80 FR 25755 - Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Modifying Its Rules To Provide for the Use of Ports That Provide Connectivity to the Exchange's Trading Systems Solely for the Cancellation or “Takedown” of Quotes and Changes to the NYSE Amex Options Fee Schedule Related to This Quote Takedown Service

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 86 (May 5, 2015)

Page Range		25755-25758
FR Document		2015-10410
Federal Register, Volume 80 Issue 86 (Tuesday, May 5, 2015)
[Federal Register Volume 80, Number 86 (Tuesday, May 5, 2015)]
[Notices]
[Pages 25755-25758]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-10410]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74840; File No. SR-NYSEMKT-2015-31]


Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Modifying Its Rules To 
Provide for the Use of Ports That Provide Connectivity to the 
Exchange's Trading Systems Solely for the Cancellation or ``Takedown'' 
of Quotes and Changes to the NYSE Amex Options Fee Schedule Related to 
This Quote Takedown Service

April 29, 2015.
    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 17, 2015, NYSE MKT LLC (the ``Exchange'' or ``NYSE 
MKT'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which 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 its rules to provide for the use of 
ports that provide connectivity to the Exchange's trading systems 
solely for the cancellation or ``takedown'' of quotes. In addition, the 
proposed rule change reflects changes to the NYSE Amex Options Fee 
Schedule (``Fee Schedule'') related to this quote takedown service. The 
text of the proposed rule change is available on the Exchange's Web 
site 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to modify its rules to provide for the use of 
ports that provide connectivity to the Exchange's trading systems 
solely for the cancellation or ``takedown'' of quotes. In addition, the 
proposed rule change reflects changes to the Fee Schedule related to 
this quote takedown service.
Order/Quote Entry Ports
    The Exchange currently makes available to ATP Holders order/quote 
entry ports for connectivity to Exchange trading systems (each an 
``order/quote entry port''). ATP Holders may be authorized to utilize 
order/quote entry ports for option activity on NYSE Amex Options and 
incur monthly Port Fees. Currently, the Exchange charges $450 per 
month, per order/quote entry port for the first 40 ports and $150 per 
month, per order/quote entry port for any additional ports in excess of 
40 (i.e., ports 41 and greater).\4\
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    \4\ See Fee Schedule, available at, https://www.nyse.com/publicdocs/nyse/markets/amex-options/NYSE_Amex_Options_Fee_Schedule.pdf. Unutilized order/quote entry 
ports that connect to the Exchange via its backup datacenter are 
considered established for backup purposes and are not subject to 
Port Fees. In addition, for purpose of calculating the number of 
order/quote entry ports, the Exchange shall aggregate the ports of 
Affiliates. See id.
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    While order/quote entry ports may be used by ATP Holders registered 
as Market Makers to both enter and cancel or remove quotes, Market 
Makers may dedicate certain ports solely to the removal of quotes, 
i.e., a ``quote takedown port,'' \5\ and, until now, the

[[Page 25756]]

Exchange has treated such dedicated quote takedown ports the same as 
order/quote entry port for Port Fee purposes.
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    \5\ See Trader Update regarding Options Pre-Trade and Post-Trade 
Risk Controls, available at, https://www.nyse.com/publicdocs/nyse/markets/amex-options/US_Options_Risk_Controls_Client_Document.pdf 
(announcing availability of ports dedicated to quote takedown to 
minimize latency for quote takedowns).
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Quote Takedown Ports
    The Exchange is proposing to modify its rules to provide ports 
specifically dedicated to quote cancellation or ``quote takedown'' 
(each a ``Quote Takedown Port'') as a service distinct from order/quote 
entry ports, which may be used both for entering quotes or orders and 
removing or cancelling quotes. The proposed Quote Takedown Ports would 
be designed to assist ATP Holders registered as Marker Makers in the 
management of, and risk control over, their quotes, particularly if 
they have a large number of options issues in their appointment. For 
example, if a Market Maker detects market indications that may 
influence the direction or bias of its quotes, the Market Maker may 
attempt to cancel all of its quotes in a number of classes, thereby 
avoiding unintended executions, while it evaluates the direction of the 
market. Thus, to reduce uncertainty, the Marker Maker may submit to the 
Exchange a ``quote takedown'' message through a dedicated Quote 
Takedown Port for the prompt removal of quotes. By entering a quote 
takedown message through a dedicated Quote Takedown Port, a Market 
Maker may reduce its exposure to risk because of heavy quote traffic-
induced latency.
    The Exchange proposes to modify the Fee Schedule to provide that 
certain Quote Takedown Ports would not be subject to Port Fees. 
Specifically, for each order/quote entry port utilized, the Exchange 
proposes to allow Market Makers to utilize, free of charge, one Quote 
Takedown Port. Because Quote Takedown Ports would not be available for 
quote or order submission, the Exchange is proposing to allow one Quote 
Takedown Port free of charge for every order/quote entry port that a 
Market Maker utilizes. In other words, provided a Market Maker does not 
exceed a 1-to-1 ratio of order/quote entry port-to-Quote Takedown Port, 
the Quote Takedown Port(s) would be free (the ``1-to-1 ratio''). 
However, a Market Maker that exceeds the 1-to-1 ratio would be charged 
for additional Quote Takedown Ports. For example, a Market Maker with 
thirty-five (35) order/quote entry ports and forty-two (42) Quote 
Takedown Ports would have forty-two (42) ports subject to charge 
because the Exchange would charge for the 35 order/quote entry ports 
and the seven Quote Takedown Ports that exceed the 1-1 ratio (42-35=7). 
The Exchange would not charge for the first 35 Quote Takedown Ports 
because those ports would meet the 1-to-1 ratio.
    Similarly, the Exchange would not include those Quote Takedown 
Ports that meet the 1-to-1 ratio to determine a Market Maker's total 
number of ports for purposes of calculating Port Fees. As noted above, 
the Exchange charges $450 per month, per port for the first forty 
ports, and $150 per month for each additional port in excess of forty. 
Thus, using the example above, the Exchange would not count the thirty-
five (35) Quote Takedown Ports (which align with the 35 order/quote 
entry ports) against the Market Maker's total number of ports utilized, 
but would count seven (7) additional Quote Takedown Ports. Thus, 
because the Market Maker would have forty-two (42) chargeable ports, 
the Market Maker's total monthly port fee would be $18,300 (i.e., 40 
ports x $450 per port = $18,000; and 2 ports x $150 per port $300).
    The Exchange notes that options Market Makers typically require 
more than forty (40) order/quote entry ports, in part to satisfy their 
obligation to maintain continuous two-sided markets in their appointed 
classes. Thus, the Exchange believes that the proposed change would 
enhance the ability of Market Maker firms to manage quotes, quote 
traffic, and their quoting obligations by eliminating fees for certain 
Quote Takedown Ports, which function as risk management tools rather 
than trade opportunity tools. The Exchange believes this proposed 
change would permit the Exchange to remain competitive with other 
exchanges with respect to fees charged for ports.
    To reflect the proposed change, the Exchange proposes to add to the 
Fee Schedule, in Section V. (Technology & System Access Fees), 
subsection A. (Port Fees), a new category for ``Quote Takedown Ports,'' 
together with the following language: ``For each order/quote entry port 
utilized, NYSE Amex Options Market Makers may utilize, free of charge, 
one port dedicated to quote cancellation or `quote takedown,' which 
port(s) will not be included in the count of order/quote entry ports 
utilized. Any quote takedown port utilized by a NYSE Amex Options 
Market Maker that is in excess of the number of order/quote entry ports 
utilized will be counted and charged as an order/quote entry port.'' 
The Exchange also proposes to make clear that the Quote Takedown Ports 
of Affiliates, like order/quote entry ports, are aggregated.\6\ 
Finally, to add clarity regarding Port Fees, the Exchange proposes a 
non-substantive change to the layout of the table setting forth Port 
Fees, which the Exchange believes will simplify and add transparency to 
the Fee Schedule.
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    \6\ See proposed Fee Schedule, Section V.A. (``For purpose of 
calculating the number of order/quote entry ports and quote takedown 
ports, the Exchange will aggregate the ports of Affiliates.'').
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    The Exchange believes the proposal to offer Quote Takedown Ports 
would ensure a fair and reasonable use of resources by eliminating 
charges to Market Makers for certain Quote Takedown Ports (described 
above), which are used to control and manage risk exposure to the 
benefit of all marker participants.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) \7\ of the 
Securities Exchange Act of 1934 (the ``Act''), in general, and furthers 
the objectives of Section 6(b)(5),\8\ in particular, in that it is 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in facilitating transactions in 
securities, and to remove impediments to and perfect the mechanism of a 
free and open market and a national market system.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change would promote 
just and equitable principles of trade and remove impediments to and 
perfect the mechanism of a free and open market because offering ATP 
Holders registered as Market Makers designated Quote Takedown Ports 
would enhance Market Makers' ability to manage quotes, quote traffic, 
and their quoting obligations, which would, in turn, improve their risk 
controls to the benefit of all participants. The Exchange believes that 
the Quote Takedown Ports would foster cooperation and coordination with 
persons engaged in facilitating transactions in securities because 
Quote Takedown Ports minimize latency for quote takedown, which would 
enable the fair and reasonable use of Market Makers' resources. Because 
Quote Takedown Ports, as the name suggests, are only available for 
quote takedowns and not order or quote entry (or order cancellation), 
the Quote Takedown Ports are not designed to permit unfair 
discrimination but rather are designed to enable Market Makers, that 
are subject to heightened obligations that other market participants 
are not, to meet their quoting obligations, which, in turn, benefits 
all market participants.

[[Page 25757]]

    The Exchange also believes that the proposed rule change is 
consistent with Section 6(b) of the Act,\9\ in general, and furthers 
the objectives of Sections 6(b)(4) and (5) of the Act,\10\ 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
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes the proposed change is reasonable, equitable 
and not unfairly discriminatory for the following reasons. First, all 
ATP Holders would be subject to the same schedule of Port Fees and ATP 
Holders would continue to be able to request, and pay for only those 
ports that they require, with no impact to other ATP Holders. As noted 
above, because Quote Takedown Ports are uniquely designed to address 
quotes and only Market Makers are obliged to quote, the proposed fee 
structure for Quote Takedown Ports would not disadvantage non-Market 
Makers trading on the Exchange. Second, the proposal to enable Market 
Makers to utilize certain Quote Takedown Ports free of charge would 
result in the fair and reasonable use of resources by Market Makers, 
and would encourage trading on the Exchange, thus improving liquidity 
and price discovery, to the benefit of all market participants. In 
addition, providing Market Makers a free Quote Takedown Port for each 
order/quote entry port may increase use of Quote Takedown Ports as a 
cost effective means of improving risk controls. The increased use of 
Quote Takedown Ports by Market Makers would improve Market Makers' 
ability to manage quotes, quote traffic, and their quoting obligations, 
which would, in turn, improve their risk controls to the benefit of all 
participants.
    The Exchange likewise believes that not including those Quote 
Takedown Ports that meet the 1-to-1 ratio (order/quote entry ports-to-
Quote Takedown Ports) in the count against a Market Maker's total 
number of ports utilized for purposes of calculating the monthly Port 
Fees is reasonable, equitable and not unfairly discriminatory. The 
Exchange notes that options Market Makers, require more than 40 ports 
in order to satisfy their responsibilities and obligations to 
investors, which stem from the significant number of series that exist 
for any particular option class \11\ and the corresponding obligations 
that Market Makers have to maintain continuous quotations in all series 
in their appointed classes. Furthermore, Market Makers that quote 
across a significant number, if not all, of the 2,520 classes traded on 
the Exchange could have responsibility for upwards of 620,000 
individual option series.\12\ Accordingly, the level of activity that 
is required to satisfy the quoting obligations, which directly relates 
to the number of ports needed, is such that the Exchange believes it is 
equitable and not unfairly discriminatory to only include the number of 
order/quote entry and Quote Takedown Ports in excess of the 1-to-1 
ratio in determining the per port charge for Market Makers.
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    \11\ For example, as of February 24, 2015, there were more than 
1,952 individual option series overlying Chipotle Mexican Grill, 
Inc.
    \12\ As of February 24, 2015.
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    Finally, the Exchange believes that the proposed change is 
reasonable, because the Quote Takedown Ports are used for purposes 
distinct from order/quote entry ports, for which the Exchange 
charges.\13\ In this regard, the Exchange believes that its Port Fees 
are competitive with those charged by other venues, and that in some 
cases its Port Fees are less expensive than many of its primary 
competitors. For example, the Chicago Board Options Exchange (``CBOE'') 
charges $750 per port per month for a Network Access Port.\14\ The 
NASDAQ Options Market (``NOM'') charges $650 per port per month.\15\
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    \13\ The Exchange also charges for use of drop copy ports, which 
are not discussed in this filing. See supra n. 4.
    \14\ See CBOE fee schedule, Command Connectivity Charges, at p 
11, available at, http://www.cboe.com/publish/feeschedule/CBOEFeeSchedule.pdf (charging $750 per month for each Network Access 
Port (1 Gbps) and $3,500 per month for each Network Access Port 
(10Gbps)).
    \15\ See NOM Price List, Section 3, NASDAQ Options Market, 
Access Services, available at, http://nasdaq.cchwallstreet.com/NASDAQTools/bookmark.asp?id=nasdaq-rule-options_XVS3&manual=/nasdaq/main/nasdaq-optionsrules/.
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    For these reasons, the Exchange believes that the proposal is 
consistent with the Act.

B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act,\16\ 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. Because the proposed change results in the 
fair and reasonable use of resources by ATP Holders, particularly 
Market Makers, in that the Exchange allows ATP Holders to utilize one 
Quote Takedown Port per one order/quote entry port free of charge, the 
Exchange believes this change would benefit all market participants. In 
addition, because Quote Takedown Ports enhance Market Makers' risk 
controls for transactions executed on the Exchange, the Exchange 
believes the proposal is pro-competitive.
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    \16\ 15 U.S.C. 78f(b)(8).
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    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 Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \17\ and Rule 19b-4(f)(6) thereunder.\18\ 
Because the proposed rule change does not: (i) Significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
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    \17\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \18\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) \19\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b4(f)(6)(iii),\20\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has 
requested that the Commission waive the 30-day operative delay so that 
the proposal may become

[[Page 25758]]

operative immediately upon filing and thereby enable Market Makers to 
enhance their risk controls and risk management processes without 
delay. The Commission believes that waiving the 30-day operative delay 
is consistent with the protection of investors and the public interest. 
Therefore, the Commission hereby waives the 30-day operative delay and 
designates the proposal effective upon filing.\21\
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    \19\ 17 CFR 240.19b-4(f)(6).
    \20\ 17 CFR 240.19b-4(f)(6)(iii).
    \21\ For purposes of waiving the 30-day operative delay, the 
Commission has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
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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) \22\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \22\ 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-NYSEMKT-2015-31 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-NYSEMKT-2015-31. 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 Web site (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 Web site 
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 will also be 
available for inspection and copying at the NYSE's principal office and 
on its Internet Web site at www.nyse.com. All comments received will be 
posted without change; the Commission does not edit personal 
identifying information from submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NYSEMKT-2015-31, and should be submitted 
on or before May 26, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-10410 Filed 5-4-15; 8:45 am]
 BILLING CODE 8011-01-P
Federal Register / Vol. 80, No. 86 / Tuesday, May 5, 2015 / Notices 25755

interest, for the protection of investors, For the Commission, by the Division of II. Self-Regulatory Organization’s
or otherwise in furtherance of the Trading and Markets, pursuant to delegated Statement of the Purpose of, and
purposes of the Act. If the Commission authority.43 Statutory Basis for, the Proposed Rule
takes such action, the Commission shall Brent J. Fields, Change
institute proceedings to determine Secretary. In its filing with the Commission, the
whether the proposed rule should be [FR Doc. 2015–10403 Filed 5–4–15; 8:45 am] self-regulatory organization included
approved or disapproved. statements concerning the purpose of,
BILLING CODE 8011–01–P
IV. Solicitation of Comments and basis for, the proposed rule change
Interested persons are invited to and discussed any comments it received
submit written data, views, and SECURITIES AND EXCHANGE on the proposed rule change. The text
arguments concerning the foregoing, COMMISSION of those statements may be examined at
including whether the proposed rule the places specified in Item IV below.
change is consistent with the Act. [Release No. 34–74840; File No. SR– The Exchange has prepared summaries,
Comments may be submitted by any of NYSEMKT–2015–31] set forth in sections A, B, and C below,
the following methods: of the most significant parts of such
Self-Regulatory Organizations; NYSE statements.
Electronic Comments MKT LLC; Notice of Filing and A. Self-Regulatory Organization’s
• Use the Commission’s Internet Immediate Effectiveness of Proposed Statement of the Purpose of, and
comment form (http://www.sec.gov/ Rule Change Modifying Its Rules To Statutory Basis for, the Proposed Rule
rules/sro.shtml); or Provide for the Use of Ports That Change
• Send an email to rule-comments@ Provide Connectivity to the
sec.gov. Please include File Number SR– 1. Purpose
Exchange’s Trading Systems Solely
Phlx–2015–36 on the subject line. The Exchange proposes to modify its
for the Cancellation or ‘‘Takedown’’ of
Paper Comments Quotes and Changes to the NYSE rules to provide for the use of ports that
provide connectivity to the Exchange’s
• Send paper comments in triplicate Amex Options Fee Schedule Related to
This Quote Takedown Service trading systems solely for the
to Secretary, Securities and Exchange
cancellation or ‘‘takedown’’ of quotes. In
Commission, 100 F Street NE.,
April 29, 2015. addition, the proposed rule change
Washington, DC 20549–1090.
Pursuant to Section 19(b)(1) 1 of the reflects changes to the Fee Schedule
All submissions should refer to File related to this quote takedown service.
Number SR–Phlx–2015–36. This file Securities Exchange Act of 1934 (the
number should be included on the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 Order/Quote Entry Ports
subject line if email is used. To help the notice is hereby given that on April 17, The Exchange currently makes
Commission process and review your 2015, NYSE MKT LLC (the ‘‘Exchange’’ available to ATP Holders order/quote
comments more efficiently, please use or ‘‘NYSE MKT’’) filed with the entry ports for connectivity to Exchange
only one method. The Commission will Securities and Exchange Commission trading systems (each an ‘‘order/quote
post all comments on the Commission’s (the ‘‘Commission’’) the proposed rule entry port’’). ATP Holders may be
Internet Web site (http://www.sec.gov/ change as described in Items I and II authorized to utilize order/quote entry
rules/sro.shtml). Copies of the below, which have been prepared by the ports for option activity on NYSE Amex
submission, all subsequent self-regulatory organization. The Options and incur monthly Port Fees.
amendments, all written statements Commission is publishing this notice to Currently, the Exchange charges $450
with respect to the proposed rule solicit comments on the proposed rule per month, per order/quote entry port
change that are filed with the change from interested persons. for the first 40 ports and $150 per
Commission, and all written month, per order/quote entry port for
communications relating to the I. Self-Regulatory Organization’s any additional ports in excess of 40 (i.e.,
proposed rule change between the Statement of the Terms of Substance of ports 41 and greater).4
Commission and any person, other than the Proposed Rule Change While order/quote entry ports may be
those that may be withheld from the used by ATP Holders registered as
public in accordance with the The Exchange proposes to modify its Market Makers to both enter and cancel
provisions of 5 U.S.C. 552, will be rules to provide for the use of ports that or remove quotes, Market Makers may
available for Web site viewing and provide connectivity to the Exchange’s dedicate certain ports solely to the
printing in the Commission’s Public trading systems solely for the removal of quotes, i.e., a ‘‘quote
Reference Room, 100 F Street NE., cancellation or ‘‘takedown’’ of quotes. In takedown port,’’ 5 and, until now, the
Washington, DC 20549 on official addition, the proposed rule change
business days between the hours of reflects changes to the NYSE Amex 4 See Fee Schedule, available at, https://

10:00 a.m. and 3:00 p.m. Copies of such Options Fee Schedule (‘‘Fee Schedule’’) www.nyse.com/publicdocs/nyse/markets/amex-
filing also will be available for options/NYSE_Amex_Options_Fee_Schedule.pdf.
related to this quote takedown service. Unutilized order/quote entry ports that connect to
inspection and copying at the principal The text of the proposed rule change is the Exchange via its backup datacenter are
office of the Exchange. All comments available on the Exchange’s Web site at considered established for backup purposes and are
received will be posted without change; not subject to Port Fees. In addition, for purpose of
asabaliauskas on DSK5VPTVN1PROD with NOTICES

www.nyse.com, at the principal office of
the Commission does not edit personal calculating the number of order/quote entry ports,
the Exchange, and at the Commission’s the Exchange shall aggregate the ports of Affiliates.
identifying information from Public Reference Room. See id.
submissions. You should submit only 5 See Trader Update regarding Options Pre-Trade

information that you wish to make and Post-Trade Risk Controls, available at, https://
available publicly. All submissions 43 17 CFR 200.30–3(a)(12). www.nyse.com/publicdocs/nyse/markets/amex-
options/US_Options_Risk_Controls_Client_
should refer to File Number SR–Phlx– 1 15 U.S.C. 78s(b)(1).
Document.pdf (announcing availability of ports
2015–36, and should be submitted on or 2 15 U.S.C. 78a.
dedicated to quote takedown to minimize latency
before May 26, 2015. 3 17 CFR 240.19b–4. for quote takedowns).

VerDate Sep<11>2014 17:18 May 04, 2015 Jkt 235001 PO 00000 Frm 00096 Fmt 4703 Sfmt 4703 E:\FR\FM\05MYN1.SGM 05MYN1
25756 Federal Register / Vol. 80, No. 86 / Tuesday, May 5, 2015 / Notices

Exchange has treated such dedicated Takedown Ports because those ports regarding Port Fees, the Exchange
quote takedown ports the same as order/ would meet the 1-to-1 ratio. proposes a non-substantive change to
quote entry port for Port Fee purposes. Similarly, the Exchange would not the layout of the table setting forth Port
include those Quote Takedown Ports Fees, which the Exchange believes will
Quote Takedown Ports that meet the 1-to-1 ratio to determine simplify and add transparency to the
The Exchange is proposing to modify a Market Maker’s total number of ports Fee Schedule.
its rules to provide ports specifically for purposes of calculating Port Fees. As The Exchange believes the proposal to
dedicated to quote cancellation or noted above, the Exchange charges $450 offer Quote Takedown Ports would
‘‘quote takedown’’ (each a ‘‘Quote per month, per port for the first forty ensure a fair and reasonable use of
Takedown Port’’) as a service distinct ports, and $150 per month for each resources by eliminating charges to
from order/quote entry ports, which additional port in excess of forty. Thus, Market Makers for certain Quote
may be used both for entering quotes or using the example above, the Exchange Takedown Ports (described above),
orders and removing or cancelling would not count the thirty-five (35) which are used to control and manage
quotes. The proposed Quote Takedown Quote Takedown Ports (which align risk exposure to the benefit of all marker
Ports would be designed to assist ATP with the 35 order/quote entry ports) participants.
Holders registered as Marker Makers in against the Market Maker’s total number
the management of, and risk control of ports utilized, but would count seven 2. Statutory Basis
over, their quotes, particularly if they (7) additional Quote Takedown Ports. The proposed rule change is
have a large number of options issues in Thus, because the Market Maker would consistent with Section 6(b) 7 of the
their appointment. For example, if a have forty-two (42) chargeable ports, the Securities Exchange Act of 1934 (the
Market Maker detects market Market Maker’s total monthly port fee ‘‘Act’’), in general, and furthers the
indications that may influence the would be $18,300 (i.e., 40 ports × $450 objectives of Section 6(b)(5),8 in
direction or bias of its quotes, the per port = $18,000; and 2 ports × $150 particular, in that it is designed to
Market Maker may attempt to cancel all per port $300). prevent fraudulent and manipulative
of its quotes in a number of classes, The Exchange notes that options acts and practices, to promote just and
thereby avoiding unintended Market Makers typically require more equitable principles of trade, to foster
executions, while it evaluates the than forty (40) order/quote entry ports, cooperation and coordination with
direction of the market. Thus, to reduce in part to satisfy their obligation to persons engaged in facilitating
uncertainty, the Marker Maker may maintain continuous two-sided markets transactions in securities, and to remove
submit to the Exchange a ‘‘quote in their appointed classes. Thus, the impediments to and perfect the
takedown’’ message through a dedicated Exchange believes that the proposed mechanism of a free and open market
Quote Takedown Port for the prompt change would enhance the ability of and a national market system.
removal of quotes. By entering a quote Market Maker firms to manage quotes, The Exchange believes that the
takedown message through a dedicated quote traffic, and their quoting proposed rule change would promote
Quote Takedown Port, a Market Maker obligations by eliminating fees for just and equitable principles of trade
may reduce its exposure to risk because certain Quote Takedown Ports, which and remove impediments to and perfect
of heavy quote traffic-induced latency. function as risk management tools the mechanism of a free and open
The Exchange proposes to modify the rather than trade opportunity tools. The market because offering ATP Holders
Fee Schedule to provide that certain Exchange believes this proposed change registered as Market Makers designated
Quote Takedown Ports would not be would permit the Exchange to remain Quote Takedown Ports would enhance
subject to Port Fees. Specifically, for competitive with other exchanges with Market Makers’ ability to manage
each order/quote entry port utilized, the respect to fees charged for ports. quotes, quote traffic, and their quoting
Exchange proposes to allow Market To reflect the proposed change, the obligations, which would, in turn,
Makers to utilize, free of charge, one Exchange proposes to add to the Fee improve their risk controls to the benefit
Quote Takedown Port. Because Quote Schedule, in Section V. (Technology & of all participants. The Exchange
Takedown Ports would not be available System Access Fees), subsection A. believes that the Quote Takedown Ports
for quote or order submission, the (Port Fees), a new category for ‘‘Quote would foster cooperation and
Exchange is proposing to allow one Takedown Ports,’’ together with the coordination with persons engaged in
Quote Takedown Port free of charge for following language: ‘‘For each order/ facilitating transactions in securities
every order/quote entry port that a quote entry port utilized, NYSE Amex because Quote Takedown Ports
Market Maker utilizes. In other words, Options Market Makers may utilize, free minimize latency for quote takedown,
provided a Market Maker does not of charge, one port dedicated to quote which would enable the fair and
exceed a 1-to-1 ratio of order/quote cancellation or ‘quote takedown,’ which reasonable use of Market Makers’
entry port-to-Quote Takedown Port, the port(s) will not be included in the count resources. Because Quote Takedown
Quote Takedown Port(s) would be free of order/quote entry ports utilized. Any Ports, as the name suggests, are only
(the ‘‘1-to-1 ratio’’). However, a Market quote takedown port utilized by a NYSE available for quote takedowns and not
Maker that exceeds the 1-to-1 ratio Amex Options Market Maker that is in order or quote entry (or order
would be charged for additional Quote excess of the number of order/quote cancellation), the Quote Takedown
Takedown Ports. For example, a Market entry ports utilized will be counted and Ports are not designed to permit unfair
Maker with thirty-five (35) order/quote charged as an order/quote entry port.’’ discrimination but rather are designed
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entry ports and forty-two (42) Quote The Exchange also proposes to make to enable Market Makers, that are
Takedown Ports would have forty-two clear that the Quote Takedown Ports of subject to heightened obligations that
(42) ports subject to charge because the Affiliates, like order/quote entry ports, other market participants are not, to
Exchange would charge for the 35 order/ are aggregated.6 Finally, to add clarity meet their quoting obligations, which,
quote entry ports and the seven Quote 6 See proposed Fee Schedule, Section V.A. (‘‘For
in turn, benefits all market participants.
Takedown Ports that exceed the 1–1 purpose of calculating the number of order/quote
ratio (42–35=7). The Exchange would entry ports and quote takedown ports, the Exchange 7 15 U.S.C. 78f(b).
not charge for the first 35 Quote will aggregate the ports of Affiliates.’’). 8 15 U.S.C. 78f(b)(5).

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The Exchange also believes that the class 11 and the corresponding Makers, in that the Exchange allows
proposed rule change is consistent with obligations that Market Makers have to ATP Holders to utilize one Quote
Section 6(b) of the Act,9 in general, and maintain continuous quotations in all Takedown Port per one order/quote
furthers the objectives of Sections series in their appointed classes. entry port free of charge, the Exchange
6(b)(4) and (5) of the Act,10 in particular, Furthermore, Market Makers that quote believes this change would benefit all
because it provides for the equitable across a significant number, if not all, of market participants. In addition,
allocation of reasonable dues, fees, and the 2,520 classes traded on the because Quote Takedown Ports enhance
other charges among its members, Exchange could have responsibility for Market Makers’ risk controls for
issuers and other persons using its upwards of 620,000 individual option transactions executed on the Exchange,
facilities and does not unfairly series.12 Accordingly, the level of the Exchange believes the proposal is
discriminate between customers, activity that is required to satisfy the pro-competitive.
issuers, brokers or dealers quoting obligations, which directly The Exchange notes that it operates in
relates to the number of ports needed, a highly competitive market in which
The Exchange believes the proposed is such that the Exchange believes it is market participants can readily favor
change is reasonable, equitable and not equitable and not unfairly competing venues. In such an
unfairly discriminatory for the following discriminatory to only include the environment, the Exchange must
reasons. First, all ATP Holders would be number of order/quote entry and Quote continually review, and consider
subject to the same schedule of Port Takedown Ports in excess of the 1-to-1 adjusting, its fees and credits to remain
Fees and ATP Holders would continue ratio in determining the per port charge competitive with other exchanges. For
to be able to request, and pay for only for Market Makers. the reasons described above, the
those ports that they require, with no Finally, the Exchange believes that Exchange believes that the proposed
impact to other ATP Holders. As noted the proposed change is reasonable, rule change reflects this competitive
above, because Quote Takedown Ports because the Quote Takedown Ports are environment.
are uniquely designed to address quotes used for purposes distinct from order/
quote entry ports, for which the C. Self-Regulatory Organization’s
and only Market Makers are obliged to
Exchange charges.13 In this regard, the Statement on Comments on the
quote, the proposed fee structure for Proposed Rule Change Received From
Quote Takedown Ports would not Exchange believes that its Port Fees are
competitive with those charged by other Members, Participants, or Others
disadvantage non-Market Makers
trading on the Exchange. Second, the venues, and that in some cases its Port No written comments were solicited
proposal to enable Market Makers to Fees are less expensive than many of its or received with respect to the proposed
utilize certain Quote Takedown Ports primary competitors. For example, the rule change.
free of charge would result in the fair Chicago Board Options Exchange III. Date of Effectiveness of the
and reasonable use of resources by (‘‘CBOE’’) charges $750 per port per Proposed Rule Change and Timing for
Market Makers, and would encourage month for a Network Access Port.14 The Commission Action
trading on the Exchange, thus NASDAQ Options Market (‘‘NOM’’)
charges $650 per port per month.15 The Exchange has filed the proposed
improving liquidity and price discovery, rule change pursuant to Section
For these reasons, the Exchange
to the benefit of all market participants. believes that the proposal is consistent 19(b)(3)(A)(iii) of the Act 17 and Rule
In addition, providing Market Makers a with the Act. 19b–4(f)(6) thereunder.18 Because the
free Quote Takedown Port for each proposed rule change does not: (i)
order/quote entry port may increase use B. Self-Regulatory Organization’s Significantly affect the protection of
of Quote Takedown Ports as a cost Statement on Burden on Competition investors or the public interest; (ii)
effective means of improving risk In accordance with Section 6(b)(8) of impose any significant burden on
controls. The increased use of Quote the Act,16 the Exchange does not believe competition; and (iii) become operative
Takedown Ports by Market Makers that the proposed rule change would prior to 30 days from the date on which
would improve Market Makers’ ability impose any burden on competition that it was filed, or such shorter time as the
to manage quotes, quote traffic, and is not necessary or appropriate in Commission may designate, if
their quoting obligations, which would, furtherance of the purposes of the Act. consistent with the protection of
in turn, improve their risk controls to Because the proposed change results in investors and the public interest, the
the benefit of all participants. the fair and reasonable use of resources proposed rule change has become
The Exchange likewise believes that by ATP Holders, particularly Market effective pursuant to Section 19(b)(3)(A)
not including those Quote Takedown of the Act and Rule 19b-4(f)(6)(iii)
Ports that meet the 1-to-1 ratio (order/
11 For example, as of February 24, 2015, there
thereunder.
were more than 1,952 individual option series A proposed rule change filed under
quote entry ports-to-Quote Takedown overlying Chipotle Mexican Grill, Inc.
Ports) in the count against a Market 12 As of February 24, 2015.
Rule 19b–4(f)(6) 19 normally does not
become operative prior to 30 days after
Maker’s total number of ports utilized 13 The Exchange also charges for use of drop copy

ports, which are not discussed in this filing. See the date of the filing. However, pursuant
for purposes of calculating the monthly
supra n. 4. to Rule 19b4(f)(6)(iii),20 the Commission
Port Fees is reasonable, equitable and 14 See CBOE fee schedule, Command
may designate a shorter time if such
not unfairly discriminatory. The Connectivity Charges, at p 11, available at, http://
action is consistent with the protection
Exchange notes that options Market www.cboe.com/publish/feeschedule/
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CBOEFeeSchedule.pdf (charging $750 per month of investors and the public interest. The
Makers, require more than 40 ports in Exchange has requested that the
for each Network Access Port (1 Gbps) and $3,500
order to satisfy their responsibilities and per month for each Network Access Port (10Gbps)). Commission waive the 30-day operative
obligations to investors, which stem 15 See NOM Price List, Section 3, NASDAQ
delay so that the proposal may become
from the significant number of series Options Market, Access Services, available at,
that exist for any particular option http://nasdaq.cchwallstreet.com/NASDAQTools/
17 15 U.S.C. 78s(b)(3)(A)(iii).
bookmark.asp?id=nasdaq-rule-options_
18 17 CFR 240.19b–4(f)(6).
XVS3&manual=/nasdaq/main/nasdaq-
9 15 U.S.C. 78f(b). optionsrules/. 19 17 CFR 240.19b–4(f)(6).
10 15 U.S.C. 78f(b)(4) and (5). 16 15 U.S.C. 78f(b)(8). 20 17 CFR 240.19b–4(f)(6)(iii).

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25758 Federal Register / Vol. 80, No. 86 / Tuesday, May 5, 2015 / Notices

operative immediately upon filing and communications relating to the solicit comments on the proposed rule
thereby enable Market Makers to proposed rule change between the change from interested persons.
enhance their risk controls and risk Commission and any person, other than
I. Self-Regulatory Organization’s
management processes without delay. those that may be withheld from the
Statement of the Terms of Substance of
The Commission believes that waiving public in accordance with the
provisions of 5 U.S.C. 552, will be the Proposed Rule Change
the 30-day operative delay is consistent
with the protection of investors and the available for Web site viewing and The Exchange proposes to modify its
public interest. Therefore, the printing in the Commission’s Public rules to provide for the use of ports that
Commission hereby waives the 30-day Reference Room, 100 F Street NE., provide connectivity to the Exchange’s
operative delay and designates the Washington, DC 20549, on official trading systems solely for the
proposal effective upon filing.21 business days between the hours of cancellation or ‘‘takedown’’ of quotes. In
At any time within 60 days of the 10:00 a.m. and 3:00 p.m. Copies of the addition, the proposed rule change
filing of such proposed rule change, the filing will also be available for reflects changes to the NYSE Arca
Commission summarily may inspection and copying at the NYSE’s Options Fee Schedule (‘‘Fee Schedule’’)
temporarily suspend such rule change if principal office and on its Internet Web related to this quote takedown service.
it appears to the Commission that such site at www.nyse.com. All comments The text of the proposed rule change is
action is necessary or appropriate in the received will be posted without change; available on the Exchange’s Web site at
public interest, for the protection of the Commission does not edit personal www.nyse.com, at the principal office of
investors, or otherwise in furtherance of identifying information from the Exchange, and at the Commission’s
the purposes of the Act. If the submissions. You should submit only Public Reference Room.
Commission takes such action, the information that you wish to make
Commission shall institute proceedings available publicly. All submissions II. Self-Regulatory Organization’s
under Section 19(b)(2)(B) 22 of the Act to should refer to File Number SR– Statement of the Purpose of, and
determine whether the proposed rule NYSEMKT–2015–31, and should be Statutory Basis for, the Proposed Rule
change should be approved or submitted on or before May 26, 2015. Change
disapproved. For the Commission, by the Division of In its filing with the Commission, the
IV. Solicitation of Comments Trading and Markets, pursuant to delegated self-regulatory organization included
authority.23
Interested persons are invited to statements concerning the purpose of,
Brent J. Fields, and basis for, the proposed rule change
submit written data, views, and
Secretary. and discussed any comments it received
arguments concerning the foregoing,
[FR Doc. 2015–10410 Filed 5–4–15; 8:45 am] on the proposed rule change. The text
including whether the proposed rule
change is consistent with the Act. BILLING CODE 8011–01–P of those statements may be examined at
Comments may be submitted by any of the places specified in Item IV below.
the following methods: The Exchange has prepared summaries,
SECURITIES AND EXCHANGE set forth in sections A, B, and C below,
Electronic Comments COMMISSION of the most significant parts of such
• Use the Commission’s Internet [Release No. 34–74841; File No. SR– statements.
comment form (http://www.sec.gov/ NYSEARCA–2015–32]
rules/sro.shtml); or A. Self-Regulatory Organization’s
• Send an email to rule-comments@ Self-Regulatory Organizations; NYSE Statement of the Purpose of, and
sec.gov. Please include File Number SR– Arca, Inc.; Notice of Filing and Statutory Basis for, the Proposed Rule
NYSEMKT–2015–31 on the subject line. Immediate Effectiveness of Proposed Change
Rule Change Modifying Its Rules To 1. Purpose
Paper Comments Provide for the Use of Ports That
• Send paper comments in triplicate Provide Connectivity to the The Exchange proposes to modify its
to Secretary, Securities and Exchange Exchange’s Trading Systems Solely rules to provide for the use of ports that
Commission, 100 F Street NE., for the Cancellation or ‘‘Takedown’’ of provide connectivity to the Exchange’s
Washington, DC 20549–1090. Quotes and Changes to the NYSE Arca trading systems solely for the
All submissions should refer to File Options Fee Schedule Related to cancellation or ‘‘takedown’’ of quotes. In
Number SR–NYSEMKT–2015–31. This Quote Takedown Service addition, the proposed rule change
file number should be included on the reflects changes to the Fee Schedule
April 29, 2015. related to this quote takedown service.
subject line if email is used.
To help the Commission process and Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the Order/Quote Entry Ports
review your comments more efficiently,
please use only one method. The ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 The Exchange currently makes
Commission will post all comments on notice is hereby given that, on April 17 available to OTP Holders and OTP
the Commission’s Internet Web site 2015, NYSE Arca, Inc. (the ‘‘Exchange’’ Firms (‘‘OTPs’’) order/quote entry ports
(http://www.sec.gov/rules/sro.shtml). or ‘‘NYSE Arca’’) filed with the for connectivity to Exchange trading
Copies of the submission, all subsequent Securities and Exchange Commission systems (each an ‘‘order/quote entry
amendments, all written statements (the ‘‘Commission’’) the proposed rule port’’). OTPs may be authorized to
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with respect to the proposed rule change as described in Items I and II utilize order/quote entry ports for
change that are filed with the below, which Items have been prepared option activity on NYSE Arca Options
Commission, and all written by the self-regulatory organization. The and incur monthly Port Fees. Currently,
Commission is publishing this notice to the Exchange charges $450 per month,
21 For purposes of waiving the 30-day operative
23 17
per order/quote entry port for the first
delay, the Commission has considered the proposed CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
40 ports and $150 per month, per order/
rule’s impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f). 2 15 U.S.C. 78a. quote entry port for any additional ports
22 15 U.S.C. 78s(b)(2)(B). 3 17 CFR 240.19b–4. in excess of 40 (i.e., ports 41 and

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Document Created: 2015-12-16 07:54:04
Document Modified: 2015-12-16 07:54:04
Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Notices
FR Citation		80 FR 25755