Document ID: SEC-2017-1219-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2017-07-19T04:00Z

[Federal Register Volume 82, Number 137 (Wednesday, July 19, 2017)]
[Notices]
[Pages 33194-33197]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-15101]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81140; File No. SR-NYSEArca-2017-77]

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

July 13, 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 July 10, 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 July 10, 2017.\4\ 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.
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    \4\ The Exchange originally filed to amend the Fee Schedule on 
July 3, 2017 (SR-NYSEArca-2017-74) and withdrew such filing on July 
10, 2017.
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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

[[Page 33195]]

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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this filing is to amend the Fee Schedule to offer an 
incentive for Market Makers to post liquidity in the SPDR S&P 500 ETF 
Trust (``SPY''). The Exchange also proposes a number of textual changes 
designed to clarify certain aspects of the Fee Schedule.
    Currently, Market Makers receive a $0.28 per contract credit for 
executions against Market Maker posted liquidity in Penny Pilot Issues 
and Lead Market Makers (``LMMs'') may receive an additional $.04 per 
contract credit (for a total of $0.32 per contract credit) for posted 
liquidity in Penny Pilot Issues that are in the LMM's appointment.\5\ 
Similarly, Market Makers may receive a $0.28 per contract credit for 
executions against Market Maker posted liquidity in SPY.\6\ The 
Exchange currently offers additional incentives (i.e., enhanced 
credits) to Market Makers to post liquidity.\7\
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    \5\ See Fee Schedule, Transaction Fee for Electronic Executions, 
Per Contract. See also Market Maker Monthly Posting Credit Tiers and 
Qualifications for Executions in Penny Pilot Issues and SPY (the 
``MM Tiers'').
    \6\ See Fee Schedule, the MM Tiers, Base Rate.
    \7\ See id. See, e.g., the Market Maker Incentive for Penny 
Pilot Issues (which provides a $0.41 per contract credit for 
executions of Marker Maker posted interest provided the Market Maker 
achieves at least 0.75% of total industry Customer equity and ETF 
option average daily volume (``TCADV'') from Customer posted 
interest (e.g., from the Marker Maker's affiliate of Appointed Order 
Flow Provider) in all issues and an ADV from Market Maker posted 
interest equal to 0.70% of TCADV).
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    The Exchange proposes to add a new incentive to encourage Market 
Makers to post interest in SPY. Specifically, the Exchange proposes to 
offer any Market Maker that has posted interest of at least 0.20% of 
TCADV in SPY during a calendar month, a per contract credit of $0.45 
for electronic executions against such posted interest.\8\ As is the 
case today, a Market Maker that qualifies for more than one available 
credit will always receive the highest rebate applicable to a 
transaction. For example, a Market Maker that is eligible to receive 
both the $0.41 per contract credit via the Market Maker Incentive For 
Penny Pilot Issues as well as the proposed $0.45 per contract credit 
via the Market Maker Incentive for SPY would receive the latter 
(higher) credit.
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    \8\ See proposed Fee Schedule, Market Maker Incentive for SPY 
(including reference to Endnote 8, which sets forth the calculations 
for monthly posting credits).
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    The Exchange also proposes to make the following textual changes to 
the Fee Schedule regarding Market Maker incentives, which are designed 
to make the Fee Schedule easier to navigate and comprehend:
     The Exchange proposes to re-locate the reference to 
Endnote 15 from the beginning to the end of each of the following 
tables: The Market Maker Incentive For Penny Pilot Issues; the Market 
Maker Incentive For Non-Penny Pilot Issues; and the MM Tiers 
(collectively, the ``MM Tables''). Endnote 15 defines an Appointed 
Market Maker (``MM'') and an Appointed Order Flow Provider (``OFP'').
     The Exchange proposes to add a sentence to the beginning 
of Endnote 15 to make clear that the qualification thresholds set forth 
in the MM Tables ``[i]ncludes transaction volume from the OTP Holder's 
or OTP Firm's affiliates or its Appointed OFP or Appointed MM.'' \9\ 
Consistent with this proposed change, the Exchange proposes to remove 
the language that appears at the end of each of the MM Tables providing 
that volume of an Appointed MM or Appointed OFP may be included because 
it would be duplicative of the proposed new next in Endnote 15.
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    \9\ See proposed Fee Schedule, Endnote 15.
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     The Exchange proposes to modify Endnote 8 to define Total 
Industry Customer equity and ETF option average daily volume as 
``TCADV'' and to use this shorthand reference in each of the MM Tables.
     The Exchange proposes to clarify how the credit for each 
of the MM Tables is applied, i.e., that it is applied to ``electronic 
executions of Market Maker posted interest'' in the applicable 
securities. Consistent with this change, the Exchange proposes to 
delete the current language that provides the credit is applied to 
``Posted Electronic Market Maker Executions'' in the applicable 
securities.
     In each of the MM Tables, the Exchange proposes to replace 
reference to ``Posted Orders'' with ``posted interest'' and ``orders'' 
with ``interest'' to make clear that, where applicable, liquidity may 
include orders or quotes.
     In the fee table for Market Maker Incentive for Penny 
Pilot Issues, the Exchange proposes to replace reference to ``both 
Penny and Non-Penny Issues'' with ``all issues.''
     For consistency, the Exchange proposes to remove the 
capitalization from ``Non-Penny,'' as appears in the Market Maker 
Incentive For Non-Penny Pilot Issues, and to remove any capitalization 
from ``all' and ``issues'' in reference to ``all issues'' in the MM 
Tables.
     For ease of reference, the Exchange proposes to rename the 
Market Maker Monthly Posting Credit Tiers and Qualifications for 
Executions in Penny Pilot Issues and SPY (i.e., the MM Tiers) to 
``MARKET MAKER PENNY PILOT AND SPY POSTING CREDIT TIERS,'' and to add 
the following preamble, followed by reference to Endnotes 8 and 15 (as 
modified herein): ``OTP Holders and OTP Firms meeting the 
qualifications below will receive the corresponding credit on 
electronic executions of Market Maker posted interest in Penny Pilot 
issues and SPY.'' The Exchange also proposes to update a cross 
reference to the MM Tiers to reflect the modified name.\10\
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    \10\ See proposed Fee Schedule, Transaction Fee for Electronic 
Executions, Per Contract.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\11\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\12\ 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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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that providing an enhanced incentive for 
executions against posted liquidity in SPY is reasonable, equitable, 
and not unfairly discriminatory because, among other things, it may 
encourage greater participation in SPY--which is consistently the most 
active options issue nationally. The proposed SPY incentive would also 
provide an additional means for Market Makers to qualify for credits 
for posting volume on the Exchange. By encouraging activity in SPY, the 
Exchange believes that opportunities to qualify for other rebates are 
increased, which benefits all participants through increased Market 
Maker activity. The Exchange also believes that encouraging a higher 
level of trading volume in SPY should increase opportunities for OTP 
Holders and OTP Firms (``OTPs'') to achieve credits available through 
existing incentive programs, such as the MM

[[Page 33196]]

Tiers, which provides OTPs the ability to achieve per contract credit 
for electronic executions of posted Market Maker interest in SPY and 
other Penny Pilot names by combining the volume of the OTP with volume 
of their affiliates or Appointed Market Maker. To the extent that order 
flow, which adds liquidity, is increased by the proposal, OTPs will be 
encouraged to compete for the opportunity to trade on the Exchange, 
including by sending additional order flow to the Exchange to achieve 
higher tiers or enhanced rebates. The resulting increased volume and 
liquidity would benefit all Exchange participants by providing more 
trading opportunities and tighter spreads.
    The Exchange also believes the proposed SPY incentive is not 
unfairly discriminatory to non-Market Markers (i.e., Customers, 
Professionals Customers, Firms and Broker-Dealers) because such market 
participants are not subject to the obligations that apply to Market 
Makers. The Exchange believes the proposed incentive is reasonable, 
equitable and not unfairly discriminatory because encouraging Market 
Makers to direct more volume to the Exchange would also contribute to 
the Exchange's depth of book as well as to the top of book liquidity.
    The Exchange also notes that the proposed credit for posting in SPY 
is reasonable, equitable, and not unfairly discriminatory as it is 
consistent with credits offered to Market Makers by other options 
exchanges.\13\
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    \13\ See, e.g., MIAX Pearl Fee Schedule, Section 1.a., 
Transaction Rebates/Fees, Exchange Rebates/Fees--Add/Remove Tiered 
Rebates/Fees, available here, http://www.miaxoptions.com/sites/default/files/page-files/MIAX_PEARL_Fee_Schedule_06072017.pdf 
(providing an alternative basis to achieve a $0.47 per contract 
credit in Penny Pilot Issues based on a specified level of SPY 
volume).
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    The Exchange believes that the proposed textual modifications are 
reasonable, equitable, and not unfairly discriminatory because the 
proposed changes would add clarity, transparency and internal 
consistency to the Fee Schedule making it easier to navigate and 
comprehend, which is in the public interest.
    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,\14\ 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 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 would impair the ability of any market participants or 
competing order execution venues to maintain their competitive standing 
in the financial markets. Further, the incentive would not impose an 
unfair burden on non-Market Markers because such market participants 
are not subject to the heightened obligations that apply to Market 
Makers. The Exchanges notes that the proposed textual changes are not 
intended to have any impact on competition, but instead are designed to 
make the Fee Schedule easier for market participants to navigate and 
digest, which is in the public interest.
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    \14\ 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) \15\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \16\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 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) \17\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \17\ 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-2017-77 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-2017-77. 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-

[[Page 33197]]

NYSEArca-2017-77, and should be submitted on or before August 9, 2017.
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    \18\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2017-15101 Filed 7-18-17; 8:45 am]
 BILLING CODE 8011-01-P