Document ID: SEC-2016-1244-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE MKT, LLC
Posted Date: 2016-07-18T04:00Z

[Federal Register Volume 81, Number 137 (Monday, July 18, 2016)]
[Notices]
[Pages 46749-46751]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-16856]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78297; File No. SR-NYSEMKT-2016-67]

Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Change To Modify the NYSE Amex 
Options Fee Schedule Effective July 1, 2016

July 12, 2016.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on July 1, 2016, NYSE MKT LLC (the ``Exchange'' or ``NYSE MKT'') filed 
with the Securities and Exchange Commission (``SEC'' or ``Commission'') 
the proposed rule change as described in Items I, II, and III below, 
which Items have been prepared by the Exchange. 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\ 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 Amex Options Fee Schedule 
(``Fee Schedule''). The Exchange proposes to implement the fee change 
effective July 1, 2016. The proposed 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 amend section I. E. of the Fee 
Schedule \3\ to adjust qualification levels for certain credit tiers 
and modify how certain volumes are weighted. The Exchange proposes to 
implement these changes effective on July 1, 2016.
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    \3\ See Fee Schedule, section I.E. (Amex Customer Engagement 
(``ACE'') Program--Standard Options), available here, https://www.nyse.com/publicdocs/nyse/markets/amex-options/NYSE_Amex_Options_Fee_Schedule.pdf.
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    Section I.E. of the Fee Schedule describes the Exchange's ACE 
Program, which features five tiers (each a ``Tier'') expressed as a 
percentage of total industry Customer equity and Exchange Traded Fund 
(``ETF'') option average daily volume \4\ and provides two alternative 
methods through which Order Flow Providers (each an ``OFP'') may 
receive per contract credits for Electronic Customer volume that the 
OFP, as agent, submits to the Exchange.\5\ The Exchange proposes to 
adjust the Customer Electronic ADV volume thresholds of the ACE Program 
by raising the qualification level for two of the five Tiers as well as 
to modify how volumes are calculated for all five of the Tiers under 
both methods.
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    \4\ Total industry Customer equity and ETF option volume is 
comprised of those equity and ETF contracts that clear in the 
Customer account type at OCC and does not include contracts that 
clear in either the Firm or Market Maker account type at OCC or 
contracts overlying a security other than an equity or ETF security. 
See OCC Monthly Statistics Reports, available here, http://www.theocc.com/webapps/monthly-volume-reports.
    \5\ The first method for determining whether an OFP should 
receive credit is by calculating, on a monthly basis, the average 
daily Customer contract volume an OFP executes Electronically on the 
Exchange as a percentage of total average daily industry Customer 
equity and ETF options volume. The second method for determining 
whether an OFP should receive credit is by calculating, on a monthly 
basis, the average daily contract volume an OFP executes 
Electronically in all participant types (i.e., Customer, Firm, 
Broker-Dealer, NYSE Amex Options Market Maker, Non-NYSE Amex Options 
Market Maker, and Professional Customer) on the Exchange, as a 
percentage of total average daily industry Customer equity and ETF 
option volume, with the further requirement that a specified 
percentage of the minimum volume required to qualify for the Tier 
must be Customer volume. See supra n. 3.
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    Currently, to qualify for Tier 2 on Customer Electronic ADV, the 
Customer Electronic ADV entered by an OFP must exceed 0.60% of Industry 
Customer Equity and ETF Options ADV (``ICADV''). The Exchange proposes 
to raise the qualification level for Tier 2 on Customer Electronic ADV 
to be greater than 0.75% of ICADV and, for

[[Page 46750]]

consistency, to likewise increase Tier 1, for which there are no 
credits, to a maximum volume threshold of 0.75% of ICADV. Currently, to 
qualify for Tier 3 on Customer Electronic ADV, the Customer Electronic 
ADV entered by an OFP must exceed 0.80% of ICADV. The Exchange proposes 
to raise the qualification level for Tier 3 to be greater than 1.00% of 
ICADV. The Exchange does not proposes [sic] any changes to the credits 
associated with each Tier. Nor does the Exchange propose any changes to 
the alternative Tier Qualifications based on Total Electronic ADV.
    The Exchange periodically re-evaluates the competitive landscape 
and, given the rebate the Exchange currently provides to OFPs achieving 
Tiers 2 and 3, the Exchange believes it would be appropriate to 
increase certain of the volume thresholds associated with those Tiers. 
For example, for OFPs that achieve Tier 2 on Customer Electronic ADV, 
the Exchange currently provides an $0.18 per contract rebate based on a 
volume threshold of greater than 0.60% of ICADV. While another 
competing options exchange--the Chicago Board Options Exchange Inc. 
(``CBOE'')--that offers a program similar to ACE provides a $0.15 per 
contract credit for simple options transactions at its highest tier, 
with a volume requirement of greater than 3.00% of National Customer 
Volume in All Underlying Symbols, with certain exclusions.\6\ Thus, the 
Exchange is providing a greater (credit) benefit than some of its 
competitors for a lower (volume) ask. Given the level of the benefit 
the Exchange is offering at Tiers 2 and 3, it believes the proposed 
upward adjustment to certain of the volume thresholds is more 
reflective of the competitive environment such that the volume 
requirements are more commensurate with the benefit offered.
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    \6\ See, e.g., CBOE fee schedule, available here, http://www.cboe.com/publish/feeschedule/CBOEFeeSchedule.pdf, at p. 4, 
Volume Incentive Program (featuring four tiers based on Percentage 
Thresholds of National Customer Volume in All Underlying Symbols 
(with certain exclusions) and, for example, providing that tier 2 
requires monthly volumes of at least 0.75% to 1.80% for a $0.12 
credit on simple options transactions and tier 3 requires monthly 
volumes of at least 1.80% to 3.00% for a $0.10 credit on simple 
options transactions).
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    To mitigate the increased qualification standards for ACE Tiers 2 
and 3 based on an OFP's Customer volume transacted Electronically as a 
percentage of total industry Customer equity and ETF options, and to 
encourage additional order flow to the Exchange such that more OFPs 
qualify for each of the Tier [sic], the Exchange proposes to apply a 
proposed volume multiplier to certain volumes, which would increase the 
volumes towards the calculation of the Customer ADV on all ACE Tiers. 
Specifically, the Exchange proposes to amend the ACE Program to provide 
that ``[i]n calculating an OFP's Electronic volume, each Customer order 
that takes liquidity will be weighted as 50% greater (i.e., 1.5 times 
the contract volume) for determining Customer Electronic ADV and Total 
Electronic ADV.\7\ The Exchange believes that applying a higher 
weighting to Customer orders that take liquidity should encourage OFPs 
to direct more liquidity taking orders to the Exchange. In addition, 
with regard to the proposed increases to Tiers 2 and 3, the Exchange 
believes the proposed volume multiplier would provide additional 
incentive to OFP's that are currently achieving--or close to 
achieving--Tiers 2 and 3 to send additional order flow to the Exchange. 
While the Exchange is making it more difficult to achieve these tiers, 
qualifying OFPs will receive an additional benefit as a result.
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    \7\ See proposed Fee Schedule, section I. E. (Amex Customer 
Engagement (``ACE'') Program--Standard Options).
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    Further, the Exchange believes this increase in order flow should 
incentivize market makers that may be rewarded with additional trading 
opportunities to route to lit markets and post better size, which would 
result in better markets (tighter market maker quotes) on the Exchange.
    The proposed modifications to the ACE Program are designed to 
encourage OFPs to direct additional order flow to the Exchange, which 
additional volume and liquidity would benefit all Exchange participants 
through increased opportunities to trade as well as enhancing price 
discovery.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with section 6(b) of the Act,\8\ in general, and furthers the 
objectives of sections 6(b)(4) and (5) of the Act,\9\ 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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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed amendments to the ACE 
Program are reasonable, equitable and not unfairly discriminatory 
because the proposed changes are designed to enhance the 
competitiveness of the Exchange while continuing to encourage 
additional volumes be directed to the Exchange.\10\ Specifically, given 
the level of the benefit the Exchange is offering at Tiers 2 and 3, it 
believes the proposed upward adjustment to certain of the volume 
thresholds is more reflective of the competitive environment such that 
the volume requirements are more commensurate with the benefit offered.
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    \10\ See supra n. 6.
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    The Exchange believes that applying the proposed volume multiplier 
to certain volumes is reasonable, equitable and not unfairly 
discriminatory as it would mitigate the proposed increases to the 
volume thresholds for achieving Tiers 2 and 3, and would increase the 
volumes towards the calculation of the Customer ADV on all ACE Tiers, 
which should encourage OFPs to direct more liquidity taking orders to 
the Exchange. Further, the Exchange believes this increase in order 
flow should incentivize market makers that may be rewarded with 
additional trading opportunities to route to lit markets and post 
better size, which would result in better markets (tighter market maker 
quotes) on the Exchange.
    The Exchange believes that these proposed changes to the ACE 
Program, taken together, would attract more volume and liquidity to the 
Exchange- including taker liquidity, which would benefit all market 
participants by providing more trading opportunities and tighter 
spreads, even to those market participants that do not participate in 
the ACE Program or have not yet been able to qualify for any of the 
Tiers. With regard to the proposed increases to Tiers 2 and 3, the 
Exchange believes the proposed volume multiplier would provide 
additional incentive to OFP's that are currently achieving--or close to 
achieving--Tiers 2 and 3 to send additional order flow to the Exchange. 
While the Exchange is making it more difficult to achieve these tiers, 
qualifying OFPs will receive an additional benefit as a result.
    Finally, the Exchange believes the proposed changes are consistent 
with the Act because, to the extent the modifications permit the 
Exchange to continue to attract greater volume and liquidity, the 
proposed changes would improve the Exchange's overall competitiveness 
and strengthen its market quality for all market participants.
    For these reasons, the Exchange believes that the proposal is 
consistent with the Act.

[[Page 46751]]

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

    In accordance with section 6(b)(8) of the Act,\11\ the Exchange 
does not believe that the proposed rule change would impose any burden 
on competition that is not necessary or appropriate in furtherance of 
the purposes of the Act. The Exchange believes the proposed amendments 
to the ACE Program are pro-competitive as the proposed increased 
qualifications, which make the tiers more competitive,\12\ together 
with the enhanced weighting factor may encourage OFPs to direct 
Customer order flow, particularly taking liquidity, to the Exchange and 
any resulting increase in volume and liquidity to the Exchange would 
benefit all Exchange participants through increased opportunities to 
trade as well as enhancing price discovery, even to those market 
participants that do not participate in the ACE Program or have not yet 
been able to qualify for any of the tiers.
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    \11\ 15 U.S.C. 78f(b)(8).
    \12\ See supra n. 6.
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    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) \13\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \14\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 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) \15\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \15\ 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-NYSEMKT-2016-67 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-NYSEMKT-2016-67. 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 submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NYSEMKT-2016-67, and should 
be submitted on or before August 8, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-16856 Filed 7-15-16; 8:45 am]
 BILLING CODE 8011-01-P