Document ID: SEC-2019-0567-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2019-04-25T04:00Z

[Federal Register Volume 84, Number 80 (Thursday, April 25, 2019)]
[Notices]
[Pages 17439-17441]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-08332]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85696; File No. SR-NYSEArca-2019-24]

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

April 19, 2019.
    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 April 8, 2019, NYSE Arca, Inc. (``NYSE Arca'' or the 
``Exchange'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
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 Arca Options Fee Schedule 
(``Fee Schedule''). The Exchange proposes to implement the fee change 
effective April 8, 2019.\4\ The proposed rule change is available on 
the Exchange's website at www.nyse.com, at the principal office of the 
Exchange, and at

[[Page 17440]]

the Commission's Public Reference Room.
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    \4\ On March 28, 2019, the Exchange filed to amend the Fee 
Schedule for effectiveness on April 1, 2019 (SR-NYSEArca-2019-19) 
and withdrew such filing on April 8, 2019.
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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 modify the Fee Schedule, effective 
April 8, 2019, to modify the criteria for achieving various credits.
    The Exchange currently provides a number of incentives for OTP 
Holders and OTP Firms (collectively, ``OTPs'') designed to encourage 
OTPs to direct additional order flow to the Exchange to achieve more 
favorable pricing and higher credits. Among these incentives are 
enhanced posted liquidity credits based on achieving certain 
percentages of NYSE Arca Equity daily activity, also known as ``cross-
asset pricing.'' Similarly, because the Exchange allows Market Makers 
(``MMs'') to aggregate their volume executed on NYSE Arca with 
affiliated or Appointed Order Flow Providers (``OFPs''), MMs may 
encourage an increased level of activity from these participants to 
qualify for various incentives. As a result, NYSE Arca becomes a more 
attractive venue for Customer (and Professional Customer) orders 
offering enhanced rebates.
    Pursuant to the Customer Penny Pilot Posting Credit Tiers (the 
``Penny Credit Tiers''), Customer and Professional Customer orders that 
post liquidity and are executed on the Exchange earn a base credit of 
$0.25 per contract, and may be eligible for increased credits based on 
the participant's activity. Currently, there are 7 Penny Credit Tiers, 
with increasing minimum volume thresholds (as well as increasing 
credits) associated with each tier.
    The Exchange proposes to modify the minimum volume thresholds for 
Tier 5, but will not modify the $0.48 per contract credit associated 
with this Tier. Specifically, the Exchange proposes to modify Tier 5 to 
require that an OTP achieve at least 0.22% (decreased from 0.35%) of 
Total Customer Average Daily Volume (``TCADV'') from Customer Posted 
interest in all issues, plus Executed ADV of at least 0.90% (increased 
from 0.80%) of U.S. Equity Market Share Posted and Executed on NYSE 
Arca Equity Market.\5\ This proposed change seeks to incent OTPs to 
achieve this Tier by increasing trading on the equities market (while 
making the Tier easier to achieve based on the lower minimum threshold 
for options trading activity).
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    \5\ The Exchange is not modifying the alternative basis for an 
OTP to achieve Tier 5, which requires an OTP to achieve at least 
0.75% of TCADV from Customer posted interest in all issues, plus at 
least 0.45% of TCADV from Market Maker Total Electronic Volume.
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    The Exchange also offers a Customer Incentive Program (the 
``Incentive Program''), which offers OTPs the ability to earn one 
additional credit by achieving one of the five alternative minimum 
thresholds. The Exchange proposes to modify one of the alternatives. 
Specifically, the Exchange proposes that an OTP must achieve Executed 
ADV of 0.90% (increased from 0.80%) of U.S. Equity Market Share Posted 
and Executed on NYSE Arca Equity Market to be eligible for the 
associated $0.03 per contract credit (which credit is not changing). 
This proposed change is designed to encourage increased trading on NYSE 
Arca Equity Market.
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 the proposed modifications to the Penny 
Credit Tiers and the Incentive Program are reasonable, equitable, and 
not unfairly discriminatory because they are designed to encourage more 
participants to qualify for the various Tiers or Incentives, 
particularly those with a cross-asset pricing component. The Exchange 
believes these proposed changes should result in more order flow being 
directed to the Exchange, including from affiliated or Appointed OFPs. 
The proposed modification to Tier 5 should incent OTPs to increase 
trading on the equities market, while making it easier to meet the 
requisite volume threshold in options trading. The Exchange notes that 
OTPs are still eligible to qualify for Tier 5 under the existing 
alternative (see supra note 5) based on posted Customer volume and 
Market Maker Electronic volume. By continuing to provide such 
alternative methods to qualify for a Tier or an Incentive, the Exchange 
believes the opportunities to qualify for credits is increased, which 
benefits all participants through both increased Customer (and 
Professional Customer) volume and increased Market Maker activity. 
Further, encouraging Market Maker activity on, as well as encouraging 
OFPs to send higher volumes of Customer orders to, the Exchange would 
also contribute to the Exchange's depth of book as well as to the top 
of book liquidity.
    To the extent that order flow that adds liquidity is increased by 
the proposal, market participants will increasingly compete for the 
opportunity to trade on the Exchange, including sending more orders to 
reach higher Tiers or achieve alternative Incentives. The resulting 
increased volume and liquidity would provide more trading opportunities 
and tighter spreads to the investing public and, thus, would promote 
just and equitable principles of trade and remove impediments to, and 
perfect the mechanism of, a free and open market.
    The Exchange also believes the proposed changes would be available 
to all similarly-situated market participants on an equal and non-
discriminatory basis. The Exchange believes the proposed modifications 
are reasonable, equitable and not unfairly discriminatory because they 
encourage participants to enhance their order flow to qualify for the 
various incentives, including encouraging more participants to have 
affiliated or appointed order flow directed to the Exchange, which 
potential increase in order flow would benefit the investing public by 
improving order execution and price discovery, which promotes just and 
equitable principles of trade and removes impediments to, and perfects 
the mechanism of, a free and open market.

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

    In accordance with Section 6(b)(8) of the Act, 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

[[Page 17441]]

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 changes 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 be available to all similarly-situated 
participants, and, as such, the proposed changes would not impose a 
disparate burden on competition either among or between classes of 
market participants and, in fact, may encourage competition.
    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) \6\ of the Act and subparagraph (f)(2) of Rule 19b-
4 \7\ thereunder, because it establishes a due, fee, or other charge 
imposed by the Exchange.
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    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 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.

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 [email protected]. Please include 
File Number SR-NYSEArca-2019-24 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-NYSEArca-2019-24. 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 Number SR-NYSEArca-2019-24 and should be submitted 
on or before May 16, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-08332 Filed 4-24-19; 8:45 am]
BILLING CODE 8011-01-P