NYSE Arca, the premier ETP order-matching platform, emerged in 2006 through a merger between NYSE and Arca. It dominates the global ETF trading arena and provides NYSE Arca Options for listed options. Both NYSE and NYSE Arca now fall under the ownership of the Intercontinental Exchange (ICE).
Basics
NYSE Arca is a U.S. electronic securities exchange for ETPs and equities. It focuses on ETPs, including ETFs, ETNs, and ETVs. Besides regular orders, NYSE Arca offers opening/closing ETF auctions and midpoint orders between bid and ask prices.
A Brief History
NYSE Arca was created in 2006 when NYSE acquired Archipelago, an electronic exchange network founded in 1996. Archipelago revolutionized trading by introducing electronic trading on major U.S. exchanges, offering features like automated trading and after-hours trading. It gained popularity for its speed and liquidity.
Although the merger raised concerns about the future of floor trading, it persisted for large-cap stocks on the NYSE. In 2007, NYSE merged with Euronext, a major European exchange, forming NYSE Euronext, which was later acquired by ICE, the current parent company of NYSE Arca.
NYSE Arca's Dominance
NYSE Arca, as of December 2021, dominated the U.S. ETF market with a 16.3% share and $7.14 trillion AUM through 2,890 ETF listings. It's renowned for narrow bid-ask spreads and competitive pricing among U.S. ECNs. To enhance market depth, NYSE Arca operates a liquidity fee/rebate program. Market makers are charged around $0.003 per share to remove liquidity but receive rebates for adding it.
Top ETFs
Top 5 ETFs by annual cash flow on the platform:
- Invesco Optimum Yield Diversified Commodity Strategy No K-1 (PDBC)
- JPMorgan Equity Premium Income (JEPI)
- First Trust Global Tactical Commodity Strategy Fund (FTGC)
- SPDR Blackstone Senior Loan (SRLN)
- JPMorgan Ultr-Short Municipal Income (JMST).
NYSE Arca Membership Levels
With approximately 150 member firms as of April 2022, NYSE Arca proudly showcases its strong presence in the industry. NYSE Arca provides three levels of exchange membership for financial firms engaged in market-making on the ECN.
- Standard Market Makers: These members must actively maintain a two-sided market in the securities they specialize in.
- Lead Market Makers (LMMs): LMMs hold the primary designated market maker status and adhere to stricter standards and margin requirements.
- ETP Holders: Financial institutions that use the exchange for order routing of exchange-traded products for their own portfolios or on behalf of their clients without market-making obligations.
Bitcoin ETF Applications
NYSA Arca submitted applications to the SEC in late 2017 to list two ETFs, namely the ProShares Bitcoin ETF and the ProShares Short Bitcoin ETF. These ETFs track bitcoin futures from the Cboe Options Exchange and CME.
In October 2021, the SEC approved the first bitcoin ETF, ProShares Bitcoin Strategy ETF (BITO), possibly because it tracks CME bitcoin futures instead of directly investing in bitcoin. Despite pending applications for other crypto ETFs, the SEC's stance might shift as bitcoin hit an all-time high of $66,000 post-ProShares ETF news, leading more fund managers to seek SEC approval.
Conclusion
NYSE Arca is a leading electronic securities exchange that specializes in Exchange-Traded Products and equities. Since its establishment in 2006, NYSE Arca has dominated the global ETF trading market and offers listed options. With its extensive range of ETPs and competitive pricing, NYSE Arca has become a preferred platform for investors. As a subsidiary of the Intercontinental Exchange, NYSE Arca continues to innovate and shape the future of electronic trading in the financial industry.