Document ID: SEC-2018-0557-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE American, LLC
Posted Date: 2018-04-10T04:00Z

[Federal Register Volume 83, Number 69 (Tuesday, April 10, 2018)]
[Notices]
[Pages 15442-15444]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-07243]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82992; File No. SR-NYSEAMER-2018-11]

Self-Regulatory Organizations; NYSE American LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Change To Amend the NYSE 
Amex Options Fee Schedule With Respect to the Options Regulatory Fee

April 4, 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 March 23, 2018, NYSE American LLC (the ``Exchange'' or 
``NYSE American'') 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 Amex Options Fee Schedule 
(``Fee Schedule'') by modifying the description of the Options 
Regulatory Fee (``ORF''). 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 Exchange proposes to amend the Fee Schedule to clarify the 
description of the ORF. The Exchange charges an ORF in the amount of 
$0.0055 per contract side. The proposed rule change does not change the 
amount of the ORF, but instead modifies the rule text to clarify how 
the ORF is assessed and collected. Currently, the Exchange describes 
the ORF as follows:

    The ORF will be assessed on each ATP Holder for all options 
transactions, including Mini Options, executed or cleared by the ATP 
Holder that are cleared by the OCC in the customer range regardless 
of the exchange on which the transaction occurs. The fee is 
collected indirectly from ATP Holders through their clearing firms 
by the OCC on behalf of NYSE American. Effective December 1, 2012, 
an ATP Holder shall not be assessed the fee until it has satisfied 
applicable technological requirements necessary to commence 
operations on NYSE American. The Exchange may only increase or 
decrease the ORF semi-annually, and any such fee change will be 
effective on the first business day of February or August. The 
Exchange will notify participants via a Trader Update of any change 
in the amount of the fee at least 30 calendar days prior to the 
effective date of the change.\4\
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    \4\ See Fee Schedule, Section VII, Regulatory Fees, ORF, 
available here, https://www.nyse.com/publicdocs/nyse/markets/american-options/NYSE_American_Options_Fee_Schedule.pdf.

    The Exchange proposes to modify this description to more accurately 
reflect how the ORF is imposed. Specifically, the ORF is assessed to 
each ATP Holder for all options transactions cleared (but not 
necessarily executed) by an ATP Holder through the OCC in the customer 
range regardless of the exchange on which the transaction occurs. The 
ORF is only assessed to ATP Holders that act as the clearing firm for 
the transaction, regardless of whether the executing firm (if different 
from the clearing firm) is an ATP Holder.\5\ Thus, the Exchange 
proposes to delete the words ``executed or'' from the current 
description of the ORF and to make clear that the ORF is assessed ``to 
each ATP Holder'' on transactions ``that are cleared by the ATP Holder 
through the OCC'' and that the ORF is ``collected from ATP Holder 
clearing firms by OCC on behalf of NYSE American.'' \6\ The Exchange 
also proposes to clarify that it ``uses reports from OCC when assessing 
and collecting the ORF.'' \7\ The Exchange believes these changes would 
clarify how the ORF is assessed and collected. To illustrate how the 
ORF is assessed and collected, the Exchange provides the following set 
of scenarios.
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    \5\ The Exchange uses reports from OCC to determine the identity 
of the clearing firm and compares that to the list of ATP Holders 
for billing purposes.
    \6\ See proposed Fee Schedule, Section VII, Regulatory Fees, 
ORF. In connection with the proposed revisions, the Exchange 
proposes to remove as redundant the word ``indirectly'' from the 
sentence explaining that the OCC collects the ORF from the ATP 
Holder clearing firm. See id.
    \7\ See id. See supra note 5.
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    Scenario 1:
    Executing (or Give-Up) Firm is not an ATP Holder. The Executing 
Firm does not ``give-up'' or ``CMTA'' the transaction to another 
clearing firm.\8\
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    \8\ A CMTA or Clearing Member Trade Assignment is an agreement 
by which an investor may enter derivative trades with a limited 
number of different brokers and later consolidate these trades with 
one brokerage house for clearing.
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    No ORF Fee is assessed.
    Scenario 2:
    Executing Firm is an ATP Holder. The Executing Firm ``give-ups'' or 
``CMTAs'' the transaction to another clearing firm that is not an ATP 
Holder.
    No ORF Fee is assessed.
    Scenario 3:
    The Executing (or Give-Up) Firm is an ATP Holder. The Executing 
Firm does not ``give-up'' or ``CMTA'' the transaction to another 
clearing firm.
    ORF Fee is assessed on the self-clearing Executing Firm.
    Scenario 4:
    The Executing (or Give-Up) Firm is an ATP Holder. The Executing 
Firm ``give-ups'' or ``CMTAs'' the transaction to

[[Page 15443]]

another clearing firm that is also an ATP Holder.
    ORF Fee is assessed on the CMTA (clearing) firm.
    Scenario 5:
    The Executing (or Give-Up) Firm is not an ATP Holder. The Executing 
Firm ``give-ups'' or ``CMTAs'' the transaction to another clearing firm 
that is an ATP Holder.
    ORF Fee is assessed on the CMTA (clearing) firm.
* * * * *
    As illustrated above, the Exchange does not assess the ORF on non-
ATP Holders that self-clear transactions, even if the executing firm is 
an ATP Holder; the Exchange likewise does not impose the ORF if both 
the executing firm and the firm that clears the transaction on its 
behalf are non-ATP Holders.\9\
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    \9\ Although the Exchange believes that its broad regulatory 
responsibilities would support applying the ORF to transactions that 
are executed (even if not ultimately cleared) by an ATP Holder, the 
Exchange only imposes the ORF on transactions ultimately cleared by 
ATP Holders at this time. The Exchange's regulatory responsibilities 
are the same regardless of whether an ATP Holder enters a 
transaction or clears a transaction. The Exchange regularly reviews 
all such activities, including monitoring surveillance for position 
limit violations, manipulation, front-running, contrary exercise 
advice violations and insider trading. These activities span across 
multiple exchanges.
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    The Exchange proposes to modify the Fee Schedule to make clear that 
it does not assess the ORF on outbound linkage trades.\10\ ``Linkage 
trades'' are tagged in the Exchange's system, so the Exchange can 
distinguish them from other trades. A customer order routed to another 
exchange results in two customer trades, one from the originating 
exchange and one from the recipient exchange. Charging ORF on both 
trades could result in double-billing of ORF for a single customer 
order, thus the Exchange will not assess ORF on outbound linkage trades 
in a linkage scenario.
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    \10\ See proposed Fee Schedule, Section VII, Regulatory Fees, 
ORF.
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    To further streamline the Fee Schedule, the Exchange also proposes 
to delete superfluous and obsolete references to long-past effective 
dates. Specifically, the Exchange proposes to delete references to the 
effective dates of December 1, 2012 and February 3, 2014, which would 
add clarity and transparency to the Fee Schedule.\11\
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    \11\ See id.
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    The Exchange notes that the ORF is designed to recover a material 
portion of the costs to the Exchange of the supervision and regulation 
of ATP Holder Customer transactions, including performing routine 
surveillances and investigations, as well as policy, rulemaking, 
interpretive, and enforcement activities. The Exchange monitors the 
amount of revenue collected from the ORF to ensure that this revenue, 
in combination with other regulatory fees and fines, does not exceed 
regulatory costs. The Exchange may only increase or decrease the ORF 
semi-annually, and any such fee change will be effective on the first 
business day of February or August. If the Exchange determines that 
regulatory revenues exceed regulatory costs, the Exchange will adjust 
the ORF by submitting a fee filing and notifying ATP Holders via Trader 
Update at least 30 days prior to the effective date. The Exchange 
believes that revenue generated from the ORF, when combined with all of 
the Exchange's other regulatory fees and fines, will cover a material 
portion of the Exchange's regulatory costs.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6(b) \12\ of the Act, in general, and 
Section 6(b)(4) and (5) \13\ of the Act, in particular, in that it is 
designed to provide for the equitable allocation of reasonable dues, 
fees, and other charges among its members 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 changes to the description of 
ORF are reasonable, equitable and not unfairly discriminatory because 
the changes add clarity and transparency to the Fee Schedule by more 
accurately describing how the ORF is assessed and collected. The 
proposed change does not alter the operation of the ORF, nor does it 
alter the per contract rate of the ORF. The Exchange believes that 
specifying that OCC files are used to determine the assessment and 
collection of the ORF would add clarity and transparency to the Fee 
Schedule.
    The Exchange believes it is reasonable, equitable and not unfairly 
discriminatory to opt to not to assess and collect the ORF when neither 
the executing firm nor the CMTA (clearing) firm is an ATP Holder 
because such entities are not members of the Exchange. Although the 
Exchange believes that its broad regulatory responsibilities would 
support applying the ORF to transactions that are executed (even if not 
ultimately cleared) by an ATP Holder, because its regulatory 
responsibilities are the same regardless of whether an ATP Holder 
executes a transaction or clears a transaction, at this time the 
Exchange imposes the ORF solely on transactions ultimately cleared by 
ATP Holders.
    The Exchange believes the ORF is equitable and not unfairly 
discriminatory because it is assessed to all ATP Holders on all their 
transactions that clear as customer at the OCC. The Exchange believes 
it is appropriate to assess the ORF only to transactions that clear as 
customer at the OCC because regulating ATP Holder' customer trading 
activity is more labor intensive and requires greater expenditure of 
human and technical resources than regulating ATP Holders' non-customer 
trading activity. The Exchange believes the ORF is designed to be fair 
by assessing fees to those ATP Holders that require more Exchange 
regulatory services based on the amount of customer options business 
they conduct.
    The Exchange believes it is reasonable, equitable and 
nondiscriminatory to not impose the ORF on outbound linkage trades. 
Linkage trades'' are tagged in the Exchange's system, so the Exchange 
can distinguish them from other trades. A customer order routed to 
another exchange results in two customer trades, one from the 
originating exchange and one from the recipient exchange. Charging ORF 
on both trades could result in double-billing of ORF for a single 
customer order, thus the Exchange will not assess ORF on outbound 
linkage trades in a linkage scenario.
    The Exchange believes that the proposal deleting outdated reference 
to long-past effective dates and removing the word ``indirectly'' is 
reasonable as it would streamline the Fee Schedule by removing 
superfluous language thereby making the Fee Schedule easier for market 
participants to navigate.
    The ORF is designed to recover a material portion of the costs to 
the Exchange of the supervision and regulation of ATP Holder customer 
options business, including performing routine surveillances and 
investigations, as well as policy, rulemaking, interpretive, and 
enforcement activities. The Exchange monitors the amount of revenue 
collected from the ORF to ensure that this revenue, in combination with 
other regulatory fees and fines, does not exceed regulatory costs. The 
Exchange has designed the ORF to generate revenues that, when combined 
with all of the Exchange's other regulatory fees, would be less than or 
equal to the Exchange's regulatory costs, which is consistent with the 
view of the Securities and Exchange Commission (``Commission'') that 
regulatory fees be

[[Page 15444]]

used for regulatory purposes and not to support the Exchange's business 
side. In this regard, the Exchange believes that the ORF is reasonable.

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

    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 proposed rule change is 
not intended to address any competitive issues but rather to provide 
more clarity and transparency regarding how the Exchange assesses and 
collects the ORF. The Exchange believes any burden on competition 
imposed by the proposed rule change is outweighed by the need to help 
the Exchange adequately fund its regulatory activities to ensure 
compliance with the Exchange Act.

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) \14\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \15\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 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) \16\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \16\ 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 [email protected]. Please include 
File No. SR-NYSEAMER-2018-11 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 No. SR-NYSEAMER-2018-11. 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 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 No. SR-NYSEAMER-2018-11, and should be submitted 
on or before May 1, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-07243 Filed 4-9-18; 8:45 am]
 BILLING CODE 8011-01-P