Document ID: SEC-2019-0502-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2019-04-17T04:00Z

[Federal Register Volume 84, Number 74 (Wednesday, April 17, 2019)]
[Notices]
[Pages 16066-16068]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-07620]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85620; File No. SR-NYSEARCA-2019-25]

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

April 11, 2019.
    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 April 9, 2019, NYSE Arca, Inc. (``NYSE Arca'' or the 
``Exchange'') 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 modify the NYSE Arca Options Fee Schedule 
(``Fee Schedule''). The Exchange proposes to implement the fee change 
effective April 9, 2019.\4\ 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.
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    \4\ On March 29, 2019, the Exchange filed to amend the Fee 
Schedule for effectiveness on April 1, 2019 (SR-NYSEArca-2019-20) 
and withdrew such filing on April 9, 2019.
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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 Fee Schedule, effective 
April 9, 2019, to amend the criteria for achieving a discount on the 
LMM Rights Fee.
    The LMM Rights Fee (``Rights Fee'') is charged ``on a per issue 
basis to the OTP Firm acting as LMM in the issue.'' \5\ 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 Rights Fee by 
achieving 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 in its LMM appointment (the ``Discount'').\6\ The 
Exchange proposes to modify the criteria for achieving the Discount in 
two ways. First, the Exchange proposes to reduce the minimum TCADV 
threshold from 0.40% to 0.32%, but still

[[Page 16067]]

require that 0.08% TCADV be in its LMM appointment.\7\ The Exchange 
also proposes to add an alternative means of achieving the Discount. As 
proposed, if an LMM achieves at least 0.75% of TCADV in manual 
transactions in all account types, which may include ``transaction 
volume from the OTP Holder's or OTP Firm's affiliates (per Endnote 8) 
or Appointed OFP (per Endnote 15),'' which Endnotes define affiliates 
and Appointed OFPs, respectively, that LMM could also qualify for the 
Discount.\8\ The Exchange would continue to determine whether an LMM 
qualifies for the Discount based on the daily contract volume traded 
electronically in a calendar month. The Exchange proposes to further 
amend the Fee Schedule so that it would determine whether the LMM 
qualifies for the Discount by also assessing the daily contract volume 
traded manually by an LMM and affiliated/appointed entities each 
trading day in a calendar month.\9\
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    \5\ See Fee Schedule, Endnote 2, available here, https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf. See also, Fee Schedule, NYSE 
Arca General Options and Trading Permit (OTP) Fee, Lead Market Maker 
Rights Fee. Because the Fee Schedule already reflects that Endnote 2 
applies to all issues in an LMM's appointment, regardless of the 
Average National Daily Customer Contracts, the Exchange proposes to 
remove the references to Endnote 2 that appear next to the Rights 
Fee for issues with applicable volume of 0-2,000. See proposed Fee 
Schedule, NYSE Arca General Options and Trading Permit (OTP) Fee, 
Lead Market Maker Rights Fee.
    \6\ See id. (providing the Discount criteria). The Exchange also 
offers activity-based discounts (i.e., on total electronic volume 
and total posted volume) to LMMs with the most actively traded 
issues in their appointment. The Discount is applied to the total 
monthly rights fee after any such discounts are applied. The 
Exchange is not proposing any changes to the activity-based 
discounts to the LMM Rights Fee.
    \7\ See proposed Fee Schedule, Endnote 2. The Exchange also 
proposes to restructure the sentence regarding the Discount to put 
the amount of the Discount first, followed by the criteria needed to 
achieve the discount, which would add clarity and transparency to 
the Fee Schedule making it easier to navigate and comprehend. See 
id.
    \8\ See id. Endnote 8 of the Fee Schedule cites to Rule 1.1(a), 
which defines an affiliate as being a person that directly, or 
indirectly through one or more intermediaries, controls or is 
controlled by, or is under common control with, the person 
specified). Endnote 15 of the Fee Schedule, an ``Appointed OFP'' is 
an OFP that has been designated by an NYSE Arca Market Maker for 
purposes of the Fee Schedule.
    \9\ See proposed Fee Schedule, Endnote 2.
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    The Exchange believes the proposed modifications would encourage 
LMMs to apply for issues to be added to their appointment, and to 
encourage participation in manual transactions.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act, in general, and furthers the objectives 
of Sections 6(b)(4) and (5) of the Act, 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.
    The Exchange believes that providing modifications to the Rights 
Fee is reasonable, equitable, and not unfairly discriminatory because, 
among other things, it makes the Discount more achievable by lowering 
the threshold for electronic transactions and providing an alternative 
means of achieving the Discount based on manual transactions. The 
proposed Discount is not unfairly discriminatory because Rights Fees 
are only assessed on LMMs and there is only one LMM per issue. The 
proposed reduction of the existing qualifying threshold would make the 
Discount more achievable for LMMs and may encourage LMMs to apply for 
issues to be added to their appointment. The proposed new alternative 
threshold, which allows LMMs to pool their manual volume with 
affiliates and/or Appointed OFPs, is reasonable, equitable, and not 
unfairly discriminatory because it would encourage participation in 
manual transactions. Any increase in volume executed in open outcry on 
the Exchange would benefit all market participants by expanding 
liquidity and providing more trading opportunities, even to market 
participants that do not execute manual transactions. The Exchange 
notes that allowing market participants to aggregate volume with 
affiliates or Appointed OFPs (or Appointed Market Makers) is not new or 
novel, as the Exchange allows OTPs to aggregate such volume for 
purposes of meeting certain pricing Tiers/Incentives.\10\ The Exchange 
believes that the qualifying threshold for this alternative basis for 
achieving the Discount is reasonable, equitable, and not unfairly 
discriminatory because it is more than double the proposed new 
threshold that is based solely on LMM volume (i.e., 0.32% v. 0.75%) and 
therefore ensures that LMMs that do not have affiliates/Appointed OFPs 
and/or do not transact significant manual volume would continue to have 
the ability to meet the criteria for the Discount.
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    \10\ See e.g., NYSE Arca OPTIONS: TRADE-RELATED CHARGES FOR 
STANDARD OPTIONS (which sets forth the various programs for 
achieving certain credits based on posted volume, each of which cite 
Endnote 8, which provides that ``calculations for qualifications for 
monthly posting credits or discounts only include electronic 
executions and the Exchange will include the activity of either (i) 
affiliates or (ii) an Appointed OFP or Appointed MM, per Endnote 
15''). See Fee Schedule Endnote 15 for description of affiliates and 
Appointed OFPs and Appointed MMs.
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    The Exchange believes the proposed modification would provide 
meaningful criteria for LMMs to qualify for credits for executing 
desired volume on the Exchange, and provides additional incentive for 
LMMs to have affiliated or appointed order flow directed to the 
Exchange.
    The Exchange believes that the technical change to remove 
extraneous and potentially confusing references to Endnote 2 in regards 
to the LMM Rights Fee as well as to reorganize the sentence that 
explains the Discount and its qualification criteria would add clarity, 
transparency and internal consistency to the Fee Schedule making it 
easier for market participants to navigate and comprehend.\11\
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    \11\ See supra nn. 5, 7.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act, 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. First, because the LMM Rights Fee is charged only 
to LMM firms, market participants other than LMM firms are not directly 
impacted by this change. The Exchange believes that the proposal to 
adjust the criteria (and add new basis) for LMMs to qualify for the 
Discount (making it more achievable) may encourage LMMs to apply for 
issues to be added to their appointment and may attract additional 
liquidity to the Exchange (including open outcry transactions). To the 
extent this result is achieved, the increase in volume would benefit 
all market participants by providing more trading opportunities, 
including to market participants that do not execute manual 
transactions. The Exchange does not believe that the proposed changes 
would impair the ability of any market participants or competing order 
execution venues to maintain their competitive standing in the 
financial markets. The Exchange believes the proposed modification 
provides additional incentive for LMMs to have affiliated or appointed 
order flow directed to the Exchange, which benefits all market 
participants. To the extent that an LMM does not have any affiliates or 
an Appointed OFP, the LMM is still able eligible for the Discount by 
achieving the modified (and reduced) TCADV criteria.
    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.

[[Page 16068]]

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 [email protected]. Please include 
File Number SR-NYSEARCA-2019-25 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-2019-25. 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 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. 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 Number SR-NYSEARCA-2019-25, and should be 
submitted on or before May 8, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-07620 Filed 4-16-19; 8:45 am]
 BILLING CODE 8011-01-P