Document ID: SEC-2018-1453-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2018-09-18T04:00Z

[Federal Register Volume 83, Number 181 (Tuesday, September 18, 2018)]
[Notices]
[Pages 47232-47234]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-20194]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84099; File No. SR-NYSEARCA-2018-64]

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

September 12, 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 August 29, 2018, 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 modify the NYSE Arca Options Fee Schedule 
(``Fee Schedule''). The Exchange proposes to implement the fee change 
effective September 1, 2018. The proposed rule change is available on 
the Exchange's website at www.nyse.com, at the principal office of the 
Exchange, and at

[[Page 47233]]

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 
September 1, 2018, to modify the existing Floor Broker rebate for 
executed Qualified Contingent Cross (``QCC'') orders,\4\ and to adjust 
the Firm and Broker Dealer Monthly Fee Cap.
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    \4\ The QCC permits an OTP Holder or OTP Firm to effect a 
qualified contingent trade (``QCT'') in a Regulation NMS stock and 
cross the options leg of the trade on the Exchange immediately upon 
entry and without order exposure if the order is for at least 1,000 
contracts, is part of a QCT, is executed at a price at least equal 
to the national best bid or offer, as long as there are no Customer 
orders in the Exchange's Consolidated Book at the same price.
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    Currently, the Exchange offers a Floor Brokers Rebate of $0.035 per 
contract side for QCC trades executed on behalf of non-Customers.\5\ 
The Exchange also offers a Firm and Broker Dealer Monthly Fee Cap (the 
``Fee Cap'') which caps fees at $100,000 for Manual (Open Outcry) 
Executions and, for QCC transactions executed by a Floor Broker from 
the Floor of the Exchange, for Firm and Broker Dealer transactions 
cleared in the customer range.\6\
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    \5\ See Fee Schedule, QUALIFIED CONTINGENT CROSS TRANSACTION 
FEES, available here,https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf.
    \6\ The Fee Cap excludes fees for Strategy Executions, Royalty 
Fees and firm trades executed via a Joint Back Office agreement. See 
id. FIRM AND BROKER DEALER MONTHLY FEE CAP. The Exchange also offers 
a lesser cap on fees for those OTP Holders and OTP Firms that 
achieve certain Tiers of the Customer Penny Pilot Posting Credit 
Tiers. See id., FIRM AND BROKER DEALER MONTHLY FIRM CAP TIERS.
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    The Exchange proposes to replace the existing Floor Broker Rebate 
with a two-tiered credit. As proposed, the first tier would provide a 
$0.07 per contract credit for ``Floor Brokers executing 300,000 or 
fewer contracts in a month,'' which tier would effectively replace the 
current $0.035 ``Floor Broker Rebate for Executed Orders--Per Contract 
Side.'' \7\ The Exchange proposes to introduce a second tier that would 
enable Floor Brokers to earn a higher credit--of $0.10--for executed 
QCC transactions in excess of 300,000 contracts.\8\ The proposed 
credits would be paid solely on the volume executed to achieve each 
tier and is not retroactive to the first contract.\9\ For example, if a 
Floor Broker executes 400,000 QCC contracts in a given month, the Floor 
Broker would receive the $0.07 per contract for the first 300,000 QCC 
transactions and $0.10 per contract for the remaining 100,000 
contracts. As with the existing Floor Broker Rebate, Customer-to-
Customer QCC trades would not qualify for any credit as such 
transactions net the Exchange no revenue.
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    \7\ The Exchange also proposes to make a number of textual 
changes to the table regarding QCC transactions. Specifically, the 
Exchange proposes to revise the title of the table to reflect the 
shorthand ``QCC'' and that the table includes fees ``and credits''; 
to revise the column headings to ``Participant'' and ``Per Contract 
Fee or Credit''; to remove reference to ``per side'' with respect to 
QCC fees as fees/credits are based on participant type executing 
such contracts; and to remove the term ``Rebate'' as the Floor 
Brokers are actually given a credit against fees incurred. See 
proposed Fee Schedule, QUALIFIED CONTINGENT CROSS (``QCC'') 
TRANSACTION FEES AND CREDITS and Endnote 13. The Exchange believes 
these technical changes would add clarity and transparency to the 
Fee Schedule.
    \8\ See id. (including reference to Endnote 13 in proposed tier, 
consistent with the current schedule for QCCs). See Fee Schedule, 
Endnote 13 supra n. 5 (providing that the Floor Broker credit does 
not apply to QCC executions in which a Customer is on both sides of 
the QCC and capping the potential monthly credit at $375,000 per 
Floor Broker firm).
    \9\ See id., Endnote 13 (providing, in relevant part, ``[t]he 
Floor Broker credit is paid only on volume within the applicable 
tier and is not retroactive to the first contract traded'').
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    The Exchange notes that the proposed credit for Floor Brokers is 
consistent with such credits offered for QCC volumes across the 
industry. Specifically, the Nasdaq OMX PHLX (``PHLX'') and Nasdaq ISE 
(``ISE'') pay volume-based rebates for QCC volume that range from $0.00 
to $0.11 per contract.\10\
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    \10\ See PHLX Pricing Schedule, available here, http://www.nasdaqtrader.com/Micro.aspx?id=phlxpricing; and ISE Schedule of 
Fees, available here, http://ise.cchwallstreet.com/tools/PlatformViewer.asp?selectednode=chp_1_1_5&manual=%2Fcontents%2Fise%2Fise-fee%2F.
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    The Exchange also proposes to adopt an incremental service fee of 
$0.01 per contract for Firm or Broker Dealer Manual transactions once 
an OTP Holder or OTP Firm has reached the applicable Fee Cap. The 
incremental service fee would not apply to the execution of a QCC 
order. The Exchange notes that this proposed fee is competitive as it 
is consistent with the incremental service fee that NYSE American 
imposes once firms have reached a similar monthly fee cap on that 
exchange.\11\
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    \11\ See NYSE American Options Fee Schedule, Section I.I., Firm 
Monthly Fee Cap, available here, https://www.nyse.com/publicdocs/nyse/markets/american-options/NYSE_American_Options_Fee_Schedule.pdf 
(providing that ``[o]nce a Firm has reached the Firm Monthly Fee 
Cap, an incremental service fee of $0.01 per contract for Firm 
Manual transactions will apply, except for the execution of a QCC 
order, in which case there is no incremental service fee''). The 
Exchange notes that the fee cap on NYSE American applies only to 
``Firms,'' whereas the NYSE Arca Fee Cap applies to both Firms and 
Broker Dealers.
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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 the proposed tiered Floor Broker credits 
for QCC volume rebates are reasonable, equitable and not unfairly 
discriminatory because the credits are designed to attract more QCC 
volume to the Exchange. To the extent that the credits attract 
additional order flow to the Exchange, all market participants should 
benefit. Market participants may engage Floor Brokers to entrust them 
with their QCC orders and, given the credit that a Floor Broker may 
receive, such market participants may negotiate the appropriate fee for 
such order flow.
    The Exchange also believes that the proposed credits are equitable 
and not unfairly discriminatory because they would apply to all Floor 
Brokers that execute QCC orders on the Exchange on an equal and non-
discriminatory basis. Moreover, the Exchange notes that the proposed 
credits are consistent with credits offered by other options exchanges. 
Specifically, PHLX and ISE pay volume-based rebates for QCC volume that 
range from $0.00 to $0.11 per contract.\12\
    The Exchange believes that the proposed textual changes to the 
Floor Broker credit (see supra n. 7) would add clarity, transparency 
and internal consistency to the Fee Schedule.
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    \12\ See supra n. 10.
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    The Exchange believes that adopting the proposed incremental 
service fee once a firm reaches the Fee Cap is

[[Page 47234]]

reasonable because it would allow the Exchange to recoup the costs 
incurred in providing certain services, including but not limited to 
trade matching and processing, post trade allocation, submission for 
clearing and customer service activities related to trading activity on 
the Exchange. In this regard, the Exchanges notes that the proposed fee 
is consistent with similarly such incremental fees charged on other 
options exchanges in connection with similar fee caps and is therefore 
competitive.\13\ Finally, the Exchange believes the proposal to adopt 
the service fee is equitable and not unfairly discriminatory because it 
would uniformly apply to all member firms engaged in manual proprietary 
trading that have reached the Fee Cap.
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    \13\ See supra n. 11.
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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 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 change would allow Floor 
Brokers to better compete for QCC volumes as the credits are consistent 
with those paid to participants on other exchanges.\14\ The Exchange 
also believes that the proposed service fee is likewise competitive as 
it would allow the Exchange to recoup certain costs incurred in 
providing services to member firms and is consistent with similar such 
fees charged by other exchanges that offer a similar monthly fee 
cap.\15\
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    \14\ See supra n. 10.
    \15\ See supra n. 11.
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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) \16\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \17\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 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) \18\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \18\ 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-2018-64 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-2018-64. 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-NYSEARCA-2018-64 and should be submitted 
on or before October 9, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
Eduardo A. Aleman,
Assistant Secretary.
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    \19\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2018-20194 Filed 9-17-18; 8:45 am]
BILLING CODE 8011-01-P