[Federal Register Volume 84, Number 94 (Wednesday, May 15, 2019)]
[Notices]
[Pages 21866-21868]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-09967]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-85820; File No. SR-NYSEArca-2019-30]
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
May 9, 2019.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on April 30, 2019, NYSE Arca, Inc. (``NYSE Arca'' or
``Exchange'') filed with the Securities and Exchange Commission
(``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 May 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, 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
May 1, 2019, to provide an additional method for Market Makers to
qualify for enhanced posting credits in Penny Pilot issues and SPY. The
filing will also eliminate a program that is no longer effective.
The Exchange currently provides a number of incentives for Market
Makers and Lead Market Makers (collectively, ``Market Makers'') to
achieve posting credits that are higher than the base posting credit of
$0.28 per contract in Penny Pilot issues and SPY.\4\ 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 to aggregate their volume executed on NYSE Arca with Affiliated
or Appointed Order Flow Providers (``OFPs''), Market Makers may
encourage an increased level of activity from these participants to
qualify for various incentives. As a result, the Exchange becomes a
more attractive venue for Customer (and Professional Customer) orders
offering enhanced rebates. Pursuant to the Market Maker Penny Pilot and
SPY Posting Credit Tiers (the ``Penny Credit Tiers''), Market Maker
orders and quotes that post liquidity and are executed on the Exchange
earn a base credit of $0.28 per contract, and may be eligible for
increased credits based on the participant's activity. Currently, in
addition to the base, there are three Penny Credit Tiers, with
increasing minimum volume thresholds (as well as increasing credits)
associated with each tier: The Select Tier, the Super Tier and the
Super Tier II.
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\4\ The base credit is available for executions of Market Maker
posted interest in Penny Pilot Issues and SPY and has no minimum
volume threshold requirement.
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The Exchange proposes to add a new (third) alternative
qualification volume threshold for Super Tier II, but will not modify
the $0.42 per contract credit associated with this Tier.\5\
Specifically, the proposed alternative method of qualifying would
require a Market Maker to achieve at least 0.10% of Total Customer
Average Daily Volume (``TCADV'') from Market Maker posted interest in
all issues, plus at least 0.42% of executed Average Daily Volume
(``ADV'') of Retail Orders of U.S. Equity Market Share Posted and
Executed on NYSE Arca Equity Market.\6\ This proposed change seeks to
incent Market Makers to achieve this Tier by increasing trading on the
equities market (while making the Tier easier to achieve based on a
lower minimum threshold for options trading activity).
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\5\ The Exchange is not modifying the existing (two) alternative
bases for a Market Maker to achieve Super Tier II, which require (1)
a Market Maker to execute at least 0.20% of TCADV from Market Maker
posted interest in all issues, plus ETP Holder and Market Maker
posted volume in Tape B Securities (``Tape B Adding ADV'') that is
equal to at least 1.50% of US Tape B consolidated average daily
volume (``CADV'') for the billing month executed on NYSE Arca Equity
Market; or (2) at least 1.60% of TCADV from Market Maker interest in
all issues, with at least 0.90% of TCADV from Market Maker posted
interest in all issues.
\6\ For purposes of calculating the executed ADV of Retail
Orders of U.S. Equity Market Share on the NYSE Arca Equity Market, a
Retail Order must qualify for the Retail Order Tier set forth in the
NYSE Arca Equities Fee Schedule.
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The Exchange also currently offers a special rate of $0.12 per
contract Firm and Broker Dealer orders in manual executions of VXX that
are not facilitating a Customer or Professional Customer (the
``Program''). The Exchange has decided to discontinue the Program as it
did not attract additional participation or volume to the Exchange and
therefore proposes to delete all references to the Program and the
associated rate. The proposed change would add clarity, transparency
and internal consistency to the program.
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
[[Page 21867]]
discriminate between customers, issuers, brokers or dealers.
The Exchange believes that the proposed modification to Super Tier
II is reasonable, equitable, and not unfairly discriminatory because
offering a third alternative qualification basis should encourage more
participants to qualify for the various Tiers, particularly those like
Super Tier II that have a cross-asset pricing component. The proposed
modification to Super Tier II, which would be available to all
similarly-situated market participants on an equal and non-
discriminatory basis, should incent Market Makers to increase trading
on the equities market, while making it easier to meet the requisite
volume threshold in options trading for this Tier. The Exchange notes
that Market Makers are still eligible to qualify for Super Tier II
under the existing alternatives (see supra note 5) based on posted
Market Maker Electronic volume and overall volume, or by executing
Posted Interest coupled with Tape B activity on the NYSE Arca Equity
Market. By continuing to provide such alternative methods to qualify
for a Tier, and adding an additional method, the Exchange believes the
opportunities to qualify for credits is increased, which benefits all
participants through increased Market Maker activity. Further,
encouraging Market Maker activity on 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 Market Maker activity that adds liquidity is
increased by the proposal, market participants will increasingly
compete for the opportunity to trade on the Exchange. The resulting
increased volume and liquidity would provide more trading opportunities
and tighter spreads to all market participants and thus would promote
just and equitable principles of trade, remove impediments to and
perfect the mechanism of a free and open market and a national market
system and, in general, to protect investors and the public interest.
The Exchange believes the proposed modification is reasonable,
equitable and not unfairly discriminatory because it would encourage
participants to enhance their order flow to interact with Market Maker
orders and quotes, which potential increase in order flow would benefit
all market participants by improving order execution and price
discovery, which, in turn, promotes just and equitable principles of
trade and removes impediments to and perfects the mechanism of a free
and open market and a national market system.
Finally, the proposal to eliminate the Program is reasonable and
equitable, and not unfairly discriminatory because the Exchange has
decided to discontinue the Program, which is based on business
conducted on the Exchange in a particular symbol, and therefore would
impact all similarly-situated market participants equally. The Exchange
proposes to delete all references to the Program and the associated
rate, which would add clarity and transparency to the Fee Schedule
making it easier to navigate to the benefit of the investing public.
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 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 may, in fact, encourage
competition.
The proposal to eliminate the Program is reasonable and equitable,
and not unfairly discriminatory because the Exchange has decided to
discontinue the Program, which is based on business conducted on the
Exchange in a particular symbol, and therefore would impact all
similarly-situated market participants equally.
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) \7\ of the Act and subparagraph (f)(2) of Rule 19b-
4 \8\ thereunder, because it establishes a due, fee, or other charge
imposed by the Exchange.
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\7\ 15 U.S.C. 78s(b)(3)(A).
\8\ 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-2019-30 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-2019-30. 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
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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-2019-30 and should
be submitted on or before June 5, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\9\
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\9\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-09967 Filed 5-14-19; 8:45 am]
BILLING CODE 8011-01-P