[Federal Register Volume 82, Number 48 (Tuesday, March 14, 2017)]
[Notices]
[Pages 13702-13704]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-04923]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-80173; File No. SR-NYSEArca-2017-25]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Amending NYSE Arca
Options Fee Schedule
March 8, 2017.
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 March 6, 2017, NYSE Arca, Inc. (the ``Exchange'' or
``NYSE Arca'') 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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 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 amend the NYSE Arca Options Fee Schedule
(``Fee Schedule''). The Exchange proposes to implement the fee change
effective March 6, 2017. The proposed rule change is available on the
Exchange's Web site 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.
[[Page 13703]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of this filing is to amend the Fee Schedule, effective
March 6, 2017, to provide an incentive for OTP Holders and OTP Firms
(each an ``OTP'') to post volume in non-Penny Pilot Issues as Non-
Customers, i.e., Lead Market Maker (``LMMs''), NYSE Arca Market Makers
(``MMs''), Firms and Broker Dealers.\4\
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\4\ For purposes of this filing, Professional Customers are not
considered to be Non-Customers.
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Currently, the transactions fees and credits applied to Non-
Customer posting liquidity in non-Penny Pilot issues range from a per
contract fee of $0.50 (charged to Firms and Broker Dealers) to a per
contract credit of $0.40 (issued to LMMs).\5\ The Exchange also offers
additional incentives for market participants--Customers and Non-
Customers alike--to earn credits for posted interest in non-Penny Pilot
Issues.\6\
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\5\ See Fee Schedule, Transaction Fee for Electronic Executions
Per Contract.
\6\ See, e.g., Fee Schedule, Customer and Professional Customer
Posting Credit Tiers In Non Penny Pilot Issues; and Market Maker
Incentive For Non-Penny Pilot Issues.
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The Exchange proposes to introduce a program to further incent Non-
Customers to post volume in non-Penny Pilot Issues. The proposed
program would offer OTPs the ability to earn per contract credits for
electronic executions of Non-Customer posted interest in non-Penny
Pilot issues. The amount of credit would depend on an OTP's share of
total industry Customer equity and ETF option ADV (``TCADV'')
(referring to herein as the ``Non-Penny Posting Tiers'').\7\ The
Exchange proposes three Non-Penny Posting Tiers and the associated
qualifications and credits would be as follows:
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\7\ The thresholds are based on an OFP's volume transacted
Electronically as a percentage of TCADV as reported by the Options
Clearing Corporation (the ``OCC''). See OCC Monthly Statistics
Reports, available here, http://www.theocc.com/webapps/monthly-volume-reports. The calculation of TCADV includes transaction volume
of an OTP's affiliates or its Appointed Order Flow Provider or
Appointed Marker Maker. See proposed Fee Schedule, the Non-Penny
Posting Tiers. See also Fee Schedule, endnote 15.
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Tier 1: An OTP that has at least 0.05% of TCADV from Non-
Customer posted orders in non-Penny Pilot issues would be eligible to
receive a per contract credit of $0.32;
Tier 2: An OTP that has at least 0.10% of TCADV from Non-
Customer posted orders in non-Penny Pilot issues would be eligible to
receive a per contract credit of $0.52; and
Tier 3: An OTP that has at least 0.20% of TCADV from Non-
Customer posted orders in non-Penny Pilot issues would be eligible to
receive a per contract credit of $0.82.
If an execution of Non-Penny Pilot Issues by an OTP for a Non-
Customer is eligible for more than one fee or credit, the Exchange will
apply the most favorable rate. For instance, under the Fee Schedule, an
LMM that posts interest in non-Penny Pilot issues in its appointment
receives a base per contract credit of $0.40. If that same OTP achieves
proposed Tier 1 of the Non-Penny Posting Tiers, the OTP would be
eligible to receive a per contract credit of $0.32. However, that OTP
would still receive the higher per contract credit of $0.40 on its LMM
posted interest in non-Penny Pilot issues.
The Exchange believes the proposed Non-Penny Posting Tiers would
encourage an increased level of activity, particularly in non-Penny
Pilot Issues, which in turn encourages tighter market spreads and
increased liquidity to the benefit of all market participants.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\8\ in general, and furthers the
objectives of Sections 6(b)(4) and (5) of the Act,\9\ 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.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange believes that the proposed Non-Penny Posting Tiers are
reasonable, equitable, and not unfairly discriminatory because they are
competitive with incentive programs offered to similarly situated
participants on other options exchanges.\10\ Moreover, the Exchange
believes the proposed change does not unfairly discriminate because it
would apply equally to all Non-Customer interest and allows for
consideration of volume from affiliates and/or Appointed OFPs and
Appointed MMs. The proposed change is also non-discriminatory because
it would apply to all Non-Customer interest, while Customer (and
Professional Customer) interest may avail itself of other incentive
programs offered on the Exchange. Notably, the Exchange offers Customer
(and Professional Customer) interest the opportunity to earn credits
higher than those proposed for Non-Customer interest in the Non-Penny
Posting Tiers,\11\ which should continue to attract Customer (and
Professional Order) interest to the Exchange, resulting in greater
price discovery, increased transparency, and an increased opportunity
to trade on the Exchange.
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\10\ See Bats BZX Options Exchange Fee Schedule, available here,
https://www.bats.com/us/options/membership/fee_schedule/bzx/
(offering ``non-Penny Pilot add volume tiers'' to Non-Customers).
\11\ See, e.g., Fee Schedule, Customer and Professional Customer
Posting Credit Tiers In Non Penny Pilot Issues (providing potential
per contract credits under each Tier (beginning at $0.83 for Tier
A), each of which exceeds the highest available ($0.82) per contract
credit available to Non-Customer interest in the Non-Penny Posting
Tiers).
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The Exchange believes that the proposal is equitable and not
unfairly discriminatory because it would encourage OTPs post interest
on the Exchange in order to qualify for the proposed credits, which
would reduce their overall transaction costs on the Exchange.
Further, the Exchange believes that the proposal would provide
additional incentives to direct Non-Customer order flow to the
Exchange, which benefits all market participants through increased
liquidity and enhanced price discovery. Finally, encouraging OTPs to
send higher volumes of orders to the Exchange would also contribute to
the Exchange's depth of book as well as to the top of book liquidity.
B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with Section 6(b)(8) of the Act,\12\ the Exchange
does not believe that the proposed rule change will impose any burden
on competition that is not necessary or appropriate in furtherance of
the purposes of the Act. Instead, the Exchange believes that the
proposed changes would continue to encourage competition, including by
attracting additional liquidity to the Exchange, which would continue
to make the Exchange a more competitive venue for, among other things,
order execution and price discovery. The Exchange does not believe that
the proposed change will impair the ability of any market participants
or competing order execution venues to maintain their competitive
standing in the financial markets. Further, the proposed incentives
would be available to all similarly situated participants, and, as
such, the proposed change would not impose a disparate burden on
competition either among or between
[[Page 13704]]
classes of market participants and may, in fact, encourage competition.
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\12\ 15 U.S.C. 78f(b)(8).
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The Exchange notes that it operates in a highly competitive market
in which market participants can readily favor competing venues. In
such an environment, the Exchange must continually review, and consider
adjusting, its fees and credits to remain competitive with other
exchanges. For the reasons described above, the Exchange believes that
the proposed rule change reflects this competitive environment.
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) \13\ of the Act and subparagraph (f)(2) of Rule
19b-4 \14\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\13\ 15 U.S.C. 78s(b)(3)(A).
\14\ 17 CFR 240.19b-4(f)(2).
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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) \15\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\15\ 15 U.S.C. 78s(b)(2)(B).
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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-2017-25 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-NYSEArca-2017-25. 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 Web site (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 Web site 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; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSEArca-2017-25, and should
be submitted on or before April 4, 2017.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-04923 Filed 3-13-17; 8:45 am]
BILLING CODE 8011-01-P