82 FR 14779 - Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and Immediate Effectiveness of Proposed Change Modifying the NYSE Amex Options Fee Schedule

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 54 (March 22, 2017)

[Federal Register Volume 82, Number 54 (Wednesday, March 22, 2017)]
[Notices]
[Pages 14779-14781]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-05607]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80262; File No. SR-NYSEMKT-2017-15]


Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Change Modifying the NYSE Amex 
Options Fee Schedule

March 16, 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 9, 2017, NYSE MKT LLC (the ``Exchange'' or ``NYSE 
MKT'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, 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 modify the NYSE Amex Options Fee Schedule 
(``Fee Schedule''). The Exchange proposes to implement the fee change 
effective March 9, 2017. The proposed 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 modify the Fee Schedule to:
    (i) Provide Order Flow Providers (each an ``OFP'') that achieve 
certain tiers of the Amex Customer Enhancement (``ACE'') Program the 
opportunity to receive an additional credit for Customer Complex 
Orders; and
    (ii) establish a surcharge on any Electronic non-Customer Complex 
Order that executes against a Customer Complex Order.
    The ACE Program features five tiers, expressed as a percentage of 
total industry Customer equity and Exchange Traded Fund option average 
daily volume (``TCADV'') \4\ and provides two alternative methods for 
OFPs to receive per contract credits for Electronic Customer volume 
that the OFP, as agent, submits to the Exchange.\5\ Currently, the 
Exchange incents OFPs to achieve Tier 2 of the ACE Program by offering 
an $0.18 per contract credit on Electronic Customer volume or a 
slightly higher credit of $0.19 per contract on Customer Complex 
Orders.\6\
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    \4\ The volume thresholds are based on an OFP's Customer volume 
transacted Electronically as a percentage of total industry TCADV as 
reported by the Options Clearing Corporation (the ``OCC''). See OCC 
Monthly Statistics Reports, available here, http://www.theocc.com/webapps/monthly-volume-reports.
    \5\ See Fee Schedule, Section I. E. (Amex Customer Engagement 
(``ACE'') Program--Standard Options), available here, https://www.nyse.com/publicdocs/nyse/markets/amex-options/NYSE_Amex_Options_Fee_Schedule.pdf.
    \6\ See id. at n.1. The Exchange proposes to correct a 
typographical error by capitalizing the defined term Electronic as 
it is used in note 1 to Section I.E. See proposed Fee Schedule, 
Section I. E., n. 1.
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    The Exchange proposes to offer OFPs that achieve Tier 4 or 5 of the 
ACE Program a credit of $0.25 per contract, per leg for Electronic 
executions of

[[Page 14780]]

Customer Complex Orders, provided the OFP executes more than 0.50% of 
TCADV in initiating CUBE Orders in a calendar month (the ``Credit''). 
The Credit would be paid regardless of whether the Complex Order trades 
against interest in the Complex Order Book or ``legs out'' and trades 
with individual orders and quotes in the Consolidated Book. An OFP that 
achieves Tier 4 or 5 would remain eligible to receive the applicable 
per contract credit on Electronic Customer volume, which range from 
$0.20-$0.24, but would be eligible to receive the slightly higher per 
contract credit of $0.25 for its Complex Customer volume provided the 
OFP meets the criteria for the Credit. For example, an OFP that 
achieved Tier 4 and also met the criteria for the Credit would receive 
at least $0.20 per contract for non-Complex Electronic Customer volume 
and $0.25 per contract for Electronic Complex Customer volume.
    The Exchange also proposes to establish a $0.05 surcharge on any 
Electronic Non-Customer Complex Order that executes against a Customer 
Complex Order (the ``Surcharge).\7\ The Surcharge would apply to all 
such Complex executions, including Complex Orders executed in the 
Exchange's single-sided Complex Order Auction (``COA''). The CUBE 
Auction is not available for Complex Orders and therefore the proposed 
Surcharge would not apply to executions in a CUBE Auction.\8\ The 
Exchange notes that the proposed Surcharge is consistent with charges 
imposed by other options exchanges.\9\
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    \7\ See proposed Fee Schedule, at Section I. A., n.6. Per the 
Fee Schedule, a ``Customer'' is an individual or organization that 
is not a Broker-Dealer, per Rule 900.2NY(18); and is not a 
Professional Customer; and a ``Non-Customer'' is anyone who is not a 
Customer. See Fee Schedule, ``Key Terms and Definitions,'' supra 
note 5. Thus, Non-Customer includes Specialists, e-Specialists, 
Directed Order Market Makers, Firms, Broker Dealers, and 
Professional Customers. The Exchange notes that Firm Facilitation 
trades are not electronic and are therefore not subject to the 
proposed surcharge.
    \8\ See Rule 971.1NY (Electronic Cross Transactions) for a 
description of the CUBE Auction, which is an electronic crossing 
mechanism for single-leg orders with a price improvement auction.
    \9\ See Miami Securities International Exchange, LLC (``MIAX'') 
fee schedule, available here, https://www.miaxoptions.com/sites/default/files/page-files/MIAX_Options_Fee_Schedule_03012017B.pdf 
(imposing a $0.10 on certain complex orders). See also The Chicago 
Board Options Exchange, Inc. (``CBOE'') fee schedule, available 
here, http://www.cboe.com/publish/feeschedule/CBOEFeeSchedule.pdf, 
at n. 35 (same).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\10\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\11\ 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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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed Credit on Complex Orders is 
reasonable, equitable, and not unfairly discriminatory, as it provides 
OFPs with an additional incentive to achieve the highest two tiers of 
the ACE Program--Tier 4 or 5. The Exchange believes that incentivizing 
OFPs to route orders to the Exchange would attract more volume and 
liquidity to the Exchange, which benefits all market participants by 
providing more trading opportunities and tighter spreads, even to those 
market participants that do not participate in the ACE Program.
    The Exchange believes that the proposed Surcharge is reasonable, 
equitable, and not unfairly discriminatory, as it applies to all Non-
Customer orders. Applying the Surcharge to all market participant 
orders except Customer orders is equitable and not unfairly 
discriminatory because Customer order flow enhances liquidity on the 
Exchange for the benefit of all market participants. Specifically, 
Customer liquidity benefits all market participants by providing more 
trading opportunities, which attracts Market Makers. An increase in the 
activity of Specialists and Market Makers in turn facilitates tighter 
spreads, which may cause an additional corresponding increase in order 
flow from other market participants.
    In addition, the proposed surcharge is reasonable, equitable, and 
not unfairly discriminatory as it is consistent with fees charged by 
other options exchanges.\12\
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    \12\ See supra note 9.
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    Specifically, MIAX imposes a $0.10 ``Per Contract Surcharge for 
Removing Liquidity Against A Resting Priority Customer Complex Order on 
the Strategy Book'' for all option classes), which may result in an 
overall per contract fee of $0.60.\13\ Similarly, CBOE imposes a $0.10 
``Complex Surcharge'' on certain ``noncustomer complex order executions 
that remove liquidity,'' but caps at $0.50 per contract ``auction 
responses in COA.'' \14\ The Exchange notes that the proposed Surcharge 
of $0.05 per contract is $0.05 less than--or half the amount of--the 
surcharges imposed on both MIAX and CBOE, and is therefore competitive. 
In addition, the Exchange believes that the proposed surcharge is not 
new or novel as it incorporates aspects of the (higher) surcharges that 
are already imposed on MIAX and CBOE.
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    \13\ See MIAX fee schedule, supra note 9 (providing for a 
potential total per contract fee of $0.60 for Market Makers, which 
includes a ``Complex Per Contract Fee for Penny Classes,'' a per 
contract ``Marketing Fee,'' and a $0.10 ``Per Contract Surcharge for 
Removing Liquidity Against a Resting Priority Customer Complex Order 
on the Strategy Book for Penny and Non-Penny Classes''). The 
Exchange believes that MIAX does not subject transactions in COA to 
any fee cap.
    \14\ See CBOE fee schedule, supra note 8 (regarding the Complex 
Surcharge, providing that ``[a]uction responses in COA and AIM for 
noncustomer complex orders in Penny classes will be subject to a cap 
of $0.50 per contract, which includes the applicable transaction 
fee, Complex Surcharge and Marketing Fee (if applicable)).''
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    Further, the proposed change to capitalize the defined term 
Electronic, would add clarity and internal consistency to the Fee 
Schedule by correcting a typographical error.
    Finally, the Exchange believes the proposed changes are consistent 
with the Act because, to the extent the modifications permit the 
Exchange to continue to attract greater volume and liquidity, the 
proposed changes would improve the Exchange's overall competitiveness 
and strengthen its market quality for all market participants.
    For these reasons, the Exchange believes that the proposal is 
consistent with the Act.

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

    In accordance with Section 6(b)(8) of the Act,\15\ the Exchange 
does not believe that the proposed rule change would impose any burden 
on competition that is not necessary or appropriate in furtherance of 
the purposes of the Act. The Exchange believes the proposed Credit is 
pro-competitive as it would incent OFPs to direct Complex Order flow to 
the Exchange, and thus provide additional liquidity that enhances the 
overall market quality and increases the volume of contracts traded on 
the Exchange. The proposed Surcharge would not impose an unfair burden 
on competition as it is consistent with fees charged by other 
exchanges.\16\ To the extent that the proposed changes make NYSE Amex a 
more attractive marketplace for market participants at other exchanges, 
such market

[[Page 14781]]

participants are welcome to become NYSE Amex Options ATP Holders.
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    \15\ 15 U.S.C. 78f(b)(8).
    \16\ See supra notes 9, 13, 14.
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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. 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.

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) \17\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \18\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 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) \19\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \19\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NYSEMKT-2017-15 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSEMKT-2017-15. 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-NYSEMKT-2017-15, and should 
be submitted on or before April 12, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-05607 Filed 3-21-17; 8:45 am]
 BILLING CODE 8011-01-P