Document ID: SEC-2016-2241-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE MKT LLC
Posted Date: 2016-12-20T05:00Z

[Federal Register Volume 81, Number 244 (Tuesday, December 20, 2016)]
[Notices]
[Pages 92923-92925]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-30564]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79559; File No. SR-NYSEMKT-2016-115]

Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Change Modifying the NYSE Amex 
Options Fee Schedule

December 14, 2016.
    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 December 1, 2016, 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.
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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 Amex Options Fee Schedule 
(``Fee Schedule''). The Exchange proposes to implement the fee change 
effective December 1, 2016. The proposed 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this filing is to amend Section III. C. of the Fee 
Schedule to adjust the monthly Rights Fees assessed on Specialists, e-
Specialists, Directed Order Market Markers (each a ``DOMM), and to 
provide alternative means to qualify for a discount on the Rights Fees. 
The Exchange proposes to implement these changes effective on December 
1, 2016.
    Currently, the Exchange charges a Rights Fee on each issue in the 
allocation of an e-Specialist, DOMM, and Specialist.\4\ The monthly 
Rights Fee ranges from $75 to $1,500 and is based on the Average 
National Daily Customer Contracts (``CADV'') per issue. With one 
exception, the more active an issue, the higher the Rights Fee 
assessed. The exception is that the Exchange currently charges a higher 
rate for the lowest-volume issues (i.e., less than 201 CADV) to offset 
the Exchange's revenue with the cost of listing and maintaining these 
low-volume issues.
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    \4\ See Fee Schedule, Section III. C. (e-Specialist, DOMM and 
Specialist Monthly Rights Fees) (describing how the Rights Fee is 
assessed and setting forth the current rates), available here, 
https://www.nyse.com/publicdocs/nyse/markets/amex-options/NYSE_Amex_Options_Fee_Schedule.pdf.
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Proposed Modification to the Rights Fees
    The Exchange proposes to align the Rights Fees with the economic 
benefit of being the e-Specialist, DOMM, or Specialist in a given 
issue, based on trading activity in an issue. The Exchange therefore 
proposes that some rates would decrease (for lower-volume issues) and 
others would increase (for higher-volume issues). Using the same CADV 
levels currently in place, the Exchange proposes to amend the Rights 
Fees as follows:

              e-Specialist, DOMM, and Specialist Rights Fee
------------------------------------------------------------------------
     Average national daily customer
           contracts per issue              Current fee    Proposed fee
------------------------------------------------------------------------
0 to 200................................            $250             $50
201 to 2,000............................              75              60
2,001 to 5,000..........................             200             150
5,001 to 15,000.........................             375             375
15,001 to 100,000.......................             750           1,250
Over 100,000............................           1,500           2,000
------------------------------------------------------------------------

[[Page 92924]]

    As shown in the chart above, the Exchange proposes to significantly 
decrease the Rights Fee for the lowest-volume issues (i.e., between 0-
200 contracts) to better account for the costs to each e-Specialist, 
DOMM, and Specialist, irrespective of costs and revenue to the Exchange 
associated with listing an issue. The Exchange also proposes to 
slightly decrease the Rights Fee for option issues trading between 201-
2,000 CADV and trading between 2,001-5,000 CADV to better align with 
the cost to the Exchange associated with such issues. The Exchange 
believes the proposed reduction in the Rights Fee for issues trading 
under 5,001 CADV would create an incentive for Specialists and e-
Specialists to request appointments in these lower-volume issues, which 
may result in increased liquidity to the benefit of market 
participants. Similarly, the Exchange believes the proposed reductions 
would encourage DOMMs to seek to transact more in these less active 
issues (i.e., to make order flow arrangements with Customers to direct 
orders in these issues to them), which in turn should increase volume 
on the Exchange.
    In addition, the Exchange proposes to increase the Rights Fees 
associated with the two most active CADV categories of issues to better 
reflect the economic benefits of being an e-Specialist, DOMM, or 
Specialist in more actively-traded issues (i.e., option issues trading 
more than 5,000 CADV). The Exchange believes the proposed modifications 
to the Rights Fees are appropriate as an e-Specialist, DOMM, or 
Specialist would have an opportunity to interact with fewer than 201 
contracts per day to cover the proposed $50 per month Rights Fees and 
would have the opportunity to interact with more than 100,000 contracts 
per day to cover the proposed $2,000 per month Rights Fee.
Proposed Discounts to the Rights Fees
    The Exchange proposes two alternative methods for Specialists, e-
Specialists, and DOMMs to qualify for a discount on the monthly Rights 
Fees. First, as proposed, any Specialist, e-Specialist, or DOMM that 
participates in the Prepayment Program (outlined in Section I.D. of the 
Fee Schedule) would be eligible for a 20% discount to their monthly 
Rights Fees. Alternatively, the Exchange proposes that any Specialist, 
e-Specialist, or DOMM that achieves one of the Tiers in the Amex 
Customer Engagement (``ACE'') Program (outlined in Section I.E. of the 
Fee Schedule) would be eligible for a discount on their Rights Fees, as 
set forth in the table below.

                           Rights Fee Discount
------------------------------------------------------------------------
                                                            Discount on
                        ACE tier                          rights fees  %
------------------------------------------------------------------------
Base \5\................................................               0
1.......................................................               0
2.......................................................               0
3.......................................................              20
4.......................................................              30
5.......................................................              40
------------------------------------------------------------------------

    In the event that\\ an e-Specialist, DOMM, or Specialist qualified 
for both discounts in a given month, only the larger discount would be 
applied. For instance, a Specialist in one of the Prepayment Programs 
would be eligible to receive a 20% discount on the Rights Fees every 
month or, if that same Specialist also qualifies for ACE Tier 4, making 
it eligible for a 30% discount in a given month, the Specialist would 
receive a 30% discount to the Rights Fees for that month in lieu of the 
20% discount.
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    \5\ The Exchange notes that it is proposing to add a Base Tier 
to the ACE Program in a separate fee filing, also for December 1, 
2016. Thus, reference to a Base Tier herein is designed to align 
with that proposed change. See File No. SR-NYSEMKT-2016-114.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\6\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\7\ 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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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed modifications to the Rights 
Fees are reasonable, equitable and not unfairly discriminatory for a 
number of reasons. First, the Rights Fees apply solely to e-
Specialists, DOMMs, and Specialists (other Market Makers are not 
subject to this Fee) and are assessed to account for the enhanced 
allocation opportunities and economic benefits that inure to these 
market participants. Second, the monthly Rights Fees are directly 
related to the number of allocations in the appointment of each e-
Specialist, DOMM, or Specialist, which appointments are completely 
voluntary. Any e-Specialist, DOMM, or Specialist can opt to relinquish 
any issue in its allocation to reduce its total Rights Fee. In 
addition, the proposed Rights Fees would be more closely aligned with 
the economic benefit of being e-Specialist, DOMM, or Specialist in a 
given issue. For example, an e-Specialist, DOMM, or Specialist would 
have an opportunity to interact with fewer than 201 contracts per day 
to cover the proposed $50 per month Rights Fee and would have the 
opportunity to interact with more than 100,000 contracts per day to 
cover the proposed $2,000 per month Rights Fee. Further, e-Specialists, 
DOMMs, and Specialists trading issues with similar activity levels 
would be subject to the same Rights Fees.
    The Exchange believes the proposed reduction in the Rights Fee for 
issues trading under 5,001CADV is reasonable, equitable and not 
unfairly discriminatory because it would create an incentive for 
Specialists and e-Specialists to request appointments in these lower-
volume issues, which may result in increased liquidity to the benefit 
of market participants. Similarly, the Exchange believes the proposed 
reductions would encourage DOMMs to seek to transact more in these less 
active issues (i.e., to make order flow arrangements with Customers to 
direct orders in these issues to them), which in turn should increase 
volume on the Exchange.
    The Exchange also believes the proposed discounts on the Rights 
Fees available to e-Specialists, DOMMs, and Specialists are reasonable, 
equitable and not unfairly discriminatory for a number of reasons. 
First, the proposed discounts would reduce the overhead costs of e-
Specialists, DOMMs, and Specialists (by reducing the monthly Rights 
Fees), which would, in turn, enhance their ability to provide liquidity 
to the benefit of all market participants. Second, because Market 
Makers that are not e-Specialists, DOMMs, or Specialists are not 
subject to the Rights Fees (as such fees are assessed to account for 
the enhanced allocation opportunities and economic benefits that inure 
to these market participants), the proposed discount would not 
disadvantage Market Makers. In addition, all e-Specialists, DOMMs, and 
Specialists (as well as any other Market Makers) are eligible to 
participate in the Prepayment Program, which would enable them to 
qualify for the proposed 20% discount on the Rights Fees. Further, the 
proposed discounts available upon satisfying certain Tiers of the ACE 
Program are not discriminatory as they are open to all e-Specialists, 
DOMMS, and Specialists, as well as all other Market Makers who may 
arrange for ``appointment'' status with an Order Flow Provider 
(``OFP'').

[[Page 92925]]

    Finally, the Exchange is subject to significant competitive forces, 
as described below in the Exchange's statement regarding the burden on 
competition.
    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,\8\ 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 that the proposed 
modifications on the Rights Fees would not impose an unfair burden on 
competition because the proposed Rights Fees would more closely align 
with the economic benefit of being e-Specialist, DOMM, or Specialist in 
a given issue. Because other Market Makers are not subject to the 
Rights Fee, the proposed discount would not disadvantage Market Makers. 
Instead, the proposed ACE-related discounts would operate to incent 
each e-Specialist, DOMM, or Specialist to achieve higher ACE Tiers to 
reduce its own Rights Fee. The Exchange believes that the proposed 
discounts would encourage e-Specialists, DOMMs, or Specialists to quote 
and trade competitively in their issues and would reduce the burden on 
competition among e-Specialists, DOMMs, or Specialists in the most 
actively-traded issues because e-Specialists, DOMMs, or Specialists 
that achieve the discounts would have reduced overhead.
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    \8\ 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) \9\ of the Act and subparagraph (f)(2) of Rule 19b-
4 \10\ thereunder, because it establishes a due, fee, or other charge 
imposed by the Exchange.
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 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) \11\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \11\ 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-NYSEMKT-2016-115 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-2016-115. 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-2016-115, and should 
be submitted on or before January 10, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-30564 Filed 12-19-16; 8:45 am]
 BILLING CODE 8011-01-P