32926 Federal Register / Vol. 83, No. 136 / Monday, July 16, 2018 / Notices 

1Applicants request relief with respect to the 

named Applicants, as well as to any future series 

of the Trusts and any other registered open-end 

management investment company or series thereof 

that: (a) Is advised by the Initial Adviser, its 

successors, or any entity controlling, controlled by 

or under common control with the Initial Adviser 

or its successors (each, an ‘‘Adviser’’); (b) uses the 

multi-manager structure described in the 

application; and (c) complies with the terms and 

conditions set forth in the application (each, a 

‘‘Subadvised Series’’). For purposes of the requested 

order, ‘‘successor’’ is limited to an entity that 

results from a reorganization into another 

jurisdiction or a change in the type of business 

organization. 

2A ‘‘Sub-Adviser’’ for a Subadvised Series is (1) 

an indirect or direct ‘‘wholly-owned subsidiary’’ (as 

such term is defined in the Act) of the Adviser for 

that Subadvised Series, or (2) a sister company of 

the Adviser for that Subadvised Series that is an 

indirect or direct ‘‘wholly-owned subsidiary’’ of the 

same company that, indirectly or directly, wholly 

owns the Adviser (each of (1) and (2) a ‘‘WhollyOwned Sub-Adviser’’ and collectively, the 

‘‘Wholly-Owned Sub-Advisers’’), or (3) not an 

‘‘affiliated person’’ (as such term is defined in 

section 2(a)(3) of the Act) of the Subadvised Series 

or the Adviser, except to the extent that an 

affiliation arises solely because the Sub-Adviser 

serves as a sub-adviser to a Subadvised Series 

(‘‘Non-Affiliated Sub-Advisers’’). 

3The requested relief will not extend to any subadviser, other than a Wholly-Owned Sub-Adviser, 

who is an affiliated person, as defined in Section 

2(a)(3) of the Act, of the Subadvised Series, any 

Trust or of the Adviser, other than by reason of 

serving as a sub-adviser to one or more of the 

Subadvised Series (‘‘Affiliated Sub-Adviser’’). 

Agreement’’).1 An Adviser will provide 

each Subadvised Series with continuous 

investment management services, 

subject to the supervision of, and 

policies established by, the board of 

trustees of each Trust (each, a ‘‘Board’’). 

Each Investment Management 

Agreement permits the Adviser, subject 

to the approval of the applicable Board, 

to delegate to one or more sub-advisers 

(each, a ‘‘Sub-Adviser’’ and collectively, 

the ‘‘Sub-Advisers’’) the responsibility 

to provide the day-to-day portfolio 

investment management of each 

Subadvised Series, subject to the 

supervision and direction of the 

Adviser.2 The primary responsibility for 

managing each Subadvised Series will 

remain vested in the Adviser. The 

Adviser will hire, evaluate, allocate 

assets to and oversee the Sub-Advisers, 

including determining whether a SubAdviser should be terminated, at all 

times subject to the authority of the 

applicable Board. 

2. Applicants request an exemption to 

permit the Adviser, subject to Board 

approval, to hire certain Sub-Advisers 

pursuant to Sub-Advisory Agreements 

and materially amend existing SubAdvisory Agreements without obtaining 

the shareholder approval required under 

section 15(a) of the Act and rule 18f–2 

under the Act.3 Applicants also seek an 

exemption from the Disclosure 

Requirements to permit a Subadvised 

Series to disclose (as both a dollar 

amount and a percentage of the 

Subadvised Series’ net assets): (a) The 

aggregate fees paid to the Adviser and 

any Wholly-Owned Sub-Adviser; (b) the 

aggregate fees paid to Non-Affiliated 

Sub-Advisers; and (c) the fee paid to 

each Affiliated Sub-Adviser 

(collectively, ‘‘Aggregate Fee 

Disclosure’’). 

3. Applicants agree that any order 

granting the requested relief will be 

subject to the terms and conditions 

stated in the application. Such terms 

and conditions provide for, among other 

safeguards, appropriate disclosure to 

Subadvised Series shareholders and 

notification about sub-advisory changes 

and enhanced Board oversight to protect 

the interests of the Subadvised Series’ 

shareholders. 

4. Section 6(c) of the Act provides that 

the Commission may exempt any 

person, security, or transaction or any 

class or classes of persons, securities, or 

transactions from any provisions of the 

Act, or any rule thereunder, if such 

relief is necessary or appropriate in the 

public interest and consistent with the 

protection of investors and purposes 

fairly intended by the policy and 

provisions of the Act. Applicants 

believe that the requested relief meets 

this standard because, as further 

explained in the application, the 

Investment Management Agreements 

will remain subject to shareholder 

approval while the role of the SubAdvisers is substantially similar to that 

of individual portfolio managers, so that 

requiring shareholder approval of SubAdvisory Agreements would impose 

unnecessary delays and expenses on the 

Subadvised Series. 

Applicants believe that the requested 

relief from the Disclosure Requirements 

meets this standard because it will 

improve the Adviser’s ability to 

negotiate fees paid to the Sub-Advisers 

that are more advantageous for the 

Subadvised Series. 

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–15068 Filed 7–13–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

33157; File No. 812–14926] 

Charles Schwab & Co. Inc. and Charles 

Schwab Investment Management, Inc. 

July 10, 2018. 

AGENCY: Securities and Exchange 

Commission (‘‘Commission’’). 

ACTION: Temporary order and notice of 

application for a permanent order under 

section 9(c) of the Investment Company 

Act of 1940 (‘‘Act’’). 

SUMMARY OF APPLICATION: Applicants 

have received a temporary order 

(‘‘Temporary Order’’) exempting them 

from section 9(a) of the Act, with 

respect to an injunction entered against 

Charles Schwab & Co. Inc. (‘‘CS&Co.’’) 

on July 9, 2018 by the U.S. District 

Court for the Northern District of 

California (‘‘District Court’’), in 

connection with a consent order 

between CS&Co. and the Commission, 

until the Commission takes final action 

on an application for a permanent order 

(the ‘‘Permanent Order,’’ and with the 

Temporary Order, the ‘‘Orders’’). 

Applicants also have applied for a 

Permanent Order. 

APPLICANTS: CS&Co. and Charles 

Schwab Investment Management, Inc. 

(‘‘CSIM’’) (each an ‘‘Applicant’’ and 

together, the ‘‘Applicants’’). 

FILING DATE: The application was filed 

on July 2, 2018. 

HEARING OR NOTIFICATION OF HEARING: 

An order granting the application will 

be issued unless the Commission orders 

a hearing. Interested persons may 

request a hearing by writing to the 

Commission’s Secretary and serving 

Applicants with a copy of the request, 

personally or by mail. Hearing requests 

should be received by the Commission 

by 5:30 p.m. on August 6, 2018 and 

should be accompanied by proof of 

service on Applicants, in the form of an 

affidavit, or for lawyers, a certificate of 

service. Pursuant to rule 0–5 under the 

Act, hearing requests should state the 

nature of the writer’s interest, any facts 

bearing upon the desirability of a 

hearing on the matter, the reason for the 

request, and the issues contested. 

Persons who wish to be notified of a 

hearing may request notification by 

writing to the Commission’s Secretary. 

ADDRESSES: Secretary, U.S. Securities 

and Exchange Commission, 100 F Street 

NE, Washington, DC 20549–1090; 

Applicants: Charles Schwab & Co. Inc.: 

211 Main Street, San Francisco, CA 

94105; Charles Schwab Investment 


sradovich on DSK3GMQ082PROD with NOTICES
Federal Register / Vol. 83, No. 136 / Monday, July 16, 2018 / Notices 32927 

1The Fund Servicing Applicants and other 

Covered Persons may, if the Orders are granted, in 

the future act in any of the capacities contemplated 

by section 9(a) of the Act subject to the applicable 

terms and conditions of the Orders. 

Management, Inc.: 211 Main Street, San 

Francisco, CA 94105. 

FOR FURTHER INFORMATION CONTACT: 

Thankam A. Varghese, AttorneyAdviser, Kyle R. Ahlgren, Senior 

Counsel, or Holly L. Hunter-Ceci, 

Assistant Chief Counsel, at (202) 551– 

6821 (Division of Investment 

Management, Chief Counsel’s Office). 

SUPPLEMENTARY INFORMATION: The 

following is a temporary order and a 

summary of the application. The 

complete application may be obtained 

via the Commission’s website by 

searching for the file number, or an 

applicant using the Company name box, 

at http://www.sec.gov/search/ 

search.htm, or by calling (202) 551– 

8090. 

Applicants’ Representations 

1. CS&Co. is a California corporation 

registered as a broker-dealer under the 

Securities Exchange Act of 1934, as 

amended (‘‘Exchange Act’’), and as an 

investment adviser under the 

Investment Advisers Act of 1940, as 

amended (the ‘‘Advisers Act’’). CS&Co. 

serves as the principal underwriter for 

85 open-end management investment 

companies registered under the Act 

(‘‘Open-End Funds’’). CSIM is a 

Delaware corporation registered as an 

investment adviser under the Advisers 

Act that serves as investment adviser to 

107 Open-End Funds. A list of the funds 

to which CS&Co. and CSIM served as 

investment adviser or principal 

underwriter, individual adviser or subadviser as of June 1, 2018 (the ‘‘Funds’’) 

is appended to the Application. 

2. CS&Co. and CSIM are whollyowned subsidiaries of The Charles 

Schwab Corporation (‘‘CS’’), a Delaware 

corporation headquartered in San 

Francisco, California and listed on the 

New York Stock Exchange. CS is a 

savings and loan holding company 

incorporated in 1986 that engages 

through its subsidiaries in wealth 

management, securities brokerage, 

banking, asset management, custody, 

and financial advisory services. 

3. While no existing company of 

which CS&Co. is an ‘‘affiliated person’’ 

within the meaning of section 2(a)(3) of 

the Act (‘‘Affiliated Person’’), other than 

CS&Co. and CSIM (the ‘‘Fund Servicing 

Applicants’’) currently serves as an 

investment adviser (as defined in 

section 2(a)(20) of the Act) to, or 

depositor of, any registered investment 

company under the Act, employees’ 

securities company or investment 

company that has elected to be treated 

as a business development company 

under the Act, or as a principal 

underwriter (as defined in section 

2(a)(29) of the Act) for any Open-End 

Fund, unit investment trust registered 

under the Act (‘‘UIT’’), or face-amount 

certificate company registered under the 

Act (‘‘FACC’’) (such activities, the 

‘‘Fund Servicing Activities’’), 

Applicants request that any relief 

granted by the Commission pursuant to 

the application also apply to any 

existing company of which CS&Co. is an 

Affiliated Person and to any other 

company of which CS&Co. may become 

an Affiliated Person in the future 

(together with the Fund Servicing 

Applicants, the ‘‘Covered Persons’’) 

with respect to any activity 

contemplated by section 9(a) of the 

Act.1

4. On July 2, 2018, the Commission 

filed a complaint in the District Court 

(the ‘‘Complaint’’) alleging violations of 

section 17(a) of the Exchange Act and 

rule 17a–8 thereunder. CS&Co. agreed to 

consent to the entry of a judgment by 

the District Court against CS&Co. (the 

‘‘Final Judgment’’). The Complaint 

alleges that, in violation of section 17(a) 

of the Exchange Act and rule 17a–8 

thereunder, CS&Co. failed to file 

Suspicious Activity Reports (‘‘SARs’’) 

on suspicious transactions by 

independent advisers that CS&Co. 

terminated from its custodial platform 

(‘‘Advisers’’). Such Advisers were not 

affiliated or associated with CS&Co. 

CS&Co. terminated the Advisers for 

engaging in activity CS&Co. determined 

violated its internal policies and 

presented risk to CS&Co. or its 

customers. The Complaint alleges that: 

(1) CS&Co.’s failure to file SARs during 

the 2012–2013 time period resulted 

from its inconsistent implementation of 

policies and procedures for identifying 

reportable transactions under the SAR 

rule (31 CFR 1023.320(a)) when CS&Co. 

investigated and terminated Advisers 

from its custodial platform; (2) although 

CS&Co. took steps to investigate and 

terminate Advisers, CS&Co. did not 

have clear or consistent policies for the 

types of activities for which SARs need 

to be filed; and (3) in a number of cases 

in which Advisers were terminated and 

there was reason for CS&Co. to suspect 

fraudulent activity, CS&Co. applied an 

unreasonably high standard for 

determining whether to file a SAR on 

the suspicious transactions. 

5. Concurrently with the filing of the 

Complaint, CS&Co. presented to the 

District Court an executed Consent of 

the Defendant Charles Schwab & Co. 

Inc. to Entry of Final Judgment (the 

‘‘Consent’’), consenting to the Final 

Judgment. The Final Judgment 

permanently restrains and enjoins 

CS&Co from violating section 17(a) of 

the Exchange Act and rule 17a–8 

thereunder (the ‘‘Injunction’’) and 

ordered CS&Co. to pay a civil penalty in 

the amount of $2,800,000. 

Applicants’ Legal Analysis 

1. Section 9(a)(2) of the Act provides, 

in pertinent part, that a person may not 

serve or act as, among other things, an 

investment adviser or depositor of any 

registered investment company or as 

principal underwriter for any registered 

open-end investment company, UIT, or 

FACC, if such person ‘‘. . . by reason of 

any misconduct, is permanently or 

temporarily enjoined by order, 

judgment, or decree of any court of 

competent jurisdiction from acting as an 

underwriter, broker, dealer, investment 

adviser, municipal securities dealer, 

bank, transfer agent, credit rating agency 

or entity or person required to be 

registered under the Commodity 

Exchange Act, or as an affiliated person, 

salesman, or employee of any 

investment company, bank, insurance 

company, or entity or person required to 

be registered under the Commodity 

Exchange Act, or from engaging in or 

continuing any conduct or practice in 

connection with any such activity or in 

connection with the purchase or sale of 

any security.’’ Section 9(a)(3) of the Act 

makes the prohibitions of section 9(a)(2) 

applicable to a company, any affiliated 

person of which has been disqualified 

under the provisions of section 9(a)(2). 

Section 2(a)(3) of the Act defines 

‘‘affiliated person’’ to include, among 

others, any person directly or indirectly 

controlling, controlled by, or under 

common control with, the other person. 

The Injunction would result in a 

disqualification of CS&Co. from acting 

in the capacities specified in section 

9(a)(2) because CS&Co. would be 

permanently enjoined by the District 

Court from engaging in or continuing 

certain conduct and/or practices in 

connection with the offer or sale of any 

security. The Injunction would also 

result in the disqualification of CSIM 

under section 9(a)(3) because CS&Co. is 

an Affiliated Person of CSIM within the 

meaning of section 2(a)(3) of the Act and 

would be subject to an injunction 

described in section 9(a)(2). Other 

Covered Persons similarly would be 

disqualified pursuant to section 9(a)(3) 

were they to act in any of the capacities 

listed in section 9(a). 

2. Section 9(c) of the Act provides 

that, upon application, the Commission 

shall by order grant an exemption from 

the disqualification provisions of 


sradovich on DSK3GMQ082PROD with NOTICES
32928 Federal Register / Vol. 83, No. 136 / Monday, July 16, 2018 / Notices 

section 9(a) of the Act, either 

unconditionally or on an appropriate 

temporary or other conditional basis, to 

any person if that person establishes 

that: (1) The prohibitions of section 9(a), 

as applied to the person, are unduly or 

disproportionately severe; or (2) the 

conduct of the person has been such as 

not to make it against the public interest 

or the protection of investors to grant 

the exemption. Applicants have filed an 

application pursuant to section 9(c) 

seeking a Temporary Order and a 

Permanent Order exempting the Fund 

Servicing Applicants and other Covered 

Persons from the disqualification 

provisions of section 9(a) of the Act. 

Applicants and other Covered Persons 

may, if the relief is granted, in the future 

act in any of the capacities 

contemplated by section 9(a) of the Act 

subject to the applicable terms and 

conditions of the Orders. 

3. Applicants believe they meet the 

standards for exemption specified in 

section 9(c). Applicants assert that: (i) 

The scope of the misconduct was 

limited and did not involve any of the 

Fund Servicing Applicants performing 

Fund Service Activities, or any Fund 

with respect to which the Fund 

Servicing Applicants engaged in Fund 

Servicing Activities or their respective 

assets; (ii) application of the statutory 

bar would result in material economic 

losses, and the operations of the Funds 

would be disrupted as they sought to 

engage new underwriters, advisers and/ 

or sub-advisers, as the case may be; (iii) 

the prohibitions of section 9(a), if 

applied to the Fund Servicing 

Applicants and other Covered Persons, 

would be unduly or disproportionately 

severe; and (iv) the Conduct did not 

constitute conduct that would make it 

against the public interest or protection 

of investors to grant the exemption from 

section 9(a). 

4. Applicants assert that the Conduct 

did not implicate any Fund Servicing 

Activities and did not involve any Fund 

or the assets of any Fund with respect 

to which any Applicants provide Fund 

Servicing Activities. Applicants further 

note that none of the CS&Co. employees 

who were directly responsible for 

determining whether a SAR filing was 

required for the Advisers had any 

involvement in Fund Servicing 

Activities, and that no such person 

remains in the employ of any of the 

Fund Servicing Applicants. 

5. Applicants assert that neither the 

protection of investors nor the public 

interest would be served by permitting 

the section 9(a) disqualifications to 

apply to the Fund Servicing Applicants 

because those disqualifications would 

deprive the Funds of the advisory or 

sub-advisory and underwriting services 

that shareholders expected the Funds 

would receive when they decided to 

invest in the Funds. Applicants also 

assert that the prohibitions of section 

9(a) could operate to the financial 

detriment of the Funds and their 

shareholders, which would be an 

unduly and disproportionately severe 

consequence given that the Conduct did 

not implicate any of the Fund Servicing 

Activities. Applicants further assert that 

the inability of the Fund Servicing 

Applicants to continue providing 

investment advisory and underwriting 

services to Funds would result in the 

Funds and their shareholders facing 

other potential hardships, as described 

in the application. 

6. Applicants assert that if the Fund 

Servicing Applicants were barred under 

section 9(a) from providing investment 

advisory and underwriting services to 

the Funds and were unable to obtain the 

requested exemption, the effect on their 

businesses and employees would be 

severe. Applicants represent that 

CS&Co. has committed capital and other 

resources to establish expertise in 

underwriting the securities of Open-End 

Funds and to establish distribution 

arrangements for Open-End Fund 

shares. Applicants further represent that 

without relief under section 9(c), 

CS&Co. would lose the greater part of its 

business, potentially leading to sales 

force layoffs and placing CS&Co. at a 

competitive disadvantage to other 

distributors who can offer 

intermediaries a full menu of products. 

Applicants further represent CSIM has 

committed substantial capital and other 

resources to establishing expertise in 

advising Funds, and that investment 

advisory services provided to Funds 

represents more than 94.9% of its assets 

under management (as of March 31, 

2018). 

7. Applicants represent that: (1) None 

of the current or former directors, 

officers or employees involved in Fund 

Servicing Activities of the Fund 

Servicing Applicants had any 

involvement in the Conduct; (2) none of 

the CS&Co. employees who were 

directly responsible for determining 

whether a SAR filing was required for 

the Advisers had any involvement in 

Fund Servicing Activities, and that no 

such person remains in the employ of 

any of the Fund Servicing Applicants; 

and (3) because the Conduct did not 

involve Fund Servicing Activities, 

shareholders of Funds were not affected 

any differently than if those Funds had 

received services from any other nonaffiliated investment adviser or 

principal underwriter. 

8. Applicants represent that CS&Co. 

has taken substantial remedial actions to 

address the conduct at issue in the 

Complaint and Final Judgment. As 

further detailed in the Application, such 

remedial actions include improving 

CS&Co.’s regulatory compliance 

program with an emphasis on SAR 

compliance, increasing the number of 

employees dedicated to anti-money 

laundering and fraud prevention 

(including employees with law 

enforcement backgrounds), and 

increasing the quantity and quality of 

internal AML and SAR training. 

9. As a result of the foregoing, 

Applicants submit that granting the 

exemption as requested in the 

application is consistent with the public 

interest and the protection of investors. 

10. To provide further assurance that 

the exemptive relief being requested 

herein would be consistent with the 

public interest and the protection of the 

investors, Applicants agree that they 

will, as soon as reasonably practical 

following the entry of the Injunction, 

distribute to the boards of trustees of the 

Funds (‘‘Boards’’) written materials 

describing the circumstances that led to 

the Injunction, as well as any impact on 

the Funds and the application. The 

written materials will include an offer to 

discuss the materials at an in-person 

meeting with the Boards, including the 

trustees who are not ‘‘interested 

persons’’ of the Funds as defined in 

section 2(a)(19) of the Act and their 

‘‘independent legal counsel’’ as defined 

in rule 0–1(a)(6) under the Act. 

Applicants undertake to provide the 

Boards with all information concerning 

the Injunction and the application as 

necessary for those Funds to fulfill their 

disclosure and other obligations under 

the U.S. federal securities laws and will 

provide them a copy of the Final 

Judgment as entered by the District 

Court. 

11. Applicants state that none of the 

Applicants nor any of their affiliates 

have previously applied for orders 

under section 9(c) of the Act. 

Applicants’ Conditions 

Applicants agree that any order 

granted by the Commission pursuant to 

the application will be subject to the 

following conditions: 

1. Any temporary exemption granted 

pursuant to the Application shall be 

without prejudice to, and shall not limit 

the Commission’s rights in any manner 

with respect to, any Commission 

investigation of, or administrative 

proceedings involving or against, 

Covered Persons, including, without 

limitation, the consideration by the 

Commission of a permanent exemption 


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Federal Register / Vol. 83, No. 136 / Monday, July 16, 2018 / Notices 32929 

1 15 U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 

from section 9(a) of the Act requested 

pursuant to the Application or the 

revocation or removal of any temporary 

exemptions granted under the Act in 

connection with the application. 

2. Each Applicant and Covered Person 

will adopt and implement policies and 

procedures reasonably designed to 

ensure that it will comply with the 

terms and conditions of the Orders 

within 60 days of the date of the 

Permanent Order. 

3. CS&Co. will comply with the terms 

and conditions of the Consent. 

4. The Applicants will provide 

written notification to the Chief Counsel 

of the Commission’s Division of 

Investment Management with a copy to 

the Chief Counsel of the Commission’s 

Division of Enforcement of a material 

violation of the terms and conditions of 

the Orders and Consent within 30 days 

of discovery of the material violation. 

Temporary Order 

The Commission has considered the 

matter and finds that Applicants have 

made the necessary showing to justify 

granting a temporary exemption. 

Accordingly, 

It is hereby ordered, pursuant to 

section 9(c) of the Act, that the 

Applicants and any other Covered 

Persons are granted a temporary 

exemption from the provisions of 

section 9(a), effective as of the date of 

the Injunction, solely with respect to the 

Injunction, subject to the 

representations and conditions in the 

application, until the Commission takes 

final action on their application for a 

permanent order. 

By the Commission. 

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–15078 Filed 7–13–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83616; File No. SR– 

NYSEARCA–2018–51] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Modify the NYSE Arca 

Options Fee Schedule 

July 10, 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 July 2, 

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. 

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 July 

2, 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 July 2, 2018, 

to provide an incentive for Floor 

Brokers to bring business to the Trading 

Floor in the newly listed options on the 

NYSE FANG+ Index (‘‘NYSE FANG+’’), 

which trades under the symbol FAANG. 

The Exchange proposes to introduce 

rebates for Floor Broker organizations 

that execute a certain number of 

FAANG contract sides on the Exchange 

in a calendar month, based on the 

highest Tier achieved (the ‘‘Rebate’’). 

The volume Tiers, and the associated 

proposed Rebate, are set forth as 

follows: 

FAANG REBATE

Tier Floor broker FAANG executions Rebate 

1 ........................ From 200 to 999 contract sides ........................................................................................................................... ($1,000) 

2 ........................ From 1,000 to 1,999 contract sides ..................................................................................................................... (2,500) 

3 ........................ 2,000 to 19,999 contract sides ............................................................................................................................. (5,000) 

4 ........................ 20,000 or more contract sides .............................................................................................................................. (10,000) 

The Exchange believes the proposed 

Rebate would further the Exchange’s 

goal of introducing new products to the 

marketplace by encouraging trading in 

this index, in particular by encouraging 

Floor Brokers to bring business to the 

Trading Floor, which would in turn, 

benefit all market participants through 

increased liquidity and more 

opportunities to trade. 

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 

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 

introduce a Floor Broker Rebate for 

executing a certain number of options 

contract sides on NYSE FANG+ is 

reasonable, equitable and not unfairly 

discriminatory for the following 

reasons. The Exchange believes the 

proposed rebates, which apply equally 

to all Floor Broker transactions in NYSE 

FANG+, regardless of account type, to 


sradovich on DSK3GMQ082PROD with NOTICES