Document ID: SEC-2017-0969-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2017-06-07T04:00Z

[Federal Register Volume 82, Number 108 (Wednesday, June 7, 2017)]
[Notices]
[Pages 26532-26534]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-11749]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80838; File No. SR-NYSEArca-2017-61]

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

June 1, 2017.
    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 May 31, 2017, NYSE Arca, Inc. (the ``Exchange'' or 
``NYSE Arca'') 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 the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend the NYSE Arca Options Fee Schedule 
(``Fee Schedule'') with respect to the Lead Market Maker (``LMM'') 
Rights Fee. The Exchange proposes to implement the fee change effective 
June 1, 2017. 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 purpose of this filing is to modify the calculation of the 
threshold for qualification for the LMM Rights Fee discount.
    The LMM Rights Fee is charged ``on a per issue basis to the OTP 
Firm acting as LMM in the issue.'' \4\ The Exchange charges a Rights 
Fee on each issue in a LMM's allocation, with rates based on the 
Average National Daily Customer Contracts. LMMs are also able to 
achieve a 50% discount to their total monthly LMM Rights Fee by 
achieving an average daily volume (``ADV'') of 50,000 contracts, of 
which at least 10,000 are within its LMM Appointment (the 
``Discount'').\5\
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    \4\ See Fee Schedule, available here, https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf (NYSE Arca General Options and 
Trading Permit (OTP) Fee, Lead Market Maker Rights Fee).
    \5\ See id., endnote 2.
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    The Exchange proposes to replace the static minimum contract 
thresholds of 50,000 and 10,000 with market share criteria expressed as 
a percentage of Total Industry Customer Equity and exchange traded fund 
(``ETF'') option ADV (``TCADV'').\6\ The Exchange believes this 
proposed modification would enable Market Makers to achieve the 
Discount more consistently, despite monthly or seasonal fluctuations in 
industry volume. The Exchange is not proposing to adjust the source of 
the qualifying volume for each component of the Discount, as this 
criterion will remain the same.
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    \6\ The volume thresholds are based on Market Makers' volume 
transacted electronically as a percentage of total industry Customer 
equity and ETF options volumes as reported by the Options Clearing 
Corporation (the ``OCC''). 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.
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    Specifically, the Exchange proposes the market share requirements 
for achieving the Discount as follows: ``An LMM with daily contract 
volume traded electronically of at least 0.40% Total Industry Customer 
equity and ETF option ADV (`TCADV'), of which 0.08% TCADV are within 
its LMM appointment, will be charged 50% of the monthly Lead Market 
Maker Rights Fee.'' \7\ The Exchange notes that the TCADV percentages 
proposed are a

[[Page 26533]]

rough equivalent to the existing 50,000 and 10,000 ADV contract 
thresholds, based on TCADV for the First Quarter of 2017.
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    \7\ See proposed Fee Schedule, endnote 2.
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    The Exchange is not proposing any changes to the amount of the LMM 
Rights Fees or any of the other available per issue discounts to the 
LMM Rights Fee.
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 modifying the qualification calculation 
for the Discount from a static monthly contract amount to a percentage 
of TCADV is reasonable, equitable, and not unfairly discriminatory 
because it would make the Discount more consistently achievable as the 
calculation will be more aligned with fluctuations in overall monthly 
industry volume. The Exchange believes the proposed change is not 
unfairly discriminatory because the proposed benchmark of TCADV is tied 
to the amount of monthly volume executed on the Exchange, which would 
incentivize and reward consistent order flow month-to-month. The 
Exchange notes that other options exchanges likewise utilize 
percentages of market share as a benchmark in determining eligibility 
for monthly [sic] certain credits or rebates.\10\ The Exchange also 
believes the proposed change would help to prevent LMMs from achieving 
the Discount only during periods of heavy volumes or from being 
penalized (i.e., not achieving the Discount) during months of overall 
lower volumes on the Exchange. The Exchange notes that there is only 
one LMM per issue, and only LMMs are subject to the LMM Rights Fee, 
therefore the proposed discount is not unfairly discriminatory.
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    \10\ See, e.g., Fee Schedule, supra note 4 (Customer and 
Professional Customer Monthly Posting Credit Tiers and 
Qualifications for Executions in Penny Pilot Issues and Customer and 
Professional Customer Posting Credit Tiers In Non Penny Pilot 
Issues, both based on percentage of TCADV); NASDAQ Options Market 
fee schedule, available at, http://www.nasdaqtrader.com/Micro.aspx?id=optionsPricing (NOM Market Maker Rebate to Add 
Liquidity in Penny Pilot Options based on total industry customer 
equity and ETF option ADV contracts per day in a month); BATS 
Options Exchange fee schedule, available at, http://www.batsoptions.com/support/fee_schedule/ (Market Maker and Non-BATS 
Market Maker Penny Pilot Add Volume Tiers Market Maker and Non-BATS 
Market Maker Non Penny Pilot Add Volume Tiers, both based on 
percentage of total consolidated monthly volume calculated).
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    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,\11\ 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. By adjusting the qualifications to a market 
share basis rather than per contract volume levels, the Exchange 
believes the proposed change encourages competition without undue 
burden by being based on a share of overall business rather than a 
static volume amount.
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    \11\ 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) \12\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \13\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 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) \14\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \14\ 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-NYSEArca-2017-61 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-2017-61. 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

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should refer to File Number SR-NYSEArca-2017-61, and should be 
submitted on or before June 28, 2017.
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    \15\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-11749 Filed 6-6-17; 8:45 am]
 BILLING CODE 8011-01-P