[Federal Register Volume 84, Number 21 (Thursday, January 31, 2019)]
[Notices]
[Pages 868-870]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-00480]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-84975; File No. SR-NYSEAMER-2018-56]
Self-Regulatory Organizations; NYSE American LLC; Notice of
Filing and Immediate Effectiveness of Proposed Change To Amend the NYSE
American Options Fee Schedule
December 26, 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 21, 2018, NYSE American LLC (the ``Exchange''
or ``NYSE American'') 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 American Options Fee
Schedule (``Fee Schedule''). The Exchange proposes to implement the fee
change effective January 1, 2019. The proposed 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
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of this filing is to modify the Fee Schedule to extend
for another year the prepayment incentive program for Floor Broker
organizations (each a ``Floor Broker'') that the Exchange introduced in
April 2018 (the ``FB Prepay Program'' or ``Program'').\4\
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\4\ See Exchange Act Release No. 83073 (April 20, 2018), 83 FR
18377 (April 26, 2018) (NYSEAmer-2018-15). See also Fee Schedule,
Section III.E., Floor Broker Fixed Cost Prepayment Incentive Program
(the ``FB Prepay Program''), available here, https://www.nyse.com/publicdocs/nyse/markets/american-options/NYSE_American_Options_Fee_Schedule.pdf.
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Pursuant to the FB Prepay Program, the Exchange offered Floor
Brokers that operate on the Exchange a 10% discount on their ``Eligible
Fixed Costs'' (described in the table below) if Floor Brokers prepaid
such costs for April through December 2018.
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Eligible Fixed Costs
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Section III.A. Monthly ATP Fees.
Section III.B. Floor Access Fee.
Section IV. Monthly Floor Communication, Connectivity, Equipment and
Booth or Podia Fees as listed below:
Login.
[[Page 869]]
Transport Charges.
Booth Premises.
Telephone Service.
Cellular Phones.
Booth Telephone System--Line Charge.
Booth Telephone System--Single line phone jack and data jack.
Wire Services.
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The Exchange proposes to extend the FB Prepay Program and offer
Floor Brokers the opportunity to prepay their annual Eligible Fixed
Costs for 2019, with modifications to the benchmarks utilized to assess
eligibility for the Percentage Growth Incentive.\5\ The Exchange
proposes to continue to offer participants in the FB Prepay Program the
opportunity to qualify for larger discounts (i.e., more than 10% of the
2019 Eligible Fixed Costs) through the Percentage Growth Incentive (the
``Incentive''), which is designed to encourage Floor Brokers to
increase their average daily volume (``ADV'') in billable manual
contract sides by certain percentages (correlated with Tiers) as
measured against one of two benchmarks.\6\
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\5\ To participate in the 2019 FB Prepay Program, Floor Brokers
would have to notify the Exchange in writing by emailing
[email protected], indicating a commitment to submit
prepayment, by no later than December 31, 2018. The email to enroll
in the Program would have to originate from an officer of the Floor
Broker organization and, except as provided for below, represents a
binding commitment through the end of 2019. To participate in the
Program, prepayment for the balance of the year must be received by
the close of business on January 31, 2019. See proposed Fee
Schedule, Section III.E., Floor Broker Fixed Cost Prepayment
Incentive Program (the ``FB Prepay Program''). ``Participating Floor
Broker organizations that qualify for the Percentage Growth
Incentive will receive their 2019 rebate in January 2020.'' See id.
\6\ The Percentage Growth Incentive would continue to exclude
Customer volume, Firm Facilitation trades, and QCCs. Any volume
calculated to achieve the Firm Monthly Fee Cap and the Strategy
Execution Fee Cap, regardless of whether either of these caps is
achieved, will likewise be excluded from the Percentage Growth
Incentive because fees on such volume are already capped and
therefore such volume does not increase billable manual volume. See
Fee Schedule, Section III.E., supra note 4.
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For the 2019 FB Prepay Program, the Exchange proposes to modify the
first benchmark by requiring a minimum 11,000 contract sides (up from
10,000) in billable ADV and proposes to modify the second benchmark by
requiring 110% of the Floor Broker's total billable manual ADV in
contract sides (up from 100%) during the second half of 2017--i.e.,
July through December 2017. The Exchange is not modifying the
percentages (correlated with Tiers 1-3) against which the benchmarks
are measured.\7\ The Exchange notes that Equity Option Industry ADV for
2018 is up 24% as compared to Equity Option Industry ADV for the last
six months of 2017 (and the three years prior). Thus, in this climate,
the Exchange believes it is appropriate to apply a nominal increase in
the first benchmark--from a minimum of 10,000 ADV to 11,000 ADV.
Similarly, given that 2018 options industry volume has been elevated
and the Exchange cannot predict whether volumes for 2019 will continue
at the same pace, the Exchange believes it is appropriate to continue
to use ADV from the latter half of 2017 as the alternative benchmark,
with a nominal increase of 10% over the current requirement. The
Exchange notes that the changes to the Program are designed to
encourage those Floor Brokers that enrolled in the Program for 2018 to
reenroll for 2019 as well as to attract Floor Brokers that have not yet
participated.
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\7\ See id.
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As proposed, a Floor Broker that commits to the Program for 2019
would be invoiced in January 2019 for its estimated Eligible Fixed
Costs, through the end of 2019, less 10%. The estimated annual Eligible
Fixed Costs (i.e., for January through December 2019) for each
participating Floor Broker would be based on that Floor Broker's
November, 2018 invoice for such costs [sic].
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 proposal to extend the FB Prepayment Program as modified is
reasonable, equitable and not unfairly discriminatory for the following
reasons. First, the Program is optional and Floor Brokers can elect to
participate (or elect not to participate). In addition, the Exchange is
continuing to offer two alternative means to achieve the same enhanced
discount to ensure that Floor Brokers that are new to the Exchange (and
therefore have no historical ADV from 2017) could nonetheless
participate in the Program. The Exchange notes that Equity Option
Industry ADV for 2018 is up 24% as compared to Equity Option Industry
ADV for the last six months of 2017 (and the three years prior). Thus,
in this climate, the Exchange believes it is appropriate to apply a
nominal increase in the first benchmark--from a minimum of 10,000 ADV
to 11,000 ADV. Similarly, given that 2018 options industry volume has
been elevated and the Exchange cannot predict whether volumes for 2019
will continue at the same pace, the Exchange believes it is appropriate
to continue to use ADV from the latter half of 2017 as the alternative
benchmark, with a nominal increase of 10% over the current requirement.
The Exchange notes that the changes to the Program are designed to
encourage those Floor Brokers that enrolled in the Program for 2018 to
reenroll for 2019 as well as to attract Floor Brokers that have not yet
participated.
The Exchange believes the proposed changes to the FB Program would
continue to incent Floor Brokers to increase their billable volume
executed in open outcry on the Exchange in an effort to achieve the
Incentive (the percentages for which remain unchanged), which would
benefit all market participants by expanding liquidity and providing
more trading opportunities, even to those market participants that have
not committed to the Program. Regardless of which benchmark a
participating Floor Broker's growth is measured against, all Floor
Broker's that opt to participate and seek to achieve the Incentive
would be required to increase volume executed on the Exchange in order
to receive the enhanced discount. Thus, the Exchange believes the
proposed Program, is reasonable, equitable and not unfairly
discriminatory to others.
The Exchange believes the proposal to continue to offer the
Percentage Growth Incentive for 2019 based on ADV in contract sides in
2019 is reasonable, equitable and not unfairly discriminatory because,
just as under the existing program, this Incentive is designed to
encourage Floor Brokers to increase their ADV in billable manual
contract sides by certain percentages (correlated with Tiers) as
measured against the two available benchmarks.
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 would impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act. The Exchange believes that the
[[Page 870]]
proposed changes to the FB Prepayment Program may increase both inter-
market and intra-market competition by incenting 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. To the extent that there is an additional competitive burden
on non-Exchange participants, the Exchange believes that this is
appropriate because the proposal should incent market participants to
direct additional order flow to the Exchange, and thus provide
additional liquidity that enhances the quality of its markets and
increases the volume of contracts traded here. To the extent that this
purpose is achieved, all of the Exchange's market participants should
benefit from the improved market liquidity. Enhanced market quality and
increased transaction volume that results from the anticipated increase
in order flow directed to the Exchange would benefit all market
participants and improve competition on the Exchange.
Given the robust competition for volume among options markets, many
of which offer the same products, implementing programs to attract
order flow, such as the proposed changes to the FB Prepayment Program,
are consistent with the above-mentioned goals of the Act.
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) \10\ of the Act and subparagraph (f)(2) of Rule
19b-4 \11\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 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) \12\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\12\ 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-NYSEAMER-2018-56 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-NYSEAMER-2018-56. 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 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. 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-NYSEAMER-2018-56, and should be
submitted on or before February 21, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-00480 Filed 1-30-19; 8:45 am]
BILLING CODE 8011-01-P