80 FR 28717 - Self-Regulatory Organizations; NYSE MKT, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Modifying the NYSE Amex Options Fee Schedule Related to Fees and Credits Associated With the Customer Best Execution Auction

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 96 (May 19, 2015)

[Federal Register Volume 80, Number 96 (Tuesday, May 19, 2015)]
[Notices]
[Pages 28717-28719]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-12063]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74956; File No. SR-NYSEMKT-2015-38]


Self-Regulatory Organizations; NYSE MKT, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Modifying the NYSE 
Amex Options Fee Schedule Related to Fees and Credits Associated With 
the Customer Best Execution Auction

May 13, 2015.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on May 1, 2015, NYSE MKT LLC (the ``Exchange'' or ``NYSE MKT'') filed 
with the Securities and Exchange Commission (``SEC'' or ``Commission'') 
the proposed rule change as described in Items I, II, and III below, 
which Items have been prepared by the Exchange. 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\ 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 Amex Options Fee Schedule 
(``Fee Schedule'') related to fees and credits associated with the 
Customer Best Execution Auction (``CUBE Auction'' or ``Auction''). The 
Exchange proposes to implement the fee change effective May 1, 2015. 
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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this filing is to amend Section I.G. of the Fee 
Schedule \3\ to modify existing CUBE fees and credits and to add a new 
rebate for CUBE participants who qualify for Tiers 2, 3, 4 or 5 of the 
Amex Customer Engagement (``ACE'') Program.\4\ The Exchange proposes to 
implement the fee change effective May 1, 2015.
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    \3\ See Fee Schedule, Section I.G., available at, https://www.theice.com/publicdocs/nyse/markets/amex-options/NYSE_Amex_Options_Fee_Schedule.pdf.
    \4\ See id., Section I.E.
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    The Exchange proposes to increase the fees associated with RFR 
Responses participating in the Auction by $0.05--from $0.55 to $0.60 
for Non-Customers in Penny Pilot issues; and from $0.90 to $0.95 for 
Non-Customers in non-Penny Pilot issues. In addition, the Exchange 
proposes to decrease the Initiating Participant Credit by $0.05 for 
Penny Pilot issues--from $0.40 to $0.35; and $0.10 for non-Penny Pilot 
issues--from $0.80 to $0.70. The Exchange also proposes to introduce a 
rebate for certain Initiating Participants that qualify for the ACE 
Program. Specifically, as proposed, those ATP Holders who qualify for 
Tiers 2, 3, 4 or 5 of the ACE Program would receive a $0.12 per 
contract rebate for up to 5,000 Customer contracts per CUBE Order 
executed in a CUBE Auction (the ``ACE Initiating Participant Rebate'' 
or ``Rebate''). The proposed Rebate is payable in addition to any other 
fees or credits accrued from the CUBE Auction (e.g., in addition to the 
Initiating Participant Credit for both Penny and non-Penny Pilot 
issues). Thus, as proposed, the maximum potential CUBE credit for Penny 
Pilot issues is $0.47 ($0.12 Rebate + $0.35 Initiating Participant 
Credit) and for non-Penny Pilot issues is $0.82 ($0.12 Rebate + $0.70 
Initiating Participant Credit). The ACE Initiating Participant Rebate 
is available regardless of whether the CUBE Order trades with the 
Contra Order or RFR Response(s), whereas the current Initiating 
Participant Credits are payable only for each CUBE Order contract that 
does not trade with the Contra Order.
    The proposed amendments to CUBE Auction pricing are designed to 
incentivize market participants that have committed a certain amount of 
volume to the Exchange to provide even more liquidity through CUBE 
Auctions. This additional volume and liquidity would benefit all 
Exchange participants through increased opportunities to trade as well 
as enhancing price discovery and price improvement.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\5\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\6\ 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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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed changes to CUBE Auction 
fees are reasonable, equitable and not

[[Page 28718]]

unfairly discriminatory. First, the proposal to increase the fees 
associated with RFR Responses that participate in the CUBE applies 
equally to all non-Customer ATP Holders that choose to participate in 
the CUBE, and access to the Exchange is offered on terms that are not 
unfairly discriminatory. In addition, the proposed RFR Response fees 
are within the range of fees charged to non-Customers on other 
exchanges for executions within similar electronic crossing mechanisms. 
For example, the BOX Options Exchange LLC (``BOX'') charges 
Professional Customers and Broker Dealers who respond to an auction 
with Improvement Orders $0.72 per contract in Penny issues and $1.12 
per contract in non-Penny issues, while charging BOX Market Makers who 
respond either $0.55 in Penny issues or $0.95 in non-Penny issues.\7\
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    \7\ See BOX fee schedule, available at, http://boxexchange.com/assets/BOX_Fee_Schedule.pdf. The BOX fee schedule has several parts 
that must be taken collectively to arrive at the all-in cost of 
responding to an auction. For example, a Broker Dealer who responds 
to an auction with an Improvement Order will pay $0.72 per contract 
in Penny issues. The $0.72 fee represents the Improvement Order fee 
of $0.37 from Section I of the fee schedule, plus the $0.35 fee to 
add liquidity in Penny issues quoted with an MPV of $0.01 from 
Section II of the schedule.
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    The Exchange believes that the proposal to reduce the current 
Initiating Participant Credits are reasonable, equitable and non-
discriminatory because they apply equally to all ATP Holders that 
choose to participate in the CUBE, and access to the Exchange is 
offered on terms that are not unfairly discriminatory. Finally, the 
proposed CUBE Auction credits for Penny and non-Penny issues to be paid 
to Initiating Participants for each CUBE Order contract that does not 
trade with the Contra Order are within the range of rebates paid on 
other exchanges for executions within similar electronic crossing 
mechanisms. For example, the International Securities Exchange, LLC 
(``ISE'') pays a Price Improvement Mechanism (``PIM'') Break-up Rebate 
of $0.35 per contract in Select Symbols (i.e., Penny Pilot issues) and 
$0.80 per contract in Non-Select Symbols (i.e., non-Penny Pilot issues) 
for contracts submitted to a PIM that do not trade with their contra 
order.\8\
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    \8\ See ISE fee schedule, available at, http://www.ise.com/assets/documents/OptionsExchange/legal/fee/ISE_fee_schedule.pdf.
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    Similarly, the proposed changes to CUBE Auction credits are 
reasonable, equitable and not unfairly discriminatory. Specifically, 
the ACE Initiating Participant Rebate is based on the amount of 
business transacted on the Exchange and is designed to attract more 
volume and liquidity to the Exchange generally, and to CUBE Auctions 
specifically, which will benefit all market participants (including 
those that do not participate in the ACE Program) through increased 
opportunities to trade at potentially improved prices as well as 
enhancing price discovery. Furthermore, the proposed Rebate is 
reasonably designed and not unfairly discriminatory because it [sic] 
available regardless of the parties that trade with the CUBE Order 
(i.e., whether the CUBE Order trades with the Contra Order or 
otherwise).
    In addition, the proposal to offer an additional incentive to 
participate in the CUBE Auction to those ATP Holders that have achieved 
certain monthly volume thresholds is also not new or novel. For 
example, the MIAX Options Exchange (``MIAX'') offers an additional per 
contract rebate on certain agency orders executed in its electronic 
auction mechanism (``PRIME''), which provides for a maximum credit of 
$0.12 per contract, based on a member achieving certain monthly volume 
thresholds.\9\ In addition, the proposal to cap the Rebate at 5,000 
Customer contracts per CUBE Order is likewise consistent with the 
practice of other exchanges. For example, the Chicago Board of Options 
Exchange (``CBOE'') caps the number of contracts submitted to its price 
improvement auction that are eligible for additional volume rebates at 
1,000 contracts.\10\ The Exchange notes that although the proposed 
Rebate applies solely to Customer orders, it is nonetheless equitable 
and not unfairly discriminatory because it would enhance the incentives 
to ATP Holders to transact Customer orders on the Exchange and an 
increase in Customer order flow would bring greater volume and 
liquidity to the Exchange. Increased volume to the Exchange benefits 
all market participants by providing more trading opportunities and 
tighter spreads, even to those market participants that do not 
participate in the ACE Program.
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    \9\ See MIAX fee schedule, Priority Customer Rebate Program, 
available at, http://www.miaxoptions.com/content/fees (providing a 
$0.10 per contract rebate for all Priority Customer orders executed 
in the PRIME Auction and providing that any Member or applicable 
affiliate that qualifies for MIAX's Priority Customer Rebate Program 
volume tiers 3, 4, or 5 will be credited an additional $0.02 per 
contract for each Priority Customer order executed in the PRIME 
Auction as a PRIME Agency Order over a threshold of 1,500,000 
contracts in a month, subject to certain enumerated exceptions).
    \10\ See CBOE fee schedule, Volume Incentive Program (``VIP''), 
available at, http://www.cboe.com/publish/feeschedule/CBOEFeeSchedule.pdf (providing that VIP credits on orders executed 
electronically in Automated Improvement Mechanism will be capped at 
1,000 contracts per order for simple executions and 1,000 contracts 
per leg for complex executions).
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    Additionally, the Exchange believes the proposed changes are 
consistent with the Act because they may attract greater volume and 
liquidity to the Exchange, which would improve its overall 
competitiveness and strengthen its market quality for all market 
participants.
    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,\11\ 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. The Exchange believes the proposed amendments 
to CUBE Auction pricing are pro-competitive as the fees are to 
incentivize increases in volume and liquidity to the Exchange, which 
would benefit all of Exchange participants through increased 
opportunities to trade as well as enhancing price discovery. The 
Exchange also believes that the proposed ACE Initiating Participant 
Rebate would enhance the competiveness of the Exchange relative to 
other exchanges that offer similar rebates tied to volume 
incentives.\12\
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    \11\ 15 U.S.C. 78f(b)(8).
    \12\ See supra n. 9, 10.
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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 foregoing rule change is effective upon filing pursuant to 
Section 19(b)(3)(A) \13\ of the Act and subparagraph (f)(2) of Rule 
19b-4\14\

[[Page 28719]]

thereunder, because it establishes a due, fee, or other charge imposed 
by the Exchange.
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 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) \15\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \15\ 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-2015-38 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-2015-38. 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 such filing also will be available 
for inspection and copying at the principal offices of the Exchange. 
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-
38, and should be submitted on or before June 9, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-12063 Filed 5-18-15; 8:45 am]
 BILLING CODE 8011-01-P