Document ID: SEC-2016-0491-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE MKT LLC
Posted Date: 2016-03-21T04:00Z

[Federal Register Volume 81, Number 54 (Monday, March 21, 2016)]
[Notices]
[Pages 15136-15138]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-06228]

[[Page 15136]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77370; File No. SR-NYSEMKT-2016-35]

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

March 15, 2016.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on March 3, 2016, NYSE MKT LLC (the ``Exchange'' or ``NYSE MKT'') filed 
with the Securities and Exchange Commission (``SEC'' or ``Commission'') 
the proposed rule change as described in Items I, II, and III below, 
which Items have been prepared by the Exchange. 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\ 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 March 3, 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 add the definitions of ``Appointed 
MM'' and ``Appointed OFP'' to the Exchange's Fee Schedule, effective 
March 3, 2016, which would increase opportunities for firms to qualify 
for the Amex Customer Engagement (``ACE'') program (the ``ACE Program'' 
or ``Program'').
    Specifically, the Exchange proposes to allow NYSE Amex Options 
Market Makers to designate an Order Flow Provider (``OFP'') as its 
``Appointed OFP'' and for an OFP to designate an NYSE Amex Options 
Market Maker as its ``Appointed MM,'' for purposes of sections I.D. and 
I.E. of the Fee Schedule.\3\ ATP Holders would effectuate the 
designation by each sending an email to the Exchange.\4\ The Exchange 
would view corresponding emails as acceptance of such an appointment 
and would only recognize one such designation for each party once every 
12-months, which designation would remain in effect unless or until the 
Exchange receives an email from either party indicating that the 
appointment has been terminated.\5\ The proposed new concepts would be 
applicable to, and included in, sections 1.D. and 1.E. of the Fee 
Schedule, as described below, and are designed to increase 
opportunities for firms to qualify for the ACE Program.\6\
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    \3\ See proposed Fee Schedule, Key Terms and Definitions.
    \4\ See proposed section 1.E. to Fee Schedule, Designating an 
Appointed OFP/Appointed MM. ATP Holders should direct their emails 
designating Appointed OFP/Appointed MMs to optionsbilling@nyse.com. 
See id.
    \5\ See id. The Commission notes that the proposed rule text 
specifies that the Exchange will recognize one such designation for 
each party, and that a party may make a designation not more than 
once every 12-months, which designation shall remain in effect 
unless or until the Exchange receives an email from either party 
indicating that the appointment has been terminated.
    \6\ See proposed Fee Schedule, sections 1.D. and 1.E.
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    Last year, the Exchange instituted a Prepayment Program that allows 
NYSE Amex Options Market Makers the option to commit to either a 1-year 
or 3-year term (the ``1 Year Prepayment Program'' or ``3 Year 
Prepayment Program,'' respectively).\7\ In connection with these 
Prepayment Programs, the Exchange added the ACE Program (described 
below), which enables an NYSE Amex Options Market Maker (``Market 
Maker'') that elects to participate in either of the Prepayment 
Programs to qualify its Affiliated OFP to be eligible to receive the 
enhanced credit(s) under the ACE Program. Currently, an OFP is only 
eligible for the enhanced credits of section 1.E. by virtue of its 
affiliation (i.e., minimum of 70% common ownership) with a Market Maker 
in one of the Prepayment Programs.
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    \7\ See Securities Exchange Act Release No. 74086 (January 16, 
2015), 80 FR 3701 (January 16, 2015) [sic] (SR-NYSEMKT-2015-04). See 
also Fee Schedule, section I.D., Prepayment Program.
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    Section I.E. of the Fee Schedule describes the ACE Program,\8\ 
which features five tiers expressed as a percentage of total industry 
Customer equity and ETF option average daily volume (``ADV'').\9\ OFPs 
receive per contract credits solely for Electronic Customer volume that 
the OFP, as agent, submits to the Exchange.\10\ The ACE Program offers 
two methods for OFPs to receive credits:
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    \8\ See Fee Schedule, section I.E, ACE Program.
    \9\ In calculating ADV, the Exchange utilizes monthly reports 
published by the OCC for equity options and ETF options that show 
cleared volume by account type. See OCC Monthly Statistics Reports, 
available here, http://www.theocc.com/webapps/monthly-volume-reports 
(including for equity options and ETF options volume, subtotaled by 
exchange, along with OCC total industry volume). The Exchange 
calculates the total OCC volume for equity and ETF options that 
clear in the Customer account type and divide this total by the 
number of trading days for that month (i.e., any day the Exchange is 
open for business). For example, in a month having 21 trading days 
where there were 252,000,000 equity option and ETF option contracts 
that cleared in the Customer account type, the calculated ADV would 
be 12,000,000 (252,000,000/21 = 12,000,000).
    \10\ Electronic Customer volume is volume executed 
electronically through the Exchange System, on behalf of an 
individual or organization that is not a Broker-Dealer and who does 
not meet the definition of a Professional Customer.
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    1. By calculating, on a monthly basis, the average daily Customer 
contract volume an OFP executes Electronically on the Exchange as a 
percentage of total average daily industry Customer equity and ETF 
options volume; \11\ or
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    \11\ See supra n. 9.
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    2. By calculating, on a monthly basis, the average daily contract 
volume an OFP executes Electronically in all participant types (i.e., 
Customer, Firm, Broker-Dealer, NYSE Amex Options Market Maker, Non-NYSE 
Amex Options Market Maker, and Professional Customer) on the Exchange, 
as a percentage of total average daily industry Customer equity and ETF 
option volume,\12\ with the further requirement that a specified 
percentage of the minimum volume required to qualify for the Tier must 
be Customer volume.
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    \12\ Id.
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    Upon reaching a higher tier, an Affiliated OFP receives for all 
eligible Customer volume the per contract enhanced credit associated 
with the highest tier achieved, retroactive to the first contract 
traded each month, regardless of which of the two calculation methods 
the OFP qualifies under.\13\
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    \13\ In the event that an OFP is eligible for credits under both 
calculation methods, the OFP would benefit from whichever criterion 
results in the highest per contract credit for all the OFP's 
eligible ADV. In calculating an OFP's Electronic volume, certain 
volumes are excluded (e.g., QCC trades). See Fee Schedule, section 
I.E.

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[[Page 15137]]

    The Exchange proposes to modify sections 1.D. (Prepayment Programs) 
and 1.E (ACE Program) to include the newly introduced concepts of an 
Appointed OFP and Appointed MM.\14\ The proposal would be available to 
all Market Makers and OFPs. Specifically, the proposed changes would 
enable any Market Maker--not just those participating in a Prepayment 
Program--to qualify its Appointed OFP for credits under the ACE 
Program. In this regard, the proposed change would enable a Market 
Maker without an Affiliated OFP--or with an Affiliated OFP that doesn't 
meet the volume requirements for credits under the Program--to enter a 
relationship with an Appointed OFP. Similarly, as proposed, an OFP, by 
virtue of designating an Appointed MM, would be able to aggregate its 
own Customer volume with the activity of its Appointed MM, which would 
enhance the OFP's potential to qualify for additional credits in 
ACE.\15\ Thus, the proposed changes would enable firms that are not 
currently eligible for the ACE Program to avail themselves of the 
Program as well as to assist firms that are currently eligible for the 
Program to potentially achieve a higher ACE tier, thus qualifying to 
higher credits. The Exchange believes these proposed changes would 
incent firms to direct their order flow to the Exchange to the benefit 
of all market participants. Further, the Exchange believes that the 
proposed changes would encourage market making firms to participate in 
one of the Exchange's Prepayment Programs, which would increase capital 
commitment and liquidity on the Exchange to the benefit of all market 
participants.
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    \14\ The Exchange also proposes to make the non-substantive 
change of adding a period following reference to section I.C. See 
proposed Fee Schedule, section I.D. The Exchange also proposes to 
remove an errant period from item 2 in section 1.D. of the Fee 
Schedule. See id.
    \15\ An OFP that has both an Appointed MM and an Affiliated NYSE 
Amex Market Maker may only aggregate volumes with one of these two, 
not both. Specifically, the Exchange proposes to specify in section 
I.E. that ``[i]n calculating an OFP's Electronic volume, the 
Exchange will include the activity of either (i) Affiliates of the 
OFP, such as when an OFP has an Affiliated NYSE Amex Options Market 
Making firm, or (ii) an Appointed MM of such OFP.''
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    As proposed, the Exchange would only process one designation of an 
Appointed OFP and Appointed MM per year, which designation would remain 
in effect unless or until the parties informed the Exchange its 
termination.\16\ The Exchange believes that this requirement would 
impose a measure of exclusivity and would enable both parties to rely 
upon each other's, and potentially increase, transaction volumes 
executed on the Exchange, which is beneficial to all Exchange 
participants.
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    \16\ See supra n. 5.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with section 6(b) of the Act,\17\ in general, and furthers the 
objectives of sections 6(b)(4) and (5) of the Act,\18\ 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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    \17\ 15 U.S.C. 78f(b).
    \18\ 15 U.S.C. 78f(b)(4) and (5).
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    The proposal is reasonable, equitable and not unfairly 
discriminatory for the following reasons. First, the proposal would be 
available to all Market Makers and OFPs and the decision to be 
designated as an ``Appointed OFP'' or ``Appointed MM'' is completely 
voluntary and ATP Holders may elect to accept this appointment or not. 
In addition, the proposed changes would enable firms that are not 
currently eligible for the ACE Program to avail themselves of the 
Program as well as to assist firms that are currently eligible for the 
Program to potentially achieve a higher ACE tier, thus qualifying to 
higher credits. The Exchange believes these proposed changes would 
incent firms to direct their order flow to the Exchange. Specifically, 
the proposed changes would enable any Market Maker--not just those 
participating in a Prepayment Program--to qualify its Appointed OFP for 
credits under the ACE Program. Moreover, the proposed change would 
allow any OFP, by virtue of designating an Appointed MM, to aggregate 
its own Customer volume with the activity of its Appointed MM, which 
would enhance the OFP's potential to qualify for additional credits 
under the ACE Program. The Exchange believes these proposed changes 
would incent Appointed OFPs and OFPs with an Appointed MM to direct 
their order flow to the Exchange, which increase in orders routed to 
the Exchange would benefit all market participants by expanding 
liquidity, providing more trading opportunities and tighter spreads, 
including those market participants that opt not to become an Appointed 
OFP and therefore may be ineligible to earn the credits under the ACE 
Program.
    Similarly, the proposal, which would permit the opportunity for 
both parties to rely upon each other's, and potentially increase, 
transaction volumes, are reasonable, equitable and not unfairly 
discriminatory because they may encourage market making firms to 
participate in one of the Exchange's Prepayment Programs, which 
potential increase in order flow, capital commitment and resulting 
liquidity on the Exchange would benefit all market participants by 
expanding liquidity, providing more trading opportunities and tighter 
spreads.
    The proposal is also reasonable, equitable and not unfairly 
discriminatory because the Exchange would only process one designation 
of an Appointed OFP and Appointed MM per year, which requirement would 
impose a measure of exclusivity while allowing both parties to rely 
upon each other's, and potentially increase, transaction volumes 
executed on the Exchange to the benefit of all Exchange participants.
    Finally, the Exchange believes the proposal is reasonable, 
equitable and not unfairly discriminatory as it may encourage an 
increase in orders routed to the Exchange, which would expand liquidity 
and provide more trading opportunities and tighter spreads to the 
benefit of all market participants, even to those market participants 
that are either currently affiliated by virtue of their common 
ownership or that opt not to affiliate under this proposal (the latter 
group including market participants that are ineligible to earn the 
credits under the ACE Program).

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

    In accordance with section 6(b)(8) of the Act,\19\ 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. The Exchange believes that the proposed 
changes are pro-competitive as they would increase opportunities for 
firms to qualify for the ACE Program, which may increase intermarket 
and intramarket competition by incenting participants to direct their 
orders to the Exchange thereby increasing the volume of contracts 
traded on the Exchange and enhancing the quality of quoting. Enhanced 
market quality and increased transaction volume that results from the 
anticipated increase in order flow directed to the Exchange would 
benefit

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all market participants and improve competition on the Exchange.
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    \19\ 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) \20\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \21\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \20\ 15 U.S.C. 78s(b)(3)(A).
    \21\ 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) \22\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \22\ 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-2016-35 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-2016-35. 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 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; 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-2016-35, and should 
be submitted on or before April 11, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-06228 Filed 3-18-16; 8:45 am]
BILLING CODE 8011-01-P