[Federal Register Volume 81, Number 35 (Tuesday, February 23, 2016)]
[Notices]
[Pages 9027-9029]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-03737]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77168; File No. SR-NYSEMKT-2016-21]


Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Change Amending the NYSE Amex 
Options Fee Schedule

February 18, 2016.
    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 February 4, 2016, NYSE MKT LLC (the ``Exchange'' or 
``NYSE MKT'') 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 Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the NYSE Amex Options Fee Schedule 
(``Fee Schedule'') to exclude from its monthly calculations of contract 
volume any trading day on which the Exchange is not open for the entire 
trading day and/or a disruption affects an Exchange system that lasts 
for more than 60 minutes during regular trading hours. The Exchange 
proposes to implement the fee change effective February 4, 2016. The 
proposed 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.

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 its Fee Schedule to exclude from its 
monthly calculations of contract volume any trading day on which (1) 
the Exchange is not open for the entire trading day and/or (2) a 
disruption affects an Exchange system that lasts for more than 60 
minutes during regular trading hours. The Exchange proposes to 
implement the fee change effective February 4, 2016.
    As provided in the Exchange's Fee Schedule, several of the 
Exchange's transaction fees and credits are based on trading, quoting 
and liquidity thresholds that involve a monthly calculation of contract 
volume, including calculations of average daily volume (``ADV'').\4\ 
The Exchange

[[Page 9028]]

proposes to add a definition of Systems Disruptions to the Fee Schedule 
Preface that would permit the Exchange to exclude from its monthly 
contract volume calculations contracts traded on any day on which the 
Exchange is not is not [sic] open for the entire trading day. This 
would allow the Exchange to exclude days where the Exchange declares a 
trading halt in all securities or honors a market-wide trading halt 
declared by another market as well as days on which the market closes 
early for holiday observances. The Exchange's proposal is consistent 
with the rules of other self-regulatory organizations.\5\
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    \4\ For example, the NYSE Amex Options Market Makers are 
eligible for reduced per contract rates for electronic transactions 
in Standard Options based on rates applicable to monthly contract 
volume in a given tier. See Fee Schedule, Section I. C (NYSE Amex 
Options Market Maker Sliding Scale--Electronic). Similarly, Order 
Flow Providers (``OFP'') are eligible for certain credits for orders 
submitted to the Exchange as agent payable only on customer volume 
based on (1) calculating, on a monthly basis, the average daily 
Customer contract volume an OFP executes Electronically on the 
Exchange as a percentage of total average daily industry Customer 
equity and ETF options volume, or (2) calculating, on a monthly 
basis, the average daily contract volume an OFP executes 
Electronically in all participant types (i.e., Customer, Firm, 
Broker-Dealer, NYSE Amex Options Market Maker, Non-NYSE Amex Options 
Market Maker, and Professional Customer) on the Exchange, as a 
percentage of total average daily industry Customer equity and ETF 
option volume, with the further requirement that a specified 
percentage of the minimum volume required to qualify for the Tier 
must be Customer volume. See Fee Schedule, Section I. E (Amex 
Customer Engagement (``ACE'') Program--Standard Options).
    \5\ See, e.g., NASDAQ Stock Market LLC Rule 7018(j) ('' For 
purposes of determining average daily volume and total consolidated 
volume under this rule, any day that the market is not open for the 
entire trading day will be excluded from such calculation.''); 
International Securities Exchange, LLC Fee Schedule (``For purposes 
of determining Priority Customer ADV, any day that the regular order 
book is not open for the entire trading day or the Exchange 
instructs members in writing to route their orders to other markets 
may be excluded from such calculation; provided that the Exchange 
will only remove the day for members that would have a lower ADV 
with the day included.'').
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    The artificially low volumes of trading on days when the Exchange 
is not open for the entire trading day reduces the average daily 
activity of ATP Holders both daily and monthly. Given the decreased 
trading volumes, the numerator for the monthly calculation (e.g., 
trading volume) would be correspondingly lower, but the denominator for 
the threshold calculations (e.g., the number of trading days) would not 
be decreased, and could result in an unintended increase in the cost of 
trading on the Exchange, a result that is unintended and undesirable to 
the Exchange and its ATP Holders. The Exchange believes that the 
authority to exclude days when the Exchange is not open for the entire 
trading day would provide ATP Holders with greater certainty as to 
their monthly costs and diminish the likelihood of an effective 
increase in the cost of trading.\6\
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    \6\ See, e.g., Securities Exchange Act Release No. 70657 
(October 10, 2013), 78 FR 62899 (October 22, 2103) (SR-ISE-2013-51).
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    Similarly, the Exchange proposes to modify its Fee Schedule to 
permit the Exchange to exclude from its monthly contract calculations, 
contracts traded on a trading day where a disruption affects an 
Exchange system that lasts for more than 60 minutes during regular 
trading hours even if such disruption would not be categorized as a 
complete outage of the Exchange's system. Such a disruption may occur 
where a certain options series traded on the Exchange is unavailable 
for trading due to an Exchange system issue or where, while the 
Exchange may be able to perform certain functions with respect to 
accepting and processing orders, the Exchange may be experiencing a 
failure to another significant process, such as routing to other market 
centers, that would lead permit holders that rely on such process to 
avoid utilizing the Exchange until the Exchange's entire system was 
operational. Once again, the Exchange's proposal is consistent with the 
rules of other self-regulatory organizations.\7\
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    \7\ See, e.g., BATS BZX Exchange Fee Schedule (``The Exchange 
excludes from its calculation of ADAV and ADV shares added or 
removed on any day that the Exchange's system experiences a 
disruption that lasts for more than 60 minutes during regular 
trading hours (``Exchange System Disruption''), on any day with a 
scheduled early market close and on the last Friday in June (the 
``Russell Reconstitution Day'').
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    The Exchange is not proposing any changes to the level of rebates 
currently being provided on the Exchange, or to the thresholds required 
to achieve each rebate tier.
    The proposed change is also not otherwise intended to address any 
other issues, and the Exchange is not aware of any problems that permit 
holders would have in complying with the proposed change.
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 6(b)(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 it is reasonable to permit the Exchange 
to eliminate from the calculation days on which the market is not open 
the entire trading day because it preserves the Exchange's intent 
behind adopting volume-based pricing. Similarly, the Exchange believes 
that its proposal is reasonable because it will help provide permit 
holders with a greater level of certainty as to their level of rebates 
and costs for trading in any month where the Exchange experiences such 
a system disruption on one or more trading days. The Exchange is not 
proposing to amend the thresholds permit holders must achieve to become 
eligible for, or the dollar value associated with, the tiered rebates 
or fees. By eliminating the inclusion of a trading day on which a 
system disruption occurs, the Exchange would almost certainly be 
excluding a day that would otherwise lower members' and member 
organizations' contract volume, thereby making it more likely for 
permit holders to meet the minimum or higher tier thresholds and thus 
incentivizing permit holders to increase their participation on the 
Exchange in order to meet the next highest tier.
    The Exchange further believes that the proposal is reasonable 
because the proposed exclusion seeks to avoid penalizing permit holders 
that might otherwise qualify for certain tiered pricing but that, 
because of a significant Exchange system problem, would not participate 
to the extent that they might have otherwise participated. The Exchange 
believes that certain systems disruptions could preclude some permit 
holders from submitting orders to the Exchange even if such issue is 
not actually a complete systems outage.
    Finally, the Exchange believes that the proposal is equitable and 
not unfairly discriminatory because the methodology for the monthly 
calculations would apply equally to all permit holders and to all 
volume tiers.
    The Exchange notes that, although unlikely, there is some 
possibility that a certain small proportion of permit holders may have 
a higher ADV as a percentage of average daily volume [sic] with their 
activity included from days where the Exchange experiences a system 
disruption. The Exchange believes that the proposal would still be 
equitable and not unfairly discriminatory given that the impacted 
universe is potentially quite small and that the proposal would benefit 
the overwhelming majority of market participants and would make the 
overall cost of trading on the Exchange more

[[Page 9029]]

predictable for the membership as a whole.
    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,\10\ 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.
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    \10\ 15 U.S.C. 78f(b)(8).
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    The Exchange believes that, with respect to monthly contract 
calculations for rebates, there are very few instances where the 
exclusion would be invoked, and if invoked, would have little or no 
impact on trading decisions or execution quality. On the contrary, the 
Exchange believes that the proposal fosters competition by avoiding a 
penalty to permit holders for days when trading on the Exchange is 
disrupted for a significant portion of the day and would result in 
lower total costs to end users, a positive outcome of competitive 
markets. Further, other options exchanges have adopted rules that are 
substantially similar to the change in ADV calculation being proposed 
by the Exchange.\11\
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    \11\ See note 5, supra.
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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) \12\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \13\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 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) \14\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \14\ 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-NYSEMKT-2016-21 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-NYSEMKT-2016-21. 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 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. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NYSEMKT-2016-21 and should 
be submitted on or before March 15, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-03737 Filed 2-22-16; 8:45 am]
 BILLING CODE 8011-01-P