81 FR 91216 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange's Transaction Fees at Chapter XV, Section 2
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 242 (December 16, 2016)
Federal Register Volume 81, Issue 242 (December 16, 2016)
| Page Range | 91216-91220 | |
| FR Document | 2016-30259 |
[Federal Register Volume 81, Number 242 (Friday, December 16, 2016)] [Notices] [Pages 91216-91220] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-30259] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-79532; File No. SR-NASDAQ-2016-166] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange's Transaction Fees at Chapter XV, Section 2 December 12, 2016. 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 December 1, 2016, The NASDAQ Stock Market LLC (``Nasdaq'' or ``Exchange'') 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. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend the Exchange's transaction fees at Chapter XV, Section 2, entitled ``NASDAQ Options Market--Fees and Rebates,'' which governs pricing for Nasdaq members using the NASDAQ Options Market (``NOM''), Nasdaq's facility for executing and routing standardized equity and index options. Nasdaq proposes to implement a new rebate for adding liquidity for Customer and Professional orders in Penny and Non-Penny Pilot Options as described further below. The text of the proposed rule change is available on the Exchange's Web site at http://nasdaq.cchwallstreet.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 Exchange 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 these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set [[Page 91217]] forth in sections A, B, and C below, of the most significant aspects 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 create an alternative method for earning a rebate for adding liquidity for both Customers \3\ and Professionals \4\ in Penny Pilot \5\ and Non-Penny Pilot Options. For Customers and Professionals transacting in Penny Pilot Options, the Exchange currently pays a volume-based tiered rebate to add liquidity. That rebate consists of 8 tiers, ranging from $0.20 per contract to $0.48 per contract, with the volume requirements increasing with each tier. Thus, a NOM Participant would qualify for a rebate of $0.20 per contract in Tier 1 for Customers and Professionals if it added Customer, Professional, Firm, Non-NOM Market Maker and/or Broker-Dealer liquidity in Penny Pilot Options and/or Non-Penny Pilot Options of up to 0.10% of total industry customer equity and ETF option average daily volume (``ADV'') contracts per day in a month. In comparison, a Participant would qualify for a rebate of $0.48 in Tier 8 for Customers and Professionals if it adds Customer, Professional, Firm, Non-NOM Market Maker and/or Broker-Dealer liquidity in Penny Pilot Options and/ or Non-Penny Pilot Options above 0.75% or more of total industry customer equity and ETF option ADV contracts per day in a month, or if the Participant adds: (1) Customer and/or Professional liquidity in Penny Pilot Options and/or Non-Penny Pilot Options of 0.25% or more of total industry customer equity and ETF option ADV contracts per day in a month, and (2) has added liquidity in all securities through one or more of its Nasdaq Market Center MPIDs that represent 1.00% or more of Consolidated Volume in a month or qualifies for MARS.\6\ --------------------------------------------------------------------------- \3\ The term ``Customer'' or (``C'') applies to any transaction that is identified by a Participant for clearing in the Customer range at The Options Clearing Corporation (``OCC'') which is not for the account of broker or dealer or for the account of a ``Professional'' (as that term is defined in Chapter I, Section 1(a)(48)). \4\ The term ``Professional'' or (``P'') means any person or entity that (i) is not a broker or dealer in securities, and (ii) places more than 390 orders in listed options per day on average during a calendar month for its own beneficial account(s) pursuant to Chapter I, Section 1(a)(48). All Professional orders shall be appropriately marked by Participants. \5\ The Penny Pilot was established in March 2008. See Securities Exchange Act Release No. 57579 (March 28, 2008), 73 FR 18587 (April 4, 2008) (SR-NASDAQ-2008-026) (notice of filing and immediate effectiveness establishing Penny Pilot). Since that date, the Penny Pilot has been expanded and is currently extended through December 31, 2016 or the date of permanent approval, if earlier. See Securities Exchange Act Release No. 78037 (June 10, 2016), 81 FR 39299 (June 16, 2016) (SR-NASDAQ-2016-052). \6\ MARS refers to the Market Access and Routing Subsidy, which is set forth in Chapter XV, Section 6 [sic]. The MARS payment comprises four volume-based tiers, and is paid to NOM Participants that route eligible contracts to NOM through a participating NOM Participant's System. The MARS Payment will be paid on all executed Eligible Contracts that add liquidity. See Chapter XV, Section 6 [sic]. --------------------------------------------------------------------------- Currently, Customers and Professionals transacting in Non-Penny Pilot Options on NOM receive a $0.80 per contract Rebate to Add Liquidity. In addition, a Participant that qualifies for a Customer or Professional Penny Pilot Options Rebate to Add Liquidity in Tiers 2, 3, 4, 5 or 6 in a month will receive an additional $0.10 per contract Non- Penny Pilot Options Rebate to Add Liquidity for each transaction which adds liquidity in Non-Penny Pilot Options in that month. Furthermore, a Participant that qualifies for a Customer or Professional Penny Pilot Options Rebate to Add Liquidity in Tiers 7 or 8 in a month will receive an additional $0.20 per contract Non-Penny Pilot Options Rebate to Add Liquidity for each transaction which adds liquidity in Non-Penny Pilot Options in that month. The Exchange now proposes to add an additional rebate to Customers and Professionals for adding liquidity in both Penny Pilot and Non- Penny Pilot Options. Specifically, a NOM Participant will receive a $0.53 per contract Rebate to Add Liquidity in Penny Pilot Options as a Customer or Professional, and $1.00 per contract Rebate to Add Liquidity in Non-Penny Pilot Options as a Customer or Professional, if that NOM Participant transacts on the NASDAQ Stock Market through one or more of its Nasdaq Market Center MPIDs in the same month, and such transactions in all securities on the NASDAQ Stock Market that month through all of its Nasdaq Market Center MPIDs represent 3.00% or more of Consolidated Volume.\7\ Participants that qualify for this rebate would not be eligible for any other rebates in Tiers 1-8 or other rebate incentives on NOM for Customer and Professional order flow in Chapter XV, Section 2(1). --------------------------------------------------------------------------- \7\ Consolidated Volume would be determined as set forth in Nasdaq Rule 7018(a). --------------------------------------------------------------------------- For purposes of calculating the NOM Participant's total volume, the Exchange will add the NOM Participant's total volume transacted on the NASDAQ Stock Market in a given month across its Nasdaq Market Center MPIDs, and will divide this number by the total industry Consolidated Volume. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,\8\ in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\9\ in particular, in that it provides for the equitable allocation of reasonable dues, fees and other charges among members and issuers and other persons using any facility, and is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. --------------------------------------------------------------------------- \8\ 15 U.S.C. 78f(b). \9\ 15 U.S.C. 78f(b)(4) and (5). --------------------------------------------------------------------------- The Commission and the courts have repeatedly expressed their preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. In Regulation NMS, while adopting a series of steps to improve the current market model, the Commission highlighted the importance of market forces in determining prices and SRO revenues and, also, recognized that current regulation of the market system ``has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.'' \10\ --------------------------------------------------------------------------- \10\ Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting Release''). --------------------------------------------------------------------------- Likewise, in NetCoalition v. Securities and Exchange Commission \11\ (``NetCoalition'') the D.C. Circuit upheld the Commission's use of a market-based approach in evaluating the fairness of market data fees against a challenge claiming that Congress mandated a cost-based approach.\12\ As the court emphasized, the Commission ``intended in Regulation NMS that `market forces, rather than regulatory requirements' play a role in determining the market data . . . to be made available to investors and at what cost.''\13\ --------------------------------------------------------------------------- \11\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010). \12\ See NetCoalition, at 534-535. \13\ Id. at 537. --------------------------------------------------------------------------- Further, ``[n]o one disputes that competition for order flow is `fierce.' . . . As the SEC explained, `[i]n the U.S. national market system, buyers and sellers of securities, and the broker-dealers that act as their order-routing agents, have a wide range of choices of where to route orders for execution'; [and] `no exchange can afford to take its market share percentages for granted' because `no exchange possesses a monopoly, regulatory or otherwise, in the execution of order flow from broker [[Page 91218]] dealers'. . . .'' \14\ Although the court and the SEC were discussing the cash equities markets, the Exchange believes that these views apply with equal force to the options markets. --------------------------------------------------------------------------- \14\ Id. at 539 (quoting Securities Exchange Act Release No. 59039 (December 2, 2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-21)). --------------------------------------------------------------------------- The Exchange notes that the purpose of the proposed rebates is to incentivize NOM Participants to transact greater volume on the NASDAQ Stock Market in order to qualify for a higher rebate on NOM. The Exchange believes that the amount of the rebate ($0.53 per contract for Penny Pilot Options and $1.00 per contract for Non-Penny Pilot Options) and the volume threshold for qualifying for the rebate (3.00% or more of Consolidated Volume) are reasonable. With respect to the rebate for Penny Pilot Options, the Exchange notes that the proposed $0.53 per contract rebate is the same as the highest rebate currently available to Customers and Professionals for adding liquidity in Penny Pilot Options.\15\ The Exchange believes the proposed rebate of $0.53 per contract is reasonable when compared to the highest rebate currently available to Customers and Professionals for adding liquidity in Penny Pilot Options, as the proposed rebate imposes comparable requirements on NOM Participants in order to qualify for that rebate. Similarly, the Exchange believes the proposed $1.00 rebate per contract for Non-Penny Pilot Options is reasonable because it is comparable to the rebates that a NOM Participant currently receives for adding liquidity in Non- Penny Pilot Options as a Customer or Professional, which range from $0.80 per contract to $1.00 per contract. --------------------------------------------------------------------------- \15\ As noted above, a NOM Participant will receive a rebate of $0.48 per contract for adding liquidity as a Customer or Professional in Penny Pilot Options if it qualifies for Tier 8. In addition, as noted in footnote c of Chapter XV, Section 2, a NOM Participant may receive an additional rebate of up to $0.05 per contract in Penny Pilot Options, for a total rebate of $0.53 per contract. Specifically, Participants that: (1) Add Customer, Professional, Firm, Non-NOM Market Maker and/or Broker-Dealer liquidity in Penny Pilot Options and/or Non- Penny Pilot Options of 1.15% or more of total industry customer equity and ETF option ADV contracts per day in a month will receive an additional $0.02 per contract Penny Pilot Options Customer and/or Professional Rebate to Add Liquidity for each transaction which adds liquidity in Penny Pilot Options in that month; or (2) add Customer, Professional, Firm, Non-NOM Market Maker and/or Broker-Dealer liquidity in Penny Pilot Options and/or Non-Penny Pilot Options of 1.30% or more of total industry customer equity and ETF option ADV contracts per day in a month will receive an additional $0.05 per contract Penny Pilot Options Customer and/or Professional Rebate to Add Liquidity for each transaction which adds liquidity in Penny Pilot Options in that month; or (3)(a) add Customer, Professional, Firm, Non-NOM Market Maker and/or Broker-Dealer liquidity in Penny Pilot Options and/or Non-Penny Pilot Options above 0.80% of total industry customer equity and ETF option ADV contracts per day in a month, (b) add Customer, Professional, Firm, Non-NOM Market Maker and/or Broker- Dealer liquidity in Non-Penny Pilot Options above 0.15% of total industry customer equity and ETF option ADV contracts per day in a month, and (c) execute greater than 0.04% of Consolidated Volume (``CV'') via Market-on-Close/Limit-on-Close (``MOC/LOC'') volume within the NASDAQ Stock Market Closing Cross within a month will receive an additional $0.05 per contract Penny Pilot Options Customer and/or Professional Rebate to Add Liquidity for each transaction which adds liquidity in Penny Pilot Options in a month. Consolidated Volume shall mean the total consolidated volume reported to all consolidated transaction reporting plans by all exchanges and trade reporting facilities during a month in equity securities, excluding executed orders with a size of less than one round lot. For purposes of calculating Consolidated Volume and the extent of an equity member's trading activity, expressed as a percentage of or ratio to Consolidated Volume, the date of the annual reconstitution of the Russell Investments Indexes shall be excluded from both total Consolidated Volume and the member's trading activity. --------------------------------------------------------------------------- The Exchange believes that the requirement that a NOM Participant transact 3.00% or more in Consolidated Volume on the NASDAQ Stock Market is reasonable because this requirement, while more stringent than other volume-based requirements that currently apply to NOM Participants that transact as Customers or Professionals in Penny Pilot and Non-Penny Pilot Options, reflects the fact that NOM Participants that qualify for this rebate would generally receive a larger rebate (for Penny Pilot Options, $0.53 per contract versus $0.20-$0.53 per contract and, for Non-Penny Pilot Options, $1.00 per contract versus $0.80-$1.00 per contract) than they would currently receive for transactions as Customer or Professionals in Penny Pilot and Non-Penny Pilot Options. The Exchange believes it is reasonable to make this rebate exclusive of any other rebates in Tiers 1-8 or other rebate incentives on NOM for Customer and Professional order flow in Chapter XV, Section 2(1). As noted above, the proposed rebates are generally higher, and in some cases significantly higher, than the rebates that a NOM Participant may currently receive for adding liquidity in Penny Pilot and Non-Penny Pilot Options as a Customer or Professional. Given the size of the proposed rebates, the Exchange believes it is reasonable to make these rebates exclusive of other rebates on NOM for Customer and Professional order flow. The Exchange also believes the other aspects of this proposal are also reasonable, equitable and not unfairly discriminatory. First, the Exchange notes that the proposed rebates apply to both transactions in Penny Pilot and Non-Penny Pilot Options. Second, the Exchange believes that linking rebates on NOM to activity on the NASDAQ Stock Market is reasonable, equitable, and not unfairly discriminatory. The Exchange notes that previous and current rebates offered by NOM relate to activity on the NASDAQ Stock Market.\16\ Similarly, the NASDAQ Stock Market offers reduced transaction fees that are based on activity on NOM.\17\ Moreover, the Exchange notes that any NOM Options Participant may trade equities on the NASDAQ Stock Market because they are approved members.\18\ --------------------------------------------------------------------------- \16\ For example, in SR-NASDAQ-2015-047, the Exchange proposed to make NOM Participants that added liquidity in Penny Pilot Stocks [sic] as a Customer or Professional eligible for the Tier 8 rebate if, among other things, the Participant has certified for the Investor Support Program set forth in Rule 7014, or if the Participant qualified for rebates under the Qualified Market Maker (``QMM'') Program set forth in Rule 7014. See Securities Exchange Act Release No. 74931 (May 12, 2015), 80 FR 28308 (May 18, 2015) (SR-NASDAQ-2015-047). Currently, footnote c of the NOM fee schedule provides that Participants that (1) add Customer, Professional, Firm, Non-NOM Market Maker and/or Broker-Dealer liquidity in Penny Pilot Options and/or Non-Penny Pilot Options above 0.80% of total industry customer equity and ETF option ADV contracts per day in a month, (2) add Customer, Professional, Firm, Non-NOM Market Maker and/or Broker-Dealer liquidity in Non-Penny Pilot Options above 0.15% of total industry customer equity and ETF option ADV contracts per day in a month, and (3) execute greater than 0.04% of Consolidated Volume (``CV'') via Market-on-Close/Limit-on-Close (``MOC/LOC'') volume within the NASDAQ Stock Market Closing Cross within a month will receive an additional $0.05 per contract Penny Pilot Options Customer and/or Professional Rebate to Add Liquidity for each transaction which adds liquidity in Penny Pilot Options in a month. \17\ For example, Nasdaq charges a reduced transaction fee of $0.00295 if the member adds Customer, Professional, Firm, Non-NOM Market Maker and/or Broker-Dealer liquidity in Penny Pilot Options and/or Non-Penny Pilot Options of 1.15% or more of total industry ADV in the customer clearing range for Equity and ETF option contracts per day in a month on NOM. See Nasdaq Rule 7018. \18\ Although a NOM Participant may incur additional labor and/ or costs to establish connectivity to the NASDAQ Stock Market, there are no additional membership fees for NOM Participants that want to transact on the NASDAQ Stock Market. --------------------------------------------------------------------------- Third, while the requirements for qualifying for the proposed rebates may be more stringent than other requirements for qualifying for other rebates currently offered by NOM, the Exchange believes that these requirements are proportionate to the amount of the proposed rebates and equitably reflect the purpose of the proposed rebates, which is to incentivize NOM Participants to transact greater volume on the NASDAQ Stock Market. Moreover, all similarly-situated NOM Participants, e.g., those that add liquidity in either Penny Pilot [[Page 91219]] or Non-Penny Pilot Options as either Customers or Professionals and also transact on the NASDAQ Stock Market, are equally capable of qualifying for the proposed rebates, and the same rebates will be paid to all NOM Participants that qualify for them. Fourth, the Exchange believes that it is reasonable, equitable and not unfairly discriminatory to offer this rebate to NOM Participants that add liquidity as Customers or Professionals, and not to offer this rebate to NOM Participants that add liquidity as Firms,\19\ NOM Market Makers,\20\ non-NOM Market Makers, or Broker-Dealers.\21\ Nasdaq notes that Customer liquidity offers unique benefits to the market which benefits all market participants by providing more trading opportunities, which attracts Specialists and Market Makers. An increase in the activity of these market participants in turn facilitates tighter spreads, which may cause an additional corresponding increase in order flow from other market participants. The Exchange believes that encouraging Participants to add Professional liquidity is similarly beneficial, as the rebates may cause market participants to select NOM as a venue to send Professional order flow, increasing competition among the exchanges. As with Customer liquidity, the Exchange believes that increased Professional additional order flow should benefit other market participants. --------------------------------------------------------------------------- \19\ The term ``Firm'' or (``F'') applies to any transaction that is identified by a Participant for clearing in the Firm range at OCC. \20\ The term ``NOM Market Maker'' or (``M'') is a Participant that has registered as a Market Maker on NOM pursuant to Chapter VII, Section 2, and must also remain in good standing pursuant to Chapter VII, Section 4. In order to receive NOM Market Maker pricing in all securities, the Participant must be registered as a NOM Market Maker in at least one security. \21\ The term ``Broker-Dealer'' or (``B'') applies to any transaction which is not subject to any of the other transaction fees applicable within a particular category. --------------------------------------------------------------------------- B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. In terms of inter-market competition, the Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive, or rebate opportunities available at other venues to be more favorable. In such an environment, the Exchange must continually adjust its fees to remain competitive with other exchanges and with alternative trading systems that have been exempted from compliance with the statutory standards applicable to exchanges. Because competitors are free to modify their own fees in response, and because market participants may readily adjust their order routing practices, the Exchange believes that the degree to which fee changes in this market may impose any burden on competition is extremely limited. The Exchange does not believe that the proposed rebates will impose any burden on competition that is not necessary or appropriate. The Exchange notes that the purpose of the proposed rebate is to incentivize NOM Participants to transact on the NASDAQ Stock Market. All similarly-situated NOM Participants, e.g., those that add liquidity in either Penny Pilot or Non-Penny Pilot Options as either Customers or Professionals and also transact the requisite volumes on the NASDAQ Stock Market, are equally capable of qualifying for the proposed rebates. Additionally, the Exchange will pay the same rebates to all NOM Participants that qualify for them. The Exchange believes that Customer and Professional order flow provides unique benefits to all participants on the Exchange and may even facilitate inter-market competition, and is therefore offering the proposed rebates to NOM Participants that add liquidity as either a Customer or a Professional accordingly. With respect to linking the proposed rebates to a participant's activity on the NASDAQ Stock Market, NOM currently offers rebates that are based on activity on the NASDAQ Stock Market. Similarly, the NASDAQ Stock Market currently offers reduced transaction fees that are based on activity on NOM. Finally, because they are approved members, any NOM Options Participant may trade equities on the NASDAQ Stock Market and therefore attempt to qualify for the proposed rebates. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act.\22\ --------------------------------------------------------------------------- \22\ 15 U.S.C. 78s(b)(3)(A)(ii). --------------------------------------------------------------------------- At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. 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 CommentsUse 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-NASDAQ-2016-166 on the subject line. Paper Comments Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-NASDAQ-2016-166. 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 [[Page 91220]] 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; 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-NASDAQ-2016-166 and should be submitted on or before January 6, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\23\ --------------------------------------------------------------------------- \23\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2016-30259 Filed 12-15-16; 8:45 am] BILLING CODE 8011-01-P
![91216 Federal Register / Vol. 81, No. 242 / Friday, December 16, 2016 / Notices
secondary market trading in Shares will redemptions of Creation Units will be SECURITIES AND EXCHANGE
take place at negotiated prices, not at a the same for all purchases and COMMISSION
current offering price described in a redemptions and Deposit Instruments
[Release No. 34–79532; File No. SR–
Fund’s prospectus, and not at a price and Redemption Instruments will be NASDAQ–2016–166]
based on NAV. Applicants state that (a) valued in the same manner as those
secondary market trading in Shares does investment positions currently held by Self-Regulatory Organizations; The
not involve a Fund as a party and will the Funds. Applicants also seek relief NASDAQ Stock Market LLC; Notice of
not result in dilution of an investment from the prohibitions on affiliated Filing and Immediate Effectiveness of
in Shares, and (b) to the extent different transactions in section 17(a) to permit a Proposed Rule Change To Amend the
prices exist during a given trading day, Exchange’s Transaction Fees at
Fund to sell its Shares to and redeem its
or from day to day, such variances occur Chapter XV, Section 2
Shares from a Fund of Funds, and to
as a result of third-party market forces,
such as supply and demand. Therefore, engage in the accompanying in-kind December 12, 2016.
applicants assert that secondary market transactions with the Fund of Funds.3 Pursuant to Section 19(b)(1) of the
transactions in Shares will not lead to The purchase of Creation Units by a Securities Exchange Act of 1934
discrimination or preferential treatment Fund of Funds directly from a Fund will (‘‘Act’’),1 and Rule 19b–4 thereunder,2
among purchasers. Finally, applicants be accomplished in accordance with the notice is hereby given that on December
represent that share market prices will policies of the Fund of Funds and will 1, 2016, The NASDAQ Stock Market
be disciplined by arbitrage be based on the NAVs of the Funds. LLC (‘‘Nasdaq’’ or ‘‘Exchange’’) filed
opportunities, which should prevent 9. Section 6(c) of the Act permits the with the Securities and Exchange
Shares from trading at a material Commission to exempt any persons or Commission (‘‘SEC’’ or ‘‘Commission’’)
discount or premium from NAV. transactions from any provision of the the proposed rule change as described
6. With respect to Funds that effect Act if such exemption is necessary or in Items I, II, and III, below, which Items
creations and redemptions of Creation have been prepared by the Exchange.
appropriate in the public interest and
Units in-kind and that are based on The Commission is publishing this
consistent with the protection of
certain Underlying Indexes that include notice to solicit comments on the
foreign securities, applicants request investors and the purposes fairly
proposed rule change from interested
relief from the requirement imposed by intended by the policy and provisions of
persons.
section 22(e) in order to allow such the Act. Section 12(d)(1)(J) of the Act
Funds to pay redemption proceeds provides that the Commission may I. Self-Regulatory Organization’s
within fifteen calendar days following exempt any person, security, or Statement of the Terms of Substance of
the tender of Creation Units for transaction, or any class or classes of the Proposed Rule Change
redemption. Applicants assert that the persons, securities, or transactions, from The Exchange proposes to amend the
requested relief would not be any provision of section 12(d)(1) if the Exchange’s transaction fees at Chapter
inconsistent with the spirit and intent of exemption is consistent with the public XV, Section 2, entitled ‘‘NASDAQ
section 22(e) to prevent unreasonable, interest and the protection of investors. Options Market—Fees and Rebates,’’
undisclosed or unforeseen delays in the Section 17(b) of the Act authorizes the which governs pricing for Nasdaq
actual payment of redemption proceeds. Commission to grant an order members using the NASDAQ Options
7. Applicants request an exemption to permitting a transaction otherwise Market (‘‘NOM’’), Nasdaq’s facility for
permit Funds of Funds to acquire Fund prohibited by section 17(a) if it finds executing and routing standardized
Shares beyond the limits of section that (a) the terms of the proposed equity and index options. Nasdaq
12(d)(1)(A) of the Act; and the Funds, transaction are fair and reasonable and proposes to implement a new rebate for
and any principal underwriter for the adding liquidity for Customer and
do not involve overreaching on the part
Funds, and/or any broker or dealer Professional orders in Penny and Non-
of any person concerned; (b) the
registered under the Exchange Act, to Penny Pilot Options as described further
sell Shares to Funds of Funds beyond proposed transaction is consistent with
the policies of each registered below.
the limits of section 12(d)(1)(B) of the The text of the proposed rule change
Act. The application’s terms and investment company involved; and (c)
is available on the Exchange’s Web site
conditions are designed to, among other the proposed transaction is consistent at http://nasdaq.cchwallstreet.com, at
things, help prevent any potential (i) with the general purposes of the Act. the principal office of the Exchange, and
undue influence over a Fund through For the Commission, by the Division of at the Commission’s Public Reference
control or voting power, or in Investment Management, under delegated Room.
connection with certain services, authority.
transactions, and underwritings, (ii) II. Self-Regulatory Organization’s
Brent J. Fields, Statement of the Purpose of, and
excessive layering of fees, and (iii)
Secretary. Statutory Basis for, the Proposed Rule
overly complex fund structures, which
are the concerns underlying the limits [FR Doc. 2016–30251 Filed 12–15–16; 8:45 am] Change
in sections 12(d)(1)(A) and (B) of the BILLING CODE 8011–01–P In its filing with the Commission, the
Act. Exchange included statements
8. Applicants request an exemption 3 The requested relief would apply to direct sales concerning the purpose of and basis for
from sections 17(a)(1) and 17(a)(2) of the of Shares in Creation Units by a Fund to a Fund the proposed rule change and discussed
Act to permit persons that are Affiliated
mstockstill on DSK3G9T082PROD with NOTICES
of Funds and redemptions of those Shares. any comments it received on the
Persons, or Second Tier Affiliates, of the Applicants, moreover, are not seeking relief from proposed rule change. The text of these
Funds, solely by virtue of certain section 17(a) for, and the requested relief will not
apply to, transactions where a Fund could be
statements may be examined at the
ownership interests, to effectuate places specified in Item IV below. The
deemed an Affiliated Person, or a Second-Tier
purchases and redemptions in-kind. The Affiliate, of a Fund of Funds because an Adviser or Exchange has prepared summaries, set
deposit procedures for in-kind an entity controlling, controlled by or under
purchases of Creation Units and the common control with an Adviser provides 1 15 U.S.C. 78s(b)(1).
redemption procedures for in-kind investment advisory services to that Fund of Funds. 2 17 CFR 240.19b–4.
VerDate Sep<11>2014 18:42 Dec 15, 2016 Jkt 241001 PO 00000 Frm 00102 Fmt 4703 Sfmt 4703 E:\FR\FM\16DEN1.SGM 16DEN1](https://thefederalregister.org/doc/81_FR_91458/page/1.svg)
![Federal Register / Vol. 81, No. 242 / Friday, December 16, 2016 / Notices 91217
forth in sections A, B, and C below, of in a month, and (2) has added liquidity divide this number by the total industry
the most significant aspects of such in all securities through one or more of Consolidated Volume.
statements. its Nasdaq Market Center MPIDs that
2. Statutory Basis
represent 1.00% or more of
A. Self-Regulatory Organization’s
Consolidated Volume in a month or The Exchange believes that its
Statement of the Purpose of, and
qualifies for MARS.6 proposal is consistent with Section 6(b)
Statutory Basis for, the Proposed Rule Currently, Customers and of the Act,8 in general, and furthers the
Change Professionals transacting in Non-Penny objectives of Sections 6(b)(4) and 6(b)(5)
1. Purpose Pilot Options on NOM receive a $0.80 of the Act,9 in particular, in that it
The Exchange proposes to create an per contract Rebate to Add Liquidity. In provides for the equitable allocation of
alternative method for earning a rebate addition, a Participant that qualifies for reasonable dues, fees and other charges
for adding liquidity for both Customers 3 a Customer or Professional Penny Pilot among members and issuers and other
and Professionals 4 in Penny Pilot 5 and Options Rebate to Add Liquidity in persons using any facility, and is not
Non-Penny Pilot Options. For Tiers 2, 3, 4, 5 or 6 in a month will designed to permit unfair
Customers and Professionals transacting receive an additional $0.10 per contract discrimination between customers,
in Penny Pilot Options, the Exchange Non-Penny Pilot Options Rebate to Add issuers, brokers, or dealers.
currently pays a volume-based tiered Liquidity for each transaction which The Commission and the courts have
rebate to add liquidity. That rebate adds liquidity in Non-Penny Pilot repeatedly expressed their preference
consists of 8 tiers, ranging from $0.20 Options in that month. Furthermore, a for competition over regulatory
per contract to $0.48 per contract, with Participant that qualifies for a Customer intervention in determining prices,
the volume requirements increasing or Professional Penny Pilot Options products, and services in the securities
with each tier. Thus, a NOM Participant Rebate to Add Liquidity in Tiers 7 or 8 markets. In Regulation NMS, while
would qualify for a rebate of $0.20 per in a month will receive an additional adopting a series of steps to improve the
contract in Tier 1 for Customers and $0.20 per contract Non-Penny Pilot current market model, the Commission
Professionals if it added Customer, Options Rebate to Add Liquidity for highlighted the importance of market
Professional, Firm, Non-NOM Market each transaction which adds liquidity in forces in determining prices and SRO
Maker and/or Broker-Dealer liquidity in Non-Penny Pilot Options in that month. revenues and, also, recognized that
The Exchange now proposes to add an
Penny Pilot Options and/or Non-Penny current regulation of the market system
additional rebate to Customers and
Pilot Options of up to 0.10% of total ‘‘has been remarkably successful in
Professionals for adding liquidity in
industry customer equity and ETF promoting market competition in its
both Penny Pilot and Non-Penny Pilot
option average daily volume (‘‘ADV’’) broader forms that are most important to
Options. Specifically, a NOM
contracts per day in a month. In investors and listed companies.’’ 10
Participant will receive a $0.53 per
comparison, a Participant would qualify Likewise, in NetCoalition v. Securities
contract Rebate to Add Liquidity in
for a rebate of $0.48 in Tier 8 for and Exchange Commission 11
Penny Pilot Options as a Customer or
Customers and Professionals if it adds (‘‘NetCoalition’’) the D.C. Circuit upheld
Professional, and $1.00 per contract
Customer, Professional, Firm, Non-NOM the Commission’s use of a market-based
Rebate to Add Liquidity in Non-Penny
Market Maker and/or Broker-Dealer approach in evaluating the fairness of
Pilot Options as a Customer or
liquidity in Penny Pilot Options and/or market data fees against a challenge
Professional, if that NOM Participant
Non-Penny Pilot Options above 0.75% claiming that Congress mandated a cost-
transacts on the NASDAQ Stock Market
or more of total industry customer based approach.12 As the court
through one or more of its Nasdaq
equity and ETF option ADV contracts emphasized, the Commission ‘‘intended
Market Center MPIDs in the same
per day in a month, or if the Participant in Regulation NMS that ‘market forces,
month, and such transactions in all
adds: (1) Customer and/or Professional rather than regulatory requirements’
securities on the NASDAQ Stock Market
liquidity in Penny Pilot Options and/or play a role in determining the market
that month through all of its Nasdaq
Non-Penny Pilot Options of 0.25% or data . . . to be made available to
Market Center MPIDs represent 3.00%
more of total industry customer equity investors and at what cost.’’13
or more of Consolidated Volume.7
and ETF option ADV contracts per day Further, ‘‘[n]o one disputes that
Participants that qualify for this rebate
3 The term ‘‘Customer’’ or (‘‘C’’) applies to any
would not be eligible for any other competition for order flow is ‘fierce.’
transaction that is identified by a Participant for rebates in Tiers 1–8 or other rebate . . . As the SEC explained, ‘[i]n the U.S.
clearing in the Customer range at The Options incentives on NOM for Customer and national market system, buyers and
Clearing Corporation (‘‘OCC’’) which is not for the Professional order flow in Chapter XV, sellers of securities, and the broker-
account of broker or dealer or for the account of a Section 2(1). dealers that act as their order-routing
‘‘Professional’’ (as that term is defined in Chapter
I, Section 1(a)(48)). For purposes of calculating the NOM agents, have a wide range of choices of
4 The term ‘‘Professional’’ or (‘‘P’’) means any Participant’s total volume, the Exchange where to route orders for execution’;
person or entity that (i) is not a broker or dealer in will add the NOM Participant’s total [and] ‘no exchange can afford to take its
securities, and (ii) places more than 390 orders in volume transacted on the NASDAQ market share percentages for granted’
listed options per day on average during a calendar Stock Market in a given month across its because ‘no exchange possesses a
month for its own beneficial account(s) pursuant to
Chapter I, Section 1(a)(48). All Professional orders Nasdaq Market Center MPIDs, and will monopoly, regulatory or otherwise, in
shall be appropriately marked by Participants. the execution of order flow from broker
5 The Penny Pilot was established in March 2008. 6 MARS refers to the Market Access and Routing
See Securities Exchange Act Release No. 57579 Subsidy, which is set forth in Chapter XV, Section
mstockstill on DSK3G9T082PROD with NOTICES
8 15 U.S.C. 78f(b).
(March 28, 2008), 73 FR 18587 (April 4, 2008) (SR– 6 [sic]. The MARS payment comprises four volume- 9 15
based tiers, and is paid to NOM Participants that U.S.C. 78f(b)(4) and (5).
NASDAQ–2008–026) (notice of filing and 10 Securities Exchange Act Release No. 51808
immediate effectiveness establishing Penny Pilot). route eligible contracts to NOM through a
Since that date, the Penny Pilot has been expanded participating NOM Participant’s System. The MARS (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
and is currently extended through December 31, Payment will be paid on all executed Eligible (‘‘Regulation NMS Adopting Release’’).
11 NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir.
2016 or the date of permanent approval, if earlier. Contracts that add liquidity. See Chapter XV,
See Securities Exchange Act Release No. 78037 Section 6 [sic]. 2010).
12 See NetCoalition, at 534–535.
(June 10, 2016), 81 FR 39299 (June 16, 2016) (SR– 7 Consolidated Volume would be determined as
NASDAQ–2016–052). set forth in Nasdaq Rule 7018(a). 13 Id. at 537.
VerDate Sep<11>2014 18:42 Dec 15, 2016 Jkt 241001 PO 00000 Frm 00103 Fmt 4703 Sfmt 4703 E:\FR\FM\16DEN1.SGM 16DEN1](https://thefederalregister.org/doc/81_FR_91458/page/2.svg)
![91218 Federal Register / Vol. 81, No. 242 / Friday, December 16, 2016 / Notices
dealers’. . . .’’ 14 Although the court believes the proposed rebate of $0.53 both transactions in Penny Pilot and
and the SEC were discussing the cash per contract is reasonable when Non-Penny Pilot Options.
equities markets, the Exchange believes compared to the highest rebate currently Second, the Exchange believes that
that these views apply with equal force available to Customers and linking rebates on NOM to activity on
to the options markets. Professionals for adding liquidity in the NASDAQ Stock Market is
The Exchange notes that the purpose Penny Pilot Options, as the proposed reasonable, equitable, and not unfairly
of the proposed rebates is to incentivize rebate imposes comparable discriminatory. The Exchange notes that
NOM Participants to transact greater requirements on NOM Participants in previous and current rebates offered by
volume on the NASDAQ Stock Market order to qualify for that rebate. NOM relate to activity on the NASDAQ
in order to qualify for a higher rebate on Similarly, the Exchange believes the Stock Market.16 Similarly, the NASDAQ
NOM. The Exchange believes that the proposed $1.00 rebate per contract for Stock Market offers reduced transaction
amount of the rebate ($0.53 per contract Non-Penny Pilot Options is reasonable fees that are based on activity on
for Penny Pilot Options and $1.00 per because it is comparable to the rebates NOM.17 Moreover, the Exchange notes
contract for Non-Penny Pilot Options) that a NOM Participant currently that any NOM Options Participant may
and the volume threshold for qualifying receives for adding liquidity in Non- trade equities on the NASDAQ Stock
for the rebate (3.00% or more of Penny Pilot Options as a Customer or Market because they are approved
Consolidated Volume) are reasonable. Professional, which range from $0.80 members.18
With respect to the rebate for Penny per contract to $1.00 per contract. Third, while the requirements for
Pilot Options, the Exchange notes that The Exchange believes that the qualifying for the proposed rebates may
the proposed $0.53 per contract rebate requirement that a NOM Participant be more stringent than other
is the same as the highest rebate transact 3.00% or more in Consolidated requirements for qualifying for other
currently available to Customers and Volume on the NASDAQ Stock Market rebates currently offered by NOM, the
Professionals for adding liquidity in Exchange believes that these
is reasonable because this requirement,
Penny Pilot Options.15 The Exchange requirements are proportionate to the
while more stringent than other volume-
amount of the proposed rebates and
based requirements that currently apply
14 Id. at 539 (quoting Securities Exchange Act equitably reflect the purpose of the
to NOM Participants that transact as
Release No. 59039 (December 2, 2008), 73 FR proposed rebates, which is to
74770, 74782–83 (December 9, 2008) (SR– Customers or Professionals in Penny
incentivize NOM Participants to
NYSEArca–2006–21)). Pilot and Non-Penny Pilot Options,
transact greater volume on the NASDAQ
15 As noted above, a NOM Participant will receive
reflects the fact that NOM Participants
a rebate of $0.48 per contract for adding liquidity Stock Market. Moreover, all similarly-
that qualify for this rebate would
as a Customer or Professional in Penny Pilot situated NOM Participants, e.g., those
Options if it qualifies for Tier 8. In addition, as generally receive a larger rebate (for
that add liquidity in either Penny Pilot
noted in footnote c of Chapter XV, Section 2, a Penny Pilot Options, $0.53 per contract
NOM Participant may receive an additional rebate versus $0.20–$0.53 per contract and, for 16 For example, in SR–NASDAQ–2015–047, the
of up to $0.05 per contract in Penny Pilot Options, Non-Penny Pilot Options, $1.00 per
for a total rebate of $0.53 per contract. Specifically, Exchange proposed to make NOM Participants that
Participants that: (1) Add Customer, Professional, contract versus $0.80–$1.00 per added liquidity in Penny Pilot Stocks [sic] as a
Firm, Non-NOM Market Maker and/or Broker- contract) than they would currently Customer or Professional eligible for the Tier 8
rebate if, among other things, the Participant has
Dealer liquidity in Penny Pilot Options and/or Non- receive for transactions as Customer or certified for the Investor Support Program set forth
Penny Pilot Options of 1.15% or more of total Professionals in Penny Pilot and Non-
industry customer equity and ETF option ADV in Rule 7014, or if the Participant qualified for
contracts per day in a month will receive an Penny Pilot Options. rebates under the Qualified Market Maker (‘‘QMM’’)
additional $0.02 per contract Penny Pilot Options The Exchange believes it is reasonable Program set forth in Rule 7014. See Securities
Customer and/or Professional Rebate to Add Exchange Act Release No. 74931 (May 12, 2015), 80
to make this rebate exclusive of any FR 28308 (May 18, 2015) (SR–NASDAQ–2015–047).
Liquidity for each transaction which adds liquidity
in Penny Pilot Options in that month; or (2) add
other rebates in Tiers 1–8 or other rebate Currently, footnote c of the NOM fee schedule
Customer, Professional, Firm, Non-NOM Market incentives on NOM for Customer and provides that Participants that (1) add Customer,
Maker and/or Broker-Dealer liquidity in Penny Pilot Professional order flow in Chapter XV, Professional, Firm, Non-NOM Market Maker and/or
Options and/or Non-Penny Pilot Options of 1.30% Broker-Dealer liquidity in Penny Pilot Options and/
Section 2(1). As noted above, the or Non-Penny Pilot Options above 0.80% of total
or more of total industry customer equity and ETF
option ADV contracts per day in a month will
proposed rebates are generally higher, industry customer equity and ETF option ADV
receive an additional $0.05 per contract Penny Pilot and in some cases significantly higher, contracts per day in a month, (2) add Customer,
Options Customer and/or Professional Rebate to than the rebates that a NOM Participant Professional, Firm, Non-NOM Market Maker and/or
Add Liquidity for each transaction which adds Broker-Dealer liquidity in Non-Penny Pilot Options
may currently receive for adding above 0.15% of total industry customer equity and
liquidity in Penny Pilot Options in that month; or
(3)(a) add Customer, Professional, Firm, Non-NOM
liquidity in Penny Pilot and Non-Penny ETF option ADV contracts per day in a month, and
Market Maker and/or Broker-Dealer liquidity in Pilot Options as a Customer or (3) execute greater than 0.04% of Consolidated
Penny Pilot Options and/or Non-Penny Pilot Professional. Given the size of the Volume (‘‘CV’’) via Market-on-Close/Limit-on-Close
Options above 0.80% of total industry customer (‘‘MOC/LOC’’) volume within the NASDAQ Stock
proposed rebates, the Exchange believes Market Closing Cross within a month will receive
equity and ETF option ADV contracts per day in a
month, (b) add Customer, Professional, Firm, Non-
it is reasonable to make these rebates an additional $0.05 per contract Penny Pilot
NOM Market Maker and/or Broker-Dealer liquidity exclusive of other rebates on NOM for Options Customer and/or Professional Rebate to
in Non-Penny Pilot Options above 0.15% of total Customer and Professional order flow. Add Liquidity for each transaction which adds
industry customer equity and ETF option ADV liquidity in Penny Pilot Options in a month.
The Exchange also believes the other 17 For example, Nasdaq charges a reduced
contracts per day in a month, and (c) execute
greater than 0.04% of Consolidated Volume (‘‘CV’’) aspects of this proposal are also transaction fee of $0.00295 if the member adds
via Market-on-Close/Limit-on-Close (‘‘MOC/LOC’’) reasonable, equitable and not unfairly Customer, Professional, Firm, Non-NOM Market
volume within the NASDAQ Stock Market Closing discriminatory. First, the Exchange Maker and/or Broker-Dealer liquidity in Penny Pilot
Cross within a month will receive an additional Options and/or Non-Penny Pilot Options of 1.15%
mstockstill on DSK3G9T082PROD with NOTICES
notes that the proposed rebates apply to or more of total industry ADV in the customer
$0.05 per contract Penny Pilot Options Customer
and/or Professional Rebate to Add Liquidity for clearing range for Equity and ETF option contracts
each transaction which adds liquidity in Penny purposes of calculating Consolidated Volume and per day in a month on NOM. See Nasdaq Rule 7018.
Pilot Options in a month. Consolidated Volume the extent of an equity member’s trading activity, 18 Although a NOM Participant may incur
shall mean the total consolidated volume reported expressed as a percentage of or ratio to additional labor and/or costs to establish
to all consolidated transaction reporting plans by all Consolidated Volume, the date of the annual connectivity to the NASDAQ Stock Market, there
exchanges and trade reporting facilities during a reconstitution of the Russell Investments Indexes are no additional membership fees for NOM
month in equity securities, excluding executed shall be excluded from both total Consolidated Participants that want to transact on the NASDAQ
orders with a size of less than one round lot. For Volume and the member’s trading activity. Stock Market.
VerDate Sep<11>2014 18:42 Dec 15, 2016 Jkt 241001 PO 00000 Frm 00104 Fmt 4703 Sfmt 4703 E:\FR\FM\16DEN1.SGM 16DEN1](https://thefederalregister.org/doc/81_FR_91458/page/3.svg)
![91220 Federal Register / Vol. 81, No. 242 / Friday, December 16, 2016 / Notices
Reference Room, 100 F Street NE., Program is currently scheduled to This filing does not propose any
Washington, DC 20549, on official expire on December 31, 2016. The substantive changes to the Pilot
business days between the hours of proposed rule change is available on the Program: All classes currently
10:00 a.m. and 3:00 p.m. Copies of the Exchange’s Web site at www.nyse.com, participating will remain the same and
filing also will be available for at the principal office of the Exchange, all minimum increments will remain
inspection and copying at the principal and at the Commission’s Public unchanged. The Exchange believes the
office of the Exchange. All comments Reference Room. benefits to public customers and other
received will be posted without change; market participants who will be able to
the Commission does not edit personal II. Self-Regulatory Organization’s express their true prices to buy and sell
identifying information from Statement of the Purpose of, and options have been demonstrated to
submissions. You should submit only Statutory Basis for, the Proposed Rule outweigh the increase in quote traffic.
information that you wish to make Change
In its filing with the Commission, the 2. Statutory Basis
available publicly. All submissions
should refer to File Number SR– self-regulatory organization included The proposed rule change is
NASDAQ–2016–166 and should be statements concerning the purpose of, consistent with Section 6(b) 7 of the
submitted on or before January 6, 2017. and basis for, the proposed rule change Securities Exchange Act of 1934 (the
and discussed any comments it received ‘‘Act’’), in general, and furthers the
For the Commission, by the Division of
Trading and Markets, pursuant to delegated on the proposed rule change. The text objectives of Section 6(b)(5),8 in
authority.23 of those statements may be examined at particular, in that it is designed to
Eduardo A. Aleman, the places specified in Item IV below. prevent fraudulent and manipulative
Assistant Secretary. The Exchange has prepared summaries, acts and practices, to promote just and
set forth in sections A, B, and C below, equitable principles of trade, to foster
[FR Doc. 2016–30259 Filed 12–15–16; 8:45 am]
of the most significant parts of such cooperation and coordination with
BILLING CODE 8011–01–P
statements. persons engaged in facilitating
transactions in securities, and to remove
A. Self-Regulatory Organization’s impediments to and perfect the
SECURITIES AND EXCHANGE Statement of the Purpose of, and the
COMMISSION mechanisms of a free and open market
Statutory Basis for, the Proposed Rule and a national market system.
[Release No. 34–79524; File No. SR– Change In particular, the proposed rule
NYSEArca–2016–156] change, which extends the Penny Pilot
1. Purpose
Program for six months, allows the
Self-Regulatory Organizations; NYSE The Exchange proposes to extend the
Exchange to continue to participate in a
Arca, Inc.; Notice of Filing and Pilot Program,4 which is currently
program that has been viewed as
Immediate Effectiveness of Proposed scheduled to expire on December 31, beneficial to traders, investors and
Rule Change To Amend Commentary 2016, until June 30, 2017.5 The public customers and viewed as
.02 to Rule 6.72 Exchange believes that extending the successful by the other options
Pilot would allow for further analysis of exchanges participating in it.
December 12, 2016.
the Pilot Program and a determination Accordingly, the Exchange believes that
Pursuant to Section 19(b)(1) 1 of the of how the Pilot Program should be
Securities Exchange Act of 1934 (the the proposal is consistent with the Act
structured in the future. because it would allow the Exchange to
‘‘Act’’) 2 and Rule 19b–4 thereunder,3 During this extension of the Pilot, as
notice is hereby given that, on extend the Pilot Program prior to its
is the case today, the Exchange may
November 28, 2016, NYSE Arca, Inc. expiration on December 31, 2016. The
replace any option class that is currently
(the ‘‘Exchange’’ or ‘‘NYSE Arca’’) filed Exchange notes that this proposal does
included in the Pilot Program and that
with the Securities and Exchange not propose any new policies or
has been delisted with the next most
Commission (the ‘‘Commission’’) the provisions that are unique or unproven,
actively traded, multiply listed option
proposed rule change as described in but instead relates to the continuation of
class that is not yet participating in the
Items I, II, and III below, which Items an existing program that operates on a
Pilot Program (‘‘replacement class’’). In
have been prepared by the self- pilot basis.
light of the extension, the Exchange also The Exchange believes that the Pilot
regulatory organization. The proposes that any replacement class
Commission is publishing this notice to Program promotes just and equitable
would be determined based on national principles of trade by enabling public
solicit comments on the proposed rule average daily volume in the preceding
change from interested persons. customers and other market participants
six months, and would be added on the to express their true prices to buy and
I. Self-Regulatory Organization’s second trading day following January 1, sell options to the benefit of all market
Statement of the Terms of Substance of 2017.6 participants.
the Proposed Rule Change The proposal to extend the Pilot
4 See Securities Exchange Act Release No. 34–
The Exchange proposes to amend 55156 (January 23, 2007), 72 FR 4759 (February 1, Program is designed to promote just and
Commentary .02 to Rule 6.72 in order to 2007) (SR–NYSEArca–2006–73) (original approval equitable principles of trade, to foster
extend the Penny Pilot in options of Pilot). The Pilot has been extended several times cooperation and coordination with
since the original approval, the most recent persons engaged in facilitating
classes in certain issues (‘‘Pilot extension was obtained in earlier this year. See
Program’’ or ‘‘Pilot’’) previously Securities Exchange Act Release No. 78174 (June transactions in securities, and to remove
mstockstill on DSK3G9T082PROD with NOTICES
approved by the Securities and 28, 2016), 81 FR 43332 (July 1, 2016) (SR–
Exchange Commission (‘‘Commission’’) NYSEArca–2016–88) (most recent extension of the second trading day following January 1, 2017 would
Pilot until December 31, 2016). be identified based on The Option Clearing
through June 30, 2017. The Pilot 5 See proposed Commentary .02 to Rule 6.72. Corporation’s trading volume data from June 1,
6 See id. The month immediately preceding a 2016 through November 30, 2016. The Exchange
23 17 CFR 200.30–3(a)(12). replacement class’s addition to the Pilot Program will announce the replacement issues to the
1 15 U.S.C. 78s(b)(1). Exchange’s membership through a Trader Update.
(i.e., December) would not be used for purposes of
2 15 U.S.C. 78a. 7 15 U.S.C. 78f(b).
the analysis for determining the replacement class.
3 17 CFR 240.19b–4. Thus, a replacement class to be added on the 8 15 U.S.C. 78f(b)(5).
VerDate Sep<11>2014 18:42 Dec 15, 2016 Jkt 241001 PO 00000 Frm 00106 Fmt 4703 Sfmt 4703 E:\FR\FM\16DEN1.SGM 16DEN1](https://thefederalregister.org/doc/81_FR_91458/page/5.svg)
Document Created: 2018-02-14 09:07:52
Document Modified: 2018-02-14 09:07:52
| 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 | 81 FR 91216 |
2025 Federal Register | Disclaimer | Privacy Policy
USC | CFR | eCFR