Document ID: SEC-2017-1532-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE American, LLC
Posted Date: 2017-09-15T04:00Z

[Federal Register Volume 82, Number 178 (Friday, September 15, 2017)]
[Notices]
[Pages 43433-43436]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-19584]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81569; File No. SR-NYSEAMER-2017-13]

Self-Regulatory Organizations; NYSE American LLC; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Modify 
the NYSE American Options Fee Schedule

September 11, 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 September 1, 2017, NYSE American LLC (the ``Exchange'' 
or ``NYSE American'') 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 American Options Fee 
Schedule (``Fee Schedule''). The Exchange proposes to implement the fee 
change effective September 1, 2017. 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 modify the Fee Schedule, effective 
September 1, 2017. Specifically, the Exchange proposes to amend the 
American Customer Engagement (``ACE'') Program to modify various 
credits offered and to establish certain credits provided depending on 
the type of Electronic transactions (e.g., whether it is a simple or 
complex execution). The Exchange also proposes to add ``Simple Order'' 
to the glossary of defined terms in the Fee Schedule.
    Section I.E. of the Fee Schedule describes the Exchange's ACE 
Program. The ACE Program features a base tier and five higher tiers 
expressed as a percentage of TCADV \4\ and provides two alternative 
methods by which Order Flow Providers (each an ``OFP'') may receive per 
contract credits for Electronic Customer volume that the OFP, as agent, 
submits to the Exchange.\5\ The Exchange proposes to modify the 
qualifications for certain of the tiers.
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    \4\ See Fee Schedule, Section I.E., available here, https://www.nyse.com/publicdocs/nyse/markets/american-options/NYSE_American_Options_Fee_Schedule.pdf. See also Fee Schedule, Key 
Terms and Definitions (defining TCADV as ``Total Industry Customer 
equity and ETF option average daily volume. TCADV includes OCC 
calculated Customer volume of all types, including Complex Order 
transactions and QCC transactions, in equity and ETF options'').
    \5\ The volume thresholds are based on an OFP's Customer volume 
transacted Electronically as a percentage of total industry Customer 
equity and ETF options volumes as reported by the Options Clearing 
Corporation (the ``OCC''). See OCC Monthly Statistics Reports, 
available here, http://www.theocc.com/webapps/monthly-volume-reports.
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    Currently, an OFP that achieves 0.75% or less of Customer 
Electronic ADV (``CADV'') as a percent of TCADV falls within the Base 
Tier and is not eligible to receive ACE Credits. To qualify for Tier 1 
or 2, an OFP may achieve a level of CADV that is equal to or greater 
than certain percentages of the OFP's October 2015 volume 
(collectively, the ``Step Up'' qualifications):
     For Tier 1, an OFP qualifies by achieving CADV that 
exceeds October 2015 volume by at least 0.20% to be eligible for a 
$0.14 per contract credit;
     For Tier 2, the OFP may qualify by achieving CADV that 
exceeds October 2015 volume by at least 0.35% to be eligible for a 
$0.18 per contract credit.\6\ An OFP that achieves Tier 2 is also 
eligible to receive a more favorable $0.19 per contract credit on 
Electronic Customer Complex Orders.\7\
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    \6\ As an alternative to the Step Up qualification basis, an OFP 
may qualify for Tier 2 (and receive the same $0.18 per contract 
credit) by achieving greater than 0.75 CADV.
    \7\ See Fee Schedule, Section I.E., n. 1 (providing that the 
credit for Customer Complex Orders is provided regardless of whether 
the Complex Order trades against interest in the Complex Order Book 
or with individual orders and quotes in the Consolidated Book).
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    The Exchange proposes to eliminate Step Up qualifications and to 
instead provide that OFPs may qualify for ACE credits based solely on 
percentages of monthly TCADV. The Exchange believes this proposed 
change would provide the opportunity to all Exchange participants to 
meet the same reasonable, yet meaningful standard to qualify for the 
ACE Program credits. Thus, as proposed, an OFP that achieves monthly 
CADV of at least 0.40% would qualify for Tier 1; and an OFP that 
achieves monthly CADV of greater than 0.75% would qualify for Tier 
2.\8\ Consistent with the change, the Exchange proposes to modify the 
Fee Schedule to reflect that an OFP that achieves monthly CADV of less 
than 0.40% falls within the Base Tier and, as is the case today, would 
therefore be ineligible for ACE credits.\9\
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    \8\ See proposed Fee Schedule, Section I.E.
    \9\ The Enhanced Credits are only available to those OFPs who 
have an Affiliated NYSE American Options Market Making firm or an 
Appointed MM that has committed to the 1 Year Prepayment Program, 
Balance of the Year Program, or the 3 Year Prepayment Program, 
respectively, as described in Section I.D. See Fee Schedule, Section 
I.E.

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[[Page 43434]]

    The Exchange also proposes to modify the credits for various Tiers 
and to set forth separate credits based on transaction type. Currently, 
the ACE program provides various credits, applied on a per contract 
basis, on all Customer Electronic executions in Standard Options; the 
ACE program also offers more favorable credit for electronic Customer 
Complex Orders to OFPs that achieve Tiers 2, 4 or 5.\10\ An OFP may be 
eligible for enhanced ACE credits based on the Exchange's Prepayment 
Programs (the ``Enhanced Credits'').\11\ The Exchange proposes to 
modify the ACE Program to reflect differing credits based on the 
execution of Simple Orders--sometimes referred to by the Exchange as 
single-leg orders--and to establish ACE credits at each of the five 
tiers for execution of Complex Orders. In this regard, the Exchange 
proposes to define a ``Simple Order,'' as ``any order to purchase or 
sell contracts in a single listed option series'' and to make clear 
that ``[a] Simple Order is sometimes referred to in NYSE American Rules 
as a single-leg order (e.g., Rules 928NY and 980NY).'' \12\
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    \10\ See supra note 7 (regarding more favorable $0.19 credit 
available for OFPs that achieve Tier 2); see also Fee Schedule, 
Section I.E., n. 2 (regarding more favorable $0.25 per contract 
credit available for OFPs that achieve Tier 4 or 5, provided the OFP 
executes more than 0.50% of TCADV in Initiating CUBE Orders in a 
calendar month).
    \11\ See supra note 9.
    \12\ See proposed Fee Schedule, Key Terms and Definitions.
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    As proposed, an OFP that qualifies for Tier 1 would receive a 
credit of $0.12 per contract on executions of Customer Simple Orders, 
or, if eligible, an Enhanced Credit of $0.13 per contract. An OFP that 
qualifies for Tier 1 would receive a credit of $0.19 per contract for 
executions of Complex Orders,\13\ or, if eligible, an Enhanced Credit 
of $0.20 or $0.21 per contract, respectively, depending on whether the 
OFP is a participant in the 1- or 3-Year Prepayment Program.
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    \13\ As noted herein (see supra note 7), under Tier 2, the 
Exchange currently offers a credit of $0.19 per contract for 
executions of Customer Complex Orders.
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    As proposed, an OFP that qualifies for Tier 2 would receive a 
credit of $0.14 per contract on executions of Customer Simple Orders, 
or, if eligible, an Enhanced Credit of $0.15 or $0.16 per contract, 
respectively, depending on whether a participant in the 1- or 3-Year 
Prepayment Program. The Exchange proposes to offer an OFP that 
qualifies for Tier 2 the same credits for executions of Complex Orders 
as is offered to OFPs that achieve Tier 1 (i.e., $0.19 per contract or, 
if eligible, an Enhanced Credit of $0.20 or $0.21 per contract, 
respectively, depending on whether the OFP is a participant in the 1- 
or 3-Year Prepayment Program).
    For clarity purposes, the Exchange is proposing to specify ACE 
credits for Complex Order executions available to an OFP that achieve 
Tiers 3, 4, or 5, which credits are equivalent to ACE credits currently 
available to an OFP that achieve these Tiers.
    Consistent with the foregoing proposal to differentiate ACE credits 
for executions in Simple Orders and Complex Orders, the Exchange 
proposes to modify notes 1 and 2 to Section I.E. (referred to simply as 
``note 1'' and ``note 2''). Regarding note 1, the Exchange proposes to 
remove language made superfluous by these changes (i.e., to delete 
reference to the $0.19 credit for certain Complex Orders) and to make 
clear that ``[t]he credit for Customer Complex Order executions will be 
provided regardless of whether the Complex Order trades against 
interest in the Complex Order Book or with individual orders and quotes 
in the Consolidated Book.'' \14\ In addition, the Exchange proposes to 
delete the reference to note 1 that appears solely in Tier 2 and to 
instead add reference to note 1 in each column of the table setting 
forth the proposed ACE credit for ``Complex'' executions.\15\ To 
further streamline the Fee Schedule, the Exchange proposes to merge 
information from note 2 into proposed note 1 (resulting in the deletion 
of note 2).\16\
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    \14\ See proposed Fee Schedule, Section I.E., n. 1.
    \15\ See proposed Fee Schedule, Section I.E.
    \16\ See proposed Fee Schedule, Section I.E., n. 1 (making clear 
that the potential $0.25 credit available to OFPs that achieve Tiers 
4 or 5 (described supra at note 10) is an alternative more favorable 
credit to the proposed (base) credits for such OFPs, which range 
from $0.19-$0.24). OFPs that are eligible for more than one credit 
will always receive the more favorable credit.
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    The Exchange is also proposing a modification to the calculation of 
an OFP's Electronic volume. The Exchange would no longer provide 
overweighting in the calculation for Customer orders that take 
liquidity. The Exchange believes that eliminating the overweighting of 
such orders, coupled with the proposed modifications to the ACE credits 
offered, should incent OFPs to send a variety of different orders to 
NYSE American Options, including Complex Orders to rest in the Complex 
Order Book.
    The proposed modifications to the ACE Program are designed to 
further encourage market participants to direct order flow to the 
Exchange in an effort to achieve the modified (more achievable) 
qualification thresholds as well as to encourage OFPs to direct Complex 
Order flow to the Exchange in an effort to qualify for the proposed 
(more favorable) rebates. To the extent this purposes [sic] is 
achieved, all Exchange participants would benefit from any additional 
volume and liquidity through increased opportunities to trade as well 
as enhancing price discovery.
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 Exchange believes that the proposed amendments to the ACE 
Program are reasonable, equitable and not unfairly discriminatory 
because they would enhance the incentives to OFPs to transact Customer 
orders on the Exchange, 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.
    Specifically, the Exchange believes that the proposal to eliminate 
Step Up qualifications (for Tiers 1 and 2) would provide the 
opportunity to all Exchange participants to meet the same reasonable, 
yet meaningful standard to qualify for the ACE Program credits. The 
Exchange believes that the proposed modified qualification thresholds 
to achieve Tier 1 or 2 are reasonably offset by the slightly reduced 
credits for an OFP's Simple Order executions. The Exchange believes 
Tiers 1 and 2, as modified, would encourage market participants to 
direct order flow (especially Simple Orders) to the Exchange in an 
effort to achieve the

[[Page 43435]]

modified (more achievable) qualification thresholds. Further, the 
proposal to set forth ACE credits for Complex Orders would encourage 
OFPs that transact Customer Complex Orders to direct this order flow to 
the Exchange in an effort to qualify for the proposed (more favorable) 
rebates. The Exchange believes that all Exchange participants would 
benefit from the any [sic] additional volume and liquidity (resulting 
from the proposed changes) through increased opportunities to trade as 
well as enhancing price discovery. To the extent this goal is achieved, 
the Exchange would improve its overall competitiveness and strengthen 
its market quality for all market participants. The Exchange notes that 
other exchanges similarly offer credits for executions of Complex 
Orders and such credits are therefore not new or novel.\19\
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    \19\ See MIAX Options fee schedule, Section 1.a.ii. (Priority 
Customer Rebate Program), available here, https://www.miaxoptions.com/sites/default/files/fee_schedule-files/MIAX_Options_Fee_Schedule_08072017.pdf (offering per contracts 
credits ranging from $0.21-$0.25 for complex orders). See also The 
Chicago Board Options Exchange, Inc. (``CBOE'') fee schedule, Volume 
Incentive Program, at p. 3, available here, http://www.cboe.com/publish/feeschedule/CBOEFeeSchedule.pdf (offering per contracts 
credits ranging from $0.20-$0.25 for complex orders).
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    The proposal to define ``Simple Orders,'' in the Fee Schedule is 
likewise reasonable, equitable and not unfairly discriminatory because 
it would add clarity and transparency to the Fee Schedule to the 
benefit of all market participants.
    The Exchange believes that the proposal to eliminate the 
overweighting in the calculation for Customer orders that take 
liquidity is likewise reasonable, equitable and not unfairly 
discriminatory because eliminating the overweighting of such orders, 
coupled with the proposed modifications to the ACE credits offered, 
should incent OFPs to send a variety of different orders to NYSE 
American Options, including Complex Orders to rest in the Complex Order 
Book.
    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,\20\ 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 the proposed amendments 
to the ACE Program are pro-competitive as the changes should encourage 
OFPs to direct Customer order flow--including Complex Orders--to the 
Exchange and any resulting increase in volume and liquidity to the 
Exchange would benefit all Exchange participants through increased 
opportunities to trade as well as enhancing price discovery. To the 
extent that this purpose is achieved, this proposal would enhance the 
quality of the Exchange's markets and increase the volume of contracts 
traded here. In turn, all the Exchange's market participants would 
benefit from the improved market liquidity. If the proposed changes 
make the Exchange a more attractive marketplace for market participants 
at other exchanges, such market participants are welcome to become ATP 
Holders. The Exchange notes that other exchanges similarly offer 
credits for executions of Complex Orders and such credits are not new 
or novel and would allow the Exchange to better compete with other 
options exchanges.\21\
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    \20\ 15 U.S.C. 78f(b)(8).
    \21\ See supra note 19.
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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) \22\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \23\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \22\ 15 U.S.C. 78s(b)(3)(A).
    \23\ 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) \24\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \24\ 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-NYSEAMER-2017-13 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-NYSEAMER-2017-13. 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

[[Page 43436]]

available publicly. All submissions should refer to File Number SR-
NYSEAMER-2017-13, and should be submitted on or before October 6, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-19584 Filed 9-14-17; 8:45 am]
 BILLING CODE 8011-01-P