[Federal Register Volume 84, Number 80 (Thursday, April 25, 2019)]
[Notices]
[Pages 17439-17441]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-08332]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-85696; File No. SR-NYSEArca-2019-24]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change To Modify the
NYSE Arca Options Fee Schedule Regarding Certain Credits
April 19, 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 8, 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 and II
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''). The Exchange proposes to implement the fee change
effective April 8, 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
[[Page 17440]]
the Commission's Public Reference Room.
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\4\ On March 28, 2019, the Exchange filed to amend the Fee
Schedule for effectiveness on April 1, 2019 (SR-NYSEArca-2019-19)
and withdrew such filing on April 8, 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of this filing is to modify the Fee Schedule, effective
April 8, 2019, to modify the criteria for achieving various credits.
The Exchange currently provides a number of incentives for OTP
Holders and OTP Firms (collectively, ``OTPs'') designed to encourage
OTPs to direct additional order flow to the Exchange to achieve more
favorable pricing and higher credits. Among these incentives are
enhanced posted liquidity credits based on achieving certain
percentages of NYSE Arca Equity daily activity, also known as ``cross-
asset pricing.'' Similarly, because the Exchange allows Market Makers
(``MMs'') to aggregate their volume executed on NYSE Arca with
affiliated or Appointed Order Flow Providers (``OFPs''), MMs may
encourage an increased level of activity from these participants to
qualify for various incentives. As a result, NYSE Arca becomes a more
attractive venue for Customer (and Professional Customer) orders
offering enhanced rebates.
Pursuant to the Customer Penny Pilot Posting Credit Tiers (the
``Penny Credit Tiers''), Customer and Professional Customer orders that
post liquidity and are executed on the Exchange earn a base credit of
$0.25 per contract, and may be eligible for increased credits based on
the participant's activity. Currently, there are 7 Penny Credit Tiers,
with increasing minimum volume thresholds (as well as increasing
credits) associated with each tier.
The Exchange proposes to modify the minimum volume thresholds for
Tier 5, but will not modify the $0.48 per contract credit associated
with this Tier. Specifically, the Exchange proposes to modify Tier 5 to
require that an OTP achieve at least 0.22% (decreased from 0.35%) of
Total Customer Average Daily Volume (``TCADV'') from Customer Posted
interest in all issues, plus Executed ADV of at least 0.90% (increased
from 0.80%) of U.S. Equity Market Share Posted and Executed on NYSE
Arca Equity Market.\5\ This proposed change seeks to incent OTPs to
achieve this Tier by increasing trading on the equities market (while
making the Tier easier to achieve based on the lower minimum threshold
for options trading activity).
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\5\ The Exchange is not modifying the alternative basis for an
OTP to achieve Tier 5, which requires an OTP to achieve at least
0.75% of TCADV from Customer posted interest in all issues, plus at
least 0.45% of TCADV from Market Maker Total Electronic Volume.
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The Exchange also offers a Customer Incentive Program (the
``Incentive Program''), which offers OTPs the ability to earn one
additional credit by achieving one of the five alternative minimum
thresholds. The Exchange proposes to modify one of the alternatives.
Specifically, the Exchange proposes that an OTP must achieve Executed
ADV of 0.90% (increased from 0.80%) of U.S. Equity Market Share Posted
and Executed on NYSE Arca Equity Market to be eligible for the
associated $0.03 per contract credit (which credit is not changing).
This proposed change is designed to encourage increased trading on NYSE
Arca Equity Market.
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 the proposed modifications to the Penny
Credit Tiers and the Incentive Program are reasonable, equitable, and
not unfairly discriminatory because they are designed to encourage more
participants to qualify for the various Tiers or Incentives,
particularly those with a cross-asset pricing component. The Exchange
believes these proposed changes should result in more order flow being
directed to the Exchange, including from affiliated or Appointed OFPs.
The proposed modification to Tier 5 should incent OTPs to increase
trading on the equities market, while making it easier to meet the
requisite volume threshold in options trading. The Exchange notes that
OTPs are still eligible to qualify for Tier 5 under the existing
alternative (see supra note 5) based on posted Customer volume and
Market Maker Electronic volume. By continuing to provide such
alternative methods to qualify for a Tier or an Incentive, the Exchange
believes the opportunities to qualify for credits is increased, which
benefits all participants through both increased Customer (and
Professional Customer) volume and increased Market Maker activity.
Further, encouraging Market Maker activity on, as well as encouraging
OFPs to send higher volumes of Customer orders to, the Exchange would
also contribute to the Exchange's depth of book as well as to the top
of book liquidity.
To the extent that order flow that adds liquidity is increased by
the proposal, market participants will increasingly compete for the
opportunity to trade on the Exchange, including sending more orders to
reach higher Tiers or achieve alternative Incentives. The resulting
increased volume and liquidity would provide more trading opportunities
and tighter spreads to the investing public and, thus, would promote
just and equitable principles of trade and remove impediments to, and
perfect the mechanism of, a free and open market.
The Exchange also believes the proposed changes would be available
to all similarly-situated market participants on an equal and non-
discriminatory basis. The Exchange believes the proposed modifications
are reasonable, equitable and not unfairly discriminatory because they
encourage participants to enhance their order flow to qualify for the
various incentives, including encouraging more participants to have
affiliated or appointed order flow directed to the Exchange, which
potential increase in order flow would benefit the investing public by
improving order execution and price discovery, which promotes just and
equitable principles of trade and removes impediments to, and perfects
the mechanism of, a free and open market.
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. Instead, the Exchange believes that the proposed
changes would encourage
[[Page 17441]]
competition, including by attracting additional liquidity to the
Exchange, which would continue to make the Exchange a more competitive
venue for, among other things, order execution and price discovery. 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.
Further, the incentive would be available to all similarly-situated
participants, and, as such, the proposed changes would not impose a
disparate burden on competition either among or between classes of
market participants and, in fact, may encourage competition.
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) \6\ of the Act and subparagraph (f)(2) of Rule 19b-
4 \7\ thereunder, because it establishes a due, fee, or other charge
imposed by the Exchange.
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\6\ 15 U.S.C. 78s(b)(3)(A).
\7\ 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.
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-2019-24 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-2019-24. 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-2019-24 and should be submitted
on or before May 16, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\8\
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\8\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-08332 Filed 4-24-19; 8:45 am]
BILLING CODE 8011-01-P