Document ID: SEC-2018-0740-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE American, LLC
Posted Date: 2018-05-15T04:00Z

[Federal Register Volume 83, Number 94 (Tuesday, May 15, 2018)]
[Notices]
[Pages 22558-22560]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-10263]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83203; File No. SR-NYSEAMER-2018-20]

Self-Regulatory Organizations; NYSE American LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Change To Modify the 
NYSE American Options Fee Schedule

May 9, 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 April 30, 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 modify the NYSE American Options Fee 
Schedule (``Fee Schedule''). The Exchange proposes to implement the fee 
change effective May 1, 2018. The proposed 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 purpose of this filing is to modify the Fee Schedule, effective 
May 1, 2018. Specifically, the Exchange proposes to modify the Monthly 
Excessive Bandwidth Utilization Fees (``EBUF'').
    Currently, EBUF is assessed to an ATP Holder for submitting orders 
in an order-to-execution ratio greater than 10,000 over the course of a 
calendar month (``Orders Fee''), or for submitting in excess of 3 
billion messages (either orders or quotes) without executing at least 
one contract for every 1,500-5,000 messages (``Messages Fee'').\4\ If 
an ATP Holder is liable for either or both fees in a given month, that 
firm is only charged the greater of the two fees.
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    \4\ Currently, the Exchange has set the ratio at 1 contract for 
every 5,000 messages.
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    The Exchange has found that firms may have assessable behavior for 
an anomaly that takes place over the course of a day or two, or that 
occurs late in the month before the anomalous behavior can be fully 
diagnosed and mitigated. Because the firms recognize this as affecting 
their own efficiency, they address such issues quickly and work with 
Exchange staff to improve their messaging behavior. The Exchange notes 
that in a recent period of high volatility, firms were quick to address 
potential EBUF charges. To encourage a collegial effort in resolving 
such anomalies, the Exchange proposes that the EBUF only be charged for 
the second and any subsequent instance in a rolling 12-month period. In 
other words, EBUF would not be assessed for the first occurrence in a 
rolling 12-month period.
    The Exchange also proposes to modify the calculation basis for the 
Messages Fee. Currently, the Exchange charges an ATP Holder a fee of 
$0.005 per 1,000 messages (including orders or quotes) in excess of 3 
billion messages in a calendar month if the ATP Holder does not execute 
at least one contract for every 5,000 messages entered. In order for 
the Exchange to have flexibility to adjust the threshold level to 
reflect market conditions and current business activity, the Exchange 
proposes to amend the current rule text in the Fee Schedule to remove 
reference to the current threshold level of 3 billion messages and 
replace it with language providing that the level ``would be no less 
than 2 billion messages and no more than 10 billion messages.'' The 
Exchange is not proposing to change the current level, which would 
remain at 3 billion messages. If the Exchange were to change the level, 
the Exchange would announce any such change by Trader Update and the 
revised threshold would be applicable for the next calendar month.
    The Exchange also proposes to modify the manner in which the 
Messages Fee is calculated to encourage quote quality. Specifically, 
the Exchange proposes to exclude from the Messages to Contracts Traded 
Ratio calculation any quotes that sets or matches the National Best 
Bid-Offer (``NBBO'') market at the time the quotes are received. The 
Exchange believes that such exclusion will encourage Market Makers to 
submit tighter quotes without the risk that such quotes would result in 
increased fees. The proposed revised calculation would also keep Market 
Makers from submitting wide quotes to avoid excessive messaging.
    Additionally, the Exchange proposes to exclude from the Messages to 
Contracts Traded Ratio calculation any quote in a Specialist's or e-
Specialist's allocated issues. Specialists and e-Specialists have a 
heightened Regulatory obligation to make markets in their allocated 
issues.\5\ Unlike other Market Makers, Specialists and e-Specialists 
cannot relinquish issues from their allocation without the approval of 
the Exchange.\6\
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    \5\ Specialists (and e-Specialists) must provide continuous two-
sided quotations throughout the trading day in its appointed issues 
for 90% of the time the Exchange is open for trading in each issue. 
See NYSE American Rule 925.1NY.
    \6\ While Directed Order Market Makers (``DMM'') also have a 90% 
quoting obligation in their DMM issues, DMM issues may be added or 
dropped at any time, consistent with NYSE American Rule 923NY(c).

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[[Page 22559]]

    The Exchange notes that failure to mitigate excessive message 
traffic by a Specialist or e-Specialist can be addressed by the 
Exchange by disqualification due to operational change warranting 
immediate action.\7\
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    \7\ The Exchange notes that failure to mitigate excessive 
message traffic by a Specialist or e-Specialist can be addressed by 
the Exchange by disqualification due to operational change 
warranting immediate action. See NYSE American Rule 927NY(b)(2).
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    During the period of recent volatility and activity, the Exchange 
noted a significantly higher number of messages generated without a 
proportional amount of executed volume, especially in less active-
option issues. Concurrently, the Exchange saw no degradation in system 
performance because of prudent upgrades and expansion of the trading 
system in the past year. Thus, the Exchange believes that the proposed 
modifications would continue to encourage market participants to be 
rational and efficient in the use of the Exchange's system capacity. 
The Exchange believes that the proposed modifications should also 
reduce the possibility of charging ATP Holders a Messages Fee for 
messages designed to help maintain accurate and liquid markets with 
narrower spreads.
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 the proposed modifications to the Fees 
are reasonable, equitable, and not unfairly discriminatory because the 
proposed changes would continue to encourage market participants to be 
rational and efficient in the use of the Exchange's system capacity, 
which would benefit all market participants. The Exchange believes that 
assessing the Fees only after the second instance in a rolling twelve 
month period is reasonable because it would encourage participants to 
work with the Exchange staff to mitigate the issues while not having a 
deleterious effect on market quality or participation.
    The Exchange believes setting the threshold for the Messages Fee to 
be within a range is reasonable because it would provide the Exchange 
with flexibility to respond to changing market and business conditions 
in an expeditious manner which the Exchange believes would help perfect 
the mechanism for a free and open national market system, and generally 
help protect investors and the public interest.
    The proposed adjustments to the manner in which the Messages Fee is 
calculated are reasonable because the proposed changes would encourage 
Market Makers to submit tighter quotes without the risk that such 
quotes would result in increased fees. The proposed adjustments are 
also not unfairly discriminatory as the proposed changes would apply to 
all similarly situated market participants that are subject to the 
Messages Fee on an equal basis while encouraging quotes that are 
competitive and that increase the overall quality of markets.
    Finally, the Exchange believes the exclusion of Specialist and e-
Specialist quotes in their appointed issues is reasonable, equitable 
and not unfairly discriminatory because Specialists and e-Specialists 
have a heightened quoting obligation than other market participants and 
cannot relinquish allocation of their issues as easily as Market Makers 
are able to increase or decrease their appointments.

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

    In accordance with Section 6(b)(8) of the Act,\10\ the Exchange 
does not believe that the proposed rule change would impose any burden 
on competition that is not necessary or appropriate in furtherance of 
the purposes of the Act. The Exchange believes the proposed changes to 
the Excessive Bandwidth Utilization Fees would not place an unfair 
burden on competition because the proposed changes are designed to 
encourage efficient use of Exchange's system capacity and would apply 
to all market participants that are subject to the Fees.
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    \10\ 15 U.S.C. 78f(b)(8).
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    To the extent that these purposes are achieved, the Exchange 
believes that the proposed changes would enhance the quality of the 
Exchange's markets and increase the volume of orders directed to the 
Exchange. In turn, all the Exchange's market participants would benefit 
from the improved market liquidity. If the proposed changes make the 
Exchange a more attractive marketplace for market participants at other 
exchanges, such market participants are welcome to become ATP Holders.
    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)\11\ of the Act and subparagraph (f)(2) of Rule 19b-
4\12\ thereunder, because it establishes a due, fee, or other charge 
imposed by the Exchange.
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 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) \13\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \13\ 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-NYSEAMER-2018-20 on the subject line.

[[Page 22560]]

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE, 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEAMER-2018-20. 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 Number SR-NYSEAMER-2018-20 and should be submitted 
on or before June 5, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-10263 Filed 5-14-18; 8:45 am]
 BILLING CODE 8011-01-P