Document ID: SEC-2014-1364-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE MKT LLC
Posted Date: 2014-08-13T04:00Z

[Federal Register Volume 79, Number 156 (Wednesday, August 13, 2014)]
[Notices]
[Pages 47485-47487]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-19098]

=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72790; File No. SR-NYSEMKT-2014-66]

Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change To Amend the NYSE Amex 
Options Fee Schedule in a Number of Different Ways

August 7, 2014.
    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 August 1, 2014, NYSE MKT LLC (the ``Exchange'' or ``NYSE 
MKT'') 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C.78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange proposes to to amend the NYSE Amex Options Fee 
Schedule (``Fee Schedule'') in a number of different ways. The proposed 
changes will be operative on August 1, 2014. 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend the Fee Schedule in a number of 
different ways as described below. The proposed changes will be 
operative on August 1, 2014.
    First, the Exchange proposes to increase fees for Firm Proprietary 
\4\ electronic transactions in Penny Pilot issues. Specifically, the 
Exchange is proposing a fee of $0.34 per contract (increased from $0.32 
per contract) for electronic Firm Proprietary transactions in Penny 
Pilot issues.
---------------------------------------------------------------------------

    \4\ ``Firm Proprietary'' transactions refer to trades the Firm 
is entering into on a proprietary basis as opposed to trades entered 
into in order to facilitate the activity of one of Firm's customers, 
which is referred to as a ``Firm Facilitation'' trade on the NYSE 
Amex Options Fee Schedule. Throughout this filing, the Exchange's 
reference to Firm or Firms shall mean transactions the Firm is 
executing electronically on a proprietary basis.
---------------------------------------------------------------------------

    Separately, the Exchange is proposing a fee of $0.44 per contract 
charged to Broker Dealers, Professional Customers, and Non NYSE Amex 
Options Market Makers that electronically transact in Penny Pilot 
issues. Currently, Broker Dealers, and Professional Customers pay

[[Page 47486]]

$0.32 per contract, and Non NYSE Amex Options Market Makers pay $0.43 
per contract, for electronic transactions in Penny Pilot issues.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6(b) \5\ of the Act, in general, and 
Section 6(b)(4) and (5) \6\ 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.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    The Exchange believes that the proposal to increase fees for 
electronic transactions in Penny Pilot issues for Firms, Broker 
Dealers, Professional Customers, and Non NYSE Amex Options Market 
Makers is reasonable, equitable and not unfairly discriminatory for the 
following reasons. First, the Exchange notes that the proposed per 
contract fee of $0.44 for electronic Broker Dealers, Professional 
Customers, and Non NYSE Amex Options Market Makers and $0.34 for Firm 
Proprietary transactions, are both within the range of fees charged by 
other exchanges for Broker Dealers, Professional Customers, Non NYSE 
Amex Options Market Makers and Firms that electronically transact in 
Penny Pilot issues.\7\
---------------------------------------------------------------------------

    \7\ See NASDAQ OMX PHLX (``PHLX'') fee schedule, as of July 23, 
2014, located here: http://www.nasdaqtrader.com/Micro.aspx?id=phlxpricing. PHLX charges Professionals, Broker 
Dealers, and Firms $0.48 per contract to transact electronically in 
Penny Pilot issues. See also the Nasdaq Options Market (``NOM'') fee 
schedule located here: http://www.nasdaqtrader.com/Micro.aspx?id=OptionsPricing. NOM charges $0.49 per contract in 
Penny Pilot issues for Professionals, Broker Dealers, Firms and Non 
NOM Market Makers that take liquidity.
---------------------------------------------------------------------------

    In addition, the Exchange notes that NYSE Amex Options Market 
Makers are subject to other fees that are either higher than those 
charged to--or not at all charged to--Broker Dealers, Professional 
Customers, Non NYSE Amex Options Market Makers and Firms, such as ATP 
Permit fees and Rights Fees.\8\ For example, in order to transact 
electronically on the Exchange, a NYSE Amex Options Market Maker is 
required to have at least one options trading permit (``ATP'') that 
allows it to quote sixty issues, plus the bottom 45% of issues traded 
on the Exchange by volume. The cost of one ATP is $8,000 per month. A 
NYSE Amex Options Market Maker that wishes to transact electronically 
in all issues on the Exchange is required to have five ATPs, at a 
monthly cost of $26,000. By comparison, in order to transact 
electronically on the Exchange, Broker Dealers, Professional Customers, 
Non NYSE Amex Options Market Makers and Firms are only required to have 
a single ATP, at a monthly cost of $1,000.\9\ The Exchange notes the 
monthly cost differential of $7,000 to $25,000 in ATP fees paid by NYSE 
Amex Options Market Makers, while Broker Dealers, Professional 
Customers, Non NYSE Amex Options Market Makers and Firms incur no such 
cost. Further, the Exchange notes that a large subset of NYSE Amex 
Options Market Makers (Specialists, e-Specialists and Directed Order 
Market Makers) also incur monthly Rights Fees, which are not charged to 
Broker Dealers, Professional Customers, Non NYSE Amex Options Market 
Makers and Firms. Therefore, while the NYSE Amex Options Markets Makers 
may be charged a lower per contract rate than the rate proposed for 
Broker Dealers, Professional Customers, Non NYSE Amex Options Market 
Makers and Firms transacting electronically in Penny Pilot issues, when 
all costs to these participants are considered, the cost differential 
is much less. Thus, the Exchange believes that charging non-NYSE Amex 
Market Makers a higher rate to transact electronically in Penny Pilot 
issues is equitable and reasonable and not unfairly discriminatory vis-
[agrave]-vis NYSE Amex Market Makers because the higher rate is 
designed to reflect the costs to the Exchange in supporting trading in 
Penny Pilot issues.\10\
---------------------------------------------------------------------------

    \8\ See NYSE Amex Options Fee Schedule dated August 1, 2014 
located here: https://www.nyse.com/publicdocs/nyse/markets/amex-options/NYSE_Amex_Options_Fee_Schedule.pdf.
    \9\ Of the participants in question, only Firms are members of 
the Exchange that are billed directly for any ATPs they own. All of 
the other participants conduct business through an Exchange member 
that is only required to have a single ATP for all business that 
flows through them. For example, an Order Flow Provider with a 
single ATP may route electronic orders to the Exchange on behalf of 
Broker Dealers, Professional Customers and Non NYSE Amex Options 
Market Makers.
    \10\ The Exchange notes that this higher rate is still below the 
rate charged to an NYSE Amex Options Market Maker--Non Directed that 
electronically trades with a Customer, which rate would be $0.45, 
comprised of a $0.20 transaction fee plus a $0.25 marketing charge. 
See supra n. 8.
---------------------------------------------------------------------------

    As noted above, for electronic transactions in Penny Pilot issues, 
the Exchange proposes to charge $0.34 to Firms and $0.44 to Broker 
Dealers, Professional Customers, and Non NYSE Amex Options Market 
Makers. The Exchange believes that the per contract differential 
between these market participants is reasonable, equitable and not 
unfairly discriminatory because, among other reasons (discussed below), 
the rate differential falls within the range that already exists in the 
industry. For example, Clearing Trading Permit Holder Proprietary (the 
equivalent of a Firm Proprietary transaction on NYSE Amex) electronic 
transactions on the Chicago Board Options Exchange (``CBOE'') are 
charged $0.35 per contract in Penny Pilot issues, while Professionals, 
Voluntary Professionals, JBO Participants, Broker Dealers and Non-
Trading Permit Holder Market Makers on the CBOE are charged $0.45 per 
contract for electronic transactions in Penny Pilot issues.\11\ Thus, 
the Exchange believes that imposing a fee differential similar to one 
in existence on a competing exchange--on similar market participants, 
for the same types of transactions--is likewise reasonable, equitable 
and not unfairly discriminatory. Further, the Exchange notes that the 
Miami International Securities Exchange LLC (``MIAX'') recently adopted 
a monthly Firm fee cap for electronic Firm transactions.\12\ In 
adopting the monthly Firm fee cap, which applied solely to Firms, MIAX 
stated:
---------------------------------------------------------------------------

    \11\ See the CBOE fee schedule as of, July 1, 2014, located 
here: http://www.cboe.com/publish/feeschedule/CBOEFeeSchedule.pdf.
    \12\ See Securities and Exchange Release No. 72583 (SR-MIAX-
2014-37) (July 10, 2014), 79 FR 41612 (July 16, 2014).

    Providing a fee cap for Firms and not for other types of 
transactions is not unfairly discriminatory, because it is intended 
as a competitive response to create an additional incentive for 
Firms to send order flow to the Exchange in a manner consistent with 
other exchanges. Firms that value such incentives will have another 
venue to send their order flow. To the extent that there is 
additional competitive burden on non-Firm Members, the Exchange 
believes that this is appropriate because the proposal should incent 
Members to direct additional order flow to the Exchange and thus 
provide additional liquidity that enhances the quality of its 
markets and increases the volume of contracts traded here. To the 
extent that this purpose is achieved, all the Exchange's market 
participants should benefit from the improved market liquidity. 
Enhanced market quality and increased transaction volume that 
results from the anticipated increase in order flow directed to the 
Exchange will benefit all market participants and improve 
competition on the Exchange.\13\
---------------------------------------------------------------------------

    \13\ Id., 79 FR at 41613.

    Similar to the reasons articulated by MIAX, the Exchange also 
believes the proposed fee change is not unfairly discriminatory as it 
is designed to attract order flow to the Exchange in a manner 
consistent with other exchanges, which will, in turn, increase

[[Page 47487]]

liquidity and enhance the quality of the market to the benefit of the 
investing public. For the forgoing reasons, the Exchange believes that 
the proposal to charge $0.44 per contract to Broker Dealers, 
Professional Customers, Non NYSE Amex Options Market Makers and $0.34 
to Firms for electronic tractions in Penny Pilot issues is reasonable, 
equitable and not unfairly discriminatory. The Exchange believes that 
the proposed fees are also reasonable, equitable and not unfairly 
discriminatory because the proposed fee changes will apply equally to 
all Broker Dealers, Professional Customers, Non NYSE Amex Options 
Market Makers and Firms electronically executed volumes in Penny Pilot 
issues on the Exchange.

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 not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange believes the 
proposed fee change is reasonably designed to be fair and equitable, 
and therefore, will not unduly burden any particular group of market 
participants trading on the Exchange vis-[agrave]-vis another group 
(i.e., Market Markers versus non-Market Makers or Firms versus non-
Firms). Specifically, the Exchange believes that Broker Dealers, 
Professional Customers, Non NYSE Amex Options Market Makers and Firms 
that are not subject to the additional dues and fees of NYSE Amex 
Options Market Makers, will not be unduly burdened by the increased 
transaction fee. Moreover, with respect to the fee differential between 
Firms versus Broker Dealers, Professional Customers, Non NYSE Amex 
Options Market Makers, the proposed fees are lower than the range of 
similar transaction fees found on other options exchanges; therefore, 
the Exchange believes the proposal is consistent with robust 
competition by increasing the intermarket competition for order flow 
from Firms. To the extent that there is additional competitive burden 
on non-Firm ATP Holders, the Exchange believes that this is appropriate 
because the proposal should incent ATP Holders to direct additional 
order flow to the Exchange and thus provide additional liquidity that 
enhances the quality of its markets and increases the volume of 
contracts traded here, which, in turn, benefits the investing public. 
In addition, the Exchange believes that the proposed changes will 
enhance the competiveness of the Exchange relative to other exchanges. 
The Exchange notes that it operates in a highly competitive market in 
which market participants can readily favor competing venues if they 
deem fee levels at a particular venue to be excessive. In such an 
environment, the Exchange must continually review, and consider 
adjusting, its fees and credits to remain competitive with other 
exchanges and to attract order flow. 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) \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.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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-2014-66 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-2014-66. 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 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-2014-66, and should 
be submitted on or before September 3, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
---------------------------------------------------------------------------

    \17\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-19098 Filed 8-12-14; 8:45 am]
BILLING CODE 8011-01-P