
[Federal Register Volume 81, Number 198 (Thursday, October 13, 2016)]
[Notices]
[Pages 70719-70721]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-24700]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79063; File No. SR-NYSEArca-2016-132]


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

October 6, 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 September 23, 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 the 
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 October 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to cap the Lead Market Maker (``LMM'') Rights 
Fees (``Rights Fee'') charged for lower-volume issues to encourage OTP 
Firms acting as LMMs to add more such issues to their allocation. The 
Exchange proposes to implement the fee change effective October 1, 
2016.
    The LMM Rights Fee is charged ``on a per issue basis to the OTP 
Firm acting as LMM in the issue.'' \4\ Currently, the Exchange charges 
a Rights Fee on each issue in a LMM's allocation, with rates based on 
the Average National Daily Customer Contracts (``CADV''). The monthly 
Rights Fee ranges from $25 per month to $3,000 per month. Under the 
current Fee Schedule, the more active an issue is, the higher the 
Rights Fee, as set forth below:
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    \4\ See Fee Schedule, Endnote 2, available here,https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf.

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                                                           Monthly issue
       Average national daily  customer contracts               fee
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0 to 100................................................             $25
101 to 1,000............................................              35
1,001 to 2,000..........................................              75
2,001 to 5,000..........................................             200
5,001 to 15,000.........................................             750
15,001 to 100,000.......................................           1,500
Over 100,000............................................           3,000
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    Earlier this year, the Exchange introduced an LMM Rights Fee 
Discount applicable to each issue in an LMM's appointment with a CADV 
above 5,000 based on the amount of monthly (i) total electronic volume 
and/or (ii) total posted volume executed by an LMM in the Market Maker 
range relative to other Marker Makers appointed in that issue (the 
``Discount'').\5\ This Discount was designed to incent LMMs that 
already transact a significant amount of business on the Exchange and 
trade competitively in their issues to increase their trading and 
achieve one of the Discounts as well as to incent LMMs to apply for new 
issue allocation. The Exchange now proposes a modification to its Fee 
schedule that is designed to encourage LMMs to add lower-volume issues 
to their appointments.
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    \5\ See Securities and Exchange Act Release No. 77885 (May 23, 
2016), 81 FR 33716 (May 23 [sic], 2016) (SR-NYSEArca-2016-75).
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    Specifically, the Exchange proposes to cap at 50 issues the Rights 
Fee it charges OTP Firms for issues with a CADV of 0 to 100 contracts 
(``First Tier''). The

[[Page 70720]]

Exchange would not charge for any First Tier issues in the LMM's 
allocation that exceed 50 issues. The Exchange also proposes to cap at 
100 issues the Rights Fee it charges for issues with a CADV of 101 to 
1000 (``Second Tier''). The Exchange would not charge for any Second 
Tier issues in the LMM's allocation that exceed 100 issues. The 
practical impact of this cap is that the maximum LMM Rights Fee charged 
to an OTP Firm for issues trading in the First Tier would be $1,250 
(i.e., $25 x 50) and the maximum Rights Fee charged to an OTP Firm for 
issues trading in the Second Tier would be $3,500 (i.e., $35 x 100). 
For example, an OTP Firm acting as an LMM with 55 issues that trade in 
the First Tier, and another 130 that trade in the Second Tier, would be 
charged an LMM Rights fee of $4,750 ($1,250 (the max charged for First 
Tier issues) plus $3,500 (the max charged for Second Tier issues).
    The Exchange is setting the caps at different amounts for the First 
and Second Tiers because of the difference in the universe of available 
issues in each of these Tiers. The Exchange proposes a higher issue cap 
for options trading in the Second Tiers because there are more issues 
available in this Tier than in the First Tier and these issues are also 
more desirable because they trade more.\6\
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    \6\ As of August 10, 2016, the Exchange had 647 issues listed in 
the First Tier and 985 issues in the Second Tier.
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    The Exchange believes that the proposed caps to the LMM Rights Fee 
would increase interest of OTP Firms acting as LMMs in adding to their 
allocation issues in the First and Second Tiers.
    The Exchange notes that the proposed caps to the Rights Fees would 
not hinder an LMM's ability to achieve any of the existing discounts 
applicable to the Rights Fees; rather, to the extent that the caps 
encourage an OTP Firm acting as an LMM to increase the number of issues 
in its allocation, the proposal may increase an LMM's chances of 
achieving existing discounts (i.e., to achieve the 50% discount on the 
Rights Fee an LMM needs to trade 10,000 electronic contracts ADV in its 
appointment).
    The Exchange is not proposing any other changes to the Rights Fee 
at this time.
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 caps on the LMM Rights Fees 
for the First and Second Tier issues are reasonable, equitable and not 
unfairly discriminatory for a number of reasons. First, all LMMs 
trading First Tier issues with similar CADV levels would benefit from 
the proposed Rights Fee cap and have the same incentive to add the 
affected issues to their allocation. Second, the proposed Rights Fees 
caps are designed to encourage OTP Firms acting as LMMs to add lower-
volume issues to their appointments, which would provide greater 
opportunities for OTP Firms to achieve volume incentives on the 
Exchange without adding to their Rights Fees. In turn, the proposed 
caps may reduce the overhead costs of OTP Firms that are most actively 
trading in the affected issues, which reduced costs would enhance the 
ability of LMMs to provide liquidity to the benefit of all market 
participants. Further, the Exchange believes that having a broader 
range of products available on the Exchange would benefit all market 
participants by increasing liquidity on the Exchange and offering more 
opportunities to trade.
    Finally, the Exchange also believes that proposed caps to the 
Rights Fees on the First and Second Tiers are not unfairly 
discriminatory because they apply solely to LMMs (non-LMMs are not 
subject to this Fee) and would not disadvantage Market Makers.
    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. The Exchange believes that the proposed caps on 
Rights Fees for the lowest-volume issues would not impose an unfair 
burden on competition because the cap are designed to encourage more 
OTP Firms acting as LMMs to add such issues to their allocation, which 
would increase liquidity and offer more trading opportunities to market 
participants.
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    \9\ 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) \10\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \11\ thereunder, because it establishes a due, 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-NYSEArca-2016-132 on the subject line.

[[Page 70721]]

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEArca-2016-132. 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 such 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-2016-132, and 
should be submitted on or before November 3, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2016-24700 Filed 10-12-16; 8:45 am]
 BILLING CODE 8011-01-P


