[Federal Register Volume 84, Number 74 (Wednesday, April 17, 2019)]
[Notices]
[Pages 16066-16068]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-07620]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-85620; File No. SR-NYSEARCA-2019-25]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Modify the NYSE
Arca Options Fee Schedule
April 11, 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 April 9, 2019, NYSE Arca, Inc. (``NYSE Arca'' or the
``Exchange'') 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 modify the NYSE Arca Options Fee Schedule
(``Fee Schedule''). The Exchange proposes to implement the fee change
effective April 9, 2019.\4\ 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.
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\4\ On March 29, 2019, the Exchange filed to amend the Fee
Schedule for effectiveness on April 1, 2019 (SR-NYSEArca-2019-20)
and withdrew such filing on April 9, 2019.
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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, effective
April 9, 2019, to amend the criteria for achieving a discount on the
LMM Rights Fee.
The LMM Rights Fee (``Rights Fee'') is charged ``on a per issue
basis to the OTP Firm acting as LMM in the issue.'' \5\ The Exchange
charges a Rights Fee on each issue in a LMM's allocation, with rates
based on the Average National Daily Customer Contracts. LMMs are also
able to achieve a 50% discount to their total monthly Rights Fee by
achieving daily contract volume traded electronically of at least 0.40%
Total Industry Customer equity and ETF option ADV (``TCADV), of which
0.08% TCADV are in its LMM appointment (the ``Discount'').\6\ The
Exchange proposes to modify the criteria for achieving the Discount in
two ways. First, the Exchange proposes to reduce the minimum TCADV
threshold from 0.40% to 0.32%, but still
[[Page 16067]]
require that 0.08% TCADV be in its LMM appointment.\7\ The Exchange
also proposes to add an alternative means of achieving the Discount. As
proposed, if an LMM achieves at least 0.75% of TCADV in manual
transactions in all account types, which may include ``transaction
volume from the OTP Holder's or OTP Firm's affiliates (per Endnote 8)
or Appointed OFP (per Endnote 15),'' which Endnotes define affiliates
and Appointed OFPs, respectively, that LMM could also qualify for the
Discount.\8\ The Exchange would continue to determine whether an LMM
qualifies for the Discount based on the daily contract volume traded
electronically in a calendar month. The Exchange proposes to further
amend the Fee Schedule so that it would determine whether the LMM
qualifies for the Discount by also assessing the daily contract volume
traded manually by an LMM and affiliated/appointed entities each
trading day in a calendar month.\9\
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\5\ See Fee Schedule, Endnote 2, available here, https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf. See also, Fee Schedule, NYSE
Arca General Options and Trading Permit (OTP) Fee, Lead Market Maker
Rights Fee. Because the Fee Schedule already reflects that Endnote 2
applies to all issues in an LMM's appointment, regardless of the
Average National Daily Customer Contracts, the Exchange proposes to
remove the references to Endnote 2 that appear next to the Rights
Fee for issues with applicable volume of 0-2,000. See proposed Fee
Schedule, NYSE Arca General Options and Trading Permit (OTP) Fee,
Lead Market Maker Rights Fee.
\6\ See id. (providing the Discount criteria). The Exchange also
offers activity-based discounts (i.e., on total electronic volume
and total posted volume) to LMMs with the most actively traded
issues in their appointment. The Discount is applied to the total
monthly rights fee after any such discounts are applied. The
Exchange is not proposing any changes to the activity-based
discounts to the LMM Rights Fee.
\7\ See proposed Fee Schedule, Endnote 2. The Exchange also
proposes to restructure the sentence regarding the Discount to put
the amount of the Discount first, followed by the criteria needed to
achieve the discount, which would add clarity and transparency to
the Fee Schedule making it easier to navigate and comprehend. See
id.
\8\ See id. Endnote 8 of the Fee Schedule cites to Rule 1.1(a),
which defines an affiliate as being a person that directly, or
indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the person
specified). Endnote 15 of the Fee Schedule, an ``Appointed OFP'' is
an OFP that has been designated by an NYSE Arca Market Maker for
purposes of the Fee Schedule.
\9\ See proposed Fee Schedule, Endnote 2.
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The Exchange believes the proposed modifications would encourage
LMMs to apply for issues to be added to their appointment, and to
encourage participation in manual transactions.
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 that providing modifications to the Rights
Fee is reasonable, equitable, and not unfairly discriminatory because,
among other things, it makes the Discount more achievable by lowering
the threshold for electronic transactions and providing an alternative
means of achieving the Discount based on manual transactions. The
proposed Discount is not unfairly discriminatory because Rights Fees
are only assessed on LMMs and there is only one LMM per issue. The
proposed reduction of the existing qualifying threshold would make the
Discount more achievable for LMMs and may encourage LMMs to apply for
issues to be added to their appointment. The proposed new alternative
threshold, which allows LMMs to pool their manual volume with
affiliates and/or Appointed OFPs, is reasonable, equitable, and not
unfairly discriminatory because it would encourage participation in
manual transactions. Any increase in volume executed in open outcry on
the Exchange would benefit all market participants by expanding
liquidity and providing more trading opportunities, even to market
participants that do not execute manual transactions. The Exchange
notes that allowing market participants to aggregate volume with
affiliates or Appointed OFPs (or Appointed Market Makers) is not new or
novel, as the Exchange allows OTPs to aggregate such volume for
purposes of meeting certain pricing Tiers/Incentives.\10\ The Exchange
believes that the qualifying threshold for this alternative basis for
achieving the Discount is reasonable, equitable, and not unfairly
discriminatory because it is more than double the proposed new
threshold that is based solely on LMM volume (i.e., 0.32% v. 0.75%) and
therefore ensures that LMMs that do not have affiliates/Appointed OFPs
and/or do not transact significant manual volume would continue to have
the ability to meet the criteria for the Discount.
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\10\ See e.g., NYSE Arca OPTIONS: TRADE-RELATED CHARGES FOR
STANDARD OPTIONS (which sets forth the various programs for
achieving certain credits based on posted volume, each of which cite
Endnote 8, which provides that ``calculations for qualifications for
monthly posting credits or discounts only include electronic
executions and the Exchange will include the activity of either (i)
affiliates or (ii) an Appointed OFP or Appointed MM, per Endnote
15''). See Fee Schedule Endnote 15 for description of affiliates and
Appointed OFPs and Appointed MMs.
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The Exchange believes the proposed modification would provide
meaningful criteria for LMMs to qualify for credits for executing
desired volume on the Exchange, and provides additional incentive for
LMMs to have affiliated or appointed order flow directed to the
Exchange.
The Exchange believes that the technical change to remove
extraneous and potentially confusing references to Endnote 2 in regards
to the LMM Rights Fee as well as to reorganize the sentence that
explains the Discount and its qualification criteria would add clarity,
transparency and internal consistency to the Fee Schedule making it
easier for market participants to navigate and comprehend.\11\
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\11\ See supra nn. 5, 7.
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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. First, because the LMM Rights Fee is charged only
to LMM firms, market participants other than LMM firms are not directly
impacted by this change. The Exchange believes that the proposal to
adjust the criteria (and add new basis) for LMMs to qualify for the
Discount (making it more achievable) may encourage LMMs to apply for
issues to be added to their appointment and may attract additional
liquidity to the Exchange (including open outcry transactions). To the
extent this result is achieved, the increase in volume would benefit
all market participants by providing more trading opportunities,
including to market participants that do not execute manual
transactions. The Exchange does not believe that the proposed changes
would impair the ability of any market participants or competing order
execution venues to maintain their competitive standing in the
financial markets. The Exchange believes the proposed modification
provides additional incentive for LMMs to have affiliated or appointed
order flow directed to the Exchange, which benefits all market
participants. To the extent that an LMM does not have any affiliates or
an Appointed OFP, the LMM is still able eligible for the Discount by
achieving the modified (and reduced) TCADV criteria.
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.
[[Page 16068]]
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-2019-25 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-2019-25. 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-2019-25, and should be
submitted on or before May 8, 2019.
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,
Deputy Secretary.
[FR Doc. 2019-07620 Filed 4-16-19; 8:45 am]
BILLING CODE 8011-01-P