[Federal Register Volume 83, Number 128 (Tuesday, July 3, 2018)]
[Notices]
[Pages 31205-31210]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-14293]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83532; File No. SR-NYSEAMER-2018-32]


Self-Regulatory Organizations; NYSE American LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Change To Modify the 
NYSE American 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 20, 2018, NYSE American LLC (the ``Exchange'' or 
``NYSE American'') 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

[[Page 31206]]

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 Substance 
of the Proposed Rule Change

    The Exchange proposes to modify the NYSE American Options Fee 
Schedule (``Fee Schedule''). The Exchange proposes to implement the fee 
change effective June 20, 2018.\4\. [sic] The proposed 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.
---------------------------------------------------------------------------

    \4\ The Exchange originally filed to amend the Fee Schedule on 
June 11, 2018 (SR-NYSEAmer-2018-28) and withdrew such filing on June 
20, 2018.
---------------------------------------------------------------------------

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 portions of the Fee 
Schedule, effective June 20, 2018, by introducing defined terms and 
pricing for new functionality that facilitates executing Complex Orders 
using the Complex CUBE Auction mechanism (``Complex CUBE'' or 
``Auction'').
    On June 5, 2018, the Exchange received approval to adopt the 
Complex CUBE mechanism, which operates in a manner substantially 
similar to the existing Single-Leg CUBE Auction.\5\ The Exchange 
proposes to adopt fees and credits for the Complex CUBE Auction so that 
such pricing will be in place once the Complex CUBE Auction mechanism 
is implemented on June 11, 2018.
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release Nos. 83384 (June 5, 
2018), 83 FR 27061 (June 11, 2018) (SR-NYSEAMER-2018-05) (``Complex 
CUBE Approval Order''); 82802 (March 2, 2018), 83 FR 9769 (March 7, 
2018) (SR-NYSEAMER-2018-05) (``Complex CUBE Notice'').
---------------------------------------------------------------------------

    In short, similar to the Single-Leg CUBE Auction, the Complex CUBE 
Auction allows an ATP Holder to guarantee the execution of an order it 
represents as agent on behalf of a public customer, broker dealer, or 
any other entity, via the Complex CUBE Auction (``Complex CUBE 
Order''). The ATP Holder that submits the Complex CUBE Order (the 
``Initiating Participant'') agrees to guarantee the execution of the 
Complex CUBE Order by submitting a contra-side order (``Complex Contra 
Order'') representing principal interest or interest it has solicited 
to trade with the Complex CUBE Order. Although the Complex Contra Order 
would guarantee the execution of the Complex CUBE Order, the purpose of 
the Auction is to provide the Complex CUBE Order the opportunity for 
price improvement. Accordingly, the Exchange will notify market 
participants when an Auction is occurring and interested parties may 
submit ``RFR Responses'' during the auction.\6\
---------------------------------------------------------------------------

    \6\ Complex Orders on the opposite side of the market as Complex 
CUBE Order that arrive during the Auction and are eligible to trade 
with the Complex CUBE Order will be treated as RFR Responses and may 
trade in the Auction. See Complex CUBE Notice, id. [sic], 83 FR 
9769, 9774-5.
---------------------------------------------------------------------------

Key Terms and Definitions Related to Complex CUBE
    First, the Exchange proposes to add (or modify) the following to 
the ``Key Terms and Definitions'' section of the Fee Schedule: \7\
---------------------------------------------------------------------------

    \7\ See proposed Fee Schedule, Key Terms and Definitions.
---------------------------------------------------------------------------

    <bullet> A ``Complex CUBE Auction'' would refer to the electronic 
crossing mechanism that provides opportunities for price improvement to 
Complex CUBE Orders submitted to such auctions.
    <bullet> A ``Single-Leg CUBE Auction'' would refer to the 
electronic crossing mechanism that provides opportunities for price 
improvement to CUBE Orders submitted to such auctions.
    <bullet> A ``CUBE Auction'' would refer collectively to the Single-
Leg and Complex CUBE Auctions available on the Exchange. The Exchange 
will use this reference in the Fee Schedule when executions in (and 
resulting volume from) such auctions are treated the same.\8\
---------------------------------------------------------------------------

    \8\ See, e.g., Fee Schedule, Sections I.A., note 6 (exempting 
executions in CUBE Auctions from Marketing Fees), I.C. (excluding 
CUBE Auction volume from monthly threshold calculations for the 
Market Maker Sliding Scale program), I.E. (including CUBE Auction 
volume in monthly threshold calculations for the American Customer 
Engagement Program (``ACE'') Program, but excluding CUBE Auction 
executions from eligibility for enhanced credits under the ACE 
Program), available here, https://www.nyse.com/publicdocs/nyse/markets/american-options/NYSE_American_Options_Fee_Schedule.pdf. In 
these instances, the Exchange believes it is reasonable to treat 
Complex CUBE Volume in the same manner as Single-Leg CUBE volume 
because all CUBE Auction volume is subject to separate fees and 
credits as set forth in Section I.G. of the Fee Schedule.
---------------------------------------------------------------------------

    <bullet> A ``Complex CUBE Order'' would refer to an agency Complex 
Order that is guaranteed an execution in the Complex CUBE Auction by a 
Complex Contra Order.
    [ssquf] In this regard, the Exchange proposes to modify the current 
definition of ``CUBE Order'' to specify that such orders relate to 
Single-Leg CUBE Auctions.
    <bullet> A ``Complex Contra Order'' would be either principal 
interest or solicited interest an Initiating Participant is using to 
guarantee the execution of a Complex CUBE Order in the Complex CUBE 
Auction.
    [ssquf] In this regard, the Exchange proposes to modify the current 
definition of ``Contra Order'' to specify that such orders relate to 
Single-Leg CUBE Auctions.
    <bullet> To account for both Single-Leg and Complex CUBE Auctions, 
the Exchange proposes to modify ``Initiating Participant'' to refer to 
``an ATP Holder that submits the CUBE Order (or Complex CUBE Order) and 
agrees to guarantee the execution of such order by submitting a Contra 
Order (or Complex Contra Order) representing principal interest or 
interest it has solicited to trade with the CUBE Order (or Complex CUBE 
Order).''
Fees and Credits Related to Complex CUBE
    Section I.G. sets forth fees and credits related to Single-Leg CUBE 
Auctions for single-leg orders.\9\ The Exchange proposes to implement a 
pricing structure for the Complex CUBE Auction that mirrors its pricing 
structure for Single-Leg CUBE Auctions, with differences described 
below.\10\
---------------------------------------------------------------------------

    \9\ See id., Fee Schedule, Section I.G., CUBE Auction Fees & 
Credits. The Exchange is not modifying fees and credits related to 
the Single-Leg CUBE Auction. The Exchange proposes to modify Section 
I.G. to make clear that the current table relates to pricing for 
executions in a ``Single-Leg CUBE Auction'' and to add a new table 
that sets forth pricing for executions in a ``Complex CUBE 
Auction.'' See proposed Fee Schedule, Section I.G., CUBE Auction 
Fees & Credits.
    \10\ See Securities Exchange Act Release No. 72469 (June 25, 
2014), 79 FR 37380 (July 1, 2014) (SR-NYSEMKT-2014-52) (adopting 
fees and credits related to Single-Leg CUBE Auctions).
---------------------------------------------------------------------------

    As noted above, there are three ways to participate in a Complex 
CUBE Auction: (i) As the Complex CUBE Order; (ii) as the Complex Contra 
Order; and (iii) as an RFR Response. The Exchange proposes to charge 
for participation in the Complex CUBE

[[Page 31207]]

Auction based on the following schedule of fees: \11\
---------------------------------------------------------------------------

    \11\ See proposed Fee Schedule, Section I.G., CUBE Auction Fees 
& Credits. The Exchange proposes to modify the Single-Leg CUBE 
Auction table in Section I.G. to replace references to ``both Penny 
and Non-Penny Pilot'' with ``all issues'' in the table setting forth 
fees and credits for Single-Leg CUBE Auctions, which adds clarity, 
transparency and internal consistency to the Fee Schedule. See id. 
The Exchange likewise proposes to modify note 1 to Section I.G. of 
the Fee Schedule to make clear that ``Initiating Participant Credits 
are payable to the Initiating Participant for each contract in a 
Contra Order paired with a CUBE Order that does not trade with the 
CUBE Order because it is replaced in the auction,'' which adds 
clarity, transparency and internal consistency to the Fee Schedule. 
See id.
---------------------------------------------------------------------------

* * * * *

                          Complex CUBE Auction
------------------------------------------------------------------------
                                                             Standard
                                                            option per
             Participant/penny or non-penny                contract fee
                                                             or credit
------------------------------------------------------------------------
Complex CUBE Order Fee Customer--All issues.............           $0.00
Complex CUBE Order Fee Non-Customer--All issues.........            0.20
Complex Contra Order Fee--Penny Pilot issues............            0.05
Complex Contra Order Fee--Non-Penny Pilot issues........            0.07
RFR Response Fee Customer--All issues...................            0.00
RFR Response Fee Non-Customer--Penny Pilot..............            0.50
RFR Response Fee Non-Customer--Non-Penny Pilot..........            1.05
------------------------------------------------------------------------

    This proposed pricing is the same as the pricing for participation 
in the Single-Leg CUBE Auction with the exception of the Complex Contra 
Order Fee--Non-Penny Pilot issues, which is $0.02 more than what is 
charged for such Contra Orders in the Single-Leg CUBE Auction.
    The Exchange is also proposing to adopt credits to be paid to 
Initiating Participants for each Complex CUBE Order contract that does 
not trade with the Complex Contra Order, which credits increase if the 
Initiating Participant achieves Tier 2, 3, 4, or 5 of the ACE Program 
(or ``Program''), as set forth below.\12\
---------------------------------------------------------------------------

    \12\ See Fee Schedule, Section I.E., American Customer 
Engagement (``ACE'') Program,'' supra note 7 [sic].

                      Initiating Participant Credit
------------------------------------------------------------------------
                                                             Non-penny
              Base/ACE Tier                 Penny pilot        pilot
------------------------------------------------------------------------
Base or Tier 1..........................         ($0.20)         ($0.50)
Tier 2..................................         ($0.23)         ($0.55)
Tier 3..................................         ($0.26)         ($0.60)
Tier 4..................................         ($0.28)         ($0.65)
Tier 5..................................         ($0.35)         ($0.75)
------------------------------------------------------------------------

    Thus, as proposed, ATP Holders who do not participate in the ACE 
Program or ACE Program participants who achieve Tier 1 would be 
eligible for a per contract credit of $0.20 or $0.50 for Complex CUBE 
Orders in Penny Pilot issues or non-Penny Pilot issues, respectively. 
Further, the Exchange proposes that ACE Program participants that 
achieve at least Tier 2 would qualify for higher Initiating Credits, 
based on the Tier achieved, as outlined in the table above. In 
addition, the Exchange proposes to offer an alternative (higher) credit 
to ATP Holders that achieve Tier 5 and execute more than 1% TCADV in 
monthly Initiating Complex CUBE Orders (the ``enhanced Tier 5 
credits''). The enhanced Tier 5 credits would be $(0.45) per contract 
for Penny Pilot issues and ($0.90) per contract for non-Penny Pilot 
issues. The Exchange believes enhanced Tier 5 credits would encourage 
ATP Holders to direct Complex Order volume to the Exchange, 
specifically via the Complex CUBE mechanism, which benefits all markets 
participants, particularly those that receive price improvement on 
their Complex Orders.
    The Exchange also proposes to offer an additional $0.10 per 
contract rebate to Initiating Participants in the ACE Program (the 
``ACE Initiating Participant Rebate'' or ``ACE Rebate''). The ACE 
Rebate would be available to ATP Holders that achieve at least Tier 1 
of the Program and would be applied to each of the first 1,000 Customer 
contracts for each leg of a Complex CUBE Order execution in a Complex 
CUBE Auction. The proposed ACE Rebate is payable in addition to any 
other fees or credits accrued from the Auction (e.g., in addition to 
the Initiating Participant Credit for both Penny and non-Penny Pilot 
issues). Thus, as proposed, the maximum potential Complex CUBE credit 
for Penny Pilot issues is $0.55 ($0.10 ACE Rebate + $0.45 Initiating 
Participant Credit for Tier 5 ACE Program Participants) and for non-
Penny Pilot issues is $1.00 ($0.10 ACE Rebate + $0.90 Initiating 
Participant Credit for Tier 5 ACE Program Participants). The ACE Rebate 
is available regardless of whether the Complex CUBE Order trades with 
the Complex Contra Order or RFR Response(s), whereas the Initiating 
Participant Credits (set forth in the table above) are payable only for 
each Complex CUBE Order contract that does not trade with the Complex 
Contra Order.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\13\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\14\ 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.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    The proposal to add (or modify) defined terms related to the 
Complex CUBE are reasonable, equitable and not unfairly discriminatory 
as these terms would add clarity and transparency to the Fee Schedule 
making it easier to comprehend and navigate. The Exchange notes that 
the new definitions for Complex CUBE mirror the existing concepts 
defined in the Fee Schedule for Single-Leg CUBE and that the proposed 
updates to some existing Single-Leg CUBE definitions are meant to 
differentiate each of the auctions.

[[Page 31208]]

Similarly, the proposed modifications to the current table in Section 
I.G., which are designed to streamline the pricing descriptions or to 
account for the addition of Complex CUBE pricing, would likewise add 
clarity and transparency to the Fee Schedule making it easier to 
comprehend and navigate. Finally, the proposal to treat Complex CUBE 
Auction executions/volume in the same manner as Single-Leg CUBE vis-
[agrave]-vis other sections of the Fee Schedule (see supra note 7 
[sic]) are reasonable, equitable and not unfairly discriminatory 
because the Complex CUBE Auction (like the Single-Leg CUBE auction) 
will be subject to the separate fees and credits as proposed herein.
    The Exchange believes that the proposed fee structure for the 
Complex CUBE Auction is reasonable, equitable, and not unfairly 
discriminatory. The proposed fee structure is reasonably designed 
because it is intended to incentivize market participants to send 
Complex Order flow to the Exchange in order to participate in the price 
improvement mechanism in a manner that enables the Exchange to improve 
its overall competitiveness and strengthen its market quality for all 
market participants. Complex CUBE Auctions and the corresponding fees 
are also reasonably designed because the proposed fees and credits are 
very similar to ones the Exchange assesses for Single-Leg CUBE 
Auctions, and are within the range of fees and credits assessed by 
other exchanges employing similar fee structures for complex orders 
submitted and executed in a price improvement mechanism.\15\ Other 
competing exchanges offer different fees and credits for complex agency 
orders, contra-side orders, and responders to an auction in a manner 
similar to the proposal.\16\ Other competing exchanges also charge 
different rates for transactions in their complex price improvement 
mechanisms for Customers versus their non-Customers in a manner similar 
to the proposal.\17\
---------------------------------------------------------------------------

    \15\ See e.g., Nasdaq ISE, LLC (``ISE'') Schedule of Fees, 
Section I, II, IV.B., available here, http://ise.cchwallstreet.com/tools/PlatformViewer.asp?selectednode=chp_1_1_2&manual=%2Fcontents%2Fise%2Fise-fee%2F (setting forth fees and credits related to its price 
improvement auction or PIM); BOX Options Exchange (``BOX'') Fee 
Schedule, available here, https://boxoptions.com/assets/BOX-Fee-Schedule-as-of-April-2-2018.pdf (setting forth fees and credits 
related to its price improvement auctions--PIP (for single-leg 
orders) or COPIP (for complex orders); MIAX Options fee schedule, 
available here, https://www.miaxoptions.com/sites/default/files/fee_schedule-files/MIAX_Options_Fee_Schedule_03012018B.pdf (setting 
forth fees and credits related to its price improvement auctions--
PRIME (for single-leg orders) or cPRIME (for complex orders); Cboe 
fee schedule, available here, http://www.cboe.com/publish/feeschedule/CBOEFeeSchedule.pdf (setting forth fees and credits 
related to its price improvement auction or AIM).
    \16\ See id.
    \17\ See id. For example, on ISE, fees for trades in Select and 
Non-Select Symbols are $0.00 per contract for Priority Customer 
Crossing Orders and $0.20 per contract for non-Priority Customer 
Crossing Orders. Similarly, BOX charges $0.00 per contract for 
Customer COPIP orders, but charges $0.05 per contract for COPIP 
orders submitted on behalf of Professional Customers, Broker Dealers 
or Market.
---------------------------------------------------------------------------

    The Complex CUBE transaction fees applied are reasonable, 
equitable, and not unfairly discriminatory because they would apply 
equally amongst all Customer orders in each category of Complex CUBE 
Auction participation and would also apply equally amongst all non-
Customer orders in each category of Complex CUBE. Regarding Customers, 
all similarly situated orders for Customers are subject to the same 
transaction fee schedule and the Exchange believes that is equitable 
and not unfairly discriminatory that Customers be charged lower fees in 
Complex CUBE Auctions than other market participants. The exchanges in 
general have historically aimed to improve markets for investors and 
develop various features within market structure for customer 
benefit.\18\ The Exchange assesses Customers lower or no transactions 
fees because Customer order flow enhances liquidity on the Exchange for 
the benefit of all market participants. Customer liquidity benefits all 
market participants by providing more trading opportunities, which 
attracts Market Makers. An increase in the activity of these market 
participants in turn facilitates tighter spreads, which may cause an 
additional corresponding increase in order flow from other market 
participants.
---------------------------------------------------------------------------

    \18\ The Exchange notes that, as discussed below, certain Non-
Customers may be eligible to enhanced Initiating Participant Credits 
based on volume executed on the Exchange, which would offset their 
transaction costs.
---------------------------------------------------------------------------

    Regarding Non-Customers, all similarly situated orders for market 
participants that are not Customers are subject to the same transaction 
fees and access to the Exchange is offered on terms that are not 
unfairly discriminatory.\19\ Moreover, assessing a higher transaction 
fee on Non-Customer interest than on Customer interests for Complex 
CUBE Order transactions is reasonable, equitable, and not unfairly 
discriminatory because these types of market participants are more 
sophisticated and have higher levels of order flow activity and system 
usage, which system usage better equips Non-Customers to both interact 
with Auctions and to react to market changes. This level of trading 
activity draws on a greater amount of system resources than that of 
Customers, and thus, generates greater ongoing operational costs. 
Further, the Exchange believes that charging all market participants 
that are not Customers the same fee for all transactions is not 
unfairly discriminatory as the fees will apply to all these market 
participants equally.
---------------------------------------------------------------------------

    \19\ For example, the Exchange offers Customers preferential 
rates for other trades executed on the Exchange such as for 
Qualified Contingent Cross (``QCC'') orders. See, e.g., Fee 
Schedule, Section I.F., supra note 7 [sic] (assessing $0.00 per 
contract for Customer QCC orders and $0.20 per contract for non-
Customer QCC orders).
---------------------------------------------------------------------------

    The Exchange likewise believes that it is reasonable for Complex 
CUBE Orders and Complex Contra Orders to be assessed lower fees than 
those providing RFR Responses. Complex Contra Orders guarantee the 
Complex CUBE Order, and are subject to market risk during the time 
period that the Complex CUBE Order is exposed to other market 
participants. The Exchange believes that the market participants 
entering the Complex Contra Order plays a critical role in the Auction 
as their willingness to guarantee the Complex CUBE Order is the 
keystone to providing that CUBE Order the opportunity for price 
improvement. The Exchange believes that it is equitable and not 
unfairly discriminatory to assess fees to responders to the Complex 
CUBE Auction and credit another participant to provide incentive for 
participants to submit order flow to Complex CUBE Auctions (as 
discussed further below). The Exchange believes that it is appropriate 
to provide incentives to market participants to direct orders to 
participate in Complex CUBE Auction. Further, the Exchange believes 
that the proposed transaction fees for responding to the Auction would 
not deter market participants from providing price improvement.
    Similarly, the Exchange believes that the proposed changes to CUBE 
Auction credits are reasonable, equitable and not unfairly 
discriminatory. First, as proposed, all Initiating Participants would 
receive a base per contract credit for each Complex CUBE Order contract 
that does not trade with the Complex Contra Order in a Complex CUBE 
Auction, regardless of whether that Initiating Participant qualifies 
for the ACE Program. Thus, the proposed credits are not applied in a 
discriminatory manner. The proposed credits of $0.20 per contract for 
Penny Pilot issues and $0.50 per contract for non-Penny Pilot issues 
are consistent

[[Page 31209]]

with ``break up'' credits offered on other exchanges.\20\
---------------------------------------------------------------------------

    \20\ For example, the ISE pays a volume-based Complex PIM Break 
Up Rebate ranging from a base rate of $0.26 per contract in Select 
Symbols to $0.85 in the highest tier for contracts submitted to a 
PIM that do not trade with their contra order. See ISE fee schedule, 
supra note 15.
---------------------------------------------------------------------------

    The Exchange also believes the proposal to provide ATP Holders the 
opportunity to achieve greater Initiating Participant Credits, based on 
Tier, if those ATP Holders achieve at least Tier 2 of the ACE Program 
is likewise reasonable, equitable and not unfairly discriminatory. The 
ACE Program is based on the amount of Customer business transacted on 
the Exchange and offers ATP Holders an enhanced per contract credit on 
transaction fees for Customer volumes above certain minimum thresholds 
(established in Tiers 1-5). Thus, the Exchange believes this proposed 
change is reasonably designed because it would incentivize providers of 
Customer order flow to direct that order flow to the Exchange to 
receive greater Complex CUBE credits in a manner that enables the 
Exchange to improve its overall competitiveness and strengthen its 
market quality for all market participants. The proposed (tiered) 
rebate is fair, equitable, and not unreasonably discriminatory because 
it would apply equally to all Customer orders submitted as a Complex 
CUBE Order. The Exchange also notes that the concept of offering a 
tiered rebate in connection with a price improvement auction is not new 
or novel.\21\ Finally, the Exchange believes this proposed tiered 
rebate is reasonable because it would attract more volume and liquidity 
to the Exchange generally, and to Complex CUBE Auctions specifically, 
and would therefore benefit all market participants (including those 
that do not participate in the ACE Program) through increased 
opportunities to trade at potentially improved prices as well as 
enhancing price discovery. The Exchange believes enhanced Tier 5 
credits would encourage ATP Holders to direct Complex Order volume to 
the Exchange, specifically via the Complex CUBE mechanism, which 
benefits all markets participants, particularly those that receive 
price improvement on their Complex Orders.
---------------------------------------------------------------------------

    \21\ See id.
---------------------------------------------------------------------------

    The Exchange believes that the proposed ACE Initiating Participant 
credit is likewise reasonable, equitable and not unfairly 
discriminatory. Specifically, the ACE Initiating Participant Rebate is 
based on the amount of business transacted on the Exchange and is 
designed to attract more volume and liquidity to the Exchange 
generally, and to CUBE Auctions specifically, which will benefit all 
market participants (including those that do not participate in the ACE 
Program) through increased opportunities to trade at potentially 
improved prices as well as enhancing price discovery. Furthermore, the 
proposed ACE Rebate is reasonably designed and not unfairly 
discriminatory because it is available regardless of the parties that 
trade with the Complex CUBE Order (i.e., whether the CUBE Order trades 
with the Complex Contra Order or otherwise). The Exchange notes that 
the proposal to offer an additional incentive to participate in the 
Complex CUBE Auction to those ATP Holders that have achieved certain 
monthly volume thresholds is also not new or novel.\22\ Nor it is novel 
that the Exchange caps the amount of the potential rebate at the first 
1,000 contracts per leg of a Complex CUBE Order, as the Exchange 
currently caps the potential rebate in the Single-Leg CUBE at the first 
5,000 Customer contracts of a CUBE Order.\23\ The Exchange notes that 
although the proposed ACE Rebate applies solely to Customer orders, it 
is nonetheless equitable and not unfairly discriminatory because it 
would enhance the incentives to ATP Holders to transact Customer orders 
on the Exchange and an increase in Customer order flow would bring 
greater volume and liquidity to the Exchange. Increased volume to the 
Exchange 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.
---------------------------------------------------------------------------

    \22\ For example, MIAX offers an additional per contract rebate 
on certain agency orders executed in PRIME, which provides for a 
maximum credit of $0.12 per contract, based on a member achieving 
certain monthly volume thresholds. See MIAX fee schedule, Priority 
Customer Rebate Program, supra note 15.
    \23\ Similar to the Exchange, Cboe also caps the number of 
contracts submitted to its price improvement auction that are 
eligible for additional volume rebates. Cboe's cap is at 1,000 
contracts per order for simple executions and at 1,000 contracts per 
leg for complex executions. See Cboe fee schedule, Volume Incentive 
Program, supra note 15.
---------------------------------------------------------------------------

    The Exchange believes that it is reasonable to assess lower 
transaction and credit rates to Penny Pilot option classes than non-
Penny Pilot option classes. The Exchange believes that options that 
trade at these wider spreads merit offering greater inducement for 
market participants. In particular, within the Complex CUBE Auction, 
option classes that typically trade in minimum increments of $0.05 or 
$0.10 provide greater opportunity for market participants to offer 
price improvement. As such, the Exchange believes that the opportunity 
for additional price improvement provided by these wider spreads again 
merits offering greater incentive for market participants to increase 
the potential price improvement for customer orders in these 
transactions.

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

    In accordance with Section 6(b)(8) of the Act,\24\ 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 that the proposed change 
would enhance the competiveness of the Exchange relative to other 
exchanges that offer their own electronic crossing mechanisms, 
including for complex orders.\25\ The Exchange believes that the 
proposed fees and rebates for participation in the Complex CUBE Auction 
would not have an impact on intra-market competition based on the total 
cost for participants to transact in such order types versus the cost 
for participants to transact in the other order types available for 
trading on the Exchange.
---------------------------------------------------------------------------

    \24\ 15 U.S.C. 78f(b)(8).
    \25\ See supra note 14. See also Chicago Board Options Exchange, 
Inc. (``CBOE'') Rule 6.74A--Automated Improvement Mechanism 
(``AIM''); Nasdaq PHLX, LLC (``PHLX'') Rule 1087--Price Improvement 
XL (``PIXL''); BOX Options Exchange LLC (``BOX'') Rule 7245--Complex 
Order Price Improvement Period (``COPIP''); Nasdaq ISE, LLC 
(``ISE'') Rule 723--Price Improvement Mechanism (``PIM''); Miami 
International Securities Exchange, LLC (``MIAX'') Rule 515A, 
Interpretation and Policies .12--Price Improvement Mechanism 
(``PRIME'').
---------------------------------------------------------------------------

    As noted above, the Exchange believes that the proposed pricing for 
the Complex CUBE Auction is comparable to its own pricing for Single-
Leg CUBE and that of other exchanges offering similar electronic price 
improvement mechanisms for complex orders.\26\ The Exchange believes 
that, based on experience with electronic price improvement crossing 
mechanisms on other markets, market participants understand that the 
price-improving benefits offered by the Complex CUBE Auction justify 
the transaction costs associated with the Auction. To the extent that 
there is a difference between non-Complex CUBE Auction transactions and 
Complex CUBE Auction transactions, the Exchange does not believe this

[[Page 31210]]

difference would cause participants to refrain from responding to 
Complex CUBE Auctions. The Exchange expects to see robust competition 
within the Complex CUBE Auction to trade against the Complex CUBE 
Order.
---------------------------------------------------------------------------

    \26\ See Fee Schedule, Section I.G., CUBE Auction Fees & 
Credits, supra note 8 and supra note 16 (citing the fee schedules of 
other exchanges that set forth pricing for price improvement 
auctions).
---------------------------------------------------------------------------

    The Exchange notes that it operates in a highly competitive market 
in which market participants can readily favor competing venues if they 
deem fee levels at a particular venue to be excessive. In such an 
environment, the Exchange must continually adjust its fees to remain 
competitive with other exchanges and to attract order flow to the 
Exchange. The Exchange believes that the proposed rule change reflects 
this competitive environment because it establishes a fee structure in 
a manner that encourages market participants to direct their order 
flow, to provide liquidity, and to attract additional transaction 
volume to the Exchange.

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) \27\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \28\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
---------------------------------------------------------------------------

    \27\ 15 U.S.C. 78s(b)(3)(A).
    \28\ 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) \29\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \29\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

IV. Solicitation of Comments

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

Electronic Comments

    <bullet> Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#97e5e2fbf2baf4f8fafaf2f9e3e4d7e4f2f4b9f0f8e1"><span class="__cf_email__" data-cfemail="7200071e175f111d1f1f171c0601320117115c151d04">[email protected]</span></a>. Please include 
File Number SR-NYSEAMER-2018-32 on the subject line.

Paper Comments

    <bullet> 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-NYSEAMER-2018-32. 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 Number SR-NYSEAMER-2018-32 and should be submitted 
on or before July 24, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\30\
---------------------------------------------------------------------------

    \30\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-14293 Filed 7-2-18; 8:45 am]
 BILLING CODE P


</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>