[Federal Register Volume 79, Number 141 (Wednesday, July 23, 2014)]
[Rules and Regulations]
[Pages 42665-42670]
[FR Doc No: 2014-17228]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Parts 2 and 35

[Docket No. PL14-1-000]

Payment of Dividends From Funds Included in Capital Account

AGENCY: Federal Energy Regulatory Commission.

ACTION: Policy statement.

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SUMMARY: The Commission issues this policy statement to provide
guidance that the Federal Power Act (FPA) should be interpreted as not
prohibiting the payment of dividends from funds included in capital
account by any public utility that has a market-based rate tariff on
file with the Commission, does not have captive customers, and does not
provide transmission or local distribution services. The Commission has
concluded that the payment of dividends from funds included in capital
account by such public utilities does not implicate the concerns
underlying the enactment of the provision of the FPA that prohibits the
payment of dividends from funds included in capital account. Thus, it
is unnecessary for any public utility that meets the criteria
identified in this policy statement to file a petition for declaratory
order in order to seek assurances that dividends paid from capital
account are not unlawful under this provision of the FPA.

DATES: This policy will become effective July 23, 2014.

FOR FURTHER INFORMATION CONTACT:
Eric Olesh (Technical Information), Office of Energy Market Regulation,
888 First Street NE., Washington, DC 20426,<PHONE_NUMBER>,
<EMAIL_ADDRESS>
Antonia Frost (Legal Information), Office of General Counsel, 888 First
Street NE., Washington, DC 20426,<PHONE_NUMBER>,
<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:
148 FERC ] 61,020

Before Commissioners: Cheryl A. LaFleur, Acting Chairman; Philip D.
Moeller, John R. Norris, and Tony Clark.

Policy Statement

Issued July 17, 2014.

    1. The Commission issues this policy statement to provide guidance
that section 305(a) of the Federal Power Act (FPA) \1\ should be
interpreted as not prohibiting the payment of dividends from funds
included in capital account by any public utility that has a market-
based rate tariff on file with the Commission, does not have captive
customers, and does not provide transmission or local distribution
services because the Commission has concluded that the payment of
dividends from capital account by such public utilities does not appear
to implicate the concerns underlying the enactment of FPA section
305(a). In issuing this policy statement, the Commission eliminates a
regulatory burden otherwise applicable under FPA section 305(a) to
certain public utilities that pay dividends from funds included in
capital account. Thus, it is unnecessary for any public utility that
meets the criteria identified in this policy statement to file a
petition for declaratory order in order to seek assurances that
dividends paid from capital account are not unlawful under FPA section
305(a).
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    \1\ 16 U.S.C. 825d(a).
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I. Background

A. FPA Section 305(a) and Its Underlying Concerns

    2. FPA section 305(a) provides that it shall be unlawful for any
officer or director of any public utility to participate in the making
or paying of any dividends of such public utility from any funds
properly included in capital account.\2\
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    \2\ Id.
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    3. In Citizens Utils. Co., the Commission noted that this provision
of FPA section 305(a) had not previously been interpreted by the
Commission or the courts, and that there was no explicit statement in
the legislative history discussing the intent behind this provision.\3\
The Commission went on to explain, however, that Congress' intent could
be gleaned from the practices that led to the passage of the
legislation,\4\ providing as an example:
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    \3\ Citizens Utils. Co., 84 FERC ] 61,158, at 61,864 (1998)
(Citizens).
    \4\ Id. at 61,864-65.

that sources from which cash dividends were paid were not clearly
identified and that holding companies had been paying out excessive
dividends on the securities of their operating companies. A key
concern, thus, was corporate officials raiding corporate coffers for
their personal financial benefit.\5\
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    \5\ Id. at 61,865 (footnotes omitted); see also Entergy
Louisiana Inc., 114 FERC ] 61,060, at P 12 (2006); Exelon Corp., 109
FERC ] 61,172, at P 8 (2004); ALLETE, Inc., 107 FERC ] 61,041, at P
10 (2004); Niagara Mohawk Holdings, Inc., 95 FERC ] 61,381, at
62,416, order denying reh'g, 96 FERC ] 61,144 (2001).

    In later cases, in order to ensure that the dividend pay-outs in
question would not impair the liquidity and financial integrity of a
public utility, the Commission has also often conditioned its grant of
declaratory relief on the utility's commitment to observe specified
limitations on the amount of such dividends or on other financial
commitments.\6\
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    \6\ Niagara Mohawk Holdings, Inc., 99 FERC ] 61,323, at P 10
(2002) (order on compliance filing accepting petitioner's commitment
not to pay dividends out of paid-in capital unless it had an
investment grade credit rating for its long-term debt); Exelon
Corp., 109 FERC ] 61,172 at P 9 (requiring petitioner to maintain a
minimum common equity balance of 30 percent of total capital).
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B. Petitions for Declaratory Order Requesting Relief

    4. In cases in which a dividend (cash or otherwise) will be
accounted for as a charge to stated, additional, or miscellaneous paid-
in capital of a public utility,\7\ public utilities often filed
petitions for declaratory orders in which the petitioner requests the
Commission's concurrence that, based upon the facts and circumstances
presented, the making or paying of a proposed dividend will not
implicate the concerns underlying the enactment of FPA section 305(a)
and, therefore, will not violate FPA section 305(a). The majority of
these petitions arose from three situations: (1) Cases involving
utility mergers or acquisitions in which, due to the application of
purchase accounting to the transaction, the retained earnings, which is
the traditional source of dividends, of the acquired public utility is
reclassified for balance sheet purposes as additional paid-in capital,
without having any effect on cash otherwise available for paying future
dividends; \8\ (2) cases involving the distribution (or ``spin-off'')
of the stock of a subsidiary or subsidiaries of a public utility, as
the result of which, again for balance sheet purposes, the retained
earnings of the public utility may be substantially reduced or
eliminated, without having

any effect on cash otherwise available for paying future dividends; \9\
and (3) cases involving recapitalizations of public utilities to reduce
excessive equity balances with debt, including situations in which
single-asset generating companies with declining capital needs have
experienced a build-up in their equity balances as their assets have
been depreciated.\10\
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    \7\ See, e.g., 18 CFR pt. 101, Account 201, Common stock issued,
and Account 211, Miscellaneous paid-in capital.
    \8\ See, e.g., National Grid plc, 117 FERC ] 61,080, at P 83
(2006), order denying reh'g, 122 FERC ] 61,096 (2008); Ameren Corp.,
131 FERC ] 61,240 (2010); Duke Energy Ohio, Inc., 137 FERC ] 61,137
(2011).
    \9\ See, e.g., Citizens, 84 FERC ] 61,158 (1998); Delmarva Power
& Light Co., 91 FERC ] 61,043 (2000); ALLETE, Inc., 107 FERC ]
61,041 (2004). In ALLETE, Inc., the Commission observed that the
spin-off transaction was less like a payment of cash dividends than
it was a corporate restructuring involving a one-time distribution
of property, although the accounting issues presented were similar.
    \10\ See, e.g., PPL Electric Utilities Corp., 99 FERC ] 61,317
(2002); Allegheny Generating Co., 130 FERC ] 61,269 (2010); System
Energy Resources, Inc., 140 FERC ] 61,184 (2012).
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    5. In response to petitions for declaratory orders concerning these
three situations, and sometimes in other situations, the Commission has
found that FPA section 305(a) would not be violated by the payment of
dividends, and it has allowed the public utility to make or pay
dividends from funds included in capital account.
    6. The Commission has used a three-factor analysis, derived from
Citizens, to determine when a proposed transaction does not implicate
the concerns underlying FPA section 305(a), specifically that: (1) The
utility clearly identifies the sources from which the dividends will be
paid; (2) the dividends will not be excessive; and (3) the proposed
transaction will not have an adverse effect on the value of
shareholders' interests.\11\ In certain orders granting relief from FPA
section 305(a), issued subsequent to Citizens, the Commission's
determination also was based on commitments by petitioners either to a
specific dollar cap on dividends or a limitation on the payment of
dividends equal to the pre-merger retained earnings balance of the
acquired utility, and/or a commitment by the public utility to limit
the amount of dividends from paid-in capital so that common equity, as
a percentage of total capitalization, is maintained at a minimum level
(frequently, a minimum of 30 percent common equity as a percentage of
total capitalization).\12\
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    \11\ Citizens, 84 FERC at 61,865.
    \12\ See, e.g., Duke Energy Ohio, Inc., 137 FERC ] 61,137, at P
7 (2011); National Grid plc, 117 FERC ] 61,080, at P 83 (2006). The
Commission also has accepted alternative protections. See, e.g.,
Niagara Mohawk Holdings, Inc., 99 FERC ] 61,323, at PP 12-13 (2002).
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    7. Historically, these petitions for declaratory orders concerning
FPA section 305(a) have largely involved requests by public utilities
that have captive customers.\13\ The Commission has found that a
proposed transaction would not violate FPA section 305(a) where the
Commission has been assured that no exploitation or threat to the
financial integrity of the utilities would result from the payment of
dividends from capital account, and therefore would not impair the
utility's ability to continue its obligation to serve captive
customers.\14\
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    \13\ The Commission's regulations define ``captive customers''
to mean ``any wholesale or retail electric energy customers served
by a franchised public utility under cost-based regulation.'' 18 CFR
35.36(a)(6) (2013). Our use of the term ``captive customers'' in
this policy statement is based on this definition.
    \14\ See, e.g., National Grid plc, 117 FERC ] 61,080 (2006),
order denying reh'g, 122 FERC ] 61,096 (2008).
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C. May 16, 2013 Petition for Declaratory Order

    8. On May 16, 2013 (May 16 Petition),\15\ Exelon Generation
Company, LLC (Exelon Generation) and five of its direct and indirect
subsidiaries (the Acquired Subsidiaries) \16\ (collectively Applicants)
requesting that the Commission confirm that FPA section 305(a) was not
a bar to the payment of dividends from capital account under the
limitations and circumstances described in the petition.\17\ The
relative novelty in this May 16 Petition, as compared with other FPA
section 305(a) petitions, was that it did not involve utilities that
have captive customers.\18\ Rather, Applicants stated that Exelon
Generation and the Acquired Subsidiaries did not have captive
customers; did not provide transmission or local distribution service
or serve as a designated providers of last resort (POLR) for any class
of customers; and had electric market-based rate authorizations from
the Commission, with the standard waivers and exemptions, including
waivers of FPA section 204(a) (with respect to securities issuances)
\19\ and waiver of the requirement to maintain their books and records
in accordance with the Uniform System of Accounts (USofA).\20\
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    \15\ While the May 16 Petition arose from a merger transaction
and related accounting issues (see infra note 17), our policy
statement in this proceeding is not limited in its applicability to
transactions involving mergers and their related accounting issues.
    \16\ The five direct and indirect subsidiaries of Exelon
Generation included CER Generation II, LLC, Constellation Mystic
Power, LLC, Constellation NewEnergy, Inc., Constellation Power
Source Generation, Inc. and Criterion Power Partners, LLC.
    \17\ The May 16 Petition arose from a merger transaction, and
involved factual circumstances familiar to the Commission in the
context of FPA section 305(a). Specifically, Applicants explained
that the merger between Exelon Corporation (Exelon) and
Constellation Energy Group, Inc. (Constellation) was recorded by
Exelon under the purchase method of accounting and that Exelon
applied ``push-down'' accounting to the Legacy Constellation
Subsidiaries (i.e., all of the subsidiaries of Constellation that
became direct and indirect subsidiaries of Exelon Generation),
including the Acquired Subsidiaries, a subset of the Legacy
Constellation Subsidiaries, which are public utilities under the
FPA. ``Push-down'' accounting is a method of accounting in which the
financial statements of a subsidiary are presented to reflect the
costs incurred by the parent company to buy the subsidiary, instead
of the subsidiary's historical costs. Accordingly, the purchase
costs of the parent company are shown in the subsidiary's
statements.
    As a result of the ``push-down'' accounting adjustments to the
Legacy Constellation Subsidiaries at the time of the merger closing,
the pre-merger retained earnings balances of the Legacy
Constellation Subsidiaries were ``reset to zero'' and reestablished
on their books as miscellaneous paid-in capital. In effect, the
traditional source of dividends--retained earnings--was eliminated,
without, however, having any impact on cash actually available for
paying dividends.
    The purpose of the May 16 Petition was to obtain a Commission
determination that FPA section 305(a) did not prohibit: (1) The
Acquired Subsidiaries from paying dividends to their parent company,
Exelon Generation, from their respective capital account in equal
measure to the funds that were recorded as retained earnings at the
close of the merger; and (2) Exelon Generation from, in turn, paying
dividends to its parent company, Exelon Ventures LLC, from its
capital account to the extent that Exelon Generation has received
dividends from any of the Legacy Constellation Subsidiaries paid out
of funds recorded as miscellaneous paid-in capital.
    \18\ However, the Commission notes that, in Docket No. EL06-15-
000, Exelon Generation and an affiliate previously had filed a
petition for declaratory order requesting a determination that FPA
section 305(a) was not a bar to the payment of dividends from
capital account under the limitations and circumstances described in
that petition. Exelon Generation Company, LLC, 114 FERC ] 61,317
(2006).
    \19\ 16 U.S.C. 824c(a).
    \20\ 18 CFR pt. 101.
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    9. In the May 16 Petition, Applicants presented the Commission with
two alternative requests:
    (1) The Commission could declare that FPA section 305(a) is not a
bar to the proposed payment of dividends by the Applicants, and this
determination could be based on the traditional Citizens three-part
analysis, namely, that: (i) the source of the dividends will be clearly
identified; (ii) the dividends will not be excessive; and (iii) the
issuance of such dividends will not have an adverse effect on the value
of shareholders' interests; \21\ or, alternatively,
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    \21\ See supra P 6.
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    (2) the Commission could declare that FPA section 305(a) is not a
bar to the payment of dividends by the Applicants and all current and
future public utility subsidiaries of Exelon that have market-based
rate authority, do not have captive customers, do not provide
transmission or local distribution service, and will not be the POLR
for any class of

customers, rather than apply the traditional Citizens three-factor
analysis.
    In support of its latter alternative, Applicants argued that the
concerns relating to traditional public utilities, which FPA section
305(a) was meant to address, were not present for these kinds of non-
traditional public utilities. In particular, Applicants argued that, in
Order No. 697, the Commission concluded that it was appropriate to
apply a different standard of oversight to public utilities that do not
have captive customers and do not sell electricity at cost-based
rates.\22\ Applicants explained that, in Order No. 697, the Commission
found that it was reasonable to continue to grant (1) blanket
authorizations under FPA section 204(a) to issue securities, and (2)
waivers from the requirement to maintain books in accordance with the
USofA,\23\ to those entities that do not have captive customers and do
not sell electricity at cost-based rates. In essence, Applicants argued
that it would be logically inconsistent for the Commission to grant a
non-traditional public utility (i.e., merchant generators and power
marketers) with market-based rate authorization a blanket authorization
under FPA section 204(a) to issue securities, as well as a waiver from
the requirement to maintain its books in accordance with the USofA,
while, at the same time, under FPA section 305(a), limiting the
accounts from which that public utility may pay dividends.\24\
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    \22\ Applicants' May 16, 2013 Petition at 14.
    \23\ Market-Based Rates for Wholesale Sales of Electric Energy,
Capacity and Ancillary Services by Public Utilities, Order No. 697,
FERC Stats. & Regs. ] 31,252, at PP 984, 999, clarified, 121 FERC ]
61,260 (2007), order on reh'g, Order No. 697-A, FERC Stats. & Regs.
] 31,268, clarified, 124 FERC ] 61,055, order on reh'g, Order No.
697-B, FERC Stats. & Regs. ] 31,285 (2008), order on reh'g, Order
No. 697-C, FERC Stats. & Regs. ] 31,291 (2009), order on reh'g,
Order No. 697-D, FERC Stats. & Regs. ] 31,305 (2010), aff'd sub nom.
Montana Consumer Counsel v. FERC, 659 F.3d 910 (9th Cir. 2011),
cert. denied, 133 S. Ct 26 (2012).
    \24\ Applicants' May 16, 2013 Petition at 15. Specifically,
Applicants stated that it ``would be anomalous for the Commission to
conclude, on the one hand, that it need not be concerned with (a)
the quantity or character of securities issued by a public utility
[under FPA section 204(a)] or (b) the manner in which it keeps its
accounts [under the USofA], and then to conclude that the Commission
is concerned about how the entity accounts for dividends paid on its
securities [under FPA section 305(a)].'' Id.
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    10. In response to the May 16 Petition, the Electric Power Supply
Association (EPSA) \25\ filed comments generally supporting both
alternative requests for relief by Applicants, but it also advocated
that the Commission grant an even broader FPA section 305(a)
determination.\26\ EPSA posited that the factors that made the
Applicants' petition compelling are broadly applicable to certain
classes of public utilities, such as merchant generators and power
marketers, which have market-based rate tariffs on file with the
Commission, do not have captive customers, and do not provide
transmission or local distribution services.\27\ EPSA added that,
although Applicants proposed that the entities eligible for Applicants'
alternative broadly construed determination include a limitation that
they would not serve as a designated POLR, such condition is not
necessary where a designated POLR would meet the other three criteria,
i.e, would have market-based rate tariffs on file with the Commission,
would not have captive customers, and would not provide transmission or
local distribution services.\28\ Therefore, EPSA urged the Commission
to omit the POLR limitation proposed by Applicants in granting the
broader relief requested under section 305(a).\29\
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    \25\ EPSA is the national trade association for competitive
power suppliers, including merchant generators and power marketers.
    \26\ EPSA June 17, 2013 Comments at 1-2.
    \27\ Id. at 2-4.
    \28\ Id. at 2 n.3.
    \29\ Id.
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    11. In support of its request for a broader FPA section 305(a)
determination, EPSA argued that, in the case of entities that have
market-based rate authority, do not have captive customers, and do not
provide transmission or local distribution services, the concerns
underlying section 305(a) are not present.\30\ In such cases, according
to EPSA, the distribution of dividends would not have any adverse
effect on the financial integrity of any traditional public utility,
its customers, or the ability of state commissions to protect public
utility customers.\31\
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    \30\ Id. at 5-6.
    \31\ Id. at 5.
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    12. In sum, because of the broad applicability of these principles
to the competitive power industry as a whole, and in the interest of
administrative economy, EPSA requested that the Commission issue a
blanket order finding that FPA section 305(a) does not act as a bar to
the payment of dividends from capital account by any public utility
that has market-based rate authority, does not have captive customers,
and does not provide transmission or local distribution services.\32\
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    \32\ Id. at 2-4.
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    13. In their answer, Applicants supported EPSA's request for a
broader FPA section 305(a) determination and, therefore, noted their
agreement with EPSA's recommendation that the Commission omit the POLR
limitation.\33\ As an additional basis for dropping the POLR
limitation, Applicants observed that POLR service is a retail electric
service and, thus, within the regulatory framework of state utility
commissions.\34\ Applicants pointed out that those public utilities
that provide transmission and local distribution services and also
serve as a POLR would not be eligible for the alternative broader
determination sought in Applicants' petition by virtue of the limiting
condition that such utilities are providing transmission and local
distribution services.\35\ Further, Applicants asserted that
eliminating the POLR limitation would have positive public policy
implications because, in such cases, non-traditional public utilities
would not be discouraged from participating in POLR markets due to the
FPA section 305(a) limits on the payment of dividends.\36\ Accordingly,
Applicants stated that they would not object to the Commission's
issuance of a blanket declaratory order based on EPSA's proposal.
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    \33\ Applicants' June 20, 2013 Answer at 3. Applicants noted
that POLR, or default, service is also known by other terms, such as
Standard Offer Service or Basic Generation Service. Id. at 2 n.3.
    \34\ Id. at 3.
    \35\ Id.
    \36\ Id.
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    14. In its September 3, 2013 order \37\ on the May 16 Petition, the
Commission granted Applicants' primary request for relief, based on the
Commission's traditional Citizens three-factor analysis, since the
Commission agreed that the concerns underlying FPA section 305(a) were
not present under the limitations and circumstances described in the
petition.\38\ While it declined to grant the broader relief requested
in that proceeding, the Commission also stated that it believed that
Applicants and EPSA had made a strong case for a close examination of
whether FPA section 305(a) should be interpreted as not prohibiting the
payment of dividends from capital account by any public utility that
has a market-based rate tariff on file with the Commission, does not
have captive customers, and does not provide transmission or local
distribution services.\39\ Accordingly, the Commission stated its
intent to open a generic proceeding to consider the broader request for
relief, which would provide public notice and an

opportunity for a broader range of interested parties to comment.\40\
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    \37\ Exelon Generation Company, LLC, 144 FERC ] 61,181 (2013).
    \38\ Id. PP 20-21.
    \39\ Id. P 22.
    \40\ Id.
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D. Proposed Policy Statement

    15. In the proposed policy statement,\41\ the Commission undertook
a generic proceeding to consider whether FPA section 305(a) should be
interpreted as not prohibiting the payment of dividends from capital
account by any public utility that has a market-based rate tariff on
file with the Commission, does not have captive customers,\42\ and does
not provide transmission or local distribution services.\43\ Because
the Commission believed that the payment of dividends from capital
account by such public utilities does not appear to create the concerns
underlying the enactment of FPA section 305(a), the Commission proposed
this policy in order to eliminate the regulatory burden of filing
unnecessary petitions for declaratory relief under FPA section 305(a)
by such public utilities.
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    \41\ Proposed Policy Statement, Payment of Dividends from Funds
Included in Capital Accounts, 146 FERC ] 61,108 (2014).
    \42\ See supra note 13.
    \43\ The Commission proposed that a public utility that does not
provide transmission or local distribution service is a public
utility that does not own transmission or local distribution
facilities providing these services.
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    16. As previously noted, the Commission in response to the May 16
Petition had expressed its opinion that Applicants and EPSA made a
strong case for a close examination of whether FPA section 305(a)
should be interpreted as not prohibiting the payment of dividends from
capital account by any public utility that has a market-based rate
tariff on file with the Commission, does not have captive customers,
and does not provide transmission or local distribution services.
    17. In the proposed policy statement, the Commission observed that
an eligible public utility: (1) Will have satisfied the Commission's
market power analysis to obtain market-based rate authority for its
wholesale power sales; (2) will have no captive customers that require
protection by the Commission or the state commissions; and (3) will not
provide transmission or local distribution services, which are
traditional monopoly services subject to Commission and state
commission oversight, to customers. Similar to the Commission's finding
in Order No. 697, the Commission stated that it may be appropriate to
now apply a different approach to its FPA section 305(a) oversight for
those public utilities that meet the three conditions. The Commission
noted, in this regard, that FPA section 305(a) was promulgated in an
era of traditional, vertically-integrated utilities providing monopoly
services to captive customers, and Congress wanted to ensure that the
distribution of dividends would not have any adverse effect on the
financial integrity (and thus the ability to serve) of any such public
utility or its customers. Since that time, the Commission observed that
the electric industry has evolved, and, in the proposed policy
statement, it proposed to oversee differently the payment of dividends
by non-traditional utilities, such as merchant generators and power
marketers, who have market-based rate authority, do not have captive
customers, and do not provide transmission and local distribution
services, which, as noted, are monopoly services.
    18. The Commission requested comment as to whether the Commission
should adopt a statement of policy that FPA section 305(a) should be
interpreted as not prohibiting the payment of dividends from funds in
capital account by any public utility that has a market-based rate
tariff on file with the Commission, does not have captive customers,
and does not provide transmission or local distribution services,
because such payment of dividends does not appear to implicate the
concerns underlying the enactment of FPA section 305(a) and it is thus
appropriate to eliminate this regulatory burden otherwise applicable
under FPA section 305(a) to such public utilities.

E. Commenters

    19. The Commission received comments from Exelon, EPSA, and two
individuals, Messrs. Blake Harrison and Daisuke Ikewaza. All commenters
supported adoption of the Commission's proposed policy statement. The
comments of Exelon and EPSA include arguments similar to those made in
support of Exelon Generation's May 16 Petition. Exelon and EPSA assert
that the Commission should adopt the proposed policy statement's
interpretation of FPA section 305(a) because the payment of dividends
by a public utility that meets the three proposed criteria does not
appear to implicate the concerns underlying FPA section 305(a), as such
dividends would not have any adverse effect on the financial integrity
of any traditional public utility, its customers, or the ability of
state utility commissions to protect such public utility customers.\44\
In addition, Exelon and EPSA argue that, in routinely granting waivers
and exemptions to public utilities that have been granted market-based
rate authority, including blanket authorization to issue securities
under FPA section 204, the Commission has determined that it is
appropriate to apply a different standard of review and oversight to
such public utilities.\45\ Furthermore, Exelon asserts that by adopting
this policy, the Commission would ensure that funds appropriately
available for the overall liquidity and financial integrity of a
holding company are not stranded at a subsidiary that is a non-
traditional utility (i.e., a utility that has market-based rates, does
not have captive customers, and does not provide transmission or
distribution services).\46\ Exelon also states that the policy will
eliminate unneeded filings and lessen the burden on the Commission of
reviewing those filings.\47\
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    \44\ Exelon's May 1, 2014 Comments at 5; EPSA May 20, 2014
Comments at 4.
    \45\ Exelon's May 1, 2014 Comments at 4-5; EPSA May 20, 2014
Comments at 5-6.
    \46\ Exelon's May 1, 2014 Comments at 5-6.
    \47\ Id. at 6.
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    20. Mr. Harrison asserts that Congress's key concern in passing FPA
section 305(a) was grounded in ensuring the financial and,
consequently, operational viability of a public utility by preventing a
utility's directors or officers from exploiting and withdrawing from a
utility's capital account.\48\ Harrison states that Congress originally
passed the FPA at a time when the primary model of a public utility was
a monopolistic, all-encompassing energy provider. In this model,
Harrison states that ratepayers were forced to deal with the public
utility in order to receive energy and that a public utility director's
financial improprieties could have a dramatic impact on the ratepayers'
energy service given there was no alternative energy option available
to the ratepayer. In that model, Harrison argues that it was necessary
to install safeguards to protect the public from practices that could
harm their access to energy.\49\
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    \48\ Harrison's April 14, 2014 Comments at 1.
    \49\ Id.
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    21. However, Mr. Harrison argues that the landscape of public
utilities has changed since the passage of the FPA toward more retail
competition and, in some limited circumstances, does not give rise to
the concern that motivated the initial prohibition in FPA section
305(a).\50\ Harrison further argues that, if the fundamental concern of
FPA section

305(a) involved protecting ratepayers from being negatively impacted by
improper dividend conduct where they were beholden only to the public
utility for their energy, and if it can be shown that ratepayers are
not beholden to a public utility with certain characteristics, then FPA
section 305(a) should not be applied to public utilities with those
characteristics.\51\
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    \50\ Id.
    \51\ Id.
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    22. Mr. Harrison agrees with the Commission's proposal in the
proposed policy statement that a public utility that has a market-based
rate tariff on file with the Commission, does not have captive
customers, and does not provide transmission or local distribution
services does not lend itself to the concern that motivated Congress to
pass FPA section 305(a). Harrison states that, if the public utility
has a market-based rate tariff on file with the Commission, it is clear
evidence that the public utility is not operating in a regulated,
centralized utility environment and it signals that the public utility
is not a traditionally-regulated monopoly. Harrison asserts that,
although it is possible that such a public utility has market power,
which would give rise to the set of concerns that motivated FPA section
305(a), the Commission's next two proposed criteria further distinguish
this particular type of public utility and alleviate the concerns
motivated by FPA section 305(a).\52\ Harrison argues that, if the
public utility does not have captive customers, its failure as a result
of its financial practices would only harm those ratepayers who could
instead elect to purchase their energy from other suppliers.\53\
Finally, Harrison argues that, if the public utility does not provide
transmission or distribution, this characteristic is further evidence
that financial failure as a result of improper financial conduct would
not unduly disrupt ratepayer service.\54\
---------------------------------------------------------------------------

    \52\ Id. at 2.
    \53\ Id.
    \54\ Id.
---------------------------------------------------------------------------

    23. Mr. Ikewaza also agrees that the Commission's three criteria in
the proposed policy statement demonstrate when a public utility does
not have market power. Ikewaza explains that public utilities with
market power could exploit their capital account and pass on the
financial losses to their customers, because their customers have no
alternatives in the market and they would be forced to buy electricity
even when the price of electricity is higher.\55\ Ikewaza adds that the
Commission's three-factor analysis in Citizens, which the Commission
relies on to analyze FPA section 305(a) petitions,\56\ is a framework
established on the premise that traditional utilities indeed have
market power. Ikewaza states that this framework helps ensure the
financial integrity of, and investment in, traditional utilities by
preventing them from arbitrarily using funds from their capital
account.\57\ However, Ikewaza argues that the Citizens framework is not
necessarily suitable for non-traditional utilities because non-
traditional utilities usually do not have market power.\58\
---------------------------------------------------------------------------

    \55\ Ikewaza's April 17, 2014 Comments at 1.
    \56\ As described above, under the three-factor analysis in
Citizens, the Commission determines that a proposed transaction does
not implicate the concerns underlying FPA section 305(a) if: (1) The
utility clearly identifies the sources from which the dividends will
be paid; (2) the dividends will not be excessive; and (3) the
proposed transaction will not have an adverse effect on the value of
shareholders' interests. See supra P 6 (discussing Citizens, 84 FERC
] 61,158 at 61,865).
    \57\ D. Ikewaza's April 17, 2014 Comments at 1.
    \58\ Id.
---------------------------------------------------------------------------

    24. Mr. Ikewaza states that, under the Commission's first
criterion--that the public utility that has a market-based rate tariff
on file with the Commission--it should be presumed that such a public
utility does not have market power because the Commission would not
grant market-based rate authority to a public utility that has market
power.\59\ Ikewaza explains that if the public utility lacks market
power, customers can find and substitute electricity from other
competitors.\60\ Ikewaza asserts that the Commission's second
criterion--that the public utility does not have captive customers--is
reasonable because it protects against a situation where, even if
customers have alternative sources of electricity from competing
suppliers, the alternatives may not be meaningful if the customers
cannot switch to alternative suppliers without difficulty and at
substantial cost.\61\ Ikewaza also states that the Commission's third
criterion--that the public utility does not provide transmission or
local distribution services--is reasonable. Ikewaza argues that, even
where a public utility that meets the first two criteria and thus does
not have enough discretion to exploit its capital funds, this third
criterion protects against the situation where a public utility still
provides transmission or local distribution services and thus could
choose to exploit its capital funds in a way that would have a very
significant, negative impact on customers.\62\ Therefore, Ikewaza
supports the third criteria as part of the Commission's policy
statement.
---------------------------------------------------------------------------

    \59\ Id. at 2.
    \60\ Id.
    \61\ Id.
    \62\ Id.
---------------------------------------------------------------------------

II. Policy Statement

    25. Recognizing that the electric industry has evolved, on the
record before us, we find, as a matter of policy, that FPA section
305(a) should not be construed as a bar to the payment of dividends
from funds included in capital account by any public utility that: Has
a market-based rate tariff on file with the Commission; does not have
captive customers; and does not provide transmission or local
distribution services. The payment of dividends from capital account by
such public utilities does not appear to implicate the concerns
underlying the enactment of FPA section 305(a), and we issue this
policy statement in order to eliminate a regulatory burden otherwise
applicable under FPA section 305(a) to such public utilities. In light
of our interpretation of FPA section 305(a), it is our view that a
public utility that meets the three criteria identified above does not
need to file a petition for declaratory order under FPA section 305(a)
requesting an interpretation from the Commission that FPA section
305(a) does not bar its payment of dividends from capital account.

III. Document Availability

    26. In addition to publishing the full text of this document in the
Federal Register, the Commission provides all interested persons an
opportunity to view and/or print the contents of this document via the
Internet through the Commission's Home Page (http://www.ferc.gov) and
in the Commission's Public Reference Room during normal business hours
(8:30 a.m. to 5:00 p.m. Eastern time) at 888 First Street NE., Room 2A,
Washington, DC 20426.
    27. From the Commission's Home Page on the Internet, this
information is available on eLibrary. The full text of this document is
available on eLibrary in PDF and Microsoft Word format for viewing,
printing, and/or downloading. To access this document in eLibrary, type
the docket number excluding the last three digits of this document in
the docket number field.
    28. User assistance is available for eLibrary and the Commission's
Web site during normal business hours from FERC Online Support at 202-
502-6652 (toll free at 1-866-208-3676) or email at
<EMAIL_ADDRESS>or the Public Reference Room at (202) 502-
8371, TTY<PHONE_NUMBER>. Email the Public Reference Room at
<EMAIL_ADDRESS>
    Issued: July 17, 2014.

    By the Commission.
Nathaniel J. Davis, Sr.,
Deputy Secretary.
[FR Doc. 2014-17228 Filed 7-22-14; 8:45 am]
BILLING CODE 6717-01-P


[Federal Register Volume 82, Number 161 (Tuesday, August 22, 2017)]
[Notices]
[Page 39894]
[FR Doc No: 2017-17769]

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DEPARTMENT OF HOMELAND SECURITY

Federal Emergency Management Agency

[Internal Agency Docket No. FEMA-4317-DR; Docket ID FEMA-2017-0001]

Missouri; Amendment No. 1 to Notice of a Major Disaster
Declaration

AGENCY: Federal Emergency Management Agency, DHS.

ACTION: Notice.

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

SUMMARY: This notice amends the notice of a major disaster declaration
for the State of Missouri (FEMA-4317-DR), dated June 2, 2017, and
related determinations.

DATES: This amendment was issued July 13, 2017.

FOR FURTHER INFORMATION CONTACT: Dean Webster, Office of Response and
Recovery, Federal Emergency Management Agency, 500 C Street SW.,
Washington, DC 20472,<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION: The notice of a major disaster declaration
for the State of Missouri is hereby amended to include the following
areas among those areas determined to have been adversely affected by
the event declared a major disaster by the President in his declaration
of June 2, 2017.

    Christian, Crawford, Dent, Iron, Wanye, and Wright Counties for
Individual Assistance (already designated for Public Assistance).
    Greene and Ste. Genevieve Counties for Individual Assistance.
    The following Catalog of Federal Domestic Assistance Numbers
(CFDA) are to be used for reporting and drawing funds: 97.030,
Community Disaster Loans; 97.031, Cora Brown Fund; 97.032, Crisis
Counseling; 97.033, Disaster Legal Services; 97.034, Disaster
Unemployment Assistance (DUA); 97.046, Fire Management Assistance
Grant; 97.048, Disaster Housing Assistance to Individuals and
Households In Presidentially Declared Disaster Areas; 97.049,
Presidentially Declared Disaster Assistance--Disaster Housing
Operations for Individuals and Households; 97.050 Presidentially
Declared Disaster Assistance to Individuals and Households--Other
Needs; 97.036, Disaster Grants--Public Assistance (Presidentially
Declared Disasters); 97.039, Hazard Mitigation Grant.

Brock Long,
Administrator, Federal Emergency Management Agency.
[FR Doc. 2017-17769 Filed 8-21-17; 8:45 am]
 BILLING CODE 9111-23-P


[Federal Register Volume 86, Number 241 (Monday, December 20, 2021)]
[Notices]
[Pages 72012-72016]
[FR Doc No: 2021-27419]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-34-93770; File No. SR-NYSEArca-2021-103]

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

December 14, 2021.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on December 1, 2021, NYSE Arca, Inc. (``NYSE Arca'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C.78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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

    The Exchange proposes to amend the NYSE Arca Equities Fees and
Charges (``Fee Schedule'') to amend the criteria to qualify for the
MPID Adding Tier pricing tier and adopt a per share credit for orders
that provide liquidity in Tape B securities under the MPID Adding Tier.
The Exchange proposes to implement the fee changes effective December
1, 2021.The proposed rule change is available on the Exchange's website
at www.nyse.com, at the principal office of the Exchange, and at the
Commission's Public Reference Room.

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

    In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.

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

1. Purpose
    The Exchange proposes to amend the Fee Schedule to amend the
criteria to qualify for the MPID Adding Tier pricing tier and adopt a
per share credit for orders that provide liquidity in Tape B securities
under the MPID Adding Tier.
    The Exchange proposes to implement the fee changes effective
December 1, 2021.
Background
    The Exchange operates in a highly competitive market. The
Commission has repeatedly expressed its preference for competition over
regulatory intervention in determining prices, products, and services
in the securities markets. In Regulation NMS, the Commission
highlighted the importance of market forces in determining prices and
SRO revenues and, also, recognized that current regulation of the
market system ``has been remarkably successful in promoting market
competition in its broader forms that are most important to investors
and listed companies.'' \4\
---------------------------------------------------------------------------

    \4\ 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.'' \5\ Indeed, equity trading is currently dispersed across
16 exchanges,\6\ numerous alternative trading systems,\7\ and broker-
dealer internalizers and wholesalers, all competing for order flow.
Based on publicly available information, no single exchange currently
has more than 18%

market share.\8\ 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.\9\
---------------------------------------------------------------------------

    \5\ 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).
    \6\ See Cboe U.S Equities Market Volume Summary, available at
https://markets.cboe.com/us/equities/market_share. See generally
https://www.sec.gov/fast-answers/divisionsmarketregmrexchangesshtml.html.
    \7\ 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.
    \8\ See Cboe Global Markets U.S. Equities Market Volume Summary,
available at http://markets.cboe.com/us/equities/market_share/.
    \9\ See id.
---------------------------------------------------------------------------

    The Exchange believes that the ever-shifting market share among the
exchanges from month to month demonstrates that market participants can
move order flow, or discontinue or reduce use of certain categories of
products. While it is not possible to know a firm's reason for shifting
order flow, the Exchange believes that one such reason is because of
fee changes at any of the registered exchanges or non-exchange venues
to which a firm routes order flow. With respect to non-marketable order
flow that would provide liquidity on an Exchange against which market
makers can quote, ETP Holders can choose from any one of the 16
currently operating registered exchanges to route such order flow.
Accordingly, competitive forces constrain exchange transaction fees
that relate to orders that would provide liquidity on an exchange.
Proposed Rule Change
    Pursuant to the MPID Adding Tier pricing tier, the Exchange
currently provides a per share credit for orders that provide liquidity
in Tape A and Tape C securities. Specifically, to qualify for the
pricing tier, an MPID is required to execute providing ADV in all
securities that is at least 2 times more than its providing ADV in 2Q
2021, as a percentage of CADV. A qualifying MPID receives a credit for
providing liquidity in Tape A and Tape C securities of $0.0028 per
share if the MPID has at least 4 million shares of providing ADV during
the billing month, or $0.0029 per share if the MPID has at least 9
million shares of providing ADV during the billing month. The Exchange
currently does not provide any credit under the MPID Adding Tier for
orders that provide liquidity in Tape B securities.
    With this proposed rule change, the Exchange proposes to adopt a
per share credit for orders that provide liquidity in Tape B securities
when an MPID executes providing ADV in all securities that is at least
2 times more than its providing ADV in 2Q 2021, as a percentage of
CADV. As proposed, a qualifying MPID would receive a credit for
providing liquidity in Tape B securities of $0.0022 per share if the
MPID has at least 4 million shares of providing ADV during the billing
month. An MPID that has at least 9 million shares of providing ADV
during the billing month would also receive a similar credit of $0.0022
per share for providing liquidity in Tape B securities.
    Additionally, the Exchange proposes to rename the current MPID
Adding Tier that offers a credit of $0.0028 per share in Tape A and
Tape C securities and $0.0022 per share in Tape B securities as MPID
Adding Tier 2, and proposes to rename the current MPID Adding Tier that
offers a credit of $0.0029 per share in Tape A and Tape C securities
and $0.0022 per share in Tape B securities as MPID Adding Tier 1.
    Finally, the Exchange proposes to adopt an alternative method to
qualify for the renamed MPID Adding Tier 2. As proposed, to qualify for
the renamed MPID Adding Tier 2 credit of $0.0028 per share for
providing liquidity in Tape A and Tape C securities and $0.0022 per
share for providing liquidity in Tape B securities, an MPID would be
required to execute providing ADV in all securities that is at least 2
times more than its providing ADV in 2Q 2021, as a percentage of CADV,
and have at least 4 million shares of providing ADV during the billing
month, or 2 million shares of providing ADV during the billing month in
Tape B securities.
    The proposed rule change to adopt a new credit and an alternative
method to qualify for the existing credits is designed to incentivize
ETP Holders to increase liquidity-providing orders in Tape B securities
they send to the Exchange, which would support the quality of price
discovery on the Exchange and provide additional liquidity for incoming
orders.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\10\ in general, and furthers the
objectives of Sections 6(b)(4) and (5) of the Act,\11\ 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.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78f(b).
    \11\ 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.'' \12\
---------------------------------------------------------------------------

    \12\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
---------------------------------------------------------------------------

    The Exchange believes that the ever-shifting market share among the
exchanges from month to month demonstrates that market participants can
shift order flow, or discontinue to reduce use of certain categories of
products, in response to fee changes. With respect to non-marketable
orders which provide liquidity on an Exchange, ETP Holders can choose
from any one of the 16 currently operating registered exchanges to
route such order flow. Accordingly, competitive forces reasonably
constrain exchange transaction fees that relate to orders that would
provide displayed liquidity on an exchange. Stated otherwise, changes
to exchange transaction fees can have a direct effect on the ability of
an exchange to compete for order flow.
    In particular, the Exchange believes the proposed rule change is
reasonable because it provides an additional opportunity and amends an
existing opportunity for ETP Holders to receive an enhanced rebate on
qualifying orders in a manner that incentivizes increased order flow on
the Exchange's equities platform. The Exchange believes the proposed
new credit of $0.0022 per share for orders that provide liquidity in
Tape B securities under the MPID Adding Tier pricing tier is a
reasonable means to encourage ETP Holders to increase their liquidity
providing orders in Tape B securities each month over a predetermined
baseline by offering liquidity providers an opportunity to receive an
enhanced rebate. The Exchange believes the proposed change to adopt an
alternative method to qualify for the renamed MPID Adding Tier 2 is
reasonable because it provides ETP Holders with an additional way to
qualify for the pricing tier's credits by providing liquidity in Tape B
securities. The Exchange believes that the proposed alternative to
qualify for the pricing tier utilizing a lower volume requirement of
liquidity providing orders in Tape B securities is reasonable because
the proposal provides firms with greater flexibility to reach the
proposed volume tier across all Tape A, Tape B and Tape C securities,
thereby creating an added incentive for

additional ETP Holders to bring increased order flow to a public
exchange.
    The Exchange believes it is reasonable to provide the proposed
credit to a qualifying MPID if it meets the tier's criteria because
this would encourage individual MPIDs to send orders that provide
liquidity to the Exchange, thereby contributing to robust levels of
liquidity, which would benefit all market participants, and would
promote price discovery and transparency. The Exchange believes the
proposed change to adopt a new credit and an alternative method to
qualify for existing credits is reasonable as these changes would
provide an incentive for an ETP Holder's MPID to direct its order flow
to the Exchange and provide meaningful added levels of liquidity in
order to qualify for the new and existing credits, thereby contributing
to depth and market quality on the Exchange.
    As noted above, the Exchange operates in a highly competitive
environment, particularly for attracting order flow that provides
displayed liquidity on an exchange. More specifically, the Exchange
notes that greater add volume order flow may provide for deeper, more
liquid markets and execution opportunities at improved prices, which
the Exchange believes would incentivize liquidity providers to submit
additional liquidity and enhance execution opportunities. The Exchange
notes that other markets with which the Exchange competes currently
offer its members an opportunity to earn rebates based on the activity
of the member's MPID.\13\ The Exchange believes the proposed changes to
the MPID Adding Tier continues to be a reasonable means to encourage
ETP Holders to increase their liquidity on the Exchange.
---------------------------------------------------------------------------

    \13\ See BZX Fee Schedule, Footnote 2, Step Up Tiers, and
Footnote 4, Single Investor MPID Tiers, at https://www.cboe.com/us/equities/membership/fee_schedule/bzx/.
---------------------------------------------------------------------------

    The Exchange notes that volume-based incentives and discounts have
been widely adopted by exchanges, including the Exchange, and are
reasonable, equitable and not unfairly discriminatory because they are
available to all ETP Holders on an equal basis. They also provide
additional benefits or discounts that are reasonably related to the
value of the Exchange's market quality and associated higher levels of
market activity, such as higher levels of liquidity provision and/or
growth patterns. Additionally, the Exchange is one of many venues and
off-exchange venues to which market participants may direct their order
flow, and it represents a small percentage of the overall market.
Competing exchanges offer similar tiered pricing structures to that of
the Exchange, including schedules of rebates and fees that apply based
on members achieving certain volume thresholds.
    The Exchange believes its proposal equitably allocates its fees
among its market participants.
    The Exchange believes that the proposal represents an equitable
allocation of fees and is not unfairly discriminatory because it would
apply uniformly to all ETP Holders, in that all ETP Holders will be
eligible for the proposed new credit and have the opportunity to meet
the tier's criteria and receive the applicable rebate if such criteria
is met. The enhanced rebate (proposed and existing) would apply
automatically and uniformly to all ETP Holders that achieve the
corresponding criteria. The proposed change is designed as an incentive
to any and all liquidity providers interested in meeting the tier
criteria to submit additional order flow to the Exchange and each will
receive the associated rebate if the tier criteria is met. While the
Exchange has no way of knowing whether this proposed rule change would
definitively result in any particular ETP Holder qualifying for the
proposed new credit, the Exchange anticipates a number of ETP Holders
would be able to meet, or will reasonably be able to meet, the proposed
criteria. However, without having a view of activity on other markets
and off-exchange venues, the Exchange has no way of knowing whether
this proposed rule change would result in any ETP Holder meeting the
alternative method and/or qualifying for the proposed rebate. As
stated, the proposed new credit and the proposed alternative method to
qualify for existing credits are designed to provide an incentive for
ETP Holders to submit additional liquidity across all Tapes to qualify
for the corresponding rebates.
    The Exchange believes that the proposal is not unfairly
discriminatory. The Exchange believes it is not unfairly discriminatory
to provide the proposed credit as the credit would be provided on an
equal basis to all ETP Holders that add liquidity in Tape B securities
and meet the MPID Adding Tier's requirements. The Exchange also
believes that the proposed rule change is not unfairly discriminatory
because it is reasonably related to the value to the Exchange's market
quality associated with higher volume. The proposed changes to the MPID
Adding Tier are designed as an incentive to any and all ETP Holders
interested in meeting the tier criteria to submit additional order flow
to the Exchange and each will receive the corresponding new and
existing rebate if the tier criteria are met. The Exchange also notes
that the proposed rule change will not adversely impact any ETP
Holder's pricing or their ability to qualify for other tiers. Rather,
should an ETP Holder not meet the criteria of the MPID Adding Tier
pricing tier, the ETP Holder will merely not receive the corresponding
rebate.
    The Exchange believes it is not unfairly discriminatory to provide
an alternative way to qualify for the per share credit under the MPID
Adding Tier pricing tier, as the credit would be provided on an equal
basis to all ETP Holders that meet the proposed alternative requirement
under the renamed MPID Adding Tier 2. Further, the Exchange believes
the proposed alternative requirement would incentivize ETP Holders to
send their liquidity providing orders in Tape B securities to the
Exchange to qualify for the enhanced rebate.
    In the prevailing competitive environment, ETP Holders are free to
disfavor the Exchange's pricing if they believe that alternatives offer
them better value. Moreover, this proposed rule change neither targets
nor will it have a disparate impact on any particular category of
market participant. The Exchange believes that this proposal does not
permit unfair discrimination because the changes described in this
proposal would be applied to all similarly situated ETP Holders and all
ETP Holders would be subject to the same requirements. Accordingly, no
ETP Holder already operating on the Exchange would be disadvantaged by
the proposed allocation of fees. The Exchange further believes that the
proposed changes would not permit unfair discrimination among ETP
Holders because the MPID Adding Tier credits would be available equally
to all ETP Holders.
    Finally, the submission of orders to the Exchange is optional for
ETP Holders in that they could choose whether to submit orders to the
Exchange and, if they do, the extent of its activity in this regard.
The Exchange believes that it is subject to significant competitive
forces, as described below in the Exchange's statement regarding the
burden on competition.
    For the foregoing reasons, the Exchange believes that the proposal
is consistent with the Act.

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

    In accordance with Section 6(b)(8) of the Act,\14\ 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.'' \15\
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78f(b)(8).
    \15\ See Securities Exchange Act Release No. 51808, 70 FR 37495,
37498-99 (June 29, 2005) (S7-10-04) (Final Rule).
---------------------------------------------------------------------------

    Intramarket Competition. The Exchange believes the proposed
amendments to its Fee Schedule would not impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act. The Exchange does not believe that the proposed
changes represent a significant departure from previous pricing offered
by the Exchange or its competitors. The proposed changes are designed
to attract additional order flow to the Exchange, in particular with
respect to Tape B securities. The Exchange believes that the proposed
adoption of a new credit and the amendment to the volume requirement to
qualify for an established tier under the MPID Adding Tier pricing tier
would incentivize market participants to direct liquidity adding order
flow to the Exchange, bringing with it additional execution
opportunities for market participants and improved price transparency.
Greater overall order flow, trading opportunities, and pricing
transparency benefits all market participants on the Exchange by
enhancing market quality and continuing to encourage ETP Holders to
send orders to the Exchange, thereby contributing towards a robust and
well-balanced market ecosystem.
    Intermarket Competition. The Exchange operates in a highly
competitive market in which market participants can readily choose to
send their orders to other exchange and off-exchange venues if they
deem fee levels at those other venues to be more favorable. As noted
above, the Exchange's market share of intraday trading (i.e., excluding
auctions) is currently less than 12%. In such an environment, the
Exchange must continually adjust its fees and rebates to remain
competitive with other exchanges and with off-exchange venues. Because
competitors are free to modify their own fees and credits in response,
and because market participants may readily adjust their order routing
practices, the Exchange does not believe its proposed fee change can
impose any burden on intermarket competition.
    The Exchange believes that the proposed change could promote
competition between the Exchange and other execution venues, including
those that currently offer similar order types and comparable
transaction pricing, by encouraging additional orders to be sent to the
Exchange for execution.

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) \16\ of the Act and subparagraph (f)(2) of Rule
19b-4 \17\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 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) \18\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \18\ 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 protected]. Please include
File Number SR-NYSEArca-2021-103 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSEArca-2021-103. 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 office of the Exchange. All comments
received will be posted without change; the Commission does not edit
personal identifying information from submissions. Persons submitting
comments are cautioned that we do not redact or edit personal
identifying information from comment submissions. You should submit
only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSEArca-2021-103 and should
be submitted on or before January 10, 2022.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-27419 Filed 12-17-21; 8:45 am]
BILLING CODE 8011-01-P