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Federal Register / Vol. 86, No. 126 / Tuesday, July 6, 2021 / Notices Office of Personnel Management.
Alexys Stanley, Regulatory Affairs Analyst.

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.

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A. Self-Regulatory Organizations Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change
SECURITIES AND EXCHANGE
COMMISSION
Release No. 3492291; File No. SR
NYSEArca202152

Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the NYSE Arca Equities Fees and Charges June 29, 2021.

Pursuant to Section 19b1 1 of the Securities Exchange Act of 1934 the Act 2 and Rule 19b4 thereunder,3
notice is hereby given that, on June 14, 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 and II
below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.
I. Self-Regulatory Organizations 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 modify the per share credit and fee associated with certain Retail Orders that add and remove liquidity. The Exchange proposes to implement the fee change effective June 14, 2021.4 The proposed rule change is available on the Exchanges website at www.nyse.com, at the principal office of the Exchange, and at the Commissions Public Reference Room.
II. Self-Regulatory Organizations Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
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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 1 15

U.S.C. 78sb1.
U.S.C. 78a.
3 17 CFR 240.19b4.
4 The Exchange originally filed to amend the Fee Schedule on June 1, 2021 SRNYSEArca2021
49. SRNYSEArca202149 was subsequently withdrawn and replaced by this filing.
2 15

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1. Purpose The Exchange proposes to amend the Fee Schedule to modify the per share credit and fee associated with certain Retail Orders 5 that add and remove liquidity. The Exchange proposes to implement the fee change effective June 14, 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. 6
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. 7 Indeed, equity trading is currently dispersed across 16
exchanges,8 numerous alternative 5 A Retail Order is an agency order that originates from a natural person and is submitted to the Exchange by an ETP Holder, provided that no change is made to the terms of the order to price or side of market and the order does not originate from a trading algorithm or any other computerized methodology. See Securities Exchange Act Release No. 67540 July 30, 2012, 77 FR 46539 August 3, 2012 SRNYSEArca201277.
6 See Securities Exchange Act Release No. 51808
June 9, 2005, 70 FR 37496, 37499 June 29, 2005
File No. S71004 Final Rule Regulation NMS.
7 See Securities Exchange Act Release No. 61358, 75 FR 3594, 3597 January 21, 2010 File No. S7
0210 Concept Release on Equity Market Structure.
8 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.

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trading systems,9 and broker-dealer internalizers and wholesalers, all competing for order flow. Based on publicly-available information, no single exchange currently has more than 17% market share.10 Therefore, no exchange possesses significant pricing power in the execution of equity order flow. More specifically, the Exchange currently has less than 10% market share of executed volume of equities trading.11
The Exchange believes that the evershifting market share among the exchanges from month to month demonstrates that market participants can move order flow, or discontinue or reduce use of certain categories of products. While it is not possible to know a firms reason for shifting order flow, the Exchange believes that one such reason is because of fee changes at any of the registered exchanges or nonexchange venues to which a firm routes order flow. The competition for Retail Orders is even more stark, particularly as it relates to exchange versus offexchange venues.
The Exchange thus needs to compete in the first instance with non-exchange venues for Retail Order flow, and with the 15 other exchange venues for that Retail Order flow that is not directed off-exchange. Accordingly, competitive forces compel the Exchange to use exchange transaction fees and credits, particularly as they relate to competing for Retail Order flow, because market participants can readily trade on competing venues if they deem pricing levels at those other venues to be more favorable.
To respond to this competitive environment, the Exchange has established Retail Order Step-Up tiers,12
which are designed to provide an incentive for ETP Holders to route Retail Orders to the Exchange by providing higher credits for adding liquidity correlated to an ETP Holders higher trading volume in Retail Orders on the Exchange. Under the Retail Order StepUp Tiers, ETP Holders also do not pay a fee when such Retail Orders have a time-in-force of Day and remove liquidity from the Exchange.
9 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.
10 See Cboe Global Markets U.S. Equities Market Volume Summary, available at http
markets.cboe.com/us/equities/market_share/.
11 See id.
12 See Retail Order Tier, Retail Order Step-Up Tier 1, Retail Order Step-Up Tier 2 and Retail Order Step-Up Tier 3 on the Fee Schedule.

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