing Facilitation or
Solicitation auction on the strategy.
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    \26\ BOX notes that it does not have either the Route Timer or
liquidity refresh pause features on the Exchange. As such, BOX is
not proposing to include these features under the Proposal.
    \27\ See IM-7245-2.
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    Lastly, the Exchange proposes to expand certain Complex Order
protections to Complex QCC Orders and Complex Customer Cross Orders.
Specifically, the Exchange proposes to amend Rule IM-7240-1(a)(5) and
IM-7240(b)(5) to apply these price protection checks to Complex QCC
Orders and Complex Customer Cross

Orders. The Exchange notes that another options exchange has similar
price checks.\28\
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    \28\ See Chicago Board Options Exchange, Incorporated (``Cboe'')
Interpretations and Polices .08(c) and (g) to Rule 6.53C.
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2. Statutory Basis
    The Exchange believes that the proposal is consistent with the
requirements of Section 6(b) of the Securities Exchange Act of 1934
(the ``Act''),\29\ in general, and Section 6(b)(5) of the Act,\30\ in
particular, in that it is designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in facilitating transactions in securities, to remove
impediments to and perfect the mechanism of a free and open market and
a national market system, and, in general to protect investors and the
public interest.
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    \29\ 15 U.S.C. 78f(b).
    \30\ 15 U.S.C. 78f(b)(5).
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    The proposal to amend Rules 7110 and 7240 to codify rules covering
Complex Customer Cross and Complex QCC Orders is consistent with
Section 6(b)(5) of the Act because this proposal promotes just and
equitable principles of trade and protects investors and the public
interest by providing increased opportunities for the execution of
Complex Orders. The Exchange believes that the proposed Complex
Customer Cross and Complex QCC Rules will benefit Participants and the
marketplace as a whole by adopting rules that allow for the trading of
these types of orders on the Exchange. The Exchange believes the
proposed rules for Complex Customer Cross and Complex QCC Orders remove
impediments to and perfects the mechanism of a free and open market and
a national market system and will result in more efficient trading and
enhance the likelihood of the Complex Orders executing at the best
prices by providing additional order types resulting in potentially
greater liquidity available for trading on the Exchange.
    The proposed rule change will provide rules that make existing
functionality available to additional order types. Providing rules that
make Customer Cross and QCC available for Complex Orders removes
impediments to and perfects the mechanisms of a free and open market
and a national market system because Participants will be given
additional ways in which they can execute Complex Orders.
    The proposed rule change will protect investors and the public
interest by assuring the existing priority and allocation rules
applicable to the processing and execution of Customer Cross Orders,
QCC Orders, and Complex Orders remains consistent with the processing
and execution of these order types, unless otherwise specifically set
forth in the rules.
    The Exchange further believes that the proposed methodology for the
execution of Complex QCC Orders without consideration of the NBBO of
the stock component is consistent with the QCT Exemption. As stated
above, the QCT Exemption provides an exception for the stock leg of
qualified contingent trades from trade-through requirements. Therefore,
the system considers the NBBO of the options legs of the Complex QCC
Order, and not the NBBO for the stock component, in calculating the
pricing requirement for Complex QCC Orders.
    The system does not consider the NBBO price for the stock component
because the Exchange does not execute the stock component; the Exchange
executes the option components at a net price and ensures that the net
execution price for the strategy (i) is at least $0.01 better than the
cBBO; (ii) is not at the same price as a Public Customer Complex Order;
(iii) is at or better than any non-Public Customer Complex Order on the
Complex Order Book; and (iv) each leg is at or between the NBBO.
    The Exchange believes that the proposal to reject a Complex
Customer Cross or Complex QCC Order at the time of receipt of the order
when the strategy is subject to an ongoing auction (including COPIP,
Facilitation and Solicitation auctions), or there is an exposed order
on the strategy, removes impediments to and perfects the mechanism of a
free and open market by ensuring orderly markets involving multiple
complex orders with common components.
    The proposed rule change to implement a debit/credit check for
Complex QCC and Complex Customer Cross Orders is consistent with the
Act. With the use of debit/credit checks, the Exchange can further
assist with the maintenance of a fair and orderly market by mitigating
the potential risks associated with Complex Orders trading at prices
that are inconsistent with their strategies (which may result in
executions at prices that are extreme and potentially erroneous), which
ultimately protects investors. This proposed implementation of the
debit/credit check promotes just and equitable principles of trade, as
it is based on the same general option and volatility pricing
principles which the Exchange understands are used by market
participants in their option pricing models.
    Additionally, the Exchange also believes that calculating a maximum
price for true butterfly spreads, vertical spreads, and box spreads
will assist with the maintenance of fair and orderly markets by helping
to mitigate the potential risks associated with Complex QCC and Complex
Customer Cross Orders trading at extreme and potentially erroneous
prices that are inconsistent with particular Complex Order strategies.
Further, the Exchange notes that the maximum price is designed to
mitigate the potential risks of executions at prices that are not
within an acceptable price range, as a means to help mitigate the
potential risks associated with Complex Orders trading at prices that
are inconsistent with their strategies, in addition to the debit/credit
check. As such, the proposed rule change is designed to protect
investors and the public interest.

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

    The Exchange does not believe that the proposed rule change to
provide rules governing the trading of Complex Customer Cross and
Complex QCC Orders will impose any burden on competition not necessary
or appropriate in furtherance of the purposes of the Act. In this
regard and as indicated above, the Exchange notes that the rule is
being proposed as a competitive response to the rules of another
exchange.\31\ Additionally, the proposed rule change is intended to
promote competition by adding rules for new order types that enable
Participants to execute Complex Orders on the Exchange. The Exchange
believes that this enhances inter-market competition by enabling the
Exchange to compete for this type of order flow with other exchanges
that have similar rules and functionalities in place.
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    \31\ See MIAX Rules 515(h)(3), 515(h)(4), 518(b)(5), and
518(b)(6).
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    Further, the Exchange does not believe that the proposed Complex
Order protections will impose any burden on competition not necessary
or appropriate in furtherance of the purposes of the Act. In this
regard and as indicated above, the Exchange notes that the rule change
is being proposed as a competitive response to the rules of another
exchange.\32\ Additionally, the Exchange believes the proposed rule
change is beneficial to Participants as it will provide increased
protections that will prevent the execution of certain Complex Orders
that were entered in

error. The Exchange believes the proposal is pro-competitive and should
serve to attract additional Complex Orders to the Exchange. Further,
the Exchange does not believe the proposed change will not impose a
burden on intramarket competition because it is available to all
Participants.
---------------------------------------------------------------------------

    \32\ See supra, note 4.
---------------------------------------------------------------------------

    For the reasons stated, the Exchange does not believe that the
proposed rule changes will impose any burden on competition not
necessary or appropriate in furtherance of the purposes of the Act, and
the Exchange believes the proposed change will, in fact, enhance
competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

    The Exchange has neither solicited nor received comments on the
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

    Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include
File Number SR-BOX-2018-14 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE,
Washington, DC 20549-1090.

All submissions should refer to File Number SR-BOX-2018-14. 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 (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street, NE, Washington,
DC 20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of such filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-BOX-2018-14, and should be submitted on
or before June 29, 2018.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\33\
---------------------------------------------------------------------------

    \33\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-12319 Filed 6-7-18; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register Volume 84, Number 139 (Friday, July 19, 2019)]
[Notices]
[Pages 34979-34984]
[FR Doc No: 2019-15346]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-86377; File No. SR-NYSEArca-2019-53]

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

July 15, 2019.
    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 July 12, 2019, 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\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to amend the NYSE Arca Equities Fees and
Charges (``Fee Schedule'') to adopt new pricing tiers, Mid-Point
Liquidity Orders Step Up Tier 1 and 2, and modify current Tier 3. The
Exchange proposes to implement the fee changes effective July 12,
2019.\4\ 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.
---------------------------------------------------------------------------

    \4\ The Exchange originally filed to amend the Fee Schedule on
July 1, 2019 (SR-NYSEArca-2019-47). SR-NYSEArca-2019-47 was
subsequently withdrawn and replaced by this filing.
---------------------------------------------------------------------------

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 the
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend the Fee Schedule to adopt new
pricing tiers that would (1) provide an additional incentive for all
ETP Holders (including Market Makers) \5\ to send liquidity-providing
Mid-Point Liquidity (``MPL'') Orders \6\ to the Exchange, and (2)
provide additional incentives for ETP Holders to provide displayed
liquidity in Tapes A and C Securities.
---------------------------------------------------------------------------

    \5\ All references to ETP Holders in connection with the MPL
Orders Step Up Tier include Market Makers.
    \6\ A MPL Order is a limit order that is not displayed and does
not route, with a working price at the midpoint of the Protected
Best Bid/Offer. See NYSE Arca Rule 7.31-E(d)(3).
---------------------------------------------------------------------------

    With respect to MPL Orders, the Exchange currently has multiple
levels of credits, ranging from $0.0010 per share to $0.0020 per share,
for ETP Holders that send MPL Orders that provide liquidity. The amount
of the per share credit is based on an ETP Holder's traded volume
against its MPL orders that provide liquidity.
    The purpose of this proposed rule change is to add new pricing
tiers to incentivize ETP Holders to increase the liquidity-providing
MPL Orders they send to the Exchange as compared to such orders sent in
May 2019. Specifically, the Exchange proposes that an ETP Holder would
receive the following credits:
     If an ETP Holder's traded volume against its MPL orders
that provide liquidity is one million shares more than such ETP
Holder's baseline of MPL liquidity-providing average daily volume
(``ADV''), as measured in May 2019, the ETP Holder will receive a
credit of $0.0025 per share for such MPL orders (proposed MPL Orders
Step Up Tier 2); or
     If an ETP Holder's traded volume against its MPL orders
that provide liquidity is two million shares more than such ETP
Holder's baseline of MPL liquidity-providing ADV, as measured in May
2019, the ETP Holder will receive a credit of $0.0026 per share for
such MPL orders (proposed MPL Orders Step Up Tier 1).
    The Exchange also proposes to introduce a credit of $0.0027 per
share for adding displayed liquidity in Tapes A and C Securities if an
ETP Holder meets both the existing Tier 3 requirements and increases
its executed providing volume over its providing ADV as a percent of US
CADV from May 2019.

    The Exchange proposes to implement the fee changes effective July
12, 2019.
Background
    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.'' \7\
---------------------------------------------------------------------------

    \7\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37495, 37499 (June 29, 2005) (S7-10-04) (Final Rule)
(``Regulation NMS'').
---------------------------------------------------------------------------

    As the Commission itself recognized, the market for trading
services in NMS stocks has become ``more fragmented and competitive.''
\8\ Indeed, equity trading is currently dispersed across 13
exchanges,\9\ 31 alternative trading systems,\10\ and numerous broker-
dealer internalizers and wholesalers, all competing for order flow.
Based on publicly-available information, no single exchange has more
than 18% market share (whether including or excluding auction
volume).\11\ Therefore, no exchange possesses significant pricing power
in the execution of equity order flow. More specifically, for the first
five months of 2019, the Exchange averaged less than 9% market share of
executed volume of equity trades.\12\
---------------------------------------------------------------------------

    \8\ See Securities Exchange Act Release No. 51808, 84 FR 5202,
5253 (February 20, 2019) (File No. S7-05-18) (Final rule)
(``Transaction Fee Pilot'').
    \9\ See Cboe U.S. Equities Market Volume Summary at https://markets.cboe.com/us/equities/market_share.
    \10\ See FINRA ATS Transparency Data (June 3, 2019), available
at https://otctransparency.finra.org/otctransparency/AtsIssueData.
Although 54 alternative trading systems were registered with the
Commission as of May 31, 2019, only 31 are currently trading. A list
of alternative trading systems registered with the Commission is
available at https://www.sec.gov/foia/docs/atslist.htm.
    \11\ See Cboe Global Markets U.S. Equities Market Volume Summary
(June 28, 2019), available at http://markets.cboe.com/us/equities/market_share/.
    \12\ Based on Cboe U.S. Equities Market Volume Summary, the
Exchange's market share of intraday trading (excluding auctions) for
the months of January 2019, February 2019, March 2019, April 2019
and May 2019 was 9.01%, 8.33%, 9.02%, 8.73% and 8.8%, respectively.
---------------------------------------------------------------------------

    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, in response to fee changes. With respect to non-marketable
order flow that would provide liquidity on an Exchange, ETP Holders can
choose from any one of the 13 currently operating registered exchanges
to route such order flow. Accordingly, competitive forces constrain
exchange transaction fees that relate to orders that would provide
liquidity on an exchange.
    In response to this competitive environment, the Exchange has
already established multiple levels of credits for MPL Orders that
allow ETP Holders to passively interact with trading interest on the
Exchange and offer potential price improvement to incoming marketable
orders submitted to the Exchange.\13\ In order to provide an incentive
for ETP Holders to provide such liquidity to the Exchange, the credits
increase based on increased levels of volume directed to the Exchange.
---------------------------------------------------------------------------

    \13\ See, e.g., Securities Exchange Act Release No. 54511
(September 26, 2006), 71 FR 58460, 58461 (October 3, 2006) (SR-PCX-
2005-53).
---------------------------------------------------------------------------

    More specifically, the Exchange currently provides per share
credits under Tier 1, Tier 2 and Basic Rates \14\ for MPL Orders that
provide liquidity based on the ADV of provided liquidity in MPL Orders
for Tape A, Tape B and Tape C Securities combined (``MPL Adding ADV'').
For ETP Holders that have MPL Adding ADV during a billing month of at
least 3 million shares, the Exchange provides a credit of $0.0015 per
share for Tape A Securities and $0.0020 per share for Tape B and Tape C
Securities. For ETP Holders with MPL Adding ADV during a billing month
of at least 1.5 million shares but less than 3 million shares, the
Exchange provides a credit of $0.0015 per share for Tape A, Tape B and
Tape C Securities. For ETP Holders with MPL Adding ADV during a billing
month of less than 1.5 million shares, the Exchange provides a credit
of $0.0010 per share for Tape A, Tape B and Tape C Securities.\15\
---------------------------------------------------------------------------

    \14\ Tier 1 applies to ETP Holders (1) that provide liquidity an
average daily share volume per month of 0.70% or more of the US
CADV. Tier 2 applies to ETP Holders that provide liquidity an
average daily share volume per month of 0.30% or more, but less than
0.70% of the US CADV. Basic Rates apply when tier rates do not
apply. US CADV means United States Consolidated Average Daily Volume
for transactions reported to the Consolidated Tape, excluding odd
lots through January 31, 2014 (except for purposes of Lead Market
Maker pricing), and excludes volume on days when the market closes
early and on the date of the annual reconstitution of the Russell
Investments Indexes. Transactions that are not reported to the
Consolidated Tape are not included in US CADV.
    \15\ The Exchange charges a fee of $0.0030 per share for MPL
Orders in Tape A, Tape B and Tape C Securities that remove liquidity
from the Exchange that are not designated as ``Retail Orders.'' MPL
Orders removing liquidity from the Exchange that are designated as
Retail Orders are subject to a fee of $0.0010 per share. See Fee
Schedule.
---------------------------------------------------------------------------

    In addition, the Exchange currently has different rates depending
on whether an ETP Holder meets different specified volume thresholds.
Under the current Tier 3 threshold, if an ETP Holder provides liquidity
of an average daily share volume per month of 0.20% or more, but less
than 0.30% of US CADV, that ETP Holder is eligible for the specified
Tier 3 fees and credits. For Tape A and C Securities, if an ETP Holder
qualifies for Tier 3, that ETP Holder is eligible for a $0.0025 per
share credit for orders that provide liquidity to the Book, and is
charged a fee of $0.0030 per share for order that take liquidity from
the Book.
Proposed Fee Change for MPL Orders
    The Exchange proposes two additional tiers designed to provide an
additional incentive for ETP Holders to enter MPL Orders that post
interest on the Exchange. As proposed:
     An ETP Holder that qualifies for the ``MPL Orders Step Up
Tier 2'' is eligible for a $0.0025 per share credit for MPL Orders that
provide liquidity in Tape A, Tape B, and Tape C Securities. To qualify
for this tier, ETP Holders must provide liquidity to the Book in MPL
Orders in Tape A, Tape B and Tape C Securities combined (``MPL Adding
ADV'') during the billing month equal to at least one million shares
more than the ETP Holder's May 2019 MPL Adding ADV.
     An ETP Holder that qualifies for the ``MPL Orders Step Up
Tier 1'' is eligible for a $0.0026 per share credit in MPL Orders that
provide liquidity in Tape A, Tape B, and Tape C Securities. To qualify
for this tier, ETP Holders must provide liquidity to the Book in MPL
Orders in Tape A, Tape B and Tape C Securities combined (``MPL Adding
ADV'') during the billing month equal to at least two million shares
more than the ETP Holder's May 2019 MPL Adding ADV.
    The goal of the proposed change to add MPL Orders Step Up Tiers 1
and 2 is to incentivize ETP Holders with higher per share credits to
increase the number of MPL Orders they post on the Exchange's Book,
which would provide additional price improvement opportunities for
incoming orders. MPL Orders allow for additional opportunities for
passive interaction with trading interest on the Exchange and are
designed to offer potential price improvement to incoming marketable
orders submitted to the Exchange. The Exchange believes that by
correlating the level of the credit to the level of MPL Adding ADV, the
Exchange's fee structure would incentivize ETP Holders to submit more
liquidity-

providing MPL Orders to the Exchange, thereby increasing the potential
for price improvement to incoming marketable orders submitted to the
Exchange.
    The Exchange proposes to increase the credits available under the
proposed MPL Orders Step Up Tiers to provide an incentive for ETP
Holders to send increased order flow to qualify for these tiers. As
noted above, the Exchange operates in a competitive environment,
particularly as it relates to attracting MPL Orders that are posted on
the Exchange's Book. Because each of the proposed MPL Orders Step Up
Tiers would require ETP Holders to provide increased liquidity over
that ETP Holder's baseline providing volume, the Exchange believes that
the proposed increased credits would incentivize ETP Holders to route
additional liquidity providing MPL Orders to the Exchange to qualify
for the higher credit.
    The Exchange does not know how much order flow ETP Holders choose
to route to other exchanges or to off-exchange venues. There are
currently two firms that qualify for the credits associated with MPL
Orders under current Tier 1, while five other firms currently qualify
for the credits associated with MPL Orders under current Tier 2. The
Exchange further notes that there are 12 firms that currently have MPL
Adding ADV of at least 500,000 shares and if these firms were to submit
more of their liquidity-providing MPL Orders to the Exchange, each
could qualify for the proposed increased credits under either of the
proposed MPL Orders Step Up tiers. However, 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 qualifying for these tiers. The Exchange
believes the proposed higher credits would provide an incentive for ETP
Holders to submit additional liquidity-providing MPL Orders to the
Exchange to qualify for the higher credits.
Proposed Rule Change for Tier 3
    The Exchange proposes to provide an increased incentive for ETP
Holders that otherwise qualify for the current Tier 3 to send displayed
orders to the Exchange in Tape A and C Securities. As proposed, if an
ETP Holder (including Market Makers) meets the requirements of Tier 3
and, for the billing month, its ADV of executed orders that provide
liquidity is at least 0.05% of US CADV more than the ETP Holder's ADV
of executed orders that provide liquidity as a percent of US CADV in
May 2019, that ETP Holder would be eligible for a $0.0027 per share
credit for orders that provide liquidity to the Book in Tape A and C
Securities.
    For example, assume an ETP Holder has an ADV of executed orders
that provide liquidity of 0.10% of US CADV in all securities in the
baseline month of May 2019. If that ETP Holder has an ADV of executed
orders that provide liquidity of 0.25% of US CADV in the billing month,
that ETP Holder would qualify for current Tier 3 credits of $0.0025 per
share in Tape A and C Securities by meeting the 0.20% adding
requirement, but would also qualify for the proposed higher credits of
$0.0027 per share by meeting the 0.05% step up requirement with an
increase of 0.15% (0.0025% Adding ADV in the billing month minus the
0.0010% Adding ADV in the baseline month).
    The goal of this proposed rule change is to provide an additional
incentive for ETP Holders to send displayed liquidity to the Exchange.
If an ETP Holder qualifies for Tier 3 and meets the additional proposed
volume requirements, that ETP Holder would be eligible for an increased
credit for displayed liquidity as compared to the current credit for
qualifying for Tier 3, which is $0.0025 per share credit for orders
that provide liquidity in Tape A and C Securities.
    With this proposed change, the following credits would be available
for orders that provide liquidity to the Book in Tapes A and C
Securities:

------------------------------------------------------------------------
                                           Per share credit for orders
                  Tier                         providing liquidity
------------------------------------------------------------------------
Tier 1.................................  $0.0031 (Tape A), $0.0032 (Tape
                                          C).
Tier 2.................................  $0.0031 (Tapes A and C) or
                                          $0.0029 (Tapes A and C).
Tier 3.................................  $0.0025 (Tape A and C) or
                                          $0.0027 (Tape A and C).
Step Up Tier...........................  $0.0030 (Tape A), $0.0031 (Tape
                                          C).
Step Up Tier 2.........................  $0.0028 (Tapes A and C).
Step Up Tier 3.........................  $0.0025 (Tapes A and C).
Step Up Tier 4.........................  $0.0033 (Tapes A and C).
------------------------------------------------------------------------

    As noted above, the Exchange operates in a competitive environment,
particularly as it relates to attracting non-marketable, providing
liquidity that would be displayed on the Exchange. The proposed rule
change is designed to incentivize ETP Holders to increase the orders
sent to the Exchange that would provide displayed liquidity, which
would support the quality of price discovery and transparency on the
Exchange. The Exchange believes that by correlating the level of the
credit to the level of executed providing volume on the Exchange, the
Exchange's fee structure would incentivize ETP Holders to submit more
displayed, liquidity-providing orders to the Exchange that are likely
to be executed (i.e., are not orders that are intended to be displayed,
but are priced such that they are not likely to be executed), thereby
increasing the potential for incoming marketable orders submitted to
the Exchange to receive an execution.
Applicability of Proposed Rule Change
    Both of the proposed changes to the Fee Schedule are designed to be
available to all ETP Holders on the Exchange.
    With respect to the proposed new MPL Orders Step Up Tiers, there
are currently two ETP Holders that have qualified for the credits
associated with MPL Orders under current Tier 1, while five other ETP
Holders currently qualify for the credits associated with MPL Orders
under current Tier 2. The Exchange further notes that there are 12 ETP
Holders that currently have MPL Adding ADV of at least 500,000 shares
and if these firms were to submit more of their liquidity-providing MPL
Orders to the Exchange, each could qualify for the proposed increased
credits under either of the proposed MPL Order Step Up tiers.
    With respect to the proposed new credit under Tier 3 for orders
that provide liquidity, there are currently four ETP Holders that
qualify for Tier 3. The Exchange believes that each of these ETP
Holders could meet the proposed volume requirements to qualify for the
proposed new credit for displayed liquidity under this tier. In
addition, the Exchange believes that there are additional ETP Holders
that could qualify for both the existing Tier

3 requirements as well as the proposed new requirements in order to
qualify for the proposed new credit. However, without having a view of
ETP Holders' activity on other markets and off-exchange venues, the
Exchange has no way of knowing whether these proposed rule changes
would result in any ETP Holders qualifying for any of these proposed
new credits.
    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,\16\ in general, and furthers the
objectives of Sections 6(b)(4) and (5) of the Act,\17\ in particular,
because it provides for the equitable allocation of reasonable dues,
fees, and other charges among its members, issuers and other persons
using its facilities and does not unfairly discriminate between
customers, issuers, brokers or dealers.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

The Proposed Fee Change is Reasonable
    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. Specifically, in Regulation NMS, the
Commission highlighted the importance of market forces in determining
prices and SRO revenues and, also, recognized that current regulation
of the market system ``has been remarkably successful in promoting
market competition in its broader forms that are most important to
investors and listed companies.'' \18\
---------------------------------------------------------------------------

    \18\ See Regulation NMS, 70 FR at 37499.
---------------------------------------------------------------------------

    As the Commission itself recognized, the market for trading
services in NMS stocks has become ``more fragmented and competitive.''
\19\ Indeed, equity trading is currently dispersed across 13
exchanges,\20\ 31 alternative trading systems,\21\ and numerous broker-
dealer internalizers and wholesalers, all competing for order flow.
Based on publicly-available information, no single exchange has more
than 18% market share (whether including or excluding auction
volume).\22\ Therefore, no exchange possesses significant pricing power
in the execution of equity order flow. More specifically, for the first
five months of 2019, the Exchange averaged less than 9% market share of
executed volume of equity trades (excluding auction volume).\23\ The
Exchange believes that the ever-shifting market share among the
exchanges from month to month demonstrates that market participants can
shift order flow, or discontinue to reduce use of certain categories of
products, in response to fee changes. Accordingly, competitive forces
reasonably constrain exchange transaction fees. Stated otherwise,
changes to exchange transaction fees can have a direct effect on the
ability of an exchange to compete for order flow.
---------------------------------------------------------------------------

    \19\ See Transaction Fee Pilot, 84 FR at 5253.
    \20\ See Cboe U.S Equities Market Volume Summary at https://markets.cboe.com/us/equities/market_share.
    \21\ See FINRA ATS Transparency Data (June 3, 2019), available
at https://otctransparency.finra.org/otctransparency/AtsIssueData.
Although 54 alternative trading systems were registered with the
Commission as of May 31, 2019, only 31 are currently trading. A list
of alternative trading systems registered with the Commission is
available at https://www.sec.gov/foia/docs/atslist.htm.
    \22\ See Cboe Global Markets U.S. Equities Market Volume Summary
(June 28, 2019), available at http://markets.cboe.com/us/equities/market_share/.
    \23\ Based on Cboe U.S. Equities Market Volume Summary, the
Exchange's market share of intraday trading (excluding auctions) for
the months of January 2019, February 2019, March 2019, April 2019
and May 2019 was 9.01%, 8.33%, 9.02%, 8.73% and 8.8%, respectively.
---------------------------------------------------------------------------

    The Exchange believes the proposed MPL Orders Step Up Tiers 1 and 2
are reasonable because the higher credits under the proposed MPL Orders
Step Up Tiers would provide an incentive for ETP Holders to route
additional liquidity-providing MPL Orders to the Exchange. As noted
above, the Exchange operates in a highly competitive environment,
particularly for attracting order flow that provides liquidity on an
exchange. The Exchange believes it is reasonable to continue to provide
a higher credit for orders that provide liquidity if an ETP Holder
meets the qualification for the proposed MPL Orders Step Up Tiers.
    Because the proposed MPL Orders Step Up Tiers would be new with a
requirement to increase MPL Adding ADV, no ETP Holder currently
qualifies for the proposed new pricing tiers. The Exchange believes the
proposed increased credits are reasonable as they would provide an
additional incentive for ETP Holders to qualify for these new tiers and
direct their order flow to the Exchange and provide meaningful added
levels of liquidity, thereby contributing to the depth and market
quality on the Exchange.
    The Exchange notes that there are currently two firms that qualify
for the credits associated with MPL Orders under current Tier 1, while
five other firms currently qualify for the credits associated with MPL
Orders under current Tier 2. The Exchange further notes that there are
12 firms that currently have MPL Adding ADV of at least 500,000 shares
and if these firms were to submit more of their liquidity-providing MPL
Orders to the Exchange, each could qualify for the proposed increased
credits. However, 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 qualifying for these tiers. The Exchange believes the proposed
higher credits would provide an incentive for ETP Holders to submit
additional adding liquidity to qualify for the higher credits.
    The Exchange believes that the proposed new credit for displayed
liquidity providing orders in Tapes A and C Securities under current
Tier 3 is reasonable because it provides for an incentive for ETP
Holders to route additional displayed liquidity-providing order flow to
the Exchange, which will promote price discovery and increase execution
opportunities for all ETP Holders. The proposed pricing is structured
similarly to the Exchange's current Tier 2, which likewise provides for
a per share credit for orders that provide liquidity in Tape A and C
Securities, and provides for a higher per share credit for orders that
provide displayed liquidity if the ETP Holder meets the additional
qualifying requirements.\24\ The Exchange further believes that the
proposed change to Tier 3 is reasonable because an ETP Holder that
otherwise qualifies for the tier would still be eligible for the
current per share credit of $0.0025 per share for orders that provide
liquidity. The proposed additional credit is designed to provide an
incentive for such ETP Holder to route additional displayed providing
liquidity to the Exchange, which would be eligible for the higher
credit.
---------------------------------------------------------------------------

    \24\ If an ETP Holder qualifies for Tier 2, the per share credit
for orders that provide liquidity in Tape A and C Securities is
$0.0029 per share. That that ETP Holder both meets the Tier 2
qualifying requirements plus the additional requirements, the per
share credit for orders that provide displayed liquidity in Tape A
and C Securities is $0.0031 per share.
---------------------------------------------------------------------------

    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 increase its liquidity and improve its
market share relative to its competitors.

The Proposed Fee Change Is an Equitable Allocation of Credits and Fees
    The Exchange believes the proposed fee change is an equitable
allocation of its fees and credits. The Exchange believes that the
proposed increased credit under the MPL Orders Step Up Tiers 1 and 2 is
equitable because the magnitude of the additional credit is not
unreasonably high in comparison to the credit paid with respect to
other pricing tiers on the Exchange, and in comparison to the credits
paid by other exchanges for orders that provide midpoint liquidity. For
example, ETP Holders currently receive credits in Tape A, Tape B and
Tape C Securities that range between $0.0010 per share and $0.0020 per
share under Tier 1, Tier 2 and Basic Rates.
    With respect to credits paid by the Exchange's competitors, the
Nasdaq Stock Market LLC provides a credit of $0.0025 per share for MPL
orders in Tape A, Tape B and Tape C Securities that add non-displayed
midpoint liquidity on that market for members that add greater than 5
million shares of midpoint liquidity and add 8 million shares on non-
displayed liquidity.\25\
---------------------------------------------------------------------------

    \25\ See Rebate to Add Non-Displayed Midpoint Liquidity, at
http://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2.
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    The Exchange believes that the proposed new credit for liquidity
providing orders in Tapes A and C Securities under current Tier 3 is
also equitable because the proposal would continue to encourage ETP
Holders to route displayed liquidity to the Exchange in Tape A and C
Securities, thereby contributing to robust levels of liquidity, which
benefits all market participants.
    The Exchange notes that there are currently 4 firms qualifying for
Tier 3 and another 4 firms within 0.1% of qualifying for Tier 3. Based
on current participation on the Exchange, one firm would qualify for
the new credit and six firms are within 0.1% of qualifying for it.
Without having a view of an ETP Holder's activity on other markets and
off-exchange venues, the Exchange believes the proposed new credit
would provide an incentive for market participants to increase
liquidity in order to qualify for the proposed credit, thereby
encouraging submission of additional liquidity to the Exchange. The
proposed change will thereby encourage the submission of additional
liquidity to a national securities exchange, thus promoting price
discovery and transparency and enhancing order execution opportunities
for ETP Holders from the substantial amounts of liquidity present on
the Exchange. All ETP Holders would benefit from the greater amounts of
liquidity that will be present on the Exchange, which would provide
greater execution opportunities.
    The Exchange believes the proposed rule change would improve market
quality for all market participants on the Exchange and, as a
consequence, attract more liquidity to the Exchange thereby improving
market-wide quality. The proposal neither targets nor will it have a
disparate impact on any particular category of market participant. ETP
Holders that currently qualify for credits associated with MPL Orders
will continue to receive credits when they provide liquidity to the
Exchange. With the proposed new MPL Orders Step Up Tiers, all ETP
Holders would be eligible to qualify for the higher credit if they
increase their MPL Adding ADV over their own baseline of order flow.
The Exchange believes that recalibrating the credits for providing
liquidity will continue to attract order flow and liquidity to the
Exchange, thereby providing additional price improvement opportunities
on the Exchange and benefiting investors generally. As to those market
participants that do not presently qualify for the credits associated
with MPL Orders, the proposal will not adversely impact their existing
pricing or their ability to qualify for other credits provided by the
Exchange.
The Proposed Fee Change Is not Unfairly Discriminatory
    The Exchange believes it is not unfairly discriminatory to provide
increased per share credits as the proposed increased credits would be
provided on an equal basis to all ETP Holders that add liquidity by
meeting the requirements of the proposed MPL Orders Step Up Tiers.
Further, the Exchange believes the proposed increased per share credits
would incentivize ETP Holders that meet the current tiered requirements
to send more of their MPL Orders to the Exchange to qualify for
increased credits. The Exchange also believes that the proposed change
is not unfairly discriminatory because it is reasonably related to the
value of the Exchange's market quality associated with higher volume.
The proposed increased per share credits would apply equally to all ETP
Holders as each would be required to provide liquidity in MPL Orders
for Tape A, Tape B and Tape C Securities combined during the billing
month equal to at least 2 million shares over the ETP Holder's May 2019
MPL Adding ADV in order to qualify for MPL Orders Step Up Tier 1 and at
least 1 million shares over the ETP Holder's May 2019 MPL Adding ADV in
order to qualify for MPL Orders Step Up Tier 2 regardless of whether an
ETP Holder currently meets the requirement of another pricing tier.
    Similarly, the Exchange believes it is not unfairly discriminatory
to provide a higher new credit for liquidity providing orders in Tapes
A and C Securities under current Tier 3 because the proposed credit
would be provided on an equal basis to all ETP Holders that add
liquidity by meeting the Tier 3 requirements. Further, the Exchange
believes the proposed credit would incentivize ETP Holders to send more
orders to the Exchange to qualify for the higher credit.
    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,\26\ the Exchange
believes that the proposed rule change would not impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act. Instead, as discussed above, the Exchange believes
that the proposed changes would encourage the submission of additional
liquidity to a public exchange, thereby promoting market depth, price
discovery and transparency and enhancing order execution opportunities
for ETP Holders. As a result, the Exchange believes that the proposed
change furthers the Commission's goal in adopting Regulation NMS of
fostering integrated competition among orders, which promotes ``more
efficient pricing of individual stocks for all types of orders, large
and small.'' \27\
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    \26\ 15 U.S.C. 78f(b)(8).
    \27\ Regulation NMS, 70 FR at 37498-99.
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    Intramarket Competition. The proposed changes are designed to
attract additional order flow to the Exchange. The Exchange believes
that the proposed increased credits would continue to incentivize
market participants to direct more orders to the Exchange, and in
particular, liquidity providing MPL Orders. Greater liquidity

benefits all market participants on the Exchange by providing more
trading opportunities and encourages ETP Holders, to send orders,
thereby contributing to robust levels of liquidity, which benefits all
market participants on the Exchange. The proposed credits would be
available to all similarly-situated market participants, and, as such,
the proposed change 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 exchange and off-exchange venues if they
deem fee levels at those other venues to be more favorable. The
Exchange notes that for the months of January 2019, February 2019,
March 2019, April 2019 and May 2019, the Exchange's market share of
intraday trading (excluding auctions) was 9.01%, 8.33%, 9.02%, 8.73%
and 8.8%, respectively.\28\ In such an environment, the Exchange must
continually adjust its fees and rebates to remain competitive with
other exchanges and with off-exchange venues. Because competitors are
free to modify their own fees and credits in response, and because
market participants may readily adjust their order routing practices,
the Exchange does not believe its proposed fee change can impose any
burden on intermarket competition.
---------------------------------------------------------------------------

    \28\ See note 12, supra.
---------------------------------------------------------------------------

    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) \29\ of the Act and subparagraph (f)(2) of Rule
19b-4 \30\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
---------------------------------------------------------------------------

    \29\ 15 U.S.C. 78s(b)(3)(A).
    \30\ 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) \31\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \31\ 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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-NYSEArca-2019-53 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-2019-53. 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 (http://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-2019-53, and should be
submitted on or before August 9, 2019.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\32\
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    \32\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-15346 Filed 7-18-19; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 86, Number 144 (Friday, July 30, 2021)]
[Notices]
[Pages 41075-41076]
[FR Doc No: 2021-16299]

=======================================================================
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DEPARTMENT OF HOMELAND SECURITY

Coast Guard

[Docket No. USCG-2021-0242]

Great Lakes Pilotage Advisory Committee Meeting

AGENCY: U.S. Coast Guard, Department of Homeland Security.

ACTION: Notice of Federal Advisory Committee Meeting.

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

SUMMARY: The Great Lakes Pilotage Advisory Committee (Committee) will
meet in Cape Vincent, New York, to discuss matters relating to Great
Lakes pilotage, including review of proposed Great Lakes pilotage
regulations and policies. The meeting will be open to the public.

DATES:
    Meeting: The Committee will meet on Wednesday, September 1, 2021,
from 8 a.m. to 5:30 p.m. Eastern Daylight Time. Please note that this
meeting may adjourn early if the Committee has completed its business.
    Comments and supporting documentations: To ensure your comments are
received by Committee members before the meeting, submit your written
comments no later than August 24, 2021.

ADDRESSES: The meeting will be held at the Saint Lawrence Seaway
Pilots' Association conference facility, 230 N Point Street, Cape
Vincent, NY 13618.
    Pre-registration Information: Pre-registration is not required for
access. Attendees will be required to follow as closely as possible
COVID-19 safety guidelines promulgated by the Centers for Disease
Control and Prevention (CDC), which includes vaccinated persons do not
need to wear masks. Masks will be provided for non-vaccinated
attendees. Some CDC guidance is here: https://www.cdc.gov/coronavirus/2019-ncov/communication/guidance.html
    For information on facilities or services for individuals with
disabilities or to request special assistance at the meeting, contact
the individual listed in the FOR FURTHER INFORMATION CONTACT section of
this notice.
    Instructions: You are free to submit comments at any time,
including orally at the meeting, but if you want Committee members to
review your comment before the meeting, please submit your comments no
later than August 24, 2021. We are particularly interested in comments
on the issues in the ``Agenda'' section below. We encourage you to
submit comments through the Federal eRulemaking Portal at https://www.regulations.gov. If your material cannot be submitted using https://www.regulations.gov, call or email the individual in the FOR FURTHER
INFORMATION CONTACT section of this document for alternate
instructions. You must include the words ``Department of Homeland
Security'' and the docket number USCG-2021-0242. Comments received will
be posted without alteration at https://www.regulations.gov, including
any personal information provided. You may wish to view the Privacy and
Security Notice available on the homepage of www.regulations.gov, and
DHS's eRulemaking System of Records notice (85FR 14226, March 11,
2020). If you encounter technical difficulties with comment submission,
contact the individual listed in the FOR FURTHER INFORMATION CONTACT
section of this notice.
    Docket Search: Documents mentioned in this notice as being
available in the docket, and all public comment, will be in our online
docket at https://www.regulations.gov and can be viewed by following
that website's instructions. Additionally, if you go to the online
docket and sign-up for email alerts, you will be notified when comments
are posted.

FOR FURTHER INFORMATION CONTACT: Mr. Vincent Berg, Alternate Designated
Federal Officer of the Great Lakes Pilotage Advisory Committee,
telephone<PHONE_NUMBER>, or email<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION: Notice of this meeting is in compliance with
the Federal Advisory Committee Act (5 U.S.C. Appendix). The Great Lakes
Pilotage Advisory Committee is established under the authority of 46
U.S.C. 9307, and makes recommendations to the Secretary of Homeland
Security and the Coast Guard on matters relating to Great Lakes
pilotage, including review of proposed

Great Lakes pilotage regulations and policies.
    Agenda: The Great Lakes Pilotage Advisory Committee will meet on
Wednesday, September 1, 2021 to review, discuss, deliberate and
formulate recommendations, as appropriate on the following topics:
    1. Status of Committee member's terms and appointments.
    2. Individual pilot compensation reporting.
    3. Port of Toledo.
    4. Method of expensing major capital assets.
    5. Efficiency--delays and double pilotage.
    6. Pilotage fees during winter work.
    7. Cruise ships and Canadian tankers.
    8. Ojibway anchorage.
    9. Pilot Association project and updates.
    10. Stakeholder Outreach.
    11. Public Comments.
    A copy of all meeting documentation will be available at https://www.dco.uscg.mil/Our-Organization/Assistant-Commandant-for-Prevention-Policy-CG-5P/Marine-Transportation-Systems-CG-5PW/Office-of-Waterways-and-Ocean-Policy/Great-Lakes-Pilotage-Advisory-Committee/ by August 24,
2021. Alternatively, you may contact Mr. Vincent Berg as noted in the
FOR FURTHER INFORMATION CONTACT section above.
    Public comments or questions will be taken throughout the meeting
as the Committee discusses the issues and prior to deliberations and
voting. There will also be a public comment period at the end of the
meeting. Speakers are requested to limit their comments to 5 minutes.
Please note that the public comment period will end following the last
call for comments. Contact the individual listed in the FOR FURTHER
INFORMATION CONTACT section above, to register as a speaker.

    Dated: July 27, 2021.
Michael D. Emerson,
Director, Marine Transportation Systems.
[FR Doc. 2021-16299 Filed 7-29-21; 8:45 am]
BILLING CODE 9110-04-P