82 FR 14552 - Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the NYSE Arca Options Fee Schedule

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 53 (March 21, 2017)

[Federal Register Volume 82, Number 53 (Tuesday, March 21, 2017)]
[Notices]
[Pages 14552-14555]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-05501]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80252; File No. SR-NYSEArca-2017-26]


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

March 15, 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 March 10, 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the NYSE Arca Options Fee Schedule 
(``Fee Schedule''). 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 the Fee Schedule. 
Specifically, the Exchange proposes to modify the criteria for 
achieving various credits, including by broadening qualifying order 
flow and trading activity, to make the credits more achievable to a 
variety of market participants.
    Currently, the Exchange provides a number of incentives for OTP 
Holders and OTP Firms (collectively, ``OTPs'') designed to encourage 
OTPs to direct additional order flow to the Exchange to achieve more 
favorable pricing and higher credits. Among these incentives are 
enhanced posted liquidity credits based on achieving certain 
percentages of NYSE Arca Equity daily activity, also known as ``cross-
asset pricing.'' In addition, certain of the qualifications for 
achieving these incentives are more tailored to specific activity 
(i.e., posting in Penny Pilot issues only, or cross-asset pricing based 
only on levels of Retail Orders on the NYSE Arca Equity Market). In an 
effort to increase the opportunities for OTP Holders to achieve the 
incentives offered, the Exchange proposes a number of modifications as 
set forth below.
    First, the Exchange proposes to modify the alternative 
qualification to Tier 7 of the Customer and Professional Customer 
Monthly Posting Credit Tiers and Qualifications for Executions in Penny 
Pilot Issues (``Tier 7''). Currently, OTPs are eligible to achieve a 
per contract credit of $0.50 associated with Tier 7 provided the OTP 
has (i) at least 1.00% of Total Industry Customer equity and ETF option 
average daily volume (``TCADV'') from Customer and Professional 
Customer Posted Orders in all Issues; or (ii) at least 0.80% of TCADV 
from Customer and Professional Customer Posted Orders in all Issues

[[Page 14553]]

Plus executed ADV of Retail Orders of 0.10% ADV of U.S. Equity Market 
Share Posted and Executed on NYSE Arca Equity Market. The latter 
criteria is the cross-asset pricing portion, which the Exchange 
proposes to modify by eliminating the restriction that executed ADV be 
Retail Orders such that all Posted Orders executed on the NYSE Arca 
Equity Market would be included. To account for this expansion, the 
Exchange also proposes to raise the qualification level to ADV of at 
least 0.30% ADV of U.S. Equity Market Share.\4\ The per contract credit 
associated with Tier 7 remains unchanged.
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    \4\ See proposed Fee Schedule, Customer and Professional 
Customer Posting Credit Tiers In Penny Pilot Issues, Tier 7.
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    Second, the Exchange proposes to revise one of the alternative 
additional credits available under the Customer and Professional 
Customer Incentive Program. Currently, an OTP that has at least 1.00% 
of TCADV from Customer and Professional Customer posted orders in both 
Penny and non-Penny Pilot issues (the ``threshold qualification''), of 
which at least 0.25% of TCADV is from Customer and Professional 
Customer posted orders in non-Penny Pilot issues (the ``non-Penny 
qualification''), will receive an additional $0.05 posting credit on 
Customer and Professional Customer volume. The Exchange proposes to 
make the incentive more achievable by lowering the threshold 
qualification to at least 0.80% of TCADV, and likewise reducing the 
non-Penny qualification to at least 0.20% of TCADV. To account for the 
reduced thresholds, the Exchange proposes to reduce the additional per 
contract credit from $0.05 to $0.03.
    Third, the Exchange proposes to revise Tier C and to add new Tier D 
to the Customer and Professional Customer Posting Credit Tiers in non-
Penny Pilot Issues. Currently, to achieve the per contract credit that 
is available under Tier C, an OTP must have at least 1.50% of TCADV 
from Customer and Professional Customer Posted Orders in all Issues 
(the ``Tier C threshold qualification''), of which at least 0.30% of 
TCADV is from Customer and Professional Customer Posted Orders in non-
Penny Pilot Issues (the ``non-Penny threshold qualification''). The 
Exchange proposes to reduce the qualifications for this Tier such that 
the Tier C threshold qualification would be at least 0.80% of TCADV, 
and the non-Penny threshold qualification would be reduced to at least 
0.10% of TCADV. The Exchange also proposes to increase the credit 
available under Tier C from $0.90 to $0.95, applicable per contract on 
Customer and Professional Customer Posted Orders in non-Penny Pilot 
issues. The Exchange also proposes to add an additional tier, Tier D. 
As proposed, to achieve proposed Tier D, OTPs must have at least 0.80% 
of TCADV from Customer and Professional Customer Posted Orders in all 
issues, with an executed ADV of at least 0.30% of U.S. Equity Market 
Share Posted and Executed on NYSE Arca Equity Market.\5\ OTPs that 
qualify for proposed Tier D would be eligible for a credit of $1.02, 
applicable per contract on Customer and Professional Posted Orders in 
non-Penny Pilot issues.
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    \5\ Endnote 8 to the Fee Schedule sets forth additional detail 
regarding meeting the volume requirements of proposed Tier D. See 
Fee Schedule, Endnote 8 (``The calculations for qualifications for 
monthly posting credits only include electronic executions, 
excluding Mini options contracts. Customer equity and ETF option ADV 
does not include Electronic Complex Order Executions or Mini options 
contracts executions. QCC orders are neither posted nor taken; thus 
QCC transactions are not included in the calculation of posted or 
taken execution volumes. Orders routed to another market for 
execution are not included in the calculation of taking volume. 
Total Industry Customer equity and ETF option ADV includes OCC 
calculated Customer volume of all types, including Complex Order 
Transactions, QCC transactions, and mini options transactions, in 
equity and ETF options. An affiliate of an OTP Holder or OTP Firm is 
as defined in NYSE Arca Rule 1.1(a). For purposes of calculating the 
executed Average Daily Volume (``ADV'') of Retail Orders of U.S. 
Equity Market Share on the NYSE Arca Equity Market, a Retail Order 
must qualify for the Retail Order Tier set forth in the Schedule of 
Fees and Charges for NYSE Arca Equities, Inc.'').
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    Fourth, the Exchange proposes to modify the Super Tier in the 
Market Maker Monthly Posting Credit Tiers and Qualifications for 
Execution in Penny Pilot Issues and SPY. Currently, to qualify for the 
Super Tier, an OTP must have (i) at least 0.55% of TCADV from Market 
Maker Posted Orders in All Issues, or (ii) 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 
``alternate threshold''). The Exchange proposes to expand the 
qualifying orders to be included in the alternate threshold to include 
all issues --both Penny Pilot and non-Penny Pilot issues. The credits 
associated with the Super Tier would remain unchanged. The Exchange 
likewise proposes to modify the Market Maker Incentive for non-Penny 
Pilot Issues, which mirrors the current qualifications for the Super 
Tier, to likewise apply to posted orders in all issues.\6\
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    \6\ The Exchange introduced the Market Maker Incentive for non-
Penny Pilot Issues in February 2017 ``based on the Super Tier 
qualification levels.'' See Securities Exchange Act Release No. 
80029 (February 13, 2017), 82 FR 11085, 11086 (February 17, 2017) 
(SR-NYSEArca-2017-12). Thus, the Exchange believes it is appropriate 
to modify this Incentive to remain consistent with the amended Super 
Tier.
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    Finally, the Exchange proposes to modify the Take Fee Discount for 
Professional Customer, Market Maker, Firm, and Broker Dealer Liquidity 
Removing Orders (the ``Take Fee Discount''). Currently, to qualify for 
the Take Discount, an OTP must have (i) at least 1.00% of TCADV from 
Customer and Professional Customer Posted Orders in all Issues; or (ii) 
at least 2.00% of TCADV from Professional Customer, Market Maker, Firm, 
and Broker Dealer Liquidity Removing Orders in all Issues. The Take Fee 
Discount currently applies to both non-Penny and Penny Pilot Issues. 
The Exchange proposes to eliminate the $0.05 per contract discount 
applicable to non-Penny Pilot issues. The Exchange also proposes to add 
a new Take Fee Discount, applicable to Penny Pilot Issues, which is 
available to OTPs that have at least 0.80% of TCADV from Customer and 
Professional Customer Posted Orders in all issues, with an executed ADV 
of at least 0.30% of U.S. Equity Market Share Posted and Executed on 
NYSE Arca Equity Market.\7\ OTPs that qualify for this proposed Take 
Fee Discount would receive a per contract discount of $0.04 on 
Professional Customer, Market Maker, Firm, and Broker Dealer orders 
that take liquidity. If an OTP is eligible for more than one discount, 
the Exchange will apply the most favorable discount.
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    \7\ Endnote 8 to the Fee Schedule sets forth additional detail 
regarding meeting the volume requirements of the proposed Take Fee 
Discount. See supra note 5.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\8\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\9\ 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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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes the adjustments to qualifications for 
enhanced posting liquidity credits, including expanding the qualifying 
order flow and trading activity, are reasonable, equitable and not 
unfairly discriminatory as they are designed to attract increased 
Customer (and Professional Customer) business on the Exchange and are 
achievable in various

[[Page 14554]]

ways. An increase in Customer (and Professional Customer) orders 
executed on the Exchange benefits all participants by offering greater 
price discovery, increased transparency, and an increased opportunity 
to trade on the Exchange. The Exchange also believes that the proposed 
credits are reasonable because they are within a range of similar 
credits available on other option exchanges.\10\ Additionally, 
attracting posted Customer and Professional Customer order flow is 
desirable because it encourages liquidity to be present on the 
Exchange. The proposed changes are also non-discriminatory because they 
apply to all similarly-situated OTP Holders, and provide for various 
incentives that are achievable through different means and different 
sources of business.
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    \10\ See e.g., NASDAQ Options Market--Fees and Rebates, 
available here, http://www.nasdaqtrader.com/Micro.aspx?id=optionsPricing.
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    Specifically, the proposed addition of Tier D and the new Take Fee 
Discount are designed to incentivize market participants to increase 
the orders sent directly to the Exchange and therefore provide 
liquidity that supports the quality of price discovery and promotes 
market transparency. The Exchange believes the proposed change is 
equitable because it would be available to all similarly situated 
market participants on an equal basis. Further, the Exchange believes 
that the proposed Discount is reasonable, equitable, and not unfairly 
discriminatory because the incentives would be available to all non-
Customers on an equal and non-discriminatory basis. The modified 
incentives are also non-discriminatory because they allow qualification 
through activity combined with activity of affiliates or Appointed OFP, 
including activity on the NYSE Arca Equity Market. The Exchange 
believes the modifications are equitable and not unfairly 
discriminatory because the changes encourage more participants to 
qualify for the various incentives, including encouraging more 
participants to have affiliated or appointed order flow directed to the 
Exchange.
    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. Instead, the Exchange believes that the 
proposed changes 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 will impair the ability of any market participants 
or competing order execution venues to maintain their competitive 
standing in the financial markets. Further, the incentive would be 
available to all similarly situated participants, and, as such, the 
proposed change would not impose a disparate burden on competition 
either among or between classes of market participants and may, in 
fact, encourage competition.
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    \11\ 15 U.S.C. 78f(b)(8).
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    The Exchange notes that it operates in a highly competitive market 
in which market participants can readily favor competing venues. In 
such an environment, the Exchange must continually review, and consider 
adjusting, its fees and credits to remain competitive with other 
exchanges. For the reasons described above, the Exchange believes that 
the proposed rule change reflects this competitive environment.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change is effective upon filing pursuant to 
Section 19(b)(3)(A) \12\ of the Act and subparagraph (f)(2) of Rule 
19b-4\13\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 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)\14\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \14\ 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-NYSEArca-2017-26 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEArca-2017-26. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing 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-2017-26, and should 
be submitted on or before April 11, 2017.
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    \15\ 17 CFR 200.30-3(a)(12).


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    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-05501 Filed 3-20-17; 8:45 am]
 BILLING CODE 8011-01-P