[Federal Register Volume 83, Number 247 (Thursday, December 27, 2018)]
[Notices]
[Pages 66818-66822]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-27988]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-84874; File No. SR-NYSEArca-2018-80]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Modify the NYSE
Arca Options Fee Schedule in Conjunction With Relocating the Trading
Floor to a New Trading Facility
December 19, 2018.
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 December 18, 2018, 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 modify the NYSE Arca Options Fee Schedule
(``Fee Schedule'') in conjunction with relocating the Trading Floor to
a new trading facility. The Exchange proposes to implement the fee
change effective
[[Page 66819]]
the first day of the month following the move. The proposed rule change
is available on the Exchange's website 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 modify the Fee Schedule in
conjunction with the Exchange relocating its Trading Floor to a new
trading facility that will be in a different physical location than the
current Trading Floor. The Exchange is moving into a new, state-of-the-
art Trading Floor that has been built out to reflect today's market
that is heavily reliant on technology and electronic trading. As such,
the Exchange proposes to modify certain Trading Floor and Equipment
fees in connection with the move (the ``Floor Fees''). The Exchange
proposes that the Floor Fees would be implemented on the first day of
the month following the completion of the move, which is anticipated to
occur on or about mid-March 2019. The Exchange is filing the proposed
Floor Fees in advance of the move to provide guidance to floor OTP
Holders and OTP Firms (collectively, ``OTPs'') in planning for and
determining their commercial needs to operate on the new Trading Floor.
First, the Exchange proposes to revise the Fee Schedule regarding
Floor Broker equipment fees. The Exchange proposes to delete reference
to ``Floor Broker Order Capture Devices,'' which refer to Exchange-
provided hardware that Floor Brokers may use on the Trading Floor.
Currently, not all Floor Brokers use the Exchange-provided devices, as
some firms have chosen to use their own computers, i.e., firm-provided
devices. Regardless of whether a Floor Broker uses an Exchange-provided
or firm-provided device, Floor Brokers access the Exchange using the
same software on such devices. On the new Trading Floor, Floor Broker
firms will use their own devices that they will purchase or have
already purchased themselves. Because the Exchange will no longer
provide this hardware device to Floor Brokers, the Exchange proposes to
delete reference to the associated fee for such devices from the Fee
Schedule. Given the removal of reference to the Floor Broker Order
Capture Device, the Exchange proposes to remove reference to the ``Pass
Through'' market data fees associated with such devices. The Exchange
proposes that market data fees incurred by Floor Brokers will continue
to be passed through as they are today, only now these fees will be
addressed under the existing line item for ``Wire Services,'' which
modification would streamline the Fee Schedule.
The Exchange also proposes to delete an obsolete reference to the
``Trade Match Terminal Fee,'' which refers to a fee that is no longer
charged (or incurred) because, as a result of advances in technology, a
separate ``terminal'' is no longer needed to transmit information to
clearing. The Exchange notes that this deletion is a ``clean up''
change and (unlike the balance of the changes) is not tied to the
relocation. Finally, given the relocation, the Exchange proposes to
delete as obsolete reference to the ``Vendor Equipment Room Cabinet
Fee,'' which refers to charges for equipment stored in a room adjacent
to the current Trading Floor, which will not exist on the new Trading
Floor.
Next, the Exchange proposes to modify the way it charges for Floor
space utilized by Floor Brokers and Market Makers to reflect the
business needs and preferences of these market participants. Floor
Brokers utilize their Floor space (``Floor Booth'') akin to private
office space where employees of the same firm communicate with
customers, receive orders, and coordinate covering the Floor to
announce such orders at designated Trading Crowds. Currently, Floor
Brokers may combine multiple, contiguous ``Booths'' into a single
office space. By contrast, Market Makers operate at the point of sale,
which necessitates that their Floor space (each, a ``Podium'') be
integrated in designated Trading Crowd locations. Because Market Maker
Podia are integrated in the Trading Crowd, the more physical space
occupied by a single Market Making firm (i.e., multiple Podia) in a
given Trading Crowd means less physical space for other Market Makers
to participate in the same Crowd. Thus, the Exchange proposes to revise
its Fee Schedule to charge participants in a manner that reflects this
reality and to encourage the efficient use of space by these
participants.
The Exchange currently charges each Floor Broker $350 per Floor
Booth and (as noted above) firms may opt to pay for and combine several
Booths into a single Floor space. On the new Trading Floor, the
Exchange proposes to enable Floor Brokers to specify the amount of
space needed for their business and to charge for the amount utilized
(at a monthly rate of $80 per linear foot). The Exchange believes this
pricing would offer flexibility to Floor Broker firms to customize the
precise amount of work space needed. The Exchange proposes to modify
the Fee Schedule to reflect this new Floor Booth pricing method.
Further, the Exchange proposes to modify the way it charges for
Floor space utilized by Market Makers. Currently, the Exchange charges
$90 per month per Market Maker Podium, but the size of a ``Podium'' is
not standardized and Market Makers have not been restricted in the
amount of space that they use. Also, the Podium fee currently covers
only the desk space utilized. Market Makers currently supply their own
furniture and equipment, including monitors and there is no uniformity
in size or number of the monitors utilized. In the new location, the
Exchange proposes to offer workspaces that more efficiently serve Floor
participants. To that end, on the new Trading Floor, the Market Maker
Podia available in each Trading Crowd are designed to accommodate all
Market Makers that want to join that Trading Crowd. As proposed, each
Podium will come equipped with a desk, chair, computer keyboard and
mouse, as well as four standard monitors (including set up/mounting
apparatus to support the same).
The Exchange proposes to implement fees that align with the
standardized podia that will be available on the new Trading Floor. The
proposed fee structure is designed to encourage the efficient use and
allocation of space to Market Makers conducting business on the Trading
Floor. Further, to reduce the potential for a single Market Making firm
to use more podia space than needed in a Trading Crowd, the Exchange
proposes to scale the per Podium fees as follows:
First Podium: $200 per month;
Second Podium: $400 per month;
Third Podium: $800 each per month; and
Fourth Podium: $1,600 each per month.
[[Page 66820]]
As proposed, on the new Trading Floor, only Market Makers with an
active OTP will be assigned a Market Maker podium in a Trading Crowd
(i.e., Market Makers that have only a Reserve OTP are ineligible for
podia). Market Makers with an active OTP utilize the Podia to manage
their electronic quotes as well as to maintain a presence in the
Trading Crowd to respond to a call for a market. Because Reserve OTPs
are not active on a trading permit, they cannot respond to a call for
market, and therefore do not need to be present in the Trading Crowd.
As noted above, each Podium comes equipped with four standard
monitors (included in the cost), but Market Makers may request up to
two additional monitors per stand-alone Podium for a monthly surcharge
of $100.\4\ In addition, Market Makers will have the option to upgrade
the standard-size monitors (provided by the Exchange) to a large or
extra-large monitor for a one-time surcharge of $200 or $300,
respectively. In addition, to prevent Market Makers from monopolizing
Trading Floor space, the number of podia and monitors will be limited.
As proposed, each OTP acting as a Market Maker on the Trading Floor may
utilize no more than four podia and each such OTP in a given Trading
Crowd may utilize no more than two podia, or eight monitors.
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\4\ The Exchange will only allow the additional monitors if the
Market Maker does not have a second (or third, etc.) Podium adjacent
to its first Podium. This is to avoid too many monitors in one area
that may obstruct Floor participants' line of sight.
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The proposed cost structure is designed to provide some flexibility
for Market Makers to set up their Floor space consistent with their own
business model, while encouraging the fair and efficient use of space.
Specifically, the proposed cost structure allows a Market Maker to
utilize only one Podium but to pay for additional monitors as opposed
to paying for two Podia with the standard monitor configuration. For
example, as proposed, it would cost $600 for two Podia, each equipped
with four monitors (for a total of eight monitors) whereas it would
cost $300 for one Podium that is configured to include six monitors
(i.e., $200 for first podium plus $100 surcharge for two additional
monitors).
Further, the Exchange anticipates that, with the new standardized
work space, some OTPs may require modification to a Floor Booth or
Podium to accommodate firm-specific needs. Such modifications or
alterations may be made upon prior approval by Exchange facilities
staff. The Exchange proposes that the OTP be responsible for all
related costs for such modifications or alterations, including the
costs for Exchange staff prior approval and for restoration to standard
configuration upon vacating or relocating (elsewhere on the Floor) the
affected Floor Booth or Podium. The Exchange proposes that Exchange
staff time associated with such modifications or alterations be charged
at a rate of $200 per hour. The Exchange believes these proposed
charges, including for staff time, further encourage the deliberate and
efficient use of Exchange facilities and resources. These proposed
charges are also intended to take into consideration that the
alterations or modifications may require lengthy and expensive
supervision of code or structural approvals by experienced Exchange
staff.
Regarding telephone service, the Exchange proposes to continue to
charge $14 per month, per telephone line utilized by each Floor
participant, which can be used to send facsimiles only. However, the
Exchange will no longer be providing telephones for Floor organizations
and therefore proposes to remove these fees from the Fee Schedule as
obsolete. Instead, Floor participants that would like to have landline
telephone service have the option to subscribe directly with the
Exchange's exclusive service provider.
Finally, to protect the integrity of Exchange systems and networks,
the Exchange proposes to be the sole internet Service Provider
(``ISP'') permitted on Exchange premises. As such, the Exchange
proposes a new monthly ISP Connection Fee of $150 per connection,
capped at $750 per month. Thus, an OTP that utilizes more than five
will still only be charged $750 per month. The ISP connections may be
used for either data or for voice-over-internet-protocol (``VOIP'')
connections.
2. Statutory Basis
The Exchange believes that the proposed fee change is consistent
with Section 6(b) of the Act,\5\ in general, and furthers the
objectives of Sections 6(b)(5) of the Act,\6\ in particular, because it
is designed to prevent fraudulent and manipulative acts and practices,
to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, to remove impediments to, and
perfect the mechanisms of, a free and open market and a national market
system and, in general, to protect investors and the public interest
and because it is not designed to permit unfair discrimination between
customers, issuers, brokers, or dealers. In particular, the Exchange
believes that all market participants will benefit from the relocation
to the new Trading Floor because it will be a state-of-the-art trading
facility that has been built out to reflect today's market that is
heavily reliant on technology and electronic trading.
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\5\ 15 U.S.C. 78f(b).
\6\ 15 U.S.C. 78f(b)(5).
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The Exchange also believes that the proposed fee change is
consistent with Section 6(b)(4) of the Act,\7\ 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. The Exchange believes the proposal to
modify Floor Fees in connection with the Exchange moving the Trading
Floor to a new location is reasonable, equitable and not unfairly
discriminatory for the following reasons. First, the Exchange is
relocating its Trading Floor to a new, state-of-the-art trading Floor
that has been built out to reflect today's market that is heavily
reliant on technology and electronic trading. The proposed fee changes
are designed to enable the Exchange to align its Floor Fees with the
cost of the new Trading Floor, including the costs of transferring
operations and technology to the new location and ongoing support for
the new technology underlying the new Trading Floor.
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\7\ 15 U.S.C. 78f(b)(4).
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Second, the proposed Floor Fees are designed to reflect the
business practices and needs of Floor Participants, while encouraging
efficient use of space by all. Floor Brokers utilize Floor Booths as
private office space, out of which they communicate with customers,
take orders, and coordinate covering the Floor to announce such orders
at assigned Trading Crowds. Market Makers operate out of their Podia at
the point of sale and occupy space within the Trading Crowd. Thus, the
Exchange believes the proposed distinctions in how it proposes to
charge Floor Brokers and Market Makers for space utilized is reasonable
and equitable because it is designed to reflect the differing
businesses of these participants while offering such participants some
flexibility in setting up their Floor space consistent with their
particular business models/
[[Page 66821]]
commercial preference. For example, OTPs acting as Market Makers are
not required to upgrade their equipment (or modify their work space),
but the Exchange is providing that option as an accommodation. Further,
the proposed Floor Fees are not unfairly discriminatory, as they are
applied equally to all similarly situated Floor market participants.
The proposal to limit Market Maker Podia use to Market Makers with
an active OTP is likewise reasonable, equitable and not unfairly
discriminatory because such participants utilize the Podia to manage
their electronic quotes as well as to maintain a presence in the
Trading Crowd to respond to a call for a market. Reserve OTPs are not
unfairly burdened by this restriction because such OTPs are not active
on a trading permit, cannot respond to a call for market, and therefore
do not need to be present in the Trading Crowd. Given these
distinctions the Exchange believes this limitation represents a fair
and efficient use of Exchange resources.
The Exchange believes the proposal to charge for staff time to
supervise modifications or alterations to Floor Booths or Podia is
reasonable, equitable and not unfairly discriminatory because it is
designed to encourage the deliberate and efficient use of Exchange
facilities and resources by all Floor participants. These proposed
charges are designed to take into consideration that the alterations or
modifications may require lengthy and expensive supervision of code or
structural approvals by experienced Exchange staff.
The Exchange believes the proposed ISP Connection fee, and the
applicable fee cap, is reasonable, equitable and not unfairly
discriminatory as the fee is consistent with charges for similar
services on other options exchanges. For example, NYSE American Options
charges (``NYSE American'') a monthly Transport Charge of $150 (the
same as the proposed ISP Connection fee), capped at $500 per Floor
Broker organization (slightly lower than the proposed $750 cap).\8\ The
Exchange believes it is reasonable to charge a slightly higher fee for
these costs than is charged on NYSE American to account for the cost of
the new Trading Floor, including the costs of transferring operations
and technology to the new location and ongoing support for the new
technology underlying the new Trading Floor.
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\8\ See NYSE American Options fee schedule, Section IV, Monthly
Floor Communication, Connectivity, Equipment and Booth or Podia
Fees, available at: https://www.nyse.com/publicdocs/nyse/markets/american-options/NYSE_American_Options_Fee_Schedule.pdf.
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The Exchange also believes the proposed Floor Fees are reasonable
and equitable because OTPs choose whether to participate on the
Exchange solely through electronic means, or with a presence on the
Trading Floor. The proposed Floor Fees are designed to encourage
participants to conduct business on the Trading Floor, which may be on
behalf of any market participant. In addition, orders brought to the
Trading Floor benefit all market participants by providing more trading
opportunities, which attracts Market Makers, Customers and other
participants. An increase in activity, in turn, facilitates tighter
spreads, which may result in a corresponding increase in order flow
from all market participants.
To the extent that the Exchange will no longer be offering certain
equipment or services, the removal of such fees from the Fee Schedule
is reasonable as it would add clarity and transparency to the Fee
Schedule to the benefit of all participants.
B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with Section 6(b)(8) of the Act,\9\ the Exchange does
not believe that the proposed rule change would impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act. The proposed Floor Fees are designed to address
the relocation of the Exchange Trading Floor, not to address any
competitive issues. The Exchange believes that the proposed fees will
encourage fair and efficient use of the new Trading Floor space. If
this result is achieved, the proposed fees may increase both inter-
market and intra-market competition by incenting off-Floor participants
to direct their orders to the Exchange, which would enhance the quality
of quoting and may increase the volume of contracts traded on the
Exchange.
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\9\ 15 U.S.C. 78f(b)(8).
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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 Floor Fees would be applied to all similarly
situated participants (i.e., Floor Brokers and on-floor Market Makers),
and, as such, the proposed change would not impose a disparate burden
on competition either among or between classes of market participants.
Further, the proposal to limit Market Maker podia use to Market Makers
with an active OTP is likewise reasonable, equitable and not unfairly
discriminatory because such participants utilize the podia to manage
their electronic quotes as well as to maintain a presence in the
Trading Crowd to respond to a call for a market. Reserve OTPs are not
unfairly burdened by this restriction because such OTPs are not active
on a trading permit, cannot respond to a call for market, and therefore
do not need to be present in the Trading Crowd. Given these
distinctions the Exchange believes this limitation represents a fair
and efficient use of Exchange resources.
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 Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \10\ and Rule 19b-4(f)(6) thereunder.\11\
Because the proposed rule change does not: (i) Significantly affect the
protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.\12\
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\10\ 15 U.S.C. 78s(b)(3)(A)(iii).
\11\ 17 CFR 240.19b-4(f)(6).
\12\ [sic] CFR 240.19b-4(f)(6). In addition, Rule 19b-
4(f)(6)(iii) requires a self-regulatory organization to give the
Commission written notice of its intent to file the proposed rule
change, along with a brief description and text of the proposed rule
change, at least five business days prior to the date of filing of
the proposed rule change, or such shorter time as designated by the
Commission. The Exchange has satisfied this requirement.
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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
[[Page 66822]]
under Section 19(b)(2)(B) \13\ of the Act to determine whether the
proposed rule change should be approved or disapproved.
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\13\ 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-2018-80 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-2018-80. 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 website (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 website 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. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NYSEARCA-2018-80 and should be submitted
on or before January 17, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2018-27988 Filed 12-26-18; 8:45 am]
BILLING CODE 8011-01-P