[Federal Register Volume 82, Number 73 (Tuesday, April 18, 2017)]
[Notices]
[Pages 18326-18328]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-07753]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80441; File No. SR-NYSEARCA-2017-35]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending the NYSE 
Arca Options Fee Schedule

April 12, 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 April 3, 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 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 April 3, 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.

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

1. Purpose
    The purpose of this filing is to amend the Fee Schedule effective 
April 3, 2017. Specifically, the Exchange proposes to adjust certain 
fees and to modify certain incentives and qualifications by broadening 
the base of order flow and trading activity to make the different 
qualifications more achievable to a variety of market participants.
    Currently, the Exchange charges all participants a fee for orders 
that are executed by taking liquidity from the disseminated market 
(``Take Liquidity Fee,'' or ``Take Fee''), and offers credits (or 
reduced fees) for executions resulting from posting trading interest 
that is included in the disseminated market (``Post Liquidity'' 
credit). For non-Customers, the Exchange currently charges a per 
contract Take Fee of $1.08 for executions in non-Penny pilot issues.\4\ 
The Exchange proposes to increase this Take Fee to $1.10 per contract, 
which is within the range of fees charged by competing option 
exchanges.\5\
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    \4\ The Exchange notes that for purposes of this fee filing, 
``non-Customers'' include: Lead Market Makers, NYSE Arca Market 
Makers, Firm and Broker Dealers and Professional Customers.
    \5\ See e.g., NASDAQ Options Market--Fees and Rebates, available 
here, http://www.nasdaqtrader.com/Micro.aspx?id=optionsPricing and 
Bats BZX Options Exchange Fee Schedule, available here, https://www.bats.com/us/options/membership/fee_schedule/bzx/.
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    The Exchange also currently provides a Post Liquidity per contract 
credit of $0.28 to Lead Market Makers (``LMMs'') and NYSE Arca Market 
Makers for executions in Penny Pilot Issues. The Exchange proposes to 
increase the Post Liquidity credit for LMMs to $0.32 per contract. The 
Exchange also proposes that the $0.04 per contract increase in the Post 
Liquidity credit would also be available to LMMs that are eligible to 
receive any other posting credits for executions in Penny Pilot 
Issues--namely eligible volume per the ``Market Maker Monthly Posting 
Credit Tiers and Qualifications for Executions in Penny Pilot Issues 
and SPY'' (the ``MM Posting Tiers''). For instance, if an LMM qualifies 
for the Super Tier in the MM Posting Tiers, the LMM would receive a 
total per contract credit for executions in Penny Pilot issues in their 
LMM appointment of $0.37, plus the $0.04

[[Page 18327]]

Post Liquidity credit, for a combined per contract credit of $0.41.
    The Exchange also proposes to offer a $0.02 per contract Take 
Liquidity Discount for executions in Non-Penny Pilot Issues for non-
Customers that achieve at least 0.65% of Total Industry Customer equity 
and ETF option ADV (``TCADV'') from non-Customer liquidity removing 
orders in all issues. The proposed discount is similar to the existing 
discount that is available for executions in Penny Issues and includes 
transaction volume from the OTP Holder's or OTP Firm's affiliates or 
its Appointed OFP or Appointed MM.
    The Exchange also provides various incentives to OTP Holders and 
OTP Firms (``OTPs'') to achieve enhanced posted liquidity credits, some 
of which are based on achieving certain percentages of NYSE Arca Equity 
daily activity, also known as ``cross-asset pricing.'' The Exchange 
proposes to replace one of the alternative qualifications for the Super 
Tier II in the MM Posting Tiers with a new cross-asset pricing credit 
by achieving a level of options activity and achieving a level of NYSE 
Arca Equity activity.\6\
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    \6\ The Exchange proposes to eliminate the current Super Tier II 
qualification basis that requires an OTP to achieve at least 1.60% 
of Total Industry Customer equity and ETF option ADV from Customer 
and Professional Customer orders in all issues, with at least 1.20% 
of Total Industry Customer equity and ETF option ADV from Customer 
and Professional Customer Posted Orders in all issues.
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    Specifically, as proposed, an OTP would qualify for Super Tier II 
if the OTP achieves at least 0.20% of ICADV from Market Maker posted 
orders in all issues, plus ETP Holder and Market Maker posted volume in 
Tape B Securities (``Tape B Adding ADV'') that is at least 1.50% of US 
Tape B consolidated average daily volume (``CADV'') for the billing 
month executed on NYSE Arca Equity Market. The credit applicable to 
Super Tier II would remain the same (i.e., $0.42 per contract).\7\ The 
Exchange believes that by providing the proposed alternative 
qualification basis for posted orders in Penny Pilot issues from Market 
Makers would encourage an increased level of activity in all issues, 
which in turn encourages tighter market spreads and increased 
liquidity, which benefits all market participants.
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    \7\ At [sic] The Exchange is not proposing any substantive 
change to the alternative qualification basis for achieving Super 
Tier II, which requires at least 1.60% of Total Industry Customer 
equity and ETF option ADV from Market Maker orders in all issues, 
with at least 0.90% of Total Industry Customer equity and ETF option 
ADV from Market Maker Posted Orders in Penny Pilot and Non-Penny 
Pilot Issues. However, the Exchange proposes to replace reference in 
this tier to ``Penny Pilot and Non-Penny Pilot Issues'' to ``all 
Issues,'' which should add clarity, transparency and internal 
consistency to the Fee Schedule.
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    Finally, the Exchange proposes to add clarification to Endnote 8, 
which describes transactions for qualifications for the various credits 
or discounts. The Exchange proposes to modify the Endnote such that the 
transactions for qualification referenced in Endnote 8 would be for 
various credits and discounts. Further, the Exchange proposes to add a 
clarifying sentence that ``references to Market Maker volumes and 
executions are inclusive of transactions in issues in the Market 
Maker's LMM appointment'' and an additional statement that ``references 
to LMM transactions apply solely to transactions in the LMM's 
appointment.''
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 fee increase is reasonable, 
equitable, and not unfairly discriminatory because it applies to all 
non-Customer Take Liquidity transactions in non-Penny Pilot issues and 
is within the range of fees charged by competing option exchanges.\10\
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    \10\ See supra note 5.
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    The Exchange also believes the proposed enhanced credit for posted 
liquidity for LMMs in Penny Pilot issues is reasonable, equitable, and 
not unfairly discriminatory because LMMs have heightened obligations 
for issues in their allocation that do not apply to other market 
participants. Moreover, LMMs must continue to meet their obligations 
despite market fluctuations and ebbs and flows in trading activity, 
while other market participants may rapidly add or drop interest in an 
issue.
    The Exchange believes the proposed Take Fee Discount and 
modification to Super Tier II of the MM Posting Tiers are reasonable, 
equitable, and not unfairly discriminatory because the changes would be 
available to all similarly-situated market participants on an equal and 
non-discriminatory basis. The Exchange believes the creation of a Take 
Fee discount in non-Penny Pilot Issues available to Lead Market Makers, 
Market Makers, Firms, Broker Dealers and Professional Customers is 
reasonable, equitable, and not unfairly discriminatory because it is 
applicable to all participants other than Customers, who pay a much 
lower Take Liquidity Fee.
    Modifications to the Market Maker Monthly Posting Credit Tiers and 
Qualifications for Penny Pilot Issues and SPY are equitable and not 
unfairly discriminatory because the changes to the Super Tier II for 
Market Makers and Lead Market Makers would apply to all Market Makers 
and Lead Market Makers on an equal and non-discriminatory basis. 
Further, they are not unfairly discriminatory because other non-
Customer participants do not have the burden of Market Making 
obligations.
    In addition, the proposed changes are designed to incent market 
participants to increase the orders sent directly to the Exchange and 
therefore provide liquidity that supports the quality of price 
discovery and promotes market transparency to the benefit of all market 
participants. Further, the proposed modifications are reasonable, 
equitable, and non-discriminatory because they would allow 
qualification through activity combined with activity of affiliates or 
Appointed OFP, including activity on the NYSE Arca Equity Market. Thus, 
the Exchange believes the proposed modifications are reasonable, 
equitable and not unfairly discriminatory because they encourage more 
participants to qualify for the various incentives, including 
encouraging more participants to have affiliated or appointed order 
flow directed to the Exchange.
    The Exchange believes the proposed modification to Endnote 8 is 
reasonable, equitable and not unfairly discriminatory because the 
proposed change is intended to clarify that the calculations for 
qualifications for monthly posting would be determined for credits and 
discounts, rather than credits or discounts.
    Finally, the Exchange believes the proposed non-substantive change 
to the alternative qualification basis for achieving Super Tier II is 
reasonable, equitable, and not unfairly discriminatory because it would 
add clarity, transparency and internal consistency to the Fee 
Schedule.\11\
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    \11\ See supra note 7.
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    For these reasons, the Exchange believes that the proposal is 
consistent with the Act.

[[Page 18328]]

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

    In accordance with Section 6(b)(8) of the Act, 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 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 
would impair the ability of any market participants or competing order 
execution venues to maintain their competitive standing in the 
financial markets. Further, the incentive 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 classes of market participants and may, in fact, encourage 
competition.
    The Exchange believes that the proposed enhanced credits for LMMs 
would not impose an unfair burden on competition because the LMMs have 
heightened obligations for issues in their allocation that do not apply 
to other market participants.
    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) \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-NYSEArca-2017-35 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-2017-35. 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-NYSEArca-2017-35, and should 
be submitted on or before May 9, 2017.

    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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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-07753 Filed 4-17-17; 8:45 am]
BILLING CODE 8011-01-P