Document ID: SEC-2016-0614-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2016-04-11T04:00Z

[Federal Register Volume 81, Number 69 (Monday, April 11, 2016)]
[Notices]
[Pages 21433-21435]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-08181]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77521; File No. SR-NYSEArca-2016-53]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending the NYSE 
Arca Options Fee Schedule To Add Fees for Reserve Market Maker Options 
Trading Permits

April 5, 2016
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on March 25, 2016, 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 amend the NYSE Arca Options Fee Schedule 
(``Fee Schedule'') to add fees for Reserve Market Maker Options Trading 
Permits. The Exchange proposes to implement the fee change effective 
April 1, 2016. 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this filing is to add fees for Reserve Market Maker 
Options Trading Permits (each a ``Reserve OTP'').
    Under the current NYSE Arca Fee Schedule (Fee Schedule),\4\ an OTP 
Holder or OTP Firm \5\ acting as a Market Maker must pay a monthly fee 
for each Options Trading Permit (``OTP'') it utilizes.\6\ In order to 
act as a Market Maker \7\ on the Exchange Floor, an individual must be 
specifically named on the relevant Market Maker's OTP. On occasions 
when a Market Maker operating on the Floor may is [sic] absent, the OTP 
Holder or OTP Firm may wish to have a Market Maker Authorized Trader 
\8\ (``MMAT'') employee engage in open outcry trading to cover for the 
absent Market Maker. However, an MMAT may only step in to cover for the 
absent Market Maker if it is specifically named on the relevant OTP; if 
such individual is not named, the OTP Holder or OTP Firm would be 
charged the full monthly fee if it activates the OTP to allow that 
individual to stand in for as briefly as one day.\9\
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    \4\ See Fee Schedule, available here, https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf.
    \5\ An OTP Holder is a natural person, in good standing, that 
has been issued an OTP. See Rule 1.1.(q). An OTP Firm is a sole 
proprietorship, partnership, corporation, limited liability company 
or other organization in good standing, who has been issued an OTP 
or upon whom an OTP Holder has conferred trading privileges on the 
Exchange. See Rule 1.1.(r).
    \6\ OTPs are issued by the Exchange for effecting approved 
securities transactions on the Exchange's Trading Facilities. See 
Rule 1.1.(p). The cost of each OTP ranges from $6,000, for the first 
OTP, to $1,000 for the fifth or greater OTP, as the cost decreases 
as the number of OTPs utilized per month increases. See supra n. 4. 
The first OTP allows a Market Maker to quote in up to 175 issues; a 
Market Maker is required to have four OTPs to quote all issues on 
the Exchange. See id.
    \7\ A Market Maker is an individual who is registered with the 
Exchange for the purpose of making transactions as a dealer-
specialist on the Floor of the Exchange or for the purpose of 
submitting quotes electronically and making transactions as a 
dealer-specialist through the NYSE Arca OX electronic trading 
system. See Rule 6.32(a).
    \8\ A Market Maker Authorized Trader is an authorized trader who 
performs market making activities pursuant to Rule 6 on behalf of an 
OTP Holder or OTP Firm registered as a Market Maker. See Rule 
6.1A(a)(9). A Market Maker Authorized Trader must meet the same 
registration requirements as a Market Maker before they can be 
designated as a Market Maker Authorized Trader. See Rule 6.33.
    \9\ The Monthly OTP fee is based on the maximum number of OTPs 
held by an OTP Firm or OTP Holder during a calendar month. See supra 
n. 4, endnote 1.

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[[Page 21434]]

    To provide an option to Market Maker firms to address such short-
term absences in a more economical way, the Exchange recently adopted 
paragraph (i) to Rule 6.2 (Admission to and Conduct on the Options 
Trading Floor) to create a Reserve OTP.\10\ A Reserve OTP would permit 
an OTP Holder or OTP Firm to have a qualified MMAT employee cover for 
the absent Market Maker under the firm's OTP, effectively empowering 
the individual acting as a qualified MMAT to act as a Market Maker in 
lieu of the absent individual until such time as the absent Market 
Maker returns.\11\
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    \10\ See Securities Exchange Act Release No. 77440 (March 24, 
2016), (SR-NYSEArca-2016-50) (adopting Reserve OTP on immediately 
effective basis, with waiver of 30-day operative delay). In its 
filing, the Exchange noted that other options exchanges likewise 
offer a ``Reserve'' concept. See, e.g., Securities Exchange Act 
Release No. 66237 (January 25, 2012), 77 FR 4848 (January 31, 2012) 
(SR-NYSEAmex-2012-02) (amending Rule 902NY to create a Reserve Floor 
Market Maker Amex Trading Permit (``Reserve ATP'')).
    \11\ See id.; see also Rule 6.2(i).
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    The Exchange now proposes to charge each OTP Holder and OTP Firm a 
$175 monthly fee for a Reserve OTP. The fee would be assessed to each 
OTP Holder and OTP Firm that notifies the Exchange that it would like 
to utilize a Reserve OTP, such that an MMAT in its employ would be 
eligible to be named to the OTP to act as a Floor Market Maker to cover 
for another Floor Market Maker who is otherwise absent from the Trading 
Floor that day. The proposed fee change would be implemented on April 
1, 2016.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\12\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\13\ in particular, 
because it provides for the equitable allocation of reasonable dues, 
fees, and other charges among its members, issuers and other persons 
using its facilities and does not unfairly discriminate between 
customers, issuers, brokers or dealers.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes the proposed fee is equitably allocated and 
not unfairly discriminatory because it would apply equally to all OTP 
Holders or OTP Firms that opt to utilize the Reserve OTP alternative. 
The Exchange believes that the proposed fee is reasonable because it 
provides a method for OTP Holders and OTP Firms to have fully qualified 
personnel step in for absent employees without having to pay the full 
fee every month that the OTP is used by such substitute persons. The 
Exchange believes the option of a Reserve OTP would encourage the 
efficient use of personnel resources for OTP Holders and OTP Firms, 
which contributes to fair and orderly markets. The Exchange notes that 
the proposed $175 fee is consistent with fees on other option 
exchanges.\14\
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    \14\ See NYSE Amex Options Fee Schedule, Section III.A. 
(charging $175 monthly fee for Reserve Floor Market Maker ATP), 
available here, https://www.nyse.com/publicdocs/nyse/markets/amex-options/NYSE_Amex_Options_Fee_Schedule.pdf.
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    For these reasons, the Exchange believes that the proposal is 
consistent with the Act.

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

    In accordance with Section 6(b)(8) of the Act,\15\ the Exchange 
does not believe that the proposed rule change will impose any burden 
on competition that is not necessary or appropriate in furtherance of 
the purposes of the Act.
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    \15\ 15 U.S.C. 78f(b)(8).
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    The proposed fee would enable the Exchange to compete more 
effectively with options exchanges that already provide the cost-
effective alternative of a ``Reserve'' trading permit to address 
personnel coverage for absent Floor Market Makers.\16\ The Exchange 
believes that by improving the competitiveness of Exchange Market 
Makers it would, in turn, promote competition for order flow among 
market participants and the options exchanges.
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    \16\ See supra n. 14.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change is effective upon filing pursuant to 
Section 19(b)(3)(A) \17\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \18\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \19\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \19\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSEARCA-2016-53 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSEArca-2016-53. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from

[[Page 21435]]

submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-
NYSEArca-2016-53, and should be submitted on or before May 2, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-08181 Filed 4-8-16; 8:45 am]
 BILLING CODE 8011-01-P