
[Federal Register Volume 81, Number 154 (Wednesday, August 10, 2016)]
[Notices]
[Pages 52920-52922]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-18910]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78479; File No. SR-NYSEArca-2016-105]


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

August 4, 2016.
    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 July 29, 2016, 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 August 1, 2016. The proposed rule 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 add the concepts of ``Appointed 
OFP'' and ``Appointed MM'' to the Exchange's Fee Schedule, effective 
August 1, 2016, which would increase opportunities for firms to qualify 
for various volume tier discounts and rebates.
    Specifically, the Exchange proposes to allow NYSE Arca Market 
Makers (``Marker Makers'') to designate an Order Flow Provider 
(``OFP'') \4\ as its ``Appointed OFP'' and to likewise allow OFPs to 
designate a Market Maker as its ``Appointed MM.'' \5\ As proposed, OTP 
Holders and OTP Firms (each, an ``OTP''; collectively, ``OTPs'') would 
effectuate the designation--of an Appointed OFP or Appointed MM--by 
each sending an email to the Exchange.\6\ The Exchange would view 
corresponding emails as acceptance of such an appointment and would 
only recognize one such designation for each party once every 12-
months, which designation would remain in effect unless or until the 
Exchange receives an email from either party indicating that the 
appointment has been terminated.\7\ The Exchange believes that this 
requirement would impose a measure of exclusivity and would enable both 
parties to rely upon each other's, and potentially increase, 
transaction volumes executed on the Exchange, which is beneficial to 
all Exchange participants.
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    \4\ See Rule 6.1A(a)(21) (defining OFP as any OTP Holder that 
submits, as agent, orders to the Exchange).
    \5\ See proposed Endnote 15 to Fee Schedule.
    \6\ See id.
    \7\ See id.
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    The Exchange proposes to allow an OTP to opt to combine its volume 
with that of its Appointed OFP/Appointed MM to qualify for the various 
incentive programs offered on the Exchange. First, an OTP with an 
Appointed OFP/Appointed MM would be able to aggregate certain of its 
volumes with that of its Appointed OFP/Appointed MM for purposes of 
qualifying for certain posting credits available in the Customer and 
Professional Customer Monthly Posting Credit Tiers and Qualifications 
for Executions in Penny Pilot Issues (``Customer Posting Tiers'') and 
Market Maker Monthly Posting Credit Tiers and Qualifications for 
Executions in Penny Pilot Issues and SPY (``Market Maker Posting 
Tiers'').\8\ Currently, an OTP can only aggregate its volume with that 
of its affiliate(s).\9\ The concept of Appointed OFP/Appointed MM would 
apply in those instances where an OTP qualifies for a favorable fee by 
calculating qualifying volume through combining its transactions with 
that of Appointed OFP/Appointed MM. However, an OTP that has both an 
Appointed OFP/Appointed MM and any affiliate(s) may only aggregate 
volumes with one of these two, not both. Thus, the Exchange proposes to 
modify the Fee Schedule to provide that in calculating qualifications 
for monthly posting credits, ``the Exchange would include the activity 
of either (i) affiliates or (ii) an Appointed OFP/Appointed MM.'' \10\ 
To make clear that the volume of any affiliate(s) or an Appointed OFP/
Appointed MM may be included in the monthly calculations for achieving 
any of the tiers, the Exchange proposes to remove the asterisks from 
Tiers 2 and 5 of the Customer Posting Tiers and the Super Tier of the 
Market Maker Posting Tiers, as well as the corresponding asterisk at 
the bottom of each table.
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    \8\ See id.
    \9\ See Fee Schedule, available here, https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf (explicitly providing that OTPs 
may combine volumes with affiliates to take advantage of Tiers 2 and 
5 of the Customer Posting Tiers, and the Super Tier of the Market 
Maker Posting Tiers). See also Endnote 8 citing Rule 1.1(a) 
(defining an affiliate as being a person that directly, or 
indirectly through one or more intermediaries, controls or is 
controlled by, or is under common control with, the person 
specified).
    \10\ See proposed Endnote 8 to Fee Schedule Fee.
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    In addition to the Customer Posting Tiers and the Market Maker 
Posting Tiers, as proposed, volumes of an Appointed OFP/Appointed MM 
(or, of any affiliate(s)) would also be applied in calculating whether 
an OTP achieved credits or rebates available through the Exchange's 
other incentive programs, including (i) the Customer and Professional 
Customer Incentive Program; (ii) the Market Maker Incentive Program; 
(iii) the Customer and Professional Customer Posting Credit Tiers In 
Non Penny Pilot Issues; and (iv) the Discount in Take Liquidity Fees 
for Professional Customer, Market Maker, Firm, and Broker Dealer 
Liquidity Removing Orders. In this regard, Exchange proposes to add 
language making clear that the calculations for achieving the monthly 
volume thresholds would include transaction volume from any of an OTP's 
affiliates or its Appointed MM or Appointed OFP (as applicable), which 
would add clarity and transparency to the Fee Schedule. As noted above, 
an OTP that has both

[[Page 52921]]

an Appointed OFP/Appointed MM and any affiliate(s) may only aggregate 
volumes with one of these two, not both.\11\
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    \11\ See id.
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    The Exchange also proposes to add reference to Endnote 8, as 
modified, to the beginning of each of the incentive programs discussed 
herein to make clear how the Exchange calculates the qualifications for 
monthly posting credits and discounts.\12\ Given the proposal to refer 
to Endnote 8 at the beginning of each incentive program, the Exchange 
proposes to delete references to Endnote 8 that appear elsewhere in the 
text regarding the incentives, which would eliminate redundancy and add 
clarity to the Fee Schedule.\13\
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    \12\ See id. The Exchange has added the word ``discount'' to the 
first sentence of Endnote 8 to make clear that the calculation for 
monthly qualification also apples to the Discount in Take Liquidity 
Fees for Professional Customer, Market Maker, Firm, and Broker 
Dealer Liquidity Removing Orders. See proposed Endnote 8 to Fee 
Schedule Fee.
    \13\ For example, the Exchange proposes to delete reference to 
Endnote 8 from Tiers 4 and 7 of the Customer Posting Tiers.
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    The Exchange does not propose to modify any of the volume 
qualifications or the associated credits and discounts for the various 
incentive programs at this time.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\14\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\15\ 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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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(4) and (5).
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    The proposal is reasonable, equitable and not unfairly 
discriminatory for the following reasons. First, the proposal would be 
available to all Market Makers and OFPs and the decision to be 
designated as an ``Appointed OFP'' or ``Appointed MM'' would be 
completely voluntary and an OTP may elect to accept this appointment or 
not. In addition, the proposed changes would enable firms that are not 
currently eligible for certain credits or discounts to avail themselves 
of these credits/discounts as well increase opportunities for firms 
that are currently eligible for certain credits/discounts to 
potentially achieve a higher tier, thus qualifying to higher credits. 
The Exchange believes these proposed changes would incent firms to 
direct their order flow to the Exchange. Specifically, the proposed 
changes would enable any Market Maker--not just those with affiliates--
to pool certain volumes to potentially qualify its Appointed OFP for 
credits/discounts available on the Exchange. Moreover, the proposed 
change would allow any OFP, by virtue of designating an Appointed MM, 
to aggregate certain of its own volumes with the activity of its 
Appointed MM, which would enhance the OFP's potential to qualify for 
additional credits and discounts. The Exchange believes these proposed 
changes would incent Appointed OFPs and OFPs with an Appointed MM to 
direct their order flow to the Exchange, which additional liquidity 
would benefit all market participants (including those market 
participants that are not currently affiliated and/or opt not to become 
an Appointed OFP) by providing more trading opportunities and tighter 
spreads. The Exchange also notes that the proposed changes are 
reasonable as other exchanges have adopted similar concepts for their 
own affiliate-based incentive programs.\16\
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    \16\ See NYSE Amex Options Fee Schedule, available here, https://www.nyse.com/publicdocs/nyse/markets/amex-options/NYSE_Amex_Options_Fee_Schedule.pdf (allowing aggregation of volume 
to qualify for the Amex Customer Engagement (``ACE'') Program); 
Chicago Board Options Exchange, Inc. (``CBOE'') fee schedule, 
available here, https://www.cboe.com/publish/feeschedule/CBOEFeeSchedule.pdf (allowing aggregation of volume to qualify for 
credits available under an Affiliated Volume Plan or ``AVP''); Bats 
BZX Exchange, Inc.'s (``BZX'') fee schedule, available here, https://batstrading.com/support/fee_schedule/bzx/ (allowing aggregation of 
volume to qualify for tiered pricing); NASDAQ Options Market LLC 
(``NOM'') fee schedule, available here, http://www.nasdaqtrader.com/Micro.aspx?id=OptionsPricing (allowing aggregation of volume to 
qualify for various pricing incentives).
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    Similarly, the proposal, which would permit the opportunity for 
both parties to rely upon each other's, and potentially increase, 
transaction volumes, are reasonable, equitable and not unfairly 
discriminatory because it may encourage market making firms to 
participate in the Exchange's Market Maker Incentive Program or the 
Market Maker Posting Tiers, which potential increase in order flow, 
capital commitment and resulting liquidity on the Exchange would 
benefit all market participants by expanding liquidity, providing more 
trading opportunities and tighter spreads.
    The proposal is also reasonable, equitable and not unfairly 
discriminatory because the Exchange would only process one designation 
of an ``Appointed OFP'' or ``Appointed MM'' per year, which requirement 
would impose a measure of exclusivity while allowing both parties to 
rely upon each other's, and potentially increase, transaction volumes 
executed on the Exchange to the benefit of all Exchange participants.
    Finally, the Exchange believes the proposal to make clarifying 
changes to the incentive programs, including to make clear that the 
volumes of affiliates or an Appointed OFP/Appointed MM would apply to 
all tiers and that the calculations for achieving the monthly volume 
posting credits and discounts are set forth in Endnote 8, would add 
transparency and internal consistency to the Fee Schedule, which would 
make it easier for market participants to navigate and comprehend.
    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, 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 believes that the proposed changes 
are pro-competitive as they would increase opportunities for additional 
firms to qualify for various credits and discounts, which may increase 
intermarket and intramarket competition by incenting Appointed OFPs and 
Appointed MMs to direct their orders to the Exchange, thereby 
increasing the volume of contracts traded on the Exchange and enhancing 
the quality of quoting. Enhanced market quality and increased 
transaction volume that results from the anticipated increase in order 
flow directed to the Exchange would benefit all market participants and 
improve competition on the Exchange. Moreover, the clarifying changes 
are pro-competitive to the extent the changes add transparency and 
internal consistency to the Fee Schedule, which would make it easier 
for market participants to navigate and comprehend.
    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.

[[Page 52922]]

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) \17\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \18\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 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) \19\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \19\ 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-NYSEArca-2016-105 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-2016-105. 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-NYSEArca-2016-105, and 
should be submitted on or before August 31, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-18910 Filed 8-9-16; 8:45 am]
 BILLING CODE 8011-01-P


