82 FR 11085 - Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending the NYSE Arca Options Fee Schedule

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 32 (February 17, 2017)

[Federal Register Volume 82, Number 32 (Friday, February 17, 2017)]
[Notices]
[Pages 11085-11087]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-03180]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80029; File No. SR-NYSEArca-2017-12]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending the NYSE 
Arca Options Fee Schedule

February 13, 2017.
    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 February 7, 2017, NYSE Arca, Inc. (the ``Exchange'' or 
``NYSE Arca'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend the NYSE Arca Options Fee Schedule 
(``Fee Schedule''). The Exchange proposes to implement the fee change 
effective February 7, 2017. 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.

[[Page 11086]]

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this filing is to amend the Fee Schedule effective 
February 7, 2017. Specifically, the Exchange proposes to introduce a 
Market Maker posting incentive that applies to transactions in non-
Penny Pilot Issues.
    Currently, the Exchange offers various incentives that apply to 
Market Maker posted orders in Penny Pilot issues. Among these are the 
Market Maker Incentive (``Penny Incentive''),\4\ and the Market Maker 
Monthly Posting Credit Tiers for executions in Penny Pilot Issues and 
SPY (the ``Credit Tiers''). The Credit Tiers offer increasing 
incentives applied to posted orders in Penny Pilot issues, qualified by 
increased levels of market share. One of the Credit Tiers, designated 
the Super Tier, applies a posting credit of $0.37 to posted order 
transactions in Penny Pilot issues, and a $0.39 credit to posted order 
transactions in SPY. Market Makers qualify for the Super Tier in one of 
two ways: (1) By achieving at least 0.55% of Total Industry Customer 
equity and ETF option ADV (``TCADV'') from Market Maker Posted Orders 
in All Issues, or (2) by achieving at least 1.60% of TCADV from all 
orders in Penny Pilot Issues, all account types, with at least 0.80% of 
TCADV from Posted Orders in Penny Pilot Issues (the ``Super Tier 
qualification levels'').
---------------------------------------------------------------------------

    \4\ The Penny Incentive offers a $0.41 credit applied to posted 
electronic Market Maker executions in Penny Pilot Issues to any 
Market Maker that, together with its affiliates or Appointed OFPs, 
achieve at least 0.75% of TCADV from Customer Posted Orders in both 
Penny Pilot and non-Penny Pilot Issues and an ADV from Market Maker 
Posted Orders equal to 0.70% of TCADV.
---------------------------------------------------------------------------

    The Exchange proposes to adopt an additional incentive program 
based on the Super Tier qualification levels that would apply to posted 
volume in non-Penny Pilot issues (the ``Non-Penny Incentive''). As 
proposed, a Market Maker would be eligible for a $0.55 credit for 
Posted Electronic Market Maker Executions in Non-Penny Pilot Issues 
provided the Market Maker achieved (1) at least 0.55% of TCADV from 
Market Maker Posted Orders in All Issues, or (2) at least 1.60% of 
TCADV from all orders in Penny Pilot Issues, all account types, with at 
least 0.80% of TCADV from Posted Orders in Penny Pilot Issues. The 
Exchange believes that adopting this additional incentive would 
encourage Market Makers to achieve a higher level of posted orders in 
all issues, which in turn encourages tighter market spreads and 
increased liquidity to the benefit of all market participants. The 
proposed incentive would be referred to as the ``Market Maker Incentive 
For Non-Penny Pilot Issues.''
    The Exchange notes that, like the existing Penny Incentive, the 
calculations for the qualification thresholds for the proposed Non-
Penny Incentive would apply solely to electronic executions and would 
include transaction volume from the Market Maker's affiliates or its 
Appointed OFP. Further, Qualified Contingent Cross (``QCC'') orders are 
neither posted nor taken; thus, QCC transactions would not be included 
in the calculation of posted or taken execution volumes. The 
calculations would not include volume from mini-option transactions, 
nor would they include volume from Complex Order transactions. Orders 
routed to another market for execution would not be included in the 
calculation of taking volume.
    To avoid potential confusion and to distinguish the proposed 
program from the existing Penny Incentive, the Exchange proposes to re-
name the Market Maker Incentive to the ``Market Maker Incentive in 
Penny Pilot Issues.'' The Exchange believes this proposed change would 
add clarity and consistency to the Fee Schedule.
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.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed Non-Penny Incentive is 
reasonable, equitable, and not unfairly discriminatory because it would 
be available to all Market Makers on an equal and non-discriminatory 
basis, in particular because it offers alternative means to achieve the 
same credit. The Exchange believes that adopting the proposed Incentive 
is equitable and not unfairly discriminatory because it would encourage 
more Market Makers to qualify for the credit, including encouraging 
Market Makers to have affiliated or appointed order flow directed to 
the Exchange. The Exchange believes that attracting additional order 
flow to the Exchange would enhance market quality and would benefit all 
market participants by offering greater price discovery, increased 
transparency, and an increased opportunity to trade on the Exchange. 
Further, encouraging Market Makers to send higher volumes of orders to 
the Exchange would also contribute to the Exchange's depth of book as 
well as to the top of book liquidity.
    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,\7\ the Exchange does 
not believe that the proposed rule change will impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. Instead, the Exchange believes that the proposed 
change would continue to encourage competition, including by attracting 
additional liquidity to the Exchange, which would continue to make the 
Exchange a more competitive venue for, among other things, order 
execution and price discovery. The Exchange does not believe that the 
proposed change would impair the ability of any market participants or 
competing order execution venues to maintain their competitive standing 
in the financial markets. Further, the incentive would be available to 
all similarly situated Market Makers, and, as such, the proposed change 
would not impose a disparate burden on competition either among or 
between classes of market participants and should encourage 
competition.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    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. Because competitors are free to modify their own fees and 
credits in response, and because market participants may readily adjust 
their order routing practices, the degree to which fee changes in this 
market may impose any burden on competition is extremely limited. For 
the reasons described above, the Exchange believes that the proposed 
rule change reflects this competitive environment.

[[Page 11087]]

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) \8\ of the Act and subparagraph (f)(2) of Rule 19b-
4 \9\ thereunder, because it establishes a due, fee, or other charge 
imposed by the Exchange.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    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) \10\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NYSEArca-2017-12 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-NYSEArca-2017-12. 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 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-NYSEArca-2017-12, and should 
be submitted on or before March 10, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
---------------------------------------------------------------------------

    \11\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-03180 Filed 2-16-17; 8:45 am]
BILLING CODE 8011-01-P