Document ID: SEC-2016-0256-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE MKT LLC
Posted Date: 2016-02-17T05:00Z

[Federal Register Volume 81, Number 31 (Wednesday, February 17, 2016)]
[Notices]
[Pages 8107-8109]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-03129]

[[Page 8107]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77106; File No. SR-NYSEMKT-2016-18]

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

February 10, 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 February 1, 2016, NYSE MKT LLC (the ``Exchange'' or ``NYSE MKT'') 
filed with the Securities and Exchange Commission (``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 February 1, 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 amend sections I. E. and G. of the 
Fee Schedule \3\ to adjust fees and credits payable, effective on 
February 1, 2016.
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    \3\ See Fee Schedule, sections I.E. (Amex Customer Engagement 
(``ACE'') Program--Standard Options) and I.G. (CUBE Auction Fees & 
Credits), available here, https://www.nyse.com/publicdocs/nyse/markets/amex-options/NYSE_Amex_Options_Fee_Schedule.pdf.
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Proposed Changes to ACE Program
    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 Exchange Traded Fund (``ETF'') option 
average daily volume \4\ 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.
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    \4\ The volume thresholds are based on an NYSE Amex Options 
Market Makers' [sic] 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.
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    The Exchange proposes to modify the ACE Program by increasing 
certain of the credits available for Tiers 2, 3 and 4 as illustrated in 
the table below, with proposed additions appearing in italics and 
proposed deletions appearing in brackets:
* * * * *

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                        ACE Program--standard options                 Credits payable on customer volume only
           -----------------------------------------------------------------------------------------------------
                                               Total Electronic
                                               ADV (of which 20%
                                               or greater of the
            Customer electronic               minimum qualifying                      1 Year          3 Year
   Tier        ADV as a % of                    volume for each      Customer        enhanced        enhanced
             industry customer                   Tier must be         volume         customer        customer
               equity and ETF                  Customer) as a %       credits         volume          volume
                options ADV                       of Industry                         credits         credits
                                                Customer Equity
                                                and ETF Options
                                                      ADV
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1.........  0.00% to 0.60%.....  OR.........  N/A...............           $0.00           $0.00           $0.00
2.........  > 0.60% to 0.80% or  ...........  N/A...............       [($0.14)]       [($0.15)]         ($0.16)
             >= 0.35% over                                               ($0.16)         ($0.16)
             October 2015
             volumes.
3.........  > 0.80% to 1.25%...  ...........  1.50% to 2.50% of        [($0.14)]       [($0.16)]       [($0.18)]
                                               which 20% or              ($0.17)         ($0.18)         ($0.19)
                                               greater of 1.50%
                                               must be Customer.
4.........  > 1.25% to 1.75%...  ...........  > 2.50% to 3.50%         [($0.17)]         ($0.19)         ($0.21)
                                               of which 20% or           ($0.18)
                                               greater of 2.50%
                                               must be Customer.
5.........  > 1.75%............               > 3.50% of which           ($0.19)         ($0.21)         ($0.23)
                                               20% or greater of
                                               3.5% must be
                                               Customer.
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    The proposed amendments to the ACE Program are designed to enhance 
the rebates, which the Exchange believes would attract more volume and 
liquidity to the Exchange to the benefit of Exchange participants 
through increased opportunities to trade as well as enhancing price 
discovery.
Proposed Changes to CUBE Pricing
    Section I.G. of the Fee Schedule sets forth the rates for per 
contract fees and credits for executions associated with a CUBE 
Auction. The Exchange is proposing to reduce rates for RFR Response 
fees and Initiating Credits and Rebates. Specifically, the Exchange 
proposes to reduce RFR Response fees for Non-Customers to $0.12, down 
from $0.60 for symbols in the Penny Pilot and down from $0.95 for 
symbols not in the Penny Pilot. The Exchange also proposes to reduce 
Initiating Participant credits and rebates to $0.05 down from $0.35 for 
symbols in the Penny Pilot, $0.70 for symbols not in the Penny Pilot 
and down from $0.12 for the ACE Initiating Participant Rebate.

[[Page 8108]]

    The proposed changes are designed to address concerns expressed to 
the Exchange by Market Makers about ``imposing oversized transaction 
fees on market makers (MMs) when they compete with the facilitation 
side to pre-matched auction crosses,'' including the CUBE Auction.\5\ 
Specifically, the Market Makers claim that this so-called ``break-up 
fee'' is ``designed to hamper traders (primarily MMs) from competing on 
auction crosses.''\6\ The Exchange believes the proposed changes to 
CUBE pricing, particularly the reduction in the RFR Response Fee 
addresses the concerns raised and, as a result, may attract greater 
volume and liquidity to the Exchange, which would improve its overall 
competitiveness and strengthen its market quality for all market 
participants. The Exchange notes that the proposed changes would also 
provide the concerned Market Makers to have a platform on which they 
can provide proof of concept.
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    \5\ See Letter from Gerald D. O'Connell, CRO, Susquehanna 
International Group, LLP; John Kinahan, CEO, Group One Trading, LP; 
Daniel Overmyer, Head of Compliance, IMC Financial Markets LLC; 
Edward Haravon, Chief Operating Officer, SpotTrad1ng L.L.C.; Frank 
Bednarz, President, CTC, L.L.C.; Kurt Eckert, Principal, Wolverine 
Trading LLC; and Sebastiaan KoeHng, CEO, Optiver US, LLC to 
Elizabeth M. Murphy, Secretary, U.S. Securities and Exchange 
Commission, dated October 13, 2014, available at, http://www.sec.gov/comments/sr-nysemkt-2014-52/nysemkt201452-1.pdf.
    \6\ See id. at 1.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with section 6(b) of the Act,\7\ in general, and furthers the 
objectives of sections 6(b)(4) and (5) of the Act,\8\ 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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    \7\ 15 U.S.C. 78f(b).
    \8\ 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 Order Flow Providers 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.
    In addition, the Exchange believes that the proposed changes to 
CUBE Auction fees are reasonable, equitable and not unfairly 
discriminatory. First, the proposed reductions to both the Initiating 
Participant Credits (for all issues) as well as the fees associated 
with RFR Responses that participate in the CUBE are reasonable, 
equitable and non-discriminatory because they apply equally to all ATP 
Holders that choose to participate in the CUBE, and access to the 
Exchange is offered on terms that are not unfairly discriminatory.
    The Exchange likewise believes the proposed reduction of the ACE 
Initiating Participant Credit is reasonable, equitable and not unfairly 
discriminatory for the following reasons. First, the ACE Initiating 
Participant Rebate is based on the amount of business transacted on the 
Exchange and is designed to attract more volume and liquidity to the 
Exchange generally, and to CUBE Auctions specifically, which would 
benefit all market participants (including those that do not 
participate in the ACE Program) through increased opportunities to 
trade at potentially improved prices as well as enhancing price 
discovery. Furthermore, the Exchange notes that the ACE Initiating 
Participant Rebate is equitable and not unfairly discriminatory because 
it would continue to incentivize ATP Holders to transact Customer 
orders on the Exchange and an increase in Customer order flow would 
bring greater volume and liquidity to the Exchange. Increased volume to 
the Exchange benefits all market participants by providing more trading 
opportunities and tighter spreads, even to those market participants 
that do not participate in the ACE Program.
    Finally, the Exchange believes the proposed changes are consistent 
with the Act because to the extent the modifications permit the 
Exchange to continue to attract greater volume and liquidity, the 
proposed change would improve the Exchange's overall competitiveness 
and strengthen its market quality for all market participants.
    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 would impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. To the contrary, the proposed changes to CUBE 
pricing are designed to address concerns raised by Market Makers that 
so-called ``break-up fees'' imposed in price improvement auctions like 
CUBE are anti-competitive. To that end, the Exchange believes the 
proposed amendments to CUBE Auction pricing are pro-competitive as the 
fees and credits are designed to incentivize increases in volume and 
liquidity to the Exchange, which would benefit all of Exchange 
participants through increased opportunities to trade as well as 
enhancing price discovery.
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    \9\ 15 U.S.C. 78f(b)(8).
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    Further, the Exchange believes the proposed amendments to the ACE 
Program are pro-competitive as the proposed increased rebates may 
encourage OFPs to direct Customer order flow to the Exchange 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.
    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,

[[Page 8109]]

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. 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-2016-18 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-2016-18. 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-2016-18, and should 
be submitted on or before March 9, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
Brent J. Fields,
Secretary.
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    \13\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2016-03129 Filed 2-16-16; 8:45 am]
 BILLING CODE 8011-01-P