82 FR 18317 - 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 73 (April 18, 2017)
Federal Register Volume 82, Issue 73 (April 18, 2017)
| Page Range | 18317-18320 | |
| FR Document | 2017-07752 |
[Federal Register Volume 82, Number 73 (Tuesday, April 18, 2017)] [Notices] [Pages 18317-18320] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-07752] ======================================================================= ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-80440; File No. SR-NYSEArca-2017-38] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending the NYSE Arca Options Fee Schedule April 12, 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 April 5, 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 April 5, 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. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to modify Lead Market Maker (``LMM'') Rights Fees (``Rights Fee'') to encourage OTP Firms acting as LMMs to add more issues to their allocation. The Exchange proposes to implement the fee change effective April 5, 2017. The LMM Rights Fee is charged ``on a per issue basis to the OTP Firm acting as LMM in the issue.'' \4\ Currently, the Exchange charges a Rights Fee on each issue in a LMM's allocation, with rates based on the Average National Daily Customer Contracts (``CADV''). The monthly Rights Fee ranges from $25 per month to $3,000 per month. Under the current Fee Schedule, the more active an issue is, the higher the Rights Fee, as set forth below: --------------------------------------------------------------------------- \4\ See Fee Schedule, Endnote 2, available here, https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf. ------------------------------------------------------------------------ Monthly Average national daily customer contracts issue fee ------------------------------------------------------------------------ 0 to 100.................................................... $25 101 to 1,000................................................ 35 1,001 to 2,000.............................................. 75 2,001 to 5,000.............................................. 200 5,001 to 15,000............................................. 750 15,001 to 100,000........................................... 1,500 Over 100,000................................................ 3,000 ------------------------------------------------------------------------ LMM Rights Fee Discount Currently, the Exchange provides an LMM Rights Fee Discount applicable to each issue in an LMM's appointment with a CADV above 5, 000 based on the amount of monthly (i) total electronic volume and/or (ii) total posted volume executed by an LMM in the Market Maker range relative to other Marker Makers appointed in that issue (the ``Discount'').\5\ This Discount was designed to incent LMMs that already transact a significant amount of business on the Exchange and trade competitively in their issues to achieve one of the Discounts as well as to incent LMMs to apply for new issue allocation. --------------------------------------------------------------------------- \5\ See Securities and Exchange Act Release No. 77885 (May 23, 2016), 81FR 33716 (May 27, 2016) (SR-NYSEArca-2016-75) (immediately effective filing that provides how the Discount is applied). The Exchange notes that total posted volume executed by an LMM refers to the total volume executed from posted liquidity. --------------------------------------------------------------------------- The Exchange proposes to modify and expand the Discount. First, the [[Page 18318]] Exchange proposes to make the Discount available to LMMs with issues in their appointment with a CADV above 2,000. The Exchange also proposes to modify the amount of the Discount available as set forth in the table below (with new text underlined and existing text to be deleted in brackets): * * * * * ------------------------------------------------------------------------ LMM ranking Discount to LMM rights fee ------------------------------------------------------------------------ 1st in total electronic volume............ 50%. 2nd in total electronic volume............ [25%] 40%. 3rd [or lower ranking] in total electronic [N/A] 30%. volume. 4th or lower ranking in total electronic N/A. volume. 1st in total posted volume................ 50%. 2nd in total posted volume................ [25%] 40%. 3rd [or lower ranking] in total posted [N/A] 30%. volume. 4th or lower ranking in total posted N/A. volume. ------------------------------------------------------------------------ Under the proposal, as with the current Discount, each month the LMM in an issue would be ranked against non-LMM Market Makers that quote and trade in that LMM's issue. For each issue, each month, if the LMM achieves the highest total electronic volume (or total posted volume) amongst all Market Makers, the LMM would continue to receive a 50% discount to its Rights Fee. In addition, as proposed, for each issue, each month, if the LMM achieves the second highest total electronic volume (or total posted volume) amongst all Market Makers, the LMM would receive a 40% discount to its Rights Fee (raised from 25%). The Exchange also proposes to introduce an additional discount of 30% for an LMM that achieves the third highest total electronic volume (or total posted volume) amongst all Market Makers. An LMM that achieves the fourth highest or lower total electronic volume (or total posted volume) would not be eligible for a Discount. The Exchange believes the proposed discounts would incent LMMs [sic] to compete against non-LMM Market Makers to reduce its own Rights Fee. For example, if one or more non-LMM Market Makers were ranked first, second, and third in (i) total electronic volume and (ii) total posted volume, the LMM would not receive a discount to its Rights Fee. However, when the LMM achieves one or both of the top volume rankings, the LMM would be eligible for a reduction. As is the case today, the Discounts would be cumulative and the same LMM would be eligible to achieve the discount for each monthly volume category.\6\ To illustrate how the cumulative discount applies, the Fee Schedule currently provides that ``if an LMM was 1st in Total Electronic Volume, and 2nd in Total Posting Volume, the LMM would achieve a 75% discount in that issue.'' To reflect the proposed rule change, the Exchange proposes to amend the current text in the Fee Schedule by replacing the LMM's ranking from 2nd to 3rd in Total Posting Volume and replacing the percentage of discount that the LMM would achieve from 75% to 80%. As proposed, the resulting text on the Fee Schedule would provide that ``For example, if an LMM was 1st in Total Electronic Volume, and 3rd in Total Posting Volume, the LMM would achieve an 80% discount in that issue.'' --------------------------------------------------------------------------- \6\ As is the case today Discount would be applied before the Exchange considered whether the LMM was eligible for the 50% discount on its aggregate Rights Fees across all issues (i.e., if the LMM traded at least 50,000 contracts CADV, of which 10,000 such contracts are in its LMM appointment). See id. See also Fee Schedule, Endnote 2, available here, https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf. --------------------------------------------------------------------------- The Exchange believes that the proposed discounts may incent LMMs that already transact a significant amount of business on the Exchange to quote and trade competitively in their issues to achieve the highest (or second or third highest) monthly ranking in total electronic volume and total posted volume. The Exchange also believes the proposed changes may generate interest in LMMs to apply for new issue allocations, which would increase not only an LMM's volume, but would also encourage liquidity on the Exchange to the benefit of all market participants. Cap on LMM Rights Fees The Exchange also currently offers a cap on the LMM Rights Fee (the ``Cap''). Specifically, the Exchange caps at 50 issues the Rights Fee it charges OTP Firms for issues with a CADV of 0 to 100 contracts (``First Tier''). The Exchange does not charge for any First Tier issues in the LMM's allocation that exceed 50 issues. The Exchange also caps at 100 issues the Rights Fee it charges for issues with a CADV of 101 to 1000 (``Second Tier''). The Exchange does not charge for any Second Tier issues in the LMM's allocation that exceed 100 issues. The Exchange proposes to modify the Cap to encourage LMMs to add issues to their appointments. Specifically, the Exchange proposes to reduce the Cap from 100 issues to 50 issues on the Rights Fee it charges OTP Firms for issues in the Second Tier. The Exchange would not charge for any Second Tier issues in the LMM's allocation that exceed 50 issues. The Exchange also proposes to cap at 50 issues the Rights Fee it charges for issues with a CADV of 1,001 to 2000 (``Third Tier''). The Exchange would not charge for any Third Tier issues in the LMM's allocation that exceed 50 issues. The practical impact of this Cap would be that the maximum LMM Rights Fee charged to an OTP Firm for issues trading in the Second Tier would be $1,750 (i.e., $35 x 50) and the maximum Rights Fee charged to an OTP Firm for issues trading in the Third Tier would be $3,750 (i.e., $75 x 50). For example, an OTP Firm acting as an LMM with 55 issues that trade in the Second Tier, and another 130 that trade in the Third Tier, would be charged an LMM Rights fee of $5,500 ($1,750 (the max charged for Second Tier issues) plus $3,750 (the max charged for Third Tier issues). The Exchange is proposing to set the Cap the [sic] Second and Third Tiers at the same amount (i.e., at 50 issues) as the First Tier, which the Exchange believes would reduce confusion and provide a commensurate benefit across the three lowest Tiers. The Exchange believes that the proposed modification to the Cap would increase interest of OTP Firms acting as LMMs in adding to their allocation issues in the First, Second, and Third Tiers. The Exchange does not believe that the proposed modification to the Cap would hinder an LMM's ability to achieve any of the existing discounts applicable to the Rights Fees; rather, to the extent that the Cap encourages an OTP Firm acting as an LMM to increase the number of issues in its allocation, the proposal may increase an LMM's chances of achieving existing discounts (i.e., to achieve the 50% discount on the Rights Fee an LMM needs to trade 10,000 electronic contracts ADV in its appointment).\7\ --------------------------------------------------------------------------- \7\ See supra note 6. --------------------------------------------------------------------------- The Exchange is not proposing any other changes to the Rights Fee at this time. 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 [[Page 18319]] discriminate between customers, issuers, brokers or dealers. --------------------------------------------------------------------------- \8\ 15 U.S.C. 78f(b). \9\ 15 U.S.C. 78f(b)(4) and (5). --------------------------------------------------------------------------- The Exchange believes the proposed modification to the Discount is reasonable, equitable and not unfairly discriminatory for a number of reasons. First, all LMMs trading issues with similar activity levels would be eligible to achieve the discount (e.g., those LMMs trading issues with a CADV of 2,001 or above). The Exchange notes that there is only one LMM per issue, and only LMMs are subject to the Rights Fee. Under the proposal, each month the LMM in an issue would be ranked against non-LMM Market Makers that quote and trade in that LMM's issue. Because the non-LMM Market Makers are not subject to the Rights Fee, the modified Discount would not disadvantage Market Makers. Instead, the proposal would operate to incent each LMM to achieve First, Second, or Third ranking in monthly volume--both total electronic and total posted--for each issue, relative to non-LMM Market Makers, to reduce its own Rights Fee. In addition, the Discount, as modified, would reduce the overhead costs of LMM firms that are most actively trading in the issues, which reduced costs would enhance the ability of LMMs to provide liquidity to the benefit of all market participants. The Exchange believes that the proposed modification to the Cap is reasonable, equitable and not unfairly discriminatory for a number of reasons. First, all LMMs trading in the First, Second and Third Tier issues would have the same incentive to add the affected issues to their allocation and would, in turn, be eligible to realize the same benefit. Second, the proposal would encourage OTP Firms acting as LMMs to add lower-volume issues to their appointments, which would provide greater opportunities for OTP Firms to achieve volume incentives on the Exchange without adding to their Rights Fees. In turn, the Cap, as modified, would reduce the overhead costs of OTP Firms that are most actively trading in the affected issues, which reduced costs would enhance the ability of LMMs to provide liquidity to the benefit of all market participants. Further, the Exchange believes that having a broader range of products available on the Exchange would benefit all market participants by increasing liquidity on the Exchange and offering more opportunities to trade. The changes to the Rights Fee Discounts and the changes to the LMM Rights Fee caps are reasonable, equitable and not unfairly discriminatory as they apply to all similarly situated LMMs. The Exchange believes it is reasonable, equitable and not unfairly discriminatory to put a cap on lower tier issues, as it is designed to encourage LMMs to apply for lower volume issues in their LMM appointment. Application of volume based discounts to rights fees in the lower tier issues would not encourage increased business on the Exchange, as there is much less competition amongst Market Makers because of the lower volumes. By providing a cap on fees as an alternative method of reducing the overhead cost of being an LMM in the lower volume issues, the Exchange has proposed an equitable and appropriate method to encourage LMMs to select lower volume issues. Additionally, applying volume based incentives for higher volume tier issues is reasonable, equitable, and not unfairly discriminatory, because it applies to issues where there is more overall competition, and encourages tighter markets and greater liquidity in the more active issues, which benefits all market participants by attracting more order flow to the Exchange. The Exchange also believes that the proposed modification [sic] to the Cap are not unfairly discriminatory because they apply solely to LMMs (non-LMMs are not subject to this Fee) and would not disadvantage Market Makers. Finally, the Exchange is subject to significant competitive forces, as described below in the Exchange's statement regarding the burden on competition. 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,\10\ 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. --------------------------------------------------------------------------- \10\ 15 U.S.C. 78f(b)(8). --------------------------------------------------------------------------- The Exchange believes that the proposal would not impose an unfair burden on competition because the proposed Rights Fees would more closely align with the economic benefit of being LMM in a given issue. Because the non-LMM Market Makers are not subject to the Rights Fee, the proposed Discount and Cap would not disadvantage Market Makers. Instead, the Discount, as modified, would operate to incentivize each LMM to achieve first, second or third ranking in monthly volume for each issue, relative to non-LMM Market Makers [sic] to reduce its own Rights Fee. The Exchange believes that this proposal would encourage LMMs to quote and trade competitively in their issues and would reduce the burden on competition among LMMs in the most actively-traded issues because LMMs that achieve the discounts would have reduced overhead. The Exchange also believes that the Cap, as modified, would not impose an unfair burden on competition because it would encourage more OTP Firms acting as LMMs to add the lower-volume issues to their allocation, which would increase liquidity and offer more trading opportunities to market participants. 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) \11\ of the Act and subparagraph (f)(2) of Rule 19b-4 \12\ thereunder, because it establishes a due, fee, or other charge imposed by the Exchange. --------------------------------------------------------------------------- \11\ 15 U.S.C. 78s(b)(3)(A). \12\ 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) \13\ of the Act to determine whether the proposed rule change should be approved or disapproved. --------------------------------------------------------------------------- \13\ 15 U.S.C. 78s(b)(2)(B). --------------------------------------------------------------------------- [[Page 18320]] 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-NYSEArca-2017-38 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-2017-38. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission's Public Reference Room, 100 F Street NE., Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be available for inspection and copying at the principal 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-2017-38, and should be submitted on or before May 9, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\14\ --------------------------------------------------------------------------- \14\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017-07752 Filed 4-17-17; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 82, No. 73 / Tuesday, April 18, 2017 / Notices 18317
Table of Contents Christopher C. Mohr; Comments Due: set forth in sections A, B, and C below,
I. Introduction
April 20, 2017. of the most significant parts of such
II. Docketed Proceeding(s) This notice will be published in the statements.
Federal Register.
A. Self-Regulatory Organization’s
I. Introduction Stacy L. Ruble, Statement of the Purpose of, and
The Commission gives notice that the Secretary. Statutory Basis for, the Proposed Rule
Postal Service filed request(s) for the [FR Doc. 2017–07774 Filed 4–17–17; 8:45 am] Change
Commission to consider matters related BILLING CODE 7710–FW–P 1. Purpose
to negotiated service agreement(s). The
request(s) may propose the addition or The Exchange proposes to modify
removal of a negotiated service Lead Market Maker (‘‘LMM’’) Rights
SECURITIES AND EXCHANGE Fees (‘‘Rights Fee’’) to encourage OTP
agreement from the market dominant or COMMISSION
the competitive product list, or the Firms acting as LMMs to add more
modification of an existing product [Release No. 34–80440; File No. SR– issues to their allocation. The Exchange
currently appearing on the market NYSEArca–2017–38] proposes to implement the fee change
dominant or the competitive product effective April 5, 2017.
Self-Regulatory Organizations; NYSE The LMM Rights Fee is charged ‘‘on
list.
Arca, Inc.; Notice of Filing and a per issue basis to the OTP Firm acting
Section II identifies the docket
Immediate Effectiveness of Proposed as LMM in the issue.’’ 4 Currently, the
number(s) associated with each Postal
Rule Change Amending the NYSE Arca Exchange charges a Rights Fee on each
Service request, the title of each Postal
Options Fee Schedule issue in a LMM’s allocation, with rates
Service request, the request’s acceptance
date, and the authority cited by the April 12, 2017.
based on the Average National Daily
Postal Service for each request. For each Customer Contracts (‘‘CADV’’). The
Pursuant to Section 19(b)(1) 1 of the
request, the Commission appoints an monthly Rights Fee ranges from $25 per
Securities Exchange Act of 1934 (the
officer of the Commission to represent month to $3,000 per month. Under the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
the interests of the general public in the current Fee Schedule, the more active
notice is hereby given that, on April 5,
proceeding, pursuant to 39 U.S.C. 505 an issue is, the higher the Rights Fee, as
2017, NYSE Arca, Inc. (the ‘‘Exchange’’
(Public Representative). Section II also set forth below:
or ‘‘NYSE Arca’’) filed with the
establishes comment deadline(s) Securities and Exchange Commission Average national daily customer Monthly
pertaining to each request. (the ‘‘Commission’’) the proposed rule contracts issue fee
The public portions of the Postal change as described in Items I, II, and
Service’s request(s) can be accessed via III below, which Items have been 0 to 100 ...................................... $25
the Commission’s Web site (http:// prepared by the self-regulatory 101 to 1,000 ............................... 35
www.prc.gov). Non-public portions of organization. The Commission is 1,001 to 2,000 ............................ 75
the Postal Service’s request(s), if any, 2,001 to 5,000 ............................ 200
publishing this notice to solicit 5,001 to 15,000 .......................... 750
can be accessed through compliance comments on the proposed rule change 15,001 to 100,000 ...................... 1,500
with the requirements of 39 CFR from interested persons. Over 100,000 .............................. 3,000
3007.40.
The Commission invites comments on I. Self-Regulatory Organization’s
Statement of the Terms of the Substance LMM Rights Fee Discount
whether the Postal Service’s request(s)
in the captioned docket(s) are consistent of the Proposed Rule Change Currently, the Exchange provides an
with the policies of title 39. For The Exchange proposes to amend the LMM Rights Fee Discount applicable to
request(s) that the Postal Service states NYSE Arca Options Fee Schedule (‘‘Fee each issue in an LMM’s appointment
concern market dominant product(s), Schedule’’). The Exchange proposes to with a CADV above 5, 000 based on the
applicable statutory and regulatory implement the fee change effective amount of monthly (i) total electronic
requirements include 39 U.S.C. 3622, 39 April 5, 2017. The proposed rule change volume and/or (ii) total posted volume
U.S.C. 3642, 39 CFR part 3010, and 39 is available on the Exchange’s Web site executed by an LMM in the Market
CFR part 3020, subpart B. For request(s) at www.nyse.com, at the principal office Maker range relative to other Marker
that the Postal Service states concern of the Exchange, and at the Makers appointed in that issue (the
competitive product(s), applicable Commission’s Public Reference Room. ‘‘Discount’’).5 This Discount was
statutory and regulatory requirements designed to incent LMMs that already
include 39 U.S.C. 3632, 39 U.S.C. 3633, II. Self-Regulatory Organization’s transact a significant amount of business
39 U.S.C. 3642, 39 CFR part 3015, and Statement of the Purpose of, and on the Exchange and trade
39 CFR part 3020, subpart B. Comment Statutory Basis for, the Proposed Rule competitively in their issues to achieve
deadline(s) for each request appear in Change one of the Discounts as well as to incent
section II. In its filing with the Commission, the LMMs to apply for new issue allocation.
self-regulatory organization included The Exchange proposes to modify and
II. Docketed Proceeding(s) expand the Discount. First, the
statements concerning the purpose of,
1. Docket No(s).: CP2017–163; Filing and basis for, the proposed rule change
Title: Notice of United States Postal and discussed any comments it received
4 See Fee Schedule, Endnote 2, available here,
Service of Filing a Functionally https://www.nyse.com/publicdocs/nyse/markets/
sradovich on DSK3GMQ082PROD with NOTICES
on the proposed rule change. The text arca-options/NYSE_Arca_Options_Fee_
Equivalent Global Expedited Package of those statements may be examined at Schedule.pdf.
Services 3 Negotiated Service the places specified in Item IV below. 5 See Securities and Exchange Act Release No.
Agreement and Application for Non- The Exchange has prepared summaries, 77885 (May 23, 2016), 81FR 33716 (May 27, 2016)
Public Treatment of Materials Filed (SR–NYSEArca–2016–75) (immediately effective
filing that provides how the Discount is applied).
Under Seal; Filing Acceptance Date: 1 15 U.S.C. 78s(b)(1). The Exchange notes that total posted volume
April 12, 2017; Filing Authority: 39 CFR 2 15 U.S.C. 78a. executed by an LMM refers to the total volume
3015.5; Public Representative: 3 17 CFR 240.19b–4. executed from posted liquidity.
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![18318 Federal Register / Vol. 82, No. 73 / Tuesday, April 18, 2017 / Notices
Exchange proposes to make the category.6 To illustrate how the issues in the LMM’s allocation that
Discount available to LMMs with issues cumulative discount applies, the Fee exceed 50 issues. The Exchange also
in their appointment with a CADV Schedule currently provides that ‘‘if an proposes to cap at 50 issues the Rights
above 2,000. The Exchange also LMM was 1st in Total Electronic Fee it charges for issues with a CADV
proposes to modify the amount of the Volume, and 2nd in Total Posting of 1,001 to 2000 (‘‘Third Tier’’). The
Discount available as set forth in the Volume, the LMM would achieve a 75% Exchange would not charge for any
table below (with new text underlined discount in that issue.’’ To reflect the Third Tier issues in the LMM’s
and existing text to be deleted in proposed rule change, the Exchange allocation that exceed 50 issues. The
brackets): proposes to amend the current text in practical impact of this Cap would be
* * * * * the Fee Schedule by replacing the that the maximum LMM Rights Fee
LMM’s ranking from 2nd to 3rd in Total charged to an OTP Firm for issues
Discount to Posting Volume and replacing the trading in the Second Tier would be
LMM ranking LMM rights percentage of discount that the LMM $1,750 (i.e., $35 × 50) and the maximum
fee would achieve from 75% to 80%. As Rights Fee charged to an OTP Firm for
proposed, the resulting text on the Fee issues trading in the Third Tier would
1st in total electronic volume ... 50%. Schedule would provide that ‘‘For be $3,750 (i.e., $75 × 50). For example,
2nd in total electronic volume .. [25%] 40%. example, if an LMM was 1st in Total
3rd [or lower ranking] in total [N/A] 30%.
an OTP Firm acting as an LMM with 55
Electronic Volume, and 3rd in Total issues that trade in the Second Tier, and
electronic volume.
4th or lower ranking in total N/A.
Posting Volume, the LMM would another 130 that trade in the Third Tier,
electronic volume. achieve an 80% discount in that issue.’’ would be charged an LMM Rights fee of
1st in total posted volume ....... 50%. The Exchange believes that the $5,500 ($1,750 (the max charged for
2nd in total posted volume ...... [25%] 40%. proposed discounts may incent LMMs Second Tier issues) plus $3,750 (the
3rd [or lower ranking] in total [N/A] 30%. that already transact a significant max charged for Third Tier issues).
posted volume. amount of business on the Exchange to The Exchange is proposing to set the
4th or lower ranking in total N/A. quote and trade competitively in their Cap the [sic] Second and Third Tiers at
posted volume. issues to achieve the highest (or second the same amount (i.e., at 50 issues) as
or third highest) monthly ranking in the First Tier, which the Exchange
Under the proposal, as with the total electronic volume and total posted believes would reduce confusion and
current Discount, each month the LMM volume. The Exchange also believes the provide a commensurate benefit across
in an issue would be ranked against proposed changes may generate interest
the three lowest Tiers. The Exchange
non-LMM Market Makers that quote and in LMMs to apply for new issue
believes that the proposed modification
trade in that LMM’s issue. For each allocations, which would increase not
to the Cap would increase interest of
issue, each month, if the LMM achieves only an LMM’s volume, but would also
OTP Firms acting as LMMs in adding to
the highest total electronic volume (or encourage liquidity on the Exchange to
their allocation issues in the First,
total posted volume) amongst all Market the benefit of all market participants.
Second, and Third Tiers.
Makers, the LMM would continue to Cap on LMM Rights Fees The Exchange does not believe that
receive a 50% discount to its Rights Fee. The Exchange also currently offers a the proposed modification to the Cap
In addition, as proposed, for each issue, cap on the LMM Rights Fee (the ‘‘Cap’’). would hinder an LMM’s ability to
each month, if the LMM achieves the Specifically, the Exchange caps at 50 achieve any of the existing discounts
second highest total electronic volume issues the Rights Fee it charges OTP applicable to the Rights Fees; rather, to
(or total posted volume) amongst all Firms for issues with a CADV of 0 to the extent that the Cap encourages an
Market Makers, the LMM would receive 100 contracts (‘‘First Tier’’). The OTP Firm acting as an LMM to increase
a 40% discount to its Rights Fee (raised Exchange does not charge for any First the number of issues in its allocation,
from 25%). The Exchange also proposes Tier issues in the LMM’s allocation that the proposal may increase an LMM’s
to introduce an additional discount of exceed 50 issues. The Exchange also chances of achieving existing discounts
30% for an LMM that achieves the third caps at 100 issues the Rights Fee it (i.e., to achieve the 50% discount on the
highest total electronic volume (or total charges for issues with a CADV of 101 Rights Fee an LMM needs to trade
posted volume) amongst all Market to 1000 (‘‘Second Tier’’). The Exchange 10,000 electronic contracts ADV in its
Makers. An LMM that achieves the does not charge for any Second Tier appointment).7
fourth highest or lower total electronic issues in the LMM’s allocation that The Exchange is not proposing any
volume (or total posted volume) would exceed 100 issues. other changes to the Rights Fee at this
not be eligible for a Discount. The The Exchange proposes to modify the time.
Exchange believes the proposed Cap to encourage LMMs to add issues to
discounts would incent LMMs [sic] to their appointments. Specifically, the 2. Statutory Basis
compete against non-LMM Market Exchange proposes to reduce the Cap The Exchange believes that the
Makers to reduce its own Rights Fee. from 100 issues to 50 issues on the proposed rule change is consistent with
For example, if one or more non-LMM Rights Fee it charges OTP Firms for Section 6(b) of the Act,8 in general, and
Market Makers were ranked first, issues in the Second Tier. The Exchange furthers the objectives of Sections
second, and third in (i) total electronic would not charge for any Second Tier 6(b)(4) and (5) of the Act,9 in particular,
volume and (ii) total posted volume, the because it provides for the equitable
LMM would not receive a discount to its 6 As is the case today Discount would be applied
sradovich on DSK3GMQ082PROD with NOTICES
allocation of reasonable dues, fees, and
Rights Fee. However, when the LMM before the Exchange considered whether the LMM
other charges among its members,
achieves one or both of the top volume was eligible for the 50% discount on its aggregate
Rights Fees across all issues (i.e., if the LMM traded issuers and other persons using its
rankings, the LMM would be eligible for at least 50,000 contracts CADV, of which 10,000 facilities and does not unfairly
a reduction. As is the case today, the such contracts are in its LMM appointment). See id.
Discounts would be cumulative and the See also Fee Schedule, Endnote 2, available here,
7 See supra note 6.
https://www.nyse.com/publicdocs/nyse/markets/
same LMM would be eligible to achieve arca-options/NYSE_Arca_Options_Fee_ 8 15 U.S.C. 78f(b).
the discount for each monthly volume Schedule.pdf. 9 15 U.S.C. 78f(b)(4) and (5).
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![Federal Register / Vol. 82, No. 73 / Tuesday, April 18, 2017 / Notices 18319
discriminate between customers, believes it is reasonable, equitable and Exchange believes that this proposal
issuers, brokers or dealers. not unfairly discriminatory to put a cap would encourage LMMs to quote and
The Exchange believes the proposed on lower tier issues, as it is designed to trade competitively in their issues and
modification to the Discount is encourage LMMs to apply for lower would reduce the burden on
reasonable, equitable and not unfairly volume issues in their LMM competition among LMMs in the most
discriminatory for a number of reasons. appointment. Application of volume actively-traded issues because LMMs
First, all LMMs trading issues with based discounts to rights fees in the that achieve the discounts would have
similar activity levels would be eligible lower tier issues would not encourage reduced overhead.
to achieve the discount (e.g., those increased business on the Exchange, as The Exchange also believes that the
LMMs trading issues with a CADV of there is much less competition amongst Cap, as modified, would not impose an
2,001 or above). The Exchange notes Market Makers because of the lower unfair burden on competition because it
that there is only one LMM per issue, volumes. By providing a cap on fees as would encourage more OTP Firms
and only LMMs are subject to the Rights an alternative method of reducing the acting as LMMs to add the lower-
Fee. Under the proposal, each month overhead cost of being an LMM in the volume issues to their allocation, which
the LMM in an issue would be ranked lower volume issues, the Exchange has would increase liquidity and offer more
against non-LMM Market Makers that proposed an equitable and appropriate trading opportunities to market
quote and trade in that LMM’s issue. method to encourage LMMs to select participants.
Because the non-LMM Market Makers lower volume issues.
are not subject to the Rights Fee, the Additionally, applying volume based The Exchange notes that it operates in
modified Discount would not incentives for higher volume tier issues a highly competitive market in which
disadvantage Market Makers. Instead, is reasonable, equitable, and not market participants can readily favor
the proposal would operate to incent unfairly discriminatory, because it competing venues. In such an
each LMM to achieve First, Second, or applies to issues where there is more environment, the Exchange must
Third ranking in monthly volume—both overall competition, and encourages continually review, and consider
total electronic and total posted—for tighter markets and greater liquidity in adjusting, its fees and credits to remain
each issue, relative to non-LMM Market the more active issues, which benefits competitive with other exchanges. For
Makers, to reduce its own Rights Fee. In all market participants by attracting the reasons described above, the
addition, the Discount, as modified, more order flow to the Exchange. Exchange believes that the proposed
would reduce the overhead costs of The Exchange also believes that the rule change reflects this competitive
LMM firms that are most actively proposed modification [sic] to the Cap environment.
trading in the issues, which reduced are not unfairly discriminatory because C. Self-Regulatory Organization’s
costs would enhance the ability of they apply solely to LMMs (non-LMMs Statement on Comments on the
LMMs to provide liquidity to the benefit are not subject to this Fee) and would Proposed Rule Change Received From
of all market participants. not disadvantage Market Makers.
The Exchange believes that the Members, Participants, or Others
Finally, the Exchange is subject to
proposed modification to the Cap is significant competitive forces, as No written comments were solicited
reasonable, equitable and not unfairly described below in the Exchange’s or received with respect to the proposed
discriminatory for a number of reasons. statement regarding the burden on rule change.
First, all LMMs trading in the First, competition.
Second and Third Tier issues would For these reasons, the Exchange III. Date of Effectiveness of the
have the same incentive to add the believes that the proposal is consistent Proposed Rule Change and Timing for
affected issues to their allocation and with the Act. Commission Action
would, in turn, be eligible to realize the
same benefit. Second, the proposal B. Self-Regulatory Organization’s The foregoing rule change is effective
would encourage OTP Firms acting as Statement on Burden on Competition upon filing pursuant to Section
LMMs to add lower-volume issues to In accordance with Section 6(b)(8) of 19(b)(3)(A) 11 of the Act and
their appointments, which would the Act,10 the Exchange does not believe subparagraph (f)(2) of Rule 19b–4 12
provide greater opportunities for OTP that the proposed rule change would thereunder, because it establishes a due,
Firms to achieve volume incentives on impose any burden on competition that fee, or other charge imposed by the
the Exchange without adding to their is not necessary or appropriate in Exchange.
Rights Fees. In turn, the Cap, as furtherance of the purposes of the Act. At any time within 60 days of the
modified, would reduce the overhead The Exchange believes that the filing of such proposed rule change, the
costs of OTP Firms that are most proposal would not impose an unfair Commission summarily may
actively trading in the affected issues, burden on competition because the temporarily suspend such rule change if
which reduced costs would enhance the proposed Rights Fees would more it appears to the Commission that such
ability of LMMs to provide liquidity to closely align with the economic benefit action is necessary or appropriate in the
the benefit of all market participants. of being LMM in a given issue. Because public interest, for the protection of
Further, the Exchange believes that the non-LMM Market Makers are not investors, or otherwise in furtherance of
having a broader range of products subject to the Rights Fee, the proposed the purposes of the Act. If the
available on the Exchange would benefit Discount and Cap would not Commission takes such action, the
all market participants by increasing disadvantage Market Makers. Instead, Commission shall institute proceedings
sradovich on DSK3GMQ082PROD with NOTICES
liquidity on the Exchange and offering the Discount, as modified, would under Section 19(b)(2)(B) 13 of the Act to
more opportunities to trade. operate to incentivize each LMM to determine whether the proposed rule
The changes to the Rights Fee achieve first, second or third ranking in change should be approved or
Discounts and the changes to the LMM monthly volume for each issue, relative disapproved.
Rights Fee caps are reasonable, to non-LMM Market Makers [sic] to
equitable and not unfairly reduce its own Rights Fee. The 11 15 U.S.C. 78s(b)(3)(A).
discriminatory as they apply to all 12 17 CFR 240.19b–4(f)(2).
similarly situated LMMs. The Exchange 10 15 U.S.C. 78f(b)(8). 13 15 U.S.C. 78s(b)(2)(B).
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![18320 Federal Register / Vol. 82, No. 73 / Tuesday, April 18, 2017 / Notices
IV. Solicitation of Comments For the Commission, by the Division of determine (and announce to the Trading
Trading and Markets, pursuant to delegated Permit Holders via Regulatory Circular)
Interested persons are invited to authority.14 which of the following price check
submit written data, views, and Eduardo A. Aleman, parameters will apply to eligible
arguments concerning the foregoing, Assistant Secretary. complex orders. Paragraph (b) will not
including whether the proposed rule [FR Doc. 2017–07752 Filed 4–17–17; 8:45 am] be applicable to stock-option orders.
change is consistent with the Act. BILLING CODE 8011–01–P For purposes of this Interpretation
Comments may be submitted by any of and Policy .08:
the following methods: Vertical Spread. A ‘‘vertical’’ spread
SECURITIES AND EXCHANGE is a two-legged complex order with one
Electronic Comments COMMISSION leg to buy a number of calls (puts) and
• Use the Commission’s Internet one leg to sell the same number of calls
[Release No. 34–80439; File No. SR–CBOE–
comment form (http://www.sec.gov/ 2017–031]
(puts) with the same expiration date but
different exercise prices.
rules/sro.shtml); or
Self-Regulatory Organizations; Butterfly Spread. A ‘‘butterfly’’ spread
• Send an email to rule-comments@ Chicago Board Options Exchange, is a three-legged complex order with
sec.gov. Please include File Number SR– Incorporated; Notice of Filing and two legs to buy (sell) the same number
NYSEArca–2017–38 on the subject line. Immediate Effectiveness of a Proposed of calls (puts) and one leg to sell (buy)
Rule Change Relating to Complex twice as many calls (puts), all with the
Paper Comments
Order Price Protections same expiration date but different
• Send paper comments in triplicate exercise prices, and the exercise price of
April 12, 2017. the middle leg is between the exercise
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street Pursuant to Section 19(b)(1) of the prices of the other legs. If the exercise
NE., Washington, DC 20549–1090. Securities Exchange Act of 1934 (the price of the middle leg is halfway
‘‘Act’’),1 and Rule 19b–4 thereunder,2 between the exercise prices of the other
All submissions should refer to File notice is hereby given that on April 5, legs, it is a ‘‘true’’ butterfly; otherwise,
Number SR–NYSEArca–2017–38. This 2017, Chicago Board Options Exchange, it is a ‘‘skewed’’ butterfly.
file number should be included on the Incorporated (the ‘‘Exchange’’ or Box Spread. A ‘‘box’’ spread is a four-
subject line if email is used. To help the ‘‘CBOE’’) filed with the Securities and legged complex order with one leg to
Commission process and review your Exchange Commission (the buy calls and one leg to sell puts with
comments more efficiently, please use ‘‘Commission’’) the proposed rule one strike price, and one leg to sell calls
only one method. The Commission will change as described in Items I and II and one leg to buy puts with another
post all comments on the Commission’s below, which Items have been prepared strike price, all of which have the same
Internet Web site (http://www.sec.gov/ by the Exchange. The Exchange filed the expiration date and are for the same
rules/sro.shtml). Copies of the proposal pursuant to Section number of contracts.
submission, all subsequent 19(b)(3)(A)(iii) of the Act 3 and Rule To the extent a price check parameter
19b–4(f)(6) thereunder.4 The is applicable, the Exchange will not
amendments, all written statements
Commission is publishing this notice to automatically execute an eligible
with respect to the proposed rule
solicit comments on the proposed rule complex order that is:
change that are filed with the (a)–(b) No change.
change from interested persons.
Commission, and all written (c) Debit/Credit Price Reasonability
communications relating to the I. Self-Regulatory Organization’s Checks:
proposed rule change between the Statement of the Terms of Substance of (1)–(5) No change.
Commission and any person, other than the Proposed Rule Change (6) This check does not apply to
those that may be withheld from the The Exchange proposes to amend multi-class spreads or to orders routed
public in accordance with the current price protections related to from a PAR workstation or order
provisions of 5 U.S.C. 552, will be complex orders. The text of the management terminal.
available for Web site viewing and proposed rule change is provided below (d) No change.
printing in the Commission’s Public (additions are italicized; deletions are (e) Acceptable Percentage Range
Reference Room, 100 F Street NE., [bracketed]). Parameter:
Washington, DC 20549 on official (i) An incoming complex order
* * * * * (including a stock-option order) after the
business days between the hours of
Chicago Board Options Exchange, series for all legs of the complex order
10:00 a.m. and 3:00 p.m. Copies of such
Incorporated Rules are open for trading that is marketable
filing also will be available for
and would execute immediately upon
inspection and copying at the principal * * * * *
submission to the COB or following a
office of the Exchange. All comments Rule 6.53C. Complex Orders on the COA if the execution would be at a
received will be posted without change; Hybrid System price outside an acceptable percentage
the Commission does not edit personal range. The ‘‘acceptable percentage
identifying information from (a)–(d) No change.
. . . Interpretations and Policies: range’’ is the national spread market (or
submissions. You should submit only Exchange spread market if the NBBO in
information that you wish to make .01–.07 No change.
sradovich on DSK3GMQ082PROD with NOTICES
.08 Price Check Parameters: On a any leg is locked, crossed or unavailable
available publicly. All submissions and for pairs of orders submitted to AIM
class-by-class basis, the Exchange may
should refer to File Number SR– or SAM) that existed when the System
NYSEArca–2017–38, and should be 14 17 CFR 200.30–3(a)(12). received the order or at the start of the
submitted on or before May 9, 2017. 1 15 U.S.C. 78s(b)(1). COA, as applicable, plus/minus:
2 17 CFR 240.19b–4. (A) the amount equal to a percentage
3 15 U.S.C. 78s(b)(3)(A)(iii). (which may not be less than %) of the
4 17 CFR 240.19b–4(f)(6). national spread market (the ‘‘percentage
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Document Created: 2017-04-18 00:00:32
Document Modified: 2017-04-18 00:00:32
| 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 | 82 FR 18317 |
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