Document ID: SEC-2017-0399-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2017-03-14T04:00Z

[Federal Register Volume 82, Number 48 (Tuesday, March 14, 2017)]
[Notices]
[Pages 13702-13704]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-04923]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80173; File No. SR-NYSEArca-2017-25]

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

March 8, 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 March 6, 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''). The Exchange proposes to implement the fee change 
effective March 6, 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.

[[Page 13703]]

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 amend the Fee Schedule, effective 
March 6, 2017, to provide an incentive for OTP Holders and OTP Firms 
(each an ``OTP'') to post volume in non-Penny Pilot Issues as Non-
Customers, i.e., Lead Market Maker (``LMMs''), NYSE Arca Market Makers 
(``MMs''), Firms and Broker Dealers.\4\
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    \4\ For purposes of this filing, Professional Customers are not 
considered to be Non-Customers.
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    Currently, the transactions fees and credits applied to Non-
Customer posting liquidity in non-Penny Pilot issues range from a per 
contract fee of $0.50 (charged to Firms and Broker Dealers) to a per 
contract credit of $0.40 (issued to LMMs).\5\ The Exchange also offers 
additional incentives for market participants--Customers and Non-
Customers alike--to earn credits for posted interest in non-Penny Pilot 
Issues.\6\
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    \5\ See Fee Schedule, Transaction Fee for Electronic Executions 
Per Contract.
    \6\ See, e.g., Fee Schedule, Customer and Professional Customer 
Posting Credit Tiers In Non Penny Pilot Issues; and Market Maker 
Incentive For Non-Penny Pilot Issues.
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    The Exchange proposes to introduce a program to further incent Non-
Customers to post volume in non-Penny Pilot Issues. The proposed 
program would offer OTPs the ability to earn per contract credits for 
electronic executions of Non-Customer posted interest in non-Penny 
Pilot issues. The amount of credit would depend on an OTP's share of 
total industry Customer equity and ETF option ADV (``TCADV'') 
(referring to herein as the ``Non-Penny Posting Tiers'').\7\ The 
Exchange proposes three Non-Penny Posting Tiers and the associated 
qualifications and credits would be as follows:
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    \7\ The thresholds are based on an OFP's volume transacted 
Electronically as a percentage of TCADV as reported by the Options 
Clearing Corporation (the ``OCC''). See OCC Monthly Statistics 
Reports, available here, http://www.theocc.com/webapps/monthly-volume-reports. The calculation of TCADV includes transaction volume 
of an OTP's affiliates or its Appointed Order Flow Provider or 
Appointed Marker Maker. See proposed Fee Schedule, the Non-Penny 
Posting Tiers. See also Fee Schedule, endnote 15.
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     Tier 1: An OTP that has at least 0.05% of TCADV from Non-
Customer posted orders in non-Penny Pilot issues would be eligible to 
receive a per contract credit of $0.32;
     Tier 2: An OTP that has at least 0.10% of TCADV from Non-
Customer posted orders in non-Penny Pilot issues would be eligible to 
receive a per contract credit of $0.52; and
     Tier 3: An OTP that has at least 0.20% of TCADV from Non-
Customer posted orders in non-Penny Pilot issues would be eligible to 
receive a per contract credit of $0.82.
    If an execution of Non-Penny Pilot Issues by an OTP for a Non-
Customer is eligible for more than one fee or credit, the Exchange will 
apply the most favorable rate. For instance, under the Fee Schedule, an 
LMM that posts interest in non-Penny Pilot issues in its appointment 
receives a base per contract credit of $0.40. If that same OTP achieves 
proposed Tier 1 of the Non-Penny Posting Tiers, the OTP would be 
eligible to receive a per contract credit of $0.32. However, that OTP 
would still receive the higher per contract credit of $0.40 on its LMM 
posted interest in non-Penny Pilot issues.
    The Exchange believes the proposed Non-Penny Posting Tiers would 
encourage an increased level of activity, particularly in non-Penny 
Pilot Issues, which in turn encourages tighter market spreads and 
increased liquidity to the benefit of all market participants.
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 Non-Penny Posting Tiers are 
reasonable, equitable, and not unfairly discriminatory because they are 
competitive with incentive programs offered to similarly situated 
participants on other options exchanges.\10\ Moreover, the Exchange 
believes the proposed change does not unfairly discriminate because it 
would apply equally to all Non-Customer interest and allows for 
consideration of volume from affiliates and/or Appointed OFPs and 
Appointed MMs. The proposed change is also non-discriminatory because 
it would apply to all Non-Customer interest, while Customer (and 
Professional Customer) interest may avail itself of other incentive 
programs offered on the Exchange. Notably, the Exchange offers Customer 
(and Professional Customer) interest the opportunity to earn credits 
higher than those proposed for Non-Customer interest in the Non-Penny 
Posting Tiers,\11\ which should continue to attract Customer (and 
Professional Order) interest to the Exchange, resulting in greater 
price discovery, increased transparency, and an increased opportunity 
to trade on the Exchange.
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    \10\ See Bats BZX Options Exchange Fee Schedule, available here, 
https://www.bats.com/us/options/membership/fee_schedule/bzx/ 
(offering ``non-Penny Pilot add volume tiers'' to Non-Customers).
    \11\ See, e.g., Fee Schedule, Customer and Professional Customer 
Posting Credit Tiers In Non Penny Pilot Issues (providing potential 
per contract credits under each Tier (beginning at $0.83 for Tier 
A), each of which exceeds the highest available ($0.82) per contract 
credit available to Non-Customer interest in the Non-Penny Posting 
Tiers).
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    The Exchange believes that the proposal is equitable and not 
unfairly discriminatory because it would encourage OTPs post interest 
on the Exchange in order to qualify for the proposed credits, which 
would reduce their overall transaction costs on the Exchange.
    Further, the Exchange believes that the proposal would provide 
additional incentives to direct Non-Customer order flow to the 
Exchange, which benefits all market participants through increased 
liquidity and enhanced price discovery. Finally, encouraging OTPs to 
send higher volumes of orders to the Exchange would also contribute to 
the Exchange's depth of book as well as to the top of book liquidity.

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

    In accordance with Section 6(b)(8) of the Act,\12\ 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 changes would continue to encourage competition, including by 
attracting additional liquidity to the Exchange, which would continue 
to make the Exchange a more competitive venue for, among other things, 
order execution and price discovery. The Exchange does not believe that 
the proposed change will impair the ability of any market participants 
or competing order execution venues to maintain their competitive 
standing in the financial markets. Further, the proposed incentives 
would be available to all similarly situated participants, and, as 
such, the proposed change would not impose a disparate burden on 
competition either among or between

[[Page 13704]]

classes of market participants and may, in fact, encourage competition.
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    \12\ 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) \13\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \14\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 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) \15\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \15\ 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-2017-25 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-2017-25. 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 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-NYSEArca-2017-25, and should 
be submitted on or before April 4, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-04923 Filed 3-13-17; 8:45 am]
 BILLING CODE 8011-01-P