[Federal Register Volume 84, Number 26 (Thursday, February 7, 2019)]
[Notices]
[Pages 2608-2610]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-01384]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85029; File No. SR-NYSEARCA-2018-99]


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

February 1, 2019.
    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 26, 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 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 January 1, 2019. 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,

[[Page 2609]]

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, effective 
January 1, 2019, to provide an incentive for Market Makers to provide 
more competitive prices and deeper liquidity in the NYSE FANG+ Index 
(``NYSE FANG+''), which trades under the symbol FAANG. The Exchange 
also proposes to eliminate the FAANG Rebate that it currently offers 
Floor Brokers as it failed to achieve its intended goal of encouraging 
Floor Brokers to bring FAANG business to the Trading Floor.
    The Exchange introduced fees and rebates for transactions in FAANG 
in June 2018.\4\ Currently, the Exchange charges $0.35 per contract, 
per side for non-Customer and Professional Customer FAANG transactions, 
whether executed manually or electronically.\5\ However, the Exchange 
does not charge a fee for any FAANG transactions (i) on behalf of 
Customers or (ii) by Market Makers with an appointment in NYSE 
FANG+.\6\ Thus, Market Makers that do not have an appointment in NYSE 
FANG+ are currently subject to the same fee of $0.35 per contract, per 
side for non-Customer and Professional Customer FAANG transactions. The 
Exchange proposes to remove the requirement that a Market Maker have an 
appointment in FAANG to be able to transact in FAANG for free. The 
Exchange believes that removing this limitation would encourage Market 
Makers to trade in FAANG.
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    \4\ See Securities Exchange Act Release No. 83554 (June 28, 
2018), 83 FR 31436 (July 5, 2018) (SR-NYSEArca-2018-49).
    \5\ See Fee Schedule, NYSE FANG+ Index (FAANG) Transaction Fees, 
available here: https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf. [sic]
    \6\ See id. The term Market Maker, as used herein, includes NYSE 
Arca Options Market Makers and Lead Market Makers (or LMMs).
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    Concurrent with this change, the Exchange proposes to introduce 
credits for Market Maker organizations--specifically, NYSE Arca Options 
Market Makers or LMMs--that execute at least 500 total monthly contract 
sides that open a position on the Exchange (the ``MM FAANG Credit'' or 
``Credit).\7\ Only those FAANG transactions marked as ``open'' would be 
eligible to be counted towards the MM FAANG Credit. As proposed, firms 
that meet the minimum volume threshold would receive a MM FAANG Credit 
of $5,000; provided, however, that if more than ten firms qualify for a 
MM FAANG Credit in a calendar month, the Credit for each qualifying 
firm would be a pro rata share of $50,000. The Exchange believes the 
proposed MM FAANG Credit would further the Exchange's goal of 
encouraging trading in this new index product. In particular, the 
Exchange seeks to spur Market Makers to provide increased liquidity in 
tighter markets, which would create greater trading opportunities for 
all market participants.
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    \7\ See proposed Fee Schedule, NYSE FANG+ Index (FAANG) 
Transaction Fees.
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    Finally, the Exchange proposes to eliminate the FAANG Rebate that 
it currently offers Floor Brokers as it failed to achieve its intended 
goal of encouraging Floor Brokers to bring FAANG business to the 
Trading Floor.\8\
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    \8\ See Securities Exchange Act Release No. 83616 (July 10, 
2018), 83 FR 32929, 32929 (July 16, 2018) (SR-NYSEArca-2018-51) 
(adopting the FAANG Rebate for Floor Brokers to ``encourage[e] Floor 
Brokers to bring business to the Trading Floor, which would in turn, 
benefit all market participants through increased liquidity and more 
opportunities to trade'').
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act, in general, and furthers the objectives 
of Sections 6(b)(4) and (5) of the Act, 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 remove the restriction that 
Market Makers must have an appointment in FAANG to avoid transactions 
fees in this product is reasonable, equitable and not unfairly 
discriminatory because this proposal would encourage Market Makers to 
provide liquidity in FAANG, a product that was only introduced in June 
2018. In addition, the proposed FAANG transaction fee change would 
apply equally to all Marker Maker organizations that transact in FAANG.
    The Exchange believes the proposal to introduce a MM FAANG Credit 
for executing a certain number of options contract sides on FAANG is 
reasonable, equitable and not unfairly discriminatory for the following 
reasons. First, the proposed Credit would apply equally to all Marker 
Maker organizations that transact in FAANG. Second, the proposed Credit 
would encourage Market Maker organizations to increase trading activity 
in FAANG. The Exchange anticipates that Market Makers seeking to reach 
the proposed 500 contract threshold will provide additional liquidity 
and trading opportunities for all market participants. The Exchange 
believes the proposed MM FAANG Credit is reasonable, equitable and not 
unfairly discriminatory because it is designed to further the 
Exchange's goal of encouraging transactions in FAANG, a new index 
product.
    Finally, the Exchange believes the proposal to eliminate the FAANG 
Rebate that is currently offered to Floor Brokers is reasonable, 
equitable and not unfairly discriminatory because it would apply 
equally to all Floor Brokers. Further, the proposal would encourage the 
fair and efficient use of Exchange resources given that this incentive 
program failed to meet its stated goal of encouraging Floor Brokers to 
bring FAANG business to the Trading Floor.

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 the proposed MM FAANG Credit 
for Market Maker organizations would not place an unfair burden on 
competition as it would apply to all similarly situated Market Makers. 
The Exchange also believes the proposed Credit is procompetitive as it 
would further the Exchange's goal of introducing new products to the 
marketplace and encouraging Market Makers to provide liquidity in these 
products, which would in turn, benefit all market participants. Market 
participants that do not wish to trade in FAANG are not obliged to do 
so.
    To the extent that there is an additional competitive burden on 
market participants that are not eligible for the MM FAANG Credit 
(i.e., non-Market Maker organizations), the Exchange believes that this 
is appropriate because the proposal would incent Market Makers to 
provide increased liquidity in tighter markets, which would create 
greater trading opportunities for all market participants. 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

[[Page 2610]]

order flow directed to the Exchange will benefit all market 
participants and improve competition on the Exchange.
    The proposed elimination of the FAANG Rebate currently available to 
Floor Brokers likewise does not impose an unfair burden on competition 
as it failed to achieve its intended goal of encouraging Floor Brokers 
to bring FAANG business to the Trading Floor and applies equally to all 
similarly situated Floor Brokers.
    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 Rebate would be applied to all similarly situated 
participants (i.e., Market Maker organizations), and, as such, the 
proposed change would not impose a disparate burden on competition 
either among or between classes of market participants.

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) \9\ of the Act and subparagraph (f)(2) of Rule 19b-
4 \10\ thereunder, because it establishes a due, fee, or other charge 
imposed by the Exchange.
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 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) \11\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \11\ 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-2018-99 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-2018-99. 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-NYSEARCA-2018-99, and should be 
submitted on or before February 22, 2019.
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    \12\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-01384 Filed 2-6-19; 8:45 am]
 BILLING CODE 8011-01-P