Document ID: SEC-2019-0655-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2019-05-15T04:00Z

[Federal Register Volume 84, Number 94 (Wednesday, May 15, 2019)]
[Notices]
[Pages 21866-21868]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-09967]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85820; File No. SR-NYSEArca-2019-30]

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

May 9, 2019.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that, on April 30, 2019, NYSE Arca, Inc. (``NYSE Arca'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II 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 May 1, 2019. 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 
May 1, 2019, to provide an additional method for Market Makers to 
qualify for enhanced posting credits in Penny Pilot issues and SPY. The 
filing will also eliminate a program that is no longer effective.
    The Exchange currently provides a number of incentives for Market 
Makers and Lead Market Makers (collectively, ``Market Makers'') to 
achieve posting credits that are higher than the base posting credit of 
$0.28 per contract in Penny Pilot issues and SPY.\4\ Among these 
incentives are enhanced posted liquidity credits based on achieving 
certain percentages of NYSE Arca Equity daily activity, also known as 
``cross-asset pricing.'' Similarly, because the Exchange allows Market 
Makers to aggregate their volume executed on NYSE Arca with Affiliated 
or Appointed Order Flow Providers (``OFPs''), Market Makers may 
encourage an increased level of activity from these participants to 
qualify for various incentives. As a result, the Exchange becomes a 
more attractive venue for Customer (and Professional Customer) orders 
offering enhanced rebates. Pursuant to the Market Maker Penny Pilot and 
SPY Posting Credit Tiers (the ``Penny Credit Tiers''), Market Maker 
orders and quotes that post liquidity and are executed on the Exchange 
earn a base credit of $0.28 per contract, and may be eligible for 
increased credits based on the participant's activity. Currently, in 
addition to the base, there are three Penny Credit Tiers, with 
increasing minimum volume thresholds (as well as increasing credits) 
associated with each tier: The Select Tier, the Super Tier and the 
Super Tier II.
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    \4\ The base credit is available for executions of Market Maker 
posted interest in Penny Pilot Issues and SPY and has no minimum 
volume threshold requirement.
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    The Exchange proposes to add a new (third) alternative 
qualification volume threshold for Super Tier II, but will not modify 
the $0.42 per contract credit associated with this Tier.\5\ 
Specifically, the proposed alternative method of qualifying would 
require a Market Maker to achieve at least 0.10% of Total Customer 
Average Daily Volume (``TCADV'') from Market Maker posted interest in 
all issues, plus at least 0.42% of executed Average Daily Volume 
(``ADV'') of Retail Orders of U.S. Equity Market Share Posted and 
Executed on NYSE Arca Equity Market.\6\ This proposed change seeks to 
incent Market Makers to achieve this Tier by increasing trading on the 
equities market (while making the Tier easier to achieve based on a 
lower minimum threshold for options trading activity).
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    \5\ The Exchange is not modifying the existing (two) alternative 
bases for a Market Maker to achieve Super Tier II, which require (1) 
a Market Maker to execute at least 0.20% of TCADV from Market Maker 
posted interest in all issues, plus ETP Holder and Market Maker 
posted volume in Tape B Securities (``Tape B Adding ADV'') that is 
equal to at least 1.50% of US Tape B consolidated average daily 
volume (``CADV'') for the billing month executed on NYSE Arca Equity 
Market; or (2) at least 1.60% of TCADV from Market Maker interest in 
all issues, with at least 0.90% of TCADV from Market Maker posted 
interest in all issues.
    \6\ For purposes of calculating the executed ADV of Retail 
Orders of U.S. Equity Market Share on the NYSE Arca Equity Market, a 
Retail Order must qualify for the Retail Order Tier set forth in the 
NYSE Arca Equities Fee Schedule.
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    The Exchange also currently offers a special rate of $0.12 per 
contract Firm and Broker Dealer orders in manual executions of VXX that 
are not facilitating a Customer or Professional Customer (the 
``Program''). The Exchange has decided to discontinue the Program as it 
did not attract additional participation or volume to the Exchange and 
therefore proposes to delete all references to the Program and the 
associated rate. The proposed change would add clarity, transparency 
and internal consistency to the program.
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

[[Page 21867]]

discriminate between customers, issuers, brokers or dealers.
    The Exchange believes that the proposed modification to Super Tier 
II is reasonable, equitable, and not unfairly discriminatory because 
offering a third alternative qualification basis should encourage more 
participants to qualify for the various Tiers, particularly those like 
Super Tier II that have a cross-asset pricing component. The proposed 
modification to Super Tier II, which would be available to all 
similarly-situated market participants on an equal and non-
discriminatory basis, should incent Market Makers to increase trading 
on the equities market, while making it easier to meet the requisite 
volume threshold in options trading for this Tier. The Exchange notes 
that Market Makers are still eligible to qualify for Super Tier II 
under the existing alternatives (see supra note 5) based on posted 
Market Maker Electronic volume and overall volume, or by executing 
Posted Interest coupled with Tape B activity on the NYSE Arca Equity 
Market. By continuing to provide such alternative methods to qualify 
for a Tier, and adding an additional method, the Exchange believes the 
opportunities to qualify for credits is increased, which benefits all 
participants through increased Market Maker activity. Further, 
encouraging Market Maker activity on the Exchange would also contribute 
to the Exchange's depth of book as well as to the top of book 
liquidity.
    To the extent that Market Maker activity that adds liquidity is 
increased by the proposal, market participants will increasingly 
compete for the opportunity to trade on the Exchange. The resulting 
increased volume and liquidity would provide more trading opportunities 
and tighter spreads to all market participants and thus would promote 
just and equitable principles of trade, remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system and, in general, to protect investors and the public interest.
    The Exchange believes the proposed modification is reasonable, 
equitable and not unfairly discriminatory because it would encourage 
participants to enhance their order flow to interact with Market Maker 
orders and quotes, which potential increase in order flow would benefit 
all market participants by improving order execution and price 
discovery, which, in turn, promotes just and equitable principles of 
trade and removes impediments to and perfects the mechanism of a free 
and open market and a national market system.
    Finally, the proposal to eliminate the Program is reasonable and 
equitable, and not unfairly discriminatory because the Exchange has 
decided to discontinue the Program, which is based on business 
conducted on the Exchange in a particular symbol, and therefore would 
impact all similarly-situated market participants equally. The Exchange 
proposes to delete all references to the Program and the associated 
rate, which would add clarity and transparency to the Fee Schedule 
making it easier to navigate to the benefit of the investing public.

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 will impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. Instead, the Exchange believes that the proposed 
changes would encourage competition, including by attracting additional 
liquidity to the Exchange, which would continue to make the Exchange a 
more competitive venue for, among other things, order execution and 
price discovery. The Exchange does not believe that the proposed 
changes would impair the ability of any market participants or 
competing order execution venues to maintain their competitive standing 
in the financial markets. Further, the incentive would be available to 
all similarly-situated participants, and, as such, the proposed changes 
would not impose a disparate burden on competition either among or 
between classes of market participants and may, in fact, encourage 
competition.
    The proposal to eliminate the Program is reasonable and equitable, 
and not unfairly discriminatory because the Exchange has decided to 
discontinue the Program, which is based on business conducted on the 
Exchange in a particular symbol, and therefore would impact all 
similarly-situated market participants equally.
    The Exchange notes that it operates in a highly competitive market 
in which market participants can readily favor competing venues. In 
such an environment, the Exchange must continually review, and consider 
adjusting, its fees and credits to remain competitive with other 
exchanges. For the reasons described above, the Exchange believes that 
the proposed rule change reflects this competitive environment.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

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

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

    The foregoing rule change is effective upon filing pursuant to 
Section 19(b)(3)(A) \7\ of the Act and subparagraph (f)(2) of Rule 19b-
4 \8\ thereunder, because it establishes a due, fee, or other charge 
imposed by the Exchange.
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 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.

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-2019-30 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-2019-30. 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

[[Page 21868]]

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-NYSEArca-2019-30 and should 
be submitted on or before June 5, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-09967 Filed 5-14-19; 8:45 am]
BILLING CODE 8011-01-P