Document ID: SEC-2018-0744-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2018-05-15T04:00Z

[Federal Register Volume 83, Number 94 (Tuesday, May 15, 2018)]
[Notices]
[Pages 22537-22539]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-10262]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83202; File No. SR-NYSEArca-2018-29]

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

May 9, 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 May 1, 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 amend the NYSE Arca Options Fee Schedule 
(``Fee Schedule''). The Exchange proposes to implement the fee change 
effective May 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 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 effective 
May 1, 2018. Specifically, the Exchange proposes to offer an additional 
incentive for Market Makers to post liquidity in the SPDR S&P 500 ETF 
Trust (``SPY'').
    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.\4\ 
Similarly, Market Makers may receive a $0.28 per contract credit for 
executions against their posted liquidity in SPY.\5\ The Exchange 
currently offers additional incentives (i.e., enhanced credits) to 
Market Makers to post liquidity.\6\
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    \4\ 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'').
    \5\ See Fee Schedule, the MM Tiers, Base Rate.
    \6\ 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 also offers an incentive to encourage Market Makers to 
post interest in SPY. A Market Maker that has posted interest of at 
least 0.20% of TCADV in SPY during a calendar month receives a per 
contract credit of $0.45

[[Page 22538]]

for electronic executions against such posted interest. The Exchange 
proposes to add an intermediate level incentive by offering any Market 
Maker that has posted interest of at least 0.15% of TCADV in SPY during 
a calendar month, a per contract credit of $0.36 for electronic 
executions against such posted interest \7\
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    \7\ 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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    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 $0.36 per 
contract credit via the Market Maker Incentive for SPY would receive 
the former (higher) credit.
    The Exchange is not proposing any other changes to the Fee Schedule 
at this time.
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 providing an intermediate 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 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 burdens and heightened obligations 
that apply to Market Makers, such as burdensome quoting obligations and 
costs related to market making activities. 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.\8\
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    \8\ See, e.g., MIAX Pearl Fee Schedule, Section 1.a., 
Transaction Rebates/Fees, Exchange Rebates/Fees--Add/Remove Tiered 
Rebates/Fees, available here, https://www.miaxoptions.com/sites/default/files/fee_schedule-files/MIAX_PEARL_Fee_Schedule_03082018.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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    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,\9\ 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 
change 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 burdens and heightened obligations that apply to Market 
Makers.
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    \9\ 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) \10\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \11\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 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) \12\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \12\ 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.

[[Page 22539]]

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 No. SR-NYSEArca-2018-29 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 No. SR-NYSEArca-2018-29. 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 No. SR-NYSEArca-2018-29, and should be submitted 
on or before June 5, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-10262 Filed 5-14-18; 8:45 am]
 BILLING CODE 8011-01-P