Document ID: SEC-2015-0707-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE MKT, LLC
Posted Date: 2015-04-23T04:00Z

[Federal Register Volume 80, Number 78 (Thursday, April 23, 2015)]
[Notices]
[Pages 22759-22761]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-09428]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74760; File No. SR-NYSEMKT-2015-29]

Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Modifying the NYSE Amex 
Options Fee Schedule Relating to the Amex Customer Engagement Program

April 17, 2015.
    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 April 10, 2015, 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'') related to the Amex Customer Engagement (``ACE'') 
Program. The Exchange proposes to implement the fee change effective 
April 10, 2015. The text of 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 amend existing tiers and add a new 
tier to the ACE Program.
    Section I.E. of the Fee Schedule describes the ACE Program,\3\ 
which currently features four tiers expressed as a percentage of total 
industry Customer equity and ETF option average daily volume 
(``ADV'').\4\ Order Flow Providers (``OFPs'') receive per contract 
credits solely for Electronic Customer volume that the OFP, as agent, 
submits to the Exchange.\5\ The ACE Program offers the following two 
methods for OFPs to receive credits:
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    \3\ See NYSE Amex Options Fee Schedule, available here, https://www.theice.com/publicdocs/nyse/markets/amex-options/NYSE_Amex_Options_Fee_Schedule.pdf.
    \4\ In calculating ADV, the Exchange utilizes monthly reports 
published by the OCC for equity options and ETF options that show 
cleared volume by account type. See OCC Monthly Statistics Reports, 
available here, http://www.theocc.com/webapps/monthly-volume-reports 
(including for equity options and ETF options volume, subtotaled by 
exchange, along with OCC total industry volume). The Exchange 
calculates the total OCC volume for equity and ETF options that 
clear in the Customer account type and divide this total by the 
number of trading days for that month (i.e., any day the Exchange is 
open for business). For example, in a month having 21 trading days 
where there were 252,000,000 equity option and ETF option contracts 
that cleared in the Customer account type, the calculated ADV would 
be 12,000,000 (252,000,000/21= 12,000,000).
    \5\ Electronic Customer volume is volume executed electronically 
through the Exchange System, on behalf of an individual or 
organization that is not a Broker-Dealer and who does not meet the 
definition of a Professional Customer.
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    1. 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 or \6\;
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    \6\ See supra n. 4
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    2. 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

[[Page 22760]]

percentage of total average daily industry Customer equity and ETF 
option volume,\7\ with the further requirement that a specified 
percentage of the minimum volume required to qualify for the Tier must 
be Customer volume.
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    \7\ Id.
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    Upon reaching a higher tier, an OFP would receive for all eligible 
Customer volume the per contract credit associated with the highest 
tier achieved, retroactive to the first contract traded each month, 
regardless of which of the two calculation methods the OFP qualifies 
under.\8\
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    \8\ In the event that an OFP is eligible for credits under both 
calculation methods, the OFP would benefit from whichever criterion 
results in the highest per contract credit for all the OFP's 
eligible ADV. In calculating an OFP's Electronic volume, certain 
volumes are excluded (e.g., QCC trades). See Fee Schedule (Section 
I.E.), supra n. 3.
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    The Exchange proposes to:
    (a) Lower the thresholds required to reach each tier;
    (b) introduce an additional tier, which would be an intermediate 
tier between current tiers 3 and 4; and
    (c) increase the credits available for the highest tier.
    Specifically, the Exchange proposes to modify the ACE Program tiers 
as illustrated in the table below, with proposed additions appearing 
underscored and proposed deletions appearing in brackets:

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                                           ACE Program--Standard options                                Credits payable on customer volume only
                      ----------------------------------------------------------------------------------------------------------------------------------
                                                                   Total electronic ADV (of
                                                                 which 20% or greater of the
         Tier          Customer electronic ADV as a               minimum qualifying volume                         1 Year enhanced     3 Year enhanced
                          % of industry customer                    for each tier must be       Customer volume     customer volume     customer volume
                        equity and ETF options ADV                   customer) as a % of            credits             credits             credits
                                                                   industry customer equity
                                                                     and ETF options ADV
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1....................  0.00% to 0.60% [0.75%]......         OR   N/A........................               $0.00               $0.00               $0.00
2....................  >0.60% [0.75%] to 0.80%       ..........  N/A........................              (0.13)              (0.13)              (0.13)
                        [1.00%].
3....................  >0.80% [1.00%] to 1.25%       ..........  1.50% to 2.50% [3.50%] of                (0.14)              (0.16)              (0.18)
                        [2.00%].                                  which 20% or greater of
                                                                  1.50% must be Customer.
4....................  1.25 to 1.75%....  ..........  2.50% to 3.50%                (0.17)              (0.19)              (0.21)
                                                                  of which 20% or greater of
                                                                  2.50% must be Customer.
5 [4]................  >1.75 [2.00%]...............  ..........  >3.50% of which 20% or          (0.19) [(0.14)]     (0.21) [(0.16)]     (0.23) [(0.20)]
                                                                  greater of 3.5% must be
                                                                  Customer.
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    The proposed amendments to the ACE Program are designed to make 
each of the tiers more achievable, through reduced volume requirements, 
while enhancing the rebates. When combined, the Exchange believes the 
proposed changes to the ACE Program would attract more volume and 
liquidity to the Exchange, which 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,\9\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\10\ 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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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4) and (5).
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    Overall, the Exchange believes that the proposed changes to the ACE 
Program are reasonable, equitable and not unfairly discriminatory 
because the credits offered are based on the amount of business 
transacted on the Exchange. As proposed the ACE Program continues to 
enable an OFP to earn enhanced credits if the OFP has an Affiliated 
NYSE Amex Options Market Maker (i.e., the entities share ``70% common 
ownership'' \11\) that has committed to either of the proposed 
Prepayment Programs, per Section I.D. of the Fee Schedule (each an 
``Affiliated OFP''). As the Exchange explained in further detail when 
it introduced the ACE Program in January 2015, it is not unreasonable, 
inequitable or unfairly discriminatory to offer to offer [sic] 
Affiliated OFPs enhanced discounts or credits for several reasons.\12\ 
In short, the Exchange believes that offering the ACE Program enhanced 
credits recognizes that such Affiliated OFPs have a shared economic 
interest with its affiliated Market Maker, which is subject to 
heightened obligations and costs.\13\ By contrast, non-Affiliated OFPs 
do not share economic interests with a Market Maker that is subject to 
higher obligations and costs. In addition, each non-Affiliated OFP has 
the opportunity to establish such an affiliation by several means, 
including but not limited to, a business combination (e.g., merger or 
acquisition) or the establishment of their own market making operation, 
which as a Broker-Dealer, each OFP has the potential to establish.
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    \11\ See Fee Schedule, Key Terms and Definitions, supra n. 3 
(defining Affiliates as ``a person that directly or indirectly 
through one or more intermediaries, has a 70% common ownership with, 
the person specified'').
    \12\ See Securities Exchange Act Release No. 74086 (January 16, 
2015), 80 FR 3701, 3711-12 (January 23, 2015) (SR-NYSEMKT-2015-04) 
(Notice of Filing of fee change to adopt the ACE Program).
    \13\ See, e.g., Rule 925.1NY(c) (setting forth requirement that 
Marker Makers maintain active two-sided markets in the classes in 
which they are appointed, and must meet certain minimum quoting 
requirements). See also Fee Schedule, Sections III.A., C. and D., 
supra n. 3 (setting forth higher fixed costs imposed on Marker 
Makers that are not assessed upon other market participants, 
including relatively more expensive ATP fees applicable to Market 
Makers, Rights Fees, and Premium Product Fees).
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    In addition, the Exchange believes that the proposed amendments to 
the ACE Program are reasonable, equitable and not unfairly 
discriminatory because they would enhance the incentives to OFPs to 
transact Customer orders on the Exchange, 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. Additionally, the

[[Page 22761]]

Exchange believes the proposed changes to the ACE Program are 
consistent with the Act because they may attract greater volume and 
liquidity to the Exchange, which would benefit all market participants 
by providing tighter quoting and better prices, all of which perfects 
the mechanism for a free and open market and national market system.
    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,\14\ 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. The Exchange believes the proposed amendments 
to the ACE Program are pro-competitive as the proposed reduced volume 
thresholds and increased rebates may encourage OFPs to direct Customer 
order flow to the Exchange and any resulting increase in volume and 
liquidity to the Exchange would benefit all of Exchange participants 
through increased opportunities to trade as well as enhancing price 
discovery.
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    \14\ 15 U.S.C. 78f(b)(8).
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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) \15\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \16\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 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) \17\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \17\ 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-2015-29 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-2015-29. 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 such filing also will be available 
for inspection and copying at the principal offices 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-2015-
29, and should be submitted on or before May 14, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-09428 Filed 4-22-15; 8:45 am]
 BILLING CODE 8011-01-P