Document ID: SEC-2015-1946-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2015-11-19T05:00Z

[Federal Register Volume 80, Number 223 (Thursday, November 19, 2015)]
[Notices]
[Pages 72465-72468]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-29490]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76438; File No. SR-NYSEARCA-2015-108]

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

November 13, 2015.
    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 November 2, 2015, 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 Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the NYSE Arca Options Fee Schedule 
(``Fee Schedule''). The Exchange proposes to implement the fee changes 
effective November 2, 2015. 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this filing is to amend the Fee Schedule in a number 
of different ways, effective November 2, 2015. Specifically, the 
Exchange proposes to increase certain Take Liquidity Fees charged; to 
introduce new posting credits; and to modify the Take Fee Discount 
Qualification, as described below.
Transaction Fees for Taking Liquidity in Penny Pilot Issues
    The Exchange proposes to modify the fees paid by Market Makers, 
Lead Market Makers, Firms and Broker Dealers, and Professional 
Customers (collectively, ``Non-Customers'') for Taking Liquidity in 
Penny Pilot Issues (``Take Fees''). Currently, Non-Customers pay Take 
Fees of $0.50 per contract for electronic executions. The Exchange 
proposes to raise that fee to $0.52 per contract, which is within the 
range of fees charged by competing option exchanges.\4\
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    \4\ For example, MIAX charges $0.55 for executions [sic] in the 
following penny pilot options: EEM, GLD, IWM, QQQ and SPY. See MIAX 
fee schedule, available here, https://www.miaxoptions.com/sites/default/files/MIAX_Options_Fee_Schedule_10012015C.pdf. BOX assesses 
fees greater than $0.55 to Non-customers [sic] for executions in 
penny pilot options. See BOX Options fee schedule, available here, 
http://boxexchange.com/assets/BOX_Fee_Schedule.pdf. In addition, NOM 
recently proposed to charge non-NOM Market Markers $0.55 for 
executions in the following penny pilot options: EEM, GLD, IWM, QQQ, 
and SPY; and charge all other account types $0.50 for removing 
liquidity in these symbols. See File SR-NASDAQ-2015 [sic].
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Customer Monthly Posting Credit Tiers for Penny Pilot Issues
    The Exchange is proposing to add a new tier to the Customer Monthly 
Posting Credit Tiers for Penny Pilot Issues (``Posting Credit Tiers,'' 
each a ``Tier''), which currently has six Tiers.

[[Page 72466]]

The Exchange currently offers incremental Posting Credit Tiers for 
Posted Electronic Customer and Professional Customer Executions in 
Penny Pilot Issues based on escalating levels of business executed on 
the Exchange and also on the NYSE Arca Equity Market. The Exchange 
proposes to add a new Tier that will replace Tier 6; current Tier 6 
will have the same posting requirements, but will become Tier 7.
    To qualify for proposed Tier 6, Order Flow Providers (``OFPs'') 
must achieve at least 0.50% of Total Industry Customer equity and ETF 
option Average Daily Volume (``ADV'') from Customer and Professional 
Customer Posted Orders in all Issues Plus Executed ADV of 0.70% of U.S. 
Equity Market Share Posted and Executed on NYSE Arca Equity Market.\5\ 
OFPs that meet the qualifications for Tier 6 would receive a credit of 
$0.48 per contract applied to posted electronic Customer and 
Professional Customer executions in Penny Pilot issues. The Exchange 
believes this proposed change would provide additional incentive to 
direct Customer (and Professional Customer) order flow to the Exchange, 
which benefits all market participants through increased liquidity and 
enhanced price discovery. The Exchange also notes that cross-asset 
incentives are not new or novel, as the Exchange currently offers them 
(see, e.g., Tier 4), and proposed Tier 6 offers incentives similar to 
those recently introduced on a competing option exchange.\6\
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    \5\ The qualification level of U.S. Equity Market Share Posted 
and Executed on NYSE Arca Equity Market corresponds to Tier 1 on the 
NYSE Arca Equities Inc., Schedule of Fees and Charges for Exchange 
Services, available here, https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf.
    \6\ Specifically, NOM recently added a new tier that is eligible 
for a $0.51 per contract rebate provided that ``Participant (1) adds 
Customer, Professional, Firm, Non-NOM Market Maker and/or Broker-
Dealer liquidity in Penny Pilot Options and/or Non-Penny Pilot 
Options above 0.85% of total industry customer equity and ETF option 
ADV contracts per day in a month and (2) the Participant has added 
liquidity in all securities through one or more of its Nasdaq Market 
Center MPIDs that represent 1.00% or more of Consolidated Volume 
during the month.'' See File No. SR-NASDAQ-2015-115.
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Customer and Professional Customer Incentive Program
    The Exchange is proposing two modifications to the Customer and 
Professional Customer Incentive Program, which provides four 
alternatives to earn credits. Currently, if an OTP Holder or OTP Firm 
(each an ``OTP'') executes at least 0.75% of Total Industry Customer 
equity and ETF option ADV from Customer and Professional Customer 
Posted Orders in both Penny Pilot and non-Penny Pilot Issues, of which 
at least 0.25% of Total Industry Customer equity and ETF option ADV is 
from Customer and Professional Customer Posted Orders in non-Penny 
Pilot Issues, that OFP qualifies for an additional $0.03 Credit on 
Customer and Professional Customer Posting Credits. The Exchange 
proposes to increase the 0.75% minimum volume requirement to 1.00% and 
to increase the applicable additional credit to $0.04.
    The Exchange also proposes a fifth alternative to qualify for 
additional credits under the Customer and Professional Customer 
Incentive Program. The Exchange proposes that an OTP that has an 
executed ADV of 0.70% of U.S. equity market share posted and executed 
on NYSE Arca Equity Market \7\ would qualify for an additional $0.03 
credit on Customer and Professional Customer posting credits.
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    \7\ See supra n. 5.
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Take Liquidity Discount for Certain Market Participants
    Lastly, the Exchange proposes modifications to the Discount in Take 
Liquidity Fees for Professional Customer, Market Maker, Firm and Broker 
Dealer Liquidity Removing Orders (the ``Take Fee Discount'') for OTPs. 
Currently, the Take Fee Discount is applied if the OTP meets both 
qualifications of at least 1.00% of Total Industry Customer equity and 
ETF option ADV from Customer and Professional Customer Posted Orders in 
all Issues AND at least 2.00% of Total Industry Customer equity and ETF 
option ADV from Professional Customer, Market Maker, Firm, and Broker 
Dealer Liquidity Removing Orders in all Issues. The Take Fee Discount 
applied to orders meeting both qualifications is $0.02 in Penny Pilot 
issues, and $0.06 in non-Penny Pilot issues.
    The Exchange proposes to modify the qualifications such that 
meeting either qualification (rather than both) would enable an OTP to 
receive the discount, which would make the Discount easier to achieve. 
The Exchange also proposes to increase the Take Fee Discount for 
applicable orders in Penny Pilot Issues from $0.02 to $0.04, and to 
discontinue the Take Fee Discount applied to executions in non-Penny 
Pilot issues. Thus, as proposed, a discount of $0.04 in Penny Pilot 
issues would be applied if the OTP executes at least 1.00% of Total 
Industry Customer equity and ETF option ADV from Customer and 
Professional Customer Posted Orders in all Issues, OR executes at least 
2.00% of Total Industry Customer equity and ETF option ADV from 
Professional Customer, Market Maker, Firm, and Broker Dealer Liquidity 
Removing Orders in all Issues.
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 Take Fees for Non-Customers 
reasonable, equitable and not unfairly discriminatory because they are 
competitive with fees charged by other exchanges and are designed to 
attract (and compete for) order flow to the Exchange, which provides a 
greater opportunity for trading by all market participants.\10\ In 
addition, the increased Take Fees are reasonable because the fees would 
generate revenue that would help to support the credits offered for 
posting liquidity, which are available to all market participants. 
Moreover, the Exchange believes the proposed change does not unfairly 
discriminate because it applies equally to all Non-Customers who are 
removing liquidity.
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    \10\ See supra n. 4.
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    The Exchange believes the introduction of a new Tier in the 
Customer and Professional Customer Monthly Posting Credit Tiers and 
Qualifications for Executions in Penny Pilot Issues is reasonable, 
equitable and not unfairly discriminatory because it is designed to 
attract additional Customer (and Professional Customer) electronic 
equity and ETF option volume to the Exchange, which additional 
liquidity would benefit all participants by offering greater price 
discovery, increased transparency, and an increased opportunity to 
trade on the Exchange. Additionally, the Exchange believes the proposed 
credits available on this new Tier are reasonable because they would 
incent OTPs to submit Customer (and Professional Customer) electronic 
equity and ETF option orders to the Exchange and would result in 
credits that are reasonably related to the Exchange's market quality 
that is associated with higher volumes. The Exchange also notes that 
cross-asset

[[Page 72467]]

incentives are not new or novel, as the Exchange currently offers them 
(see, e.g., Tier 4), and proposed Tier 6 offers incentives similar to 
those recently introduced on a competing option exchange.\11\
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    \11\ See supra n. 6.
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    The Exchange believes the proposed modifications to the Customer 
and Professional Customer Incentive Program are reasonable, equitable 
and not unfairly discriminatory because they are designed to attract 
additional Customer (and Professional Customer) electronic equity and 
ETF option volume to the Exchange, which additional liquidity would 
benefit all participants by offering greater price discovery, increased 
transparency, and an increased opportunity to trade on the Exchange. 
Additionally, the Exchange believes the proposed credits available in 
the new (fifth) alternative would provide additional incentive to OTPs 
to submit Customer (and Professional Customer) electronic equity and 
ETF option orders to the Exchange and would result in credits that are 
reasonably related to the Exchange's market quality that is associated 
with higher volumes. In addition, the proposed fifth alternative would 
attract additional posted order flow to NYSE Arca Equities, so as to 
provide additional opportunities for all ETP Holders to trade on NYSE 
Arca Equities.
    The Exchange believes the changes to the take Fee Discount for Non-
Customers are reasonable, equitable and non-discriminatory because it 
makes the Discount easier to achieve which would incentivize OTPs to 
execute large volumes of orders on the Exchange, which benefits all 
market participants through increased liquidity and enhanced price 
discovery. The Exchange believes the elimination of the Discount for 
Non-Penny Issues encourages OTPs to bring more business to the Exchange 
in Penny Pilot issues, which are generally the most active issues, to 
the benefit of Customers and Non-Customers alike. The Exchange believes 
the Take Fee Discount is reasonable, equitable, and not unfairly 
discriminatory because it continues to apply to all participants other 
than Customers, who pay a much lower Take Liquidity Fee, and because it 
is available to all firms that provide Customer and Professional 
Customer orders. The Exchange also notes that the proposed Take Fee 
discount is consistent with those offered on competing options 
exchanges.\12\
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    \12\ See, e.g., BATS Options Exchange fee schedule (Non-Customer 
Penny Pilot Take Volume Tiers), available here, http://www.batsoptions.com/support/fee_schedule/.
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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,\13\ 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. Instead, the Exchange believes that the 
proposed incentive will continued [sic] to encourage competition, 
including by attracting additional liquidity and a wider variety of 
business to the Exchange, which would continue to make the Exchange a 
more competitive venue for, among other things, order execution and 
price discovery. The also [sic] Exchange believes the proposed fee 
modifications do not impose an undue burden on competition because the 
changes offset an increase in fees for some transactions with a variety 
of means to achieve credits and discounts. 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.
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    \13\ 15 U.S.C. 78f(b)(8).
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    The increases in Take Liquidity fees will impact all affected order 
types (i.e., Professional Customers, Firm, Broker Dealers) in issues at 
the same rate. The proposed changes to the Customer Monthly Posting 
Credit Tiers, and the proposed modification to the Customer Incentives 
are designed to attract additional volume, in particular posted 
electronic Customer (and Professional Customer) executions, to the 
Exchange, which would promote price discovery and transparency in the 
securities markets thereby benefitting competition in the industry. As 
stated above, the Exchange believes that the proposed change would 
impact all similarly situated OTPs that post electronic Customer (and 
Professional Customer) executions on the Exchange equally, and as such, 
the proposed change would not impose a disparate burden on competition 
either among or between classes of market participants.
    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) \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.
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 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) \16\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \16\ 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-2015-108 on the subject line.

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-NYSEARCA-2015-108. This 
file number should be included on

[[Page 72468]]

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 Section, 100 F Street NE., Washington, DC 20549-1090. Copies 
of the filing will also be available for inspection and copying at the 
NYSE's principal office and on its Internet Web site at www.nyse.com. 
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-NYSEARCA-2015-
108 and should be submitted on or before December 10, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-29490 Filed 11-18-15; 8:45 am]
 BILLING CODE 8011-01-P