Document ID: SEC-2016-0139-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE MKT, LLC
Posted Date: 2016-01-26T05:00Z

[Federal Register Volume 81, Number 16 (Tuesday, January 26, 2016)]
[Notices]
[Pages 4350-4352]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-01391]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76935; File No. SR-NYSEMKT-2016-09]

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

January 20, 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 January 13, 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 January 13, 2016.\3\ 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.
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    \3\ The Exchange originally filed this proposed rule change on 
January 04, 2016 under File No. SR-NYSEMKT-2016-01. The Exchange 
subsequently withdrew that filing on January 13, 2016 and filed this 
proposed rule change.
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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 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 Sections I. A., C. and E of 
the Fee Schedule to adjust fees and credits payable, effective on 
January 13, 2016.
    Section I.A. of the Fee Schedule sets forth the rates for Standard 
Option transactions. The Exchange is proposing to increase rates per 
contract for Electronic transactions. Specifically, the Exchange 
proposes to increase rates for Electronic transactions in issues in the 
Penny Pilot program from $0.44 to $0.50 for Broker Dealers, 
Professional Customers and Non-NYSE Amex Options Market Makers; from 
$0.34 to $0.42 for Firms; and $0.23 to $0.25 for DOMMs, e-Specialists, 
NYSE Amex Options Market Makers and Specialists. These rates are 
competitive with rates being charged on other exchanges for Electronic 
executions in Penny Pilot issues.\4\
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    \4\ For example, Miami Securities International Exchange, LLC 
(``MIAX'') charges $0.45 to firms and $0.47 to non-MIAX market 
makers, broker dealers and public customers other than priority 
customers for execution in Penny Pilot issues (see MIAX fee 
schedule, available here, https://www.miaxoptions.com/content/fees); 
and NASDAQ OMX PHLX LLC (``PHLX'') charges $0.48 to professional 
customers, broker dealers and firms for execution in Penny Pilot 
issues (see PHLX fee schedule, available here, http://www.nasdaqtrader.com/Micro.aspx?id=PHLXPricing). In addition, NYSE 
Arca, Inc. (``NYSE Arca''), NASDAQ Options Market LLC (``NOM'') and 
BATS BZX Exchange (``BATS'') all charge a $0.50 take fee for 
removing liquidity in Penny Pilot issues. See NYSE Arca fee 
schedule, available here, https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf; NOM fee 
schedule, available here, http://www.nasdaqtrader.com/Micro.aspx?id=OptionsPricing; and BATS fee schedule, available here, 
http://www.batsoptions.com/support/fee_schedule/.
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    The Exchange also proposes to increase rates per contract for 
Electronic transactions in issues that are not part of the Penny Pilot 
program from $0.58 to $0.75 for Broker Dealers, Firms, Professional 
Customers and Non-NYSE Amex Options Market Makers; and $0.23 to $0.25 
for DOMMs, e-Specialists, NYSE Amex Options Market Makers and 
Specialists. These rates are competitive with rates being charged on 
other exchanges for Electronic executions in non-Penny Pilot issues.\5\
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    \5\ For example, MIAX charges $0.29 to MIAX market makers and 
$0.75 to non-MIAX market makers, firms, broker dealers and public 
customers other than priority customers for executions in non-Penny 
Pilot issues (see id., MIAX fee schedule); PHLX charges $0.25 to 
specialists and market makers and $0.75 to professional customers, 
broker dealers and firms per execution in Non-Penny issues (see id., 
PHLX fee schedule); and CBOE charges $0.75 to broker dealers, non-
CBOE market makers and professionals per execution in non-Penny 
Pilot issues (see The Chicago Board Options Exchange, Inc. 
(``CBOE'') fee schedule, http://www.cboe.com/publish/feeschedule/CBOEFeeSchedule.pdf). In addition, the BOX Options Exchange, LLC 
(``BOX'') assesses fees greater than $1.00 to non-Customers for 
executions against Public Customer interest in non-Penny Pilot 
issues and NYSE Arca charges a $0.99 take fee to lead market makers, 
market makers, firms and broker dealers for executions in non-Penny 
Pilot issues. See NYSE Arca fee schedule, available here, https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf; and BOX fee schedule, available 
here, http://boxexchange.com/assets/BOX_Fee_Schedule.pdf.
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    Section I.C. of the Fee Schedule currently provides a discount to 
NYSE Amex Options Market Maker transaction fees based on a sliding 
volume scale (the ``Sliding Scale'' [sic].\6\ Specifically, an NYSE 
Amex Options Market Maker that has monthly volume on the Exchange of 
0.10% or less of total

[[Page 4351]]

industry Customer equity and exchange traded fund (``ETF'') options 
volume \7\ is charged a base rate of $0.23 and, these same market 
participants, upon reaching certain volume thresholds, or Tiers, 
receive a reduction of this per contract rate.\8\ The Exchange is 
proposing to raise these rates across all Tiers by $0.02, which is 
competitive with base rates charged to market makers on other 
exchanges.\9\ In addition, the Exchange is proposing to eliminate Tier 
7 because Market Makers were not availing themselves of this Tier. With 
this change, Tier 6 would be the highest achievable Tier available to 
Market Makers that achieved Electronic volume of greater than 1.75% 
total industry Customer equity and ETF in a given month. Finally, the 
Exchange is proposing to offer an alternative means for Market Makers 
to qualify for the reduced per contract rate charged at each Tier of 
the Sliding Scale which is currently available to Market Makers that 
execute posting volumes in excess of 0.85% of Industry Customer Equity 
and ETF Option Volume.\10\ The Exchange proposes to make the Sliding 
Scale rates available to those Market Makers participating in either of 
the Prepayment Programs offered by the Exchange.\11\
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    \6\ See Fee Schedule, Section I.C.(NYSE Amex Options Market 
Maker Sliding Scale--Electronic), available here, https://www.nyse.com/publicdocs/nyse/markets/amex-options/NYSE_Amex_Options_Fee_Schedule.pdf.
    \7\ The volume thresholds are based on an NYSE Amex Options 
Market Makers' volume transacted Electronically as a percentage of 
total industry Customer equity and ETF options volumes as reported 
by the Options Clearing Corporation (the ``OCC''). Total industry 
Customer equity and ETF option volume is comprised of those equity 
and ETF contracts that clear in the Customer account type at OCC and 
does not include contracts that clear in either the Firm or Market 
Maker account type at OCC or contracts overlying a security other 
than an equity or ETF security. See OCC Monthly Statistics Reports, 
available here, http://www.theocc.com/webapps/monthly-volume-reports.
    \8\ In calculating an NYSE Amex Options Market Maker Electronic 
volumes, the Exchange excludes any volumes attributable to Mini 
Options, QCC trades, CUBE Auctions, and Strategy Execution Fee Caps, 
as these transactions are subject to separate pricing described in 
Fee Schedule Sections I.B., I.F., I.G., and I.J, respectively. See 
Fee Schedule, Section I.C, supra n. 6.
    \9\ See supra nn. 4, 5.
    \10\ See supra n. 8.
    \11\ The Commission notes that, consistent with this change, the 
Exchange proposes to add cross-references to Section I.C. in Section 
I.D. of the Fee Schedule. See Fee Schedule, Section I.D. (describing 
both the 1- and 3- year Prepayment Programs), see supra n. 6.
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    Section I.E. of the Fee Schedule describes the Exchange's ACE 
Program, which features five tiers expressed as a percentage of total 
industry Customer equity and ETF option average daily volume and 
provides two alternative methods through which Order Flow Providers may 
receive per contract credits for Electronic Customer volume that the 
OFP, as agent, submits to the Exchange. The Exchange is proposing two 
amendments to Tier 2 of the Program. First, the Exchange proposes to 
increase the base rebate (i.e., Customer Volume Credits not tied to 
either Prepayment Program) from $0.13 to $0.14. Second, the Exchange 
proposes to offer an additional method for which OFPs can qualify for 
Tier 2. Specifically, as proposed, an ATP Holder may qualify for Tier 2 
by increasing Customer Electronic ADV by 0.35% or more of Industry 
Customer Equity and ETF Options ADV from its volumes in October 2015. 
The Exchange's proposal is intended to incentivize OFPs to increase its 
[sic] Customer Electronic volumes even if they do not have the volumes 
equating to 0.60% Industry Customer Equity and ETF Options ADV (the 
current qualification basis to meet Tier 2).
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\12\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\13\ 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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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes the proposed change to the transaction rates 
for Electronic transactions are reasonable, equitable and not unfairly 
discriminatory because the rates are competitive with fees charged by 
other exchanges and are designed to attract (and compete for) order 
flow to the Exchange, which provides a greater opportunity for trading 
by all market participants.\14\
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    \14\ See supra nn. 4, 5.
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    The Exchange believes the proposed change to the reduce [sic] rates 
per contract on the Sliding Scale are reasonable, equitable and not 
unfairly discriminatory because the rates are competitive with fees 
charged by other exchanges and are designed to attract (and compete 
for) order flow to the Exchange, which provides a greater opportunity 
for trading by all market participants.\15\ In addition, the Exchange 
believes that the proposal to make all Market Makers participating in 
one of the Exchange's Prepayment Programs eligible to avail themselves 
of the Sliding Scale is reasonable, equitable and not unfairly 
discriminatory because it may encourage additional market making firms 
to participate in one of these Programs, which could result in 
increased capital (and resulting liquidity) being committed to the 
Exchange to the benefit of all market participants. The proposed change 
would also incentivize Market Makers already enrolled in a Prepayment 
Program to increase posted liquidity on the Exchange, which would 
benefit all Exchange participants, including ATP Holders, through 
increased opportunities to trade as well as enhancing price discovery. 
The Exchange also believes that eliminating Tier 7 from the Sliding 
Scale is reasonable, equitable and not unfairly discriminatory because 
it removes an incentive that was never utilized, thereby adding clarity 
and transparency to the Fee Schedule.
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    \15\ See supra nn. 4, 5.
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    Finally, the Exchange believes that the proposed changes to the ACE 
Program are reasonable, equitable and not unfairly discriminatory 
because the credits offered are based on the amount of business 
transacted on the Exchange. The Exchange believes the proposal to 
enable ATP Holders to be eligible for Tier 2 based on an increase in 
volume over their October 2015 volume is reasonable, equitable and not 
unfairly discriminatory because it encourages ATP Holders to maintain 
increased volumes executed on the Exchange. Moreover, the proposed 
alternative basis for achieving Tier 2 would enable those ATP Holders 
that are otherwise ineligible for the ACE Program tiers (i.e., because 
of insufficient monthly volume) to qualify by increasing or ``stepping 
up'' their own volume executed on the Exchange. The Exchange notes that 
offering so-called ``step up'' pricing or tiers that use a particular 
month as a benchmark for incentives is not new or novel.\16\
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    \16\ See BATS fee schedule, available here, http://www.batsoptions.com/support/fee_schedule/ (offering a ``Customer 
Step-Up Volume Tier'' based on a member achieving ``Options Step-Up 
Add TCV'' as well as ``NBBO Setter Tiers.). See, e.g., Securities 
and Exchange Release No. 76411 (November 10, 2015), 80 FR 71892, 
71893 (November 17, 2015) (SR-BATS-2015-98) (among other changes, 
adopting a Step-Up Volume Tier, which BATS characterized as being 
``[s]imilar to other pricing where the Exchange seeks to incentivize 
growth by providing tiered pricing based on a Member's participation 
increase over time'').
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    In addition, the Exchange believes that the proposed amendments to 
the ACE Program are reasonable, equitable and not unfairly 
discriminatory because they would enhance the incentives to Order Flow 
Providers to transact Customer orders on the Exchange,

[[Page 4352]]

which would benefit all market participants by providing more trading 
opportunities and tighter spreads, even to those market participants 
that do not participate in the ACE Program. Additionally, the Exchange 
believes the proposed changes to the ACE Program are consistent with 
the Act because they may attract greater volume and liquidity to the 
Exchange, which would benefit all market participants by providing 
tighter quoting and better prices, all of which perfects the mechanism 
for a free and open market and national market system.
    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,\17\ 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 acknowledges that the proposed 
changes relating to transaction charges and/or credits, including the 
Sliding Scale and ACE Program, may increase both intermarket and 
intramarket competition by incenting participants to direct their 
orders to the Exchange, which will enhance the quality of quoting and 
may increase the volume of contracts traded on the Exchange. To the 
extent this purpose is achieved, the Exchange believes the proposed 
amendments are pro-competitive and any resulting increase in volume and 
liquidity to the Exchange would benefit all of Exchange participants 
through increased opportunities to trade as well as enhancing price 
discovery.
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    \17\ 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) \18\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \19\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \18\ 15 U.S.C. 78s(b)(3)(A).
    \19\ 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) \20\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \20\ 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-2016-09 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-2016-09. 
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-2016-09, and should be submitted on or before February 16, 
2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2016-01391 Filed 1-25-16; 8:45 am]
BILLING CODE 8011-01-P