[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