83 FR 31436 - Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify the NYSE Arca Options Fee Schedule

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 129 (July 5, 2018)

[Federal Register Volume 83, Number 129 (Thursday, July 5, 2018)]
[Notices]
[Pages 31436-31438]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-14363]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83554; File No. SR-NYSEArca-2018-49]


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

June 28, 2018.
    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 June 27, 2018, 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 modify the NYSE Arca Options Fee Schedule 
(``Fee Schedule''). The Exchange proposes to implement the fee change 
effective June 27, 2018. The proposed rule change is available on the 
Exchange's website 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, effective 
27, 2018, to introduce fees for the newly listed options on the NYSE 
FANG+ Index (``NYSE FANG+''), which will trade under the symbol FAANG.
    The Exchange proposes that for fee purposes transactions in FAANG 
options would not be treated as adding or removing liquidity, but 
rather that all transactions, both manual and electronic, be charged by 
account status.
    As proposed, the Exchange would charge $0.35 per contract, per side 
for non-Customer and Professional Customer NYSE FANG+ transactions, 
whether executed manually or electronically.\4\ However, the Exchange 
would not charge a fee for any FAANG transactions (i) on behalf of 
Customers or (ii) by Market Makers with an appointment in NYSE 
FANG+.\5\ Market Makers that do not have an appointment in NYSE FANG+ 
will be subject to the same fee of $0.35 per contract, per side for 
non-Customer and Professional Customer NYSE FANG+ transactions. 
Further, the Exchange would not impose the Lead Market Maker Rights 
Fees upon allocation in options on NYSE FANG+.\6\ The Exchange notes 
that volume in NYSE FANG+ would be included in calculations to qualify 
for any volume-based incentives currently being offered on the 
Exchange, including (but not limited to) the Non-Customer, Non-Penny 
Pilot Posting Tiers (as applicable) and the Firm and Broker Dealer 
Monthly Fee Cap.\7\
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    \4\ See proposed Fee Schedule, NYSE FANG+ Index (FAANG) 
Transaction Fees.
    \5\ See id. The term Market Maker, as used herein, includes NYSE 
Arca Options Market Makers and Lead Market Makers (or LMMs).
    \6\ See proposed Fee Schedule, Endnote 2 (providing that ``[t]he 
Lead Market Maker Rights Fee does not apply to options on the NYSE 
FANG+ Index (FAANG)'').
    \7\ See proposed Fee Schedule, Endnote 8 (providing that ``[a]ny 
volume in options on NYSE FANG+ (FAANG) would be included in 
calculations to qualify for any volume-based incentives currently 
being offered on the Exchange'').
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    The Exchange believes the proposed fees for NYSE FANG+ would 
further the Exchange's goal of introducing new products to the 
marketplace by encouraging trading in this index, in particular by 
encouraging Market Makers to make a market in these products, which 
would in turn, benefit market participants.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act, in general, and furthers the objectives 
of Sections 6(b)(4) and (5) of the Act, in particular, because it 
provides for the equitable allocation of reasonable dues, fees, and

[[Page 31437]]

other charges among its members, issuers and other persons using its 
facilities and does not unfairly discriminate between customers, 
issuers, brokers or dealers.
    The Exchange believes the proposal to implement fees for options on 
NYSE FANG+ is reasonable, equitable and not unfairly discriminatory for 
the following reasons. The Exchange believes the proposed fees, which 
apply equally to electronic and manual (open outcry) transactions, on 
behalf of non-Customers and Professional Customers, on the one hand, 
and Customers, on the other hand, to be reasonable and equitable 
because the proposed differentiation among market participants for NYSE 
FANG+ fees is consistent with the manner in which the Exchange 
distinguishes among market participants for fee purposes in other 
contexts.\8\ The Exchange believes that not imposing fees for NYSE 
FANG+ transactions on behalf of Customers is likewise reasonable, 
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 Market Makers in turn 
facilitates tighter spreads, which may cause an additional 
corresponding increase in order flow from other market participants.
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    \8\ See, e.g., Fee Schedule, TRANSACTION FEE FOR MANUAL 
EXECUTIONS--PER CONTRACT (providing that non-Customers (i.e., NYSE 
Arca Options Market Makers, Firms and Broker Dealers) and 
Professional Customers are charged a total $0.25 per contract for 
manual executions, while Customers are charged $0.00 per contract 
for manual executions).
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    The Exchange believes that applying the same fee on all non-
Customer and Professional Customer NYSE FANG+ option transactions, 
other than those by Market Makers with an appointment in NYSE FANG+, is 
non-discriminatory because it applies to all similarly situated 
participants on an equal basis that opt to trade the product. Moreover, 
the decision to transact in NYSE FANG+ (or, for Market Makers, to seek 
an appointment) is voluntary. The Exchange believes that allowing 
Market Makers with an appointment in NYSE FANG+ to transact in the 
product free of charge is not unfairly discriminatory because Market 
Makers have heightened obligations that are not applicable to other 
non-Customer and Professional Customer market participants.\9\ It is 
also non-discriminatory because all Market Makers may apply for an 
appointment in NYSE FANG+ options. Further, encouraging Market Makers 
to seek an appointment in, and thus provide continuous quotes in, NYSE 
FANG+ would add liquidity to the market and provide market 
participants--both Customer and non-Customer alike--increased 
opportunities to trade options on NYSE FANG+. The Exchange believes 
that exempting transactions in NYSE FANG+ from the monthly Rights Fees 
would likewise encourage trading in NYSE FANG+ options, which increase 
in the availability of such options would benefit all market 
participants.
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    \9\ See, e.g., Rules 6.82-O, 6.37A-O, 6.37B-O (setting forth 
heightened quoting obligations).
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    Further, the proposal to include any volume in NYSE FANG+ in the 
calculations to qualify for any volume-based incentives offered on the 
Exchange would further the Exchange's goal of introducing new products 
to the marketplace by encouraging trading in these products. To the 
extent that the proposed change incentivizes any market participants to 
direct their order flow to the Exchange, all market participants would 
benefit from increased liquidity and trading opportunities on the 
Exchange. Finally, the Exchange notes that offering market participants 
incentives to trade in certain newly offered products is not new or 
novel.\10\
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    \10\ See, e.g., Securities Exchange Act Release No. 77294 (March 
4, 2016), 81 FR 12775 (March 10, 2016) (SR-NYSEArca-2016-40) 
(addressing the treatment of Binary Return Derivatives--or ByRDs--
and exempting such transactions from all Exchange fees to encourage 
trading in the product).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act, 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 transaction 
fees for NYSE FANG+ would not place an unfair burden on competition as 
it would apply to all similarly situated non-Customer/non-Market Maker 
participants. The Exchange also believes the proposed pricing for NYSE 
FANG+ is procompetitive as it would further the Exchange's goal of 
introducing new products to the marketplace and encouraging Market 
Makers to make a market in these products, which would in turn, benefit 
market participants. Market participants that do not wish to trade in 
or seek an appointment in NYSE FANG+ are not obliged to do so.
    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 fees would be applied to all similarly situated 
participants (i.e., non-Customers and Professional Customers), and, as 
such, the proposed change would not impose a disparate burden on 
competition either among or between classes of market participants.

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.
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 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) \13\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \13\ 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 No. SR-NYSEArca-2018-49 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange

[[Page 31438]]

Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File No. SR-NYSEArca-2018-49. 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 website (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 website 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. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File No. SR-NYSEArca-2018-49, and should be submitted 
on or before July 26, 2018.


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-14363 Filed 7-3-18; 8:45 am]
 BILLING CODE 8011-01-P