Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending the NYSE Amex Options Fee Schedule in a Number of Different Ways, 9531-9535 [2014-03562]
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Federal Register / Vol. 79, No. 33 / Wednesday, February 19, 2014 / Notices
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[FR Doc. 2014–03564 Filed 2–18–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–71531; File No. SR–
NYSEMKT–2014–16]
Self-Regulatory Organizations; NYSE
MKT LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Amending the NYSE
Amex Options Fee Schedule in a
Number of Different Ways
February 12, 2014.
EMCDONALD on DSK67QTVN1PROD with NOTICES
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 January
31, 2014, NYSE MKT LLC (the
‘‘Exchange’’ or ‘‘NYSE MKT’’) 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 selfregulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of the Substance
of the Proposed Rule Change
The Exchange proposes to amend the
NYSE Amex Options Fee Schedule
(‘‘Fee Schedule’’) in a number of
different ways. The proposed changes
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
will be operative on February 3, 2014.
The text of 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 amend the
Fee Schedule in a number of different
ways as described below. The proposed
changes will be operative on February 3,
2014.
First, the Exchange proposes to
eliminate the existing Professional
Customer and Broker Dealer Electronic
average daily volume (‘‘ADV’’) Tiers For
Taking Liquidity and the associated
endnote 16. Instead, the Exchange will
adopt a flat fee of $0.32 per contract for
electronically executed Professional
Customer and Broker Dealer volumes.
The fee of $0.32 per contract is the same
rate presently charged to Professional
Customers and/or Broker Dealers for
their electronic volumes up to and
including 16,999 contracts of ADV in
taking liquidity volume.4
Second, the Exchange proposes to
make changes to what qualifies as a
Firm Facilitation trade for purposes of
the Fee Schedule by modifying Firm
Facilitation to read as Firm Facilitation
Manual and making edits to the
associated endnote 6. Currently, Firm
Facilitation trades are charged a rate of
$0.00 per contract and are defined in
endnote 6 as follows: ‘‘The firm
facilitation rate applies to trades that
clear in the firm range (clearance
account ‘‘F’’) and customer on the
contra (clearance account ‘‘C’’) with the
same clearing firm symbol on both sides
of the trade’’. At this time, the Exchange
73 17
1 15
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4 See Securities and Exchange Release No. 34–
68407 (December 11, 2012), 77 FR 74710 (December
17, 2012) (SR–NYSEMKT–2012–74).
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9531
does not offer an electronic means for
crossing a facilitation trade.5
Consequently, the only manner that a
Facilitation Cross Transaction can be
executed is by trading in open outcry.6
The Exchange proposes to revise
endnote 6 to make clear that the Firm
Facilitation rate of $0.00 per contract
will apply only to those Facilitation
Cross Transactions executed manually
or in open outcry. In addition, the
Exchange proposes to capitalize and
revise the term ‘‘firm facilitation’’ as it
appears in endnote 6 to ‘‘Firm
Facilitation Manual’’ to conform to the
amended Fee Schedule.
Third, the Exchange proposes to
eliminate the Firm Proprietary
Electronic ADV Tiers. Instead, the
Exchange proposes to adopt a flat fee of
$0.32 per contract for electronically
executed Firm Proprietary volumes. The
fee of $0.32 per contract is the same rate
presently charged to Firms Proprietary
trades for their electronic volumes up to
and including .21% of Total Industry
Customer equity and Exchange-Traded
Funds (‘‘ETF’’) option ADV.7
Fourth, the Exchange proposes a nonsubstantive change to the Fee Schedule
designed to make it easier to navigate.
The Exchange recently submitted a
filing to adopt a Market Access and
Connectivity Subsidy (the ‘‘MAC
Subsidy’’).8 In proposing the MAC
5 Although the Exchange does not currently offer
an electronic means of executing Facilitation Cross
Transactions, Firms have in the past received the
Firm Facilitation rate for electronic trades by sheer
happenstance, which would happen when an
electronic Firm Proprietary order traded with an
electronic Customer order where both sides of the
trade had the same clearing firm symbol. When this
has occurred, the Firm did not receive any
participation entitlements or priority advantages,
etc. that would normally be associated with a
Facilitation Cross Transaction. The Exchange
believes that, when this has occurred, it
appropriately charged any Firms the Firm
Facilitation rate of $0.00 for electronic trades and
the Exchange will continue to charge this rate under
these circumstances, until the effective date of this
filing. Upon the effective date of this filing, if an
electronic Firm Proprietary order were to execute
against an electronic Customer order, where the
same clearing firm symbol is present on both sides
of the trade, the Firm Proprietary order would be
subject to the Firm Proprietary Electronic charge of
$0.32 per contract, as proposed herein and
discussed below, and the electronic Customer order
would be subject to the current Non BD Customer
Electronic charge of $0.00 per contract.
6 See Rule 934.1NY (Facilitation Cross
Transactions).
7 See Securities Exchange Act Release 34–71275
(January 9, 2014), 79 FR 2723 (January 15, 2014)
(SR–NYSEMKT–2014–04).
8 See SR–NYSEMKT–2014–12. Because the
Exchange has previously filed the MAC Subsidy
filing, which is immediately effective upon filing,
the Exchange has not included as new rule text in
the accompanying Exhibit 5 the subsection entitled
‘‘NYSE AMEX OPTIONS: TRADE-RELATED
REBATES OR SUBSIDIES FOR STANDARD
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Subsidy, the Exchange added a new
section to the end of the Fee Schedule
entitled, ‘‘NYSE AMEX OPTIONS:
TRADE-RELATED REBATES OR
SUBSIDIES FOR STANDARD
OPTIONS’’. The Exchange believes that
creating this separate section for traderelated rebates and subsidies would
make it easier for participants to
navigate and locate the relevant parts of
the Fee Schedule. Accordingly, the
Exchange is proposing to move the
existing subsection entitled ‘‘Customer
Electronic Complex Order ADV Tiers’’
and the associated per contract rebates
to this recently added section of the Fee
Schedule (i.e., ‘‘NYSE AMEX OPTIONS:
TRADE-RELATED REBATES OR
SUBSIDIES FOR STANDARD
OPTIONS’’), with no other change to
either the qualifying volumes, the tiers,
or the rebate per contract, per tier
associated with the existing Customer
Electronic Complex Order ADV Tiers.
As proposed, the Customer Electronic
Complex Order ADV Tiers and the
associated per contract rebates would
appear directly below the Mac [sic]
Subsidy rebate in the Fee Schedule.
OFP Electronic ADV Tiers ........................................................................
EMCDONALD on DSK67QTVN1PROD with NOTICES
TIER 1A—Electronic Customer volume of at least 2.0% of Total Industry Customer equity and ETF option ADV—rebate paid on Customer
electronic contract volumes in excess of 200,000 ADV only.
OR
TIER 1B—Electronic volume of at least .75% of Total Industry Customer equity and ETF option ADV where 40% of the electronic volume consists of Non-NYSE Amex Options Market Maker, Firm, Professional Customer and/or Broker Dealer—rebate paid on all Customer electronic contract volumes.
Fifth, the Exchange proposes to
modify the existing criteria and tiers
used by Order Flow Providers (‘‘OFPs’’)
to qualify and earn a rebate under the
Customer Electronic ADV Tiers. The
Exchange proposes to eliminate the
existing Customer Electronic ADV Tiers
and will instead adopt a single tier (Tier
1) with two parts—A and B—each of
which provides OFPs an alternate
means of earning a rebate. The newly
proposed Tier 1A and Tier 1B, and
language describing the qualifying
criteria and the associated rebate is
shown below:
Rebate Per Contract For Certain Electronic Equity and ETF Option Volume (excludes volume from QCC Orders, Strategy Executions, Complex Orders and orders routed away in connection with the Options
Order Protection and Locked/Crossed Market Plan referenced in
Rule 991NY).
$0.06.
$0.06.
The Exchange proposes that both Tier
1A and Tier 1B would be based on the
Total Industry Customer equity and ETF
option ADV, as is current practice.9 For
reference, the 3-month average of Total
Industry Customer equity and ETF
option ADV as of December 31, 2013
was 11,867,765 contracts. Under the
current proposal, an OFP would be
eligible to earn a rebate under one of the
two tiers. First, to be eligible to receive
the $0.06 per contact rebate under Tier
1A, an OFP would need to have
executed electronic Customer ADV of at
least 2.0% of Total Industry Customer
equity and ETF options volume or
237,355 contracts ADV. Under Tier 1A,
the rebate would only be paid on
electronic Customer volumes in excess
of 200,000 contracts ADV. Alternatively,
to be eligible to receive the $0.06 per
contact rebate under Tier 1B, an OFP
would need to have executed electronic
ADV of at least .75% of Total Industry
Customer equity and ETF options
volume or 89,008 contracts ADV and, of
those 89,008 contracts ADV executed
electronically, the OFP must have
40%—or at least 35,603 contracts—of
electronic ADV executed on behalf of
any combination of Non-NYSE Amex
Options Market Maker, Firm
Proprietary, Professional Customer or
Broker Dealer business. As proposed,
provided the foregoing criteria are met,
the rebate under Tier 1B would be paid
on all Customer electronic volumes.
As with the existing Customer
Electronic ADV Tiers, as proposed,
volumes attributable to Qualified
Contingent Cross (‘‘QCC’’) Orders,
Strategy Executions, Complex Orders
and orders routed away in connection
with the Options Order Protection and
Locked/Crossed Market Plan referenced
in Rule 991NY would not count toward
achieving either Tier 1A or Tier 1B and
would not be eligible for the per
contract rebate that might be paid under
Tier 1A or Tier 1B. In the event that an
OFP qualifies for a rebate under both
Tier 1A and Tier 1B, the Exchange
proposes that the OFP would only be
paid under the Tier—A or B—that
yields the greatest total rebate and the
Exchange proposes to reflect this change
in a revised endnote 17. In addition, the
Exchange proposes to move the
modified Customer Electronic ADV
Tiers to the end of the newly proposed
subsection of the Fee Schedule entitled
‘‘NYSE AMEX OPTIONS: TRADERELATED REBATES OR SUBSIDIES
FOR STANDARD OPTIONS’’ 10 and
retitle that section ‘‘OFP Electronic ADV
Tiers’’ to more accurately reflect how
different types of electronic volumes
will now be capable of earning a rebate
for the OFP on certain types of
electronic Customer volumes.
Finally, the Exchange is proposing to
eliminate the service fee for any capped
participants who are trading as part of
a QCC. Currently, the Exchange assesses
a service fee or surcharge for Firms,
Specialists, e-Specialists, and Market
Makers (both Directed and nonDirected) who have exceeded their
monthly fee cap. The amount of the
service fee is the same for all
enumerated participants and only varies
based on whether the contra party is a
Customer, in which case the service fee
is $0.10, or a non-Customer in which
case the service fee is $0.05. With this
proposed change, the service fee would
be eliminated such that any Firm,
Specialist, e-Specialist or Market Maker
(Directed or non-Directed) that has
exceeded their applicable monthly fee
OPTIONS’’, even though the MAC Subsidy is not
operative until February 3, 2014.
9 Total Industry Customer equity and ETF option
ADV will be that which is reported for the month
by The Options Clearing Corporation (‘‘OCC’’) in
the month in which the OFP may earn a rebate for
certain electronic volumes. For example, February
2014 Total Industry Customer equity and ETF
option ADV will be used in determining what, if
any, rebate a qualifying OFP may be eligible for on
select electronic Customer volumes it executes in
February 2014 relative to Total Industry Customer
equity and ETF option ADV. Total Industry
Customer equity and ETF option ADV comprises
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.
10 See supra note 8.
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Federal Register / Vol. 79, No. 33 / Wednesday, February 19, 2014 / Notices
cap 11 would not pay any incremental
service fee when they participate in a
QCC trade. Concurrent with this change,
the Exchange would also adopt language
to limit the amount of the Floor Broker
Rebate for Executed QCC orders to a
maximum of $375,000 per month per
Floor Brokerage firm, which changes
would be reflected in the section for
‘‘NYSE AMEX OPTIONS: QUALIFIED
CONTINGENT CROSS (‘QCC’) FEES’’
and related endnotes 5, 6 and 15.
2. Statutory Basis
EMCDONALD on DSK67QTVN1PROD with NOTICES
The Exchange believes that the
proposed rule change is consistent with
the provisions of Section 6(b) 12 of the
Act, in general, and Section 6(b)(4) and
(5) 13 of the Act, in particular, in that it
is designed to provide for the equitable
allocation of reasonable dues, fees, and
other charges among its members and
other persons using its facilities and
does not unfairly discriminate between
customers, issuers, brokers, or dealers.
The Exchange believes that the
proposal to eliminate the existing
Professional Customer and Broker
Dealer Electronic ADV Tiers For Taking
Liquidity and to instead adopt flat, per
contract, pricing of $0.32 is reasonable,
equitable and not unfairly
discriminatory for the following
reasons. First, the Exchange notes that
the proposed per contract fee of $0.32 is
within the range of fees charged by
other exchanges for Professional
Customers and Broker Dealers.14
Further, the Exchange notes that the
proposed $0.32 fee is the same fee that
the Exchange currently charges for
Professional Customers and Broker
Dealers who execute electronically less
than 17,000 contracts per day in taking
liquidity volume, and, as noted by the
Exchange when it adopted the fee, the
fee is reasonable, equitable and not
unfairly discriminatory.15 For these
reasons, the Exchange believes that the
proposal to charge $0.32 per contract for
11 See NYSE Amex Options Fee Schedule
available here https://globalderivatives.nyx.com/
sites/globalderivatives.nyx.com/files/nyse_amex_
options_fee_schedule_for_1-8-14.pdf at endnotes 5
and 6 (describing Market Maker and Firm monthly
fee caps).
12 15 U.S.C. 78f(b).
13 15 U.S.C. 78f(b)(4) and (5).
14 See Chicago Board of Options (‘‘CBOE’’) Fee
Schedule available at https://www.cboe.com/
publish/feeschedule/CBOEFeeSchedule.pdf
(charging a $0.30 per contract for Professional
Customers and either $0.45 or $0.60 per contract in
Penny/Non-Penny issues for Broker Dealers). See
also Nasdaq Options Market (‘‘NOM’’) Fee Schedule
available at https://www.nasdaqtrader.com/
Micro.aspx?id=OptionsPricing (charging $0.49 per
contract in Penny issues and $.89 per contract in
Non-Penny issues to both Professional Customers
and Broker Dealers who take liquidity).
15 See supra note 4.
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electronic volumes from Professional
Customers and Broker Dealers while
eliminating volume-based tiers at the
same time is reasonable, equitable and
not unfairly discriminatory, particularly
as it will apply equally to all
Professional Customers and Broker
Dealers electronically executed volumes
on the Exchange.
In addition, the Exchange believes
that the proposal to modify the criteria
for what qualifies as a Firm Facilitation
trade for purposes of the Fee Schedule
is reasonable given that the change will
make clear that Firms wishing to qualify
for the Firm Facilitation charge of $0.00
per contract must do so using the
procedures of Rule 934.1NY Facilitation
Cross Transactions. Further, the
Exchange believes this proposed change
is also equitable and not unfairly
discriminatory as it will apply equally
to all Firms that trade on the Exchange.
The Exchange notes that other
exchanges that offer open outcry trading
have also limited the application of the
Firm Facilitation rate to those trades
effected in open outcry.16 For these
reasons the Exchange believes the
proposal to limit the application of the
Firm Facilitation rate to those
transactions executed in open outcry
utilizing the procedures set forth in Rule
934.1NY are reasonable, equitable and
not unfairly discriminatory.
The Exchange likewise believes that
the proposal to eliminate the existing
Firm Proprietary Electronic ADV Tiers
and to adopt flat per contract pricing of
$0.32 per contract is reasonable,
equitable and not unfairly
discriminatory for the following
reasons. First, the Exchange notes that
the proposed per contract fee of $0.32 is
within the range of fees charged by
other exchanges for Firm Proprietary
Electronic volumes.17 Further, the
Exchange notes that the proposed fee is
the same fee that the Exchange currently
charges for Firms that execute
electronically less than .21% of Total
16 See NASDAQ OMX PHLX (‘‘PHLX’’) Fee
Schedule available at https://
www.nasdaqtrader.com/
Micro.aspx?id=PHLXPricing (‘‘The Firm Floor
Options Transaction Charges will be waived for
members executing facilitation orders pursuant to
Exchange Rule 1064 [Crossing, Facilitation and
Solicited Orders] when such members are trading
in their own proprietary account (including
‘Cabinet Options Transaction Charges’)’’).
17 See International Securities Exchange (‘‘ISE’’)
Fee Schedule, available at https://www.ise.com/
assets/documents/OptionsExchange/legal/fee/ISE_
fee_schedule.pdf (charging a flat fee of $0.30 per
contract for Firm Proprietary transactions in NonSelect Symbols). See also NOM Fee Schedule,
available at https://www.nasdaqtrader.com/
Micro.aspx?id=OptionsPricing (charging a flat fee of
$0.49 per contract in Penny issues and $0.89 per
contract in Non-Penny issues to Firms who take
liquidity).
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9533
Industry Customer equity and ETF
option ADV, and, as noted by the
Exchange when it adopted the fee, the
fee is reasonable, equitable and not
unfairly discriminatory.18 For these
reasons, the Exchange believes that the
proposal to charge $0.32 per contract for
electronic volumes from Firms and to
eliminate volume-based tiers at the
same time is reasonable, equitable and
not unfairly discriminatory, particularly
as it will apply equally to all Firm
Proprietary electronically executed
volumes on the Exchange.
The Exchange believes that the
proposal to re-locate the existing
Customer Electronic Complex Order
ADV Tiers to a new section of the Fee
Schedule, entitled ‘‘NYSE AMEX
OPTIONS: TRADE RELATED REBATES
OR SUBSIDIES FOR STANDARD
OPTIONS’’ is reasonable, equitable and
not unfairly discriminatory as it will
make it easier for participants to locate
all standard options rebates and/or
subsidies within the Fee Schedule. The
Exchange further notes that there are no
changes, aside from the location of the
text describing the existing Customer
Electronic Complex Order ADV Tiers
and, as the Exchange noted when it
adopted these volume-based tiers, the
rebates are reasonable, equitable and not
unfairly discriminatory.19
The Exchange believes that the
proposal to modify the existing criteria
and tiers used by Order Flow Providers
(‘‘OFPs’’) to qualify and earn a rebate
under the Customer Electronic ADV
Tiers by the adoption of Tier 1A and
Tier 1B is reasonable, equitable and not
unfairly discriminatory for the following
reasons.
First, the Exchange is providing OFPs
with two alternate means of potentially
earning a rebate on certain of their
electronic Customer volumes. Under the
first, Tier 1A, an OFP would need to
have executed electronic Customer ADV
of at least 2.0% of Total Industry
Customer equity and ETF options
volume, in which case they would be
eligible for a rebate of $0.06 per contract
on certain Customer electronic volumes
over 200,000 contracts ADV. Under the
second, Tier 1B, an OFP would need to
have executed electronic ADV of at least
.75% of Total Industry Customer equity
and ETF options volume, of which 40%
must be comprised of any combination
of Non-NYSE Amex Options Market
Maker, Firm, Professional Customer or
Broker Dealer business in order to
qualify for the rebate of $0.06 per
18 See
supra note 7.
Securities and Exchange Release No. 34–
67635 (August 9, 2012), 77 FR 49035 (August 15,
2012) (SR–NYSEMKT–2012–34).
19 See
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EMCDONALD on DSK67QTVN1PROD with NOTICES
contract for their electronic Customer
volumes. Offering OFPs an alternate
means to earn a rebate is nothing new
or novel. In fact, at least one exchange
offers OFPs three different ways to earn
the same rebate per contract.20 The
Exchange believes that offering OFPs a
$0.06 per contract rebate under the
terms outlined in Tier 1A—beyond the
level of 200,000 contracts ADV—is
reasonable as the rebate is designed to
attract additional Customer volumes to
the Exchange which benefits all other
participants by increasing the
opportunities to trade, enhancing
transparency and price discovery. By
only offering the rebate to qualifying
OFPs for Customer electronic volumes
in excess of 200,000 contracts ADV the
Exchange is intending to attract new
business to the Exchange and to avoid
paying for existing business, which the
Exchange believes is a reasonable
approach lest the Exchange risk raising
costs for other participants to fund a
rebate for existing business.
Similarly, the Exchange believes that
offering OFPs a $0.06 per contract rebate
under the terms and conditions outlined
in Tier 1B is also reasonable as the
rebate is designed to attract additional
Customer volumes along with NonNYSE Amex Options Market Maker,
Firm Proprietary, Professional Customer
and Broker Dealer volumes to the
Exchange which benefits all other
participants by increasing the
opportunities to trade, enhancing
transparency and price discovery.
Requiring a certain level and type of
activity before qualifying for a rebate on
a different type of activity is also not
new or novel and has not been viewed
as being unreasonable, inequitable or
unfairly discriminatory. Specifically,
the Exchange notes the fee arrangements
available on two other exchanges that
require participants to commit to a
certain level and type of activity before
qualifying for a rebate on other
activity.21
20 See NOM Fee Schedule available here: https://
www.nasdaqtrader.com/
Micro.aspx?id=OptionsPricing and Tiers 4, 5, and 6
(The Customer and Professional Rebate to Add
Liquidity in Penny Pilot Options) (offering alternate
means of achieving a $0.45 rebate for NOM
participants with Customer and Professional
volumes that add liquidity).
21 See CBOE Fee Schedule available here: https://
www.cboe.com/publish/feeschedule/
CBOEFeeSchedule.pdf (offering the CBOE
Proprietary Products Sliding Scale which provides
Clearing Trading Permit Holders reduced rates in
CBOE Proprietary Products (SPX, VIX, etc.) if the
Clearing Trading Permit Holder achieves certain
ADV thresholds in multiply-listed options). See
also PHLX Fee Schedule available here https://
www.nasdaqtrader.com/
Micro.aspx?id=PHLXPricing (offering the Customer
Rebate Program and Tier 3 where, ‘‘The Exchange
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In addition, the Exchange believes
that excluding certain volumes from
being eligible for the rebate, specifically
QCC volumes, electronic Customer
Complex volumes, Strategy Executions
and orders routed away in conjunction
with the Options Order Protection and
Locked/Crossed Market Plan referenced
in Rule 991NY is also reasonable as
these volumes are already eligible for
either reduced rates, rebates or capped
fees and offering additional discounts
on these volumes is not desirable as to
do so may lead to increased costs for
other participants.
As the Exchange noted when it
established OFP Rebates with
exclusions for the above-described
volumes, excluding such volumes is
reasonable, equitable and not unfairly
discriminatory as well.22 The Exchange
also believes that paying OFPs that
qualify under both Tier 1A and Tier 1B
from the tier that generates the largest
rebate for the OFP is also reasonable, as
to do otherwise might result in having
to raise fees for other participants in
order to fund a rebate for any
participant who qualified for both Tier
1A and Tier 1B. As the proposed OFP
Electronic ADV Tiers and the associated
rebates will be available to all
participants who route electronic
Customer business, the Exchange
believes the proposal is also equitable
and not unfairly discriminatory.
The Exchange believes that the
proposal to eliminate the service fee of
either $0.10 or $0.05 per contract for
any capped participants who are trading
as part of a QCC is also reasonable,
equitable and not unfairly
discriminatory. First, the Exchange
notes that other exchanges that offer
QCC trading do not charge a service fee
for capped participants who are party to
a QCC trade.23 The Exchange believes
that the elimination of the service fee for
capped participants will better enable
our Floor Broker participants to
compete for QCC orders, enhancing the
competitiveness of the Exchange
relative to those exchanges that either
do not charge a service fee for capped
participants engaged in QCC trades or
those that pay a higher per contract
will pay a $0.02 per contract rebate in addition to
the applicable Tier 3 rebate to a Specialist or Market
Maker or its member or member organization
affiliate under Common Ownership provided the
Specialist or Market Maker has reached the
Monthly Market Maker Cap, as defined in Section
II’’).
22 See Securities and Exchange Release No. 34–
68036 (October 11, 2012), 77 FR 63900 (October 17,
2012) (SR–NYSEMKT–2012–50).
23 See PHLX Fee Schedule available here https://
www.nasdaqtrader.com/
Micro.aspx?id=PHLXPricing (QCC Transaction
Fees).
PO 00000
Frm 00079
Fmt 4703
Sfmt 4703
rebate for QCC volumes.24 To enhance
the competiveness of the Exchange is
reasonable, as higher overall volume
levels on the Exchange can benefit all
participants potentially in the form of
more complete information and
enhanced price discovery. The
Exchange also believes that the
elimination of the of the [sic] service fee
for capped participants that are party to
a QCC trade is also equitable and not
unfairly discriminatory as all capped
participants are being treated the same
in this regard.
Finally, the Exchange believes that
adopting a maximum Floor Broker
Rebate for QCC trades of $375,000 per
month is reasonable, particularly in
light of the elimination of the service fee
for capped participants who are party to
a QCC trade. The Exchange believes that
absent a cap on the maximum to be paid
under the monthly QCC rebate program,
costs of the program may need to be
shared by other participants on the
Exchange, even those who do not
engage in QCC trading. As such, the
Exchange believes it is reasonable and
equitable to adopt such a cap. The
Exchange further notes that at least one
other exchange with a QCC rebate has
also adopted a similar cap or maximum
rebate to be paid.25 As the proposed
monthly maximum rebate to be paid
under the Floor Broker Rebate program
for QCC is applying to all ATP Holders
acting as Floor Brokers equally, the
Exchange believes the proposal is also
equitable and not unfairly
discriminatory.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
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 will enhance the competiveness
of the Exchange relative to other
exchanges. The Exchange notes that it
operates in a highly competitive market
in which market participants can
readily favor competing venues if they
deem fee levels at a particular venue to
be excessive. In such an environment,
the Exchange must continually review,
and consider adjusting, its fees and
credits to remain competitive with other
24 See ISE Fee Schedule available here https://
www.ise.com/assets/documents/OptionsExchange/
legal/fee/ISE_fee_schedule.pdf (offering QCC
rebates up to $0.11 per contract compared to $0.10
on NYSE Amex). See also supra note 20 [sic].
25 See supra note 20 [sic] (PHLX Fee Schedule,
regarding QCC Transaction Fees, ‘‘The maximum
QCC Rebate to be paid in a given month will not
exceed $375,000.’’).
E:\FR\FM\19FEN1.SGM
19FEN1
Federal Register / Vol. 79, No. 33 / Wednesday, February 19, 2014 / Notices
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) 26 of the Act and
subparagraph (f)(2) of Rule 19b–4 27
thereunder, because it establishes a due,
fee, or other charge imposed by the
Exchange.
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) 28 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
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 (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSEMKT–2014–16 on the subject line.
EMCDONALD on DSK67QTVN1PROD with NOTICES
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–NYSEMKT–2014–16. This
file number should be included on the
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(2).
28 15 U.S.C. 78s(b)(2)(B).
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 (https://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 at 100 F Street NE.,
Washington, DC 20549–1090 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–
NYSEMKT–2014–16, and should be
submitted on or before March 12, 2014.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.29
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–03562 Filed 2–18–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–71545; File No. SR–FINRA–
2014–006]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing of
Proposed Rule Change Relating to per
Share Estimated Valuations for
Unlisted DPP and REIT Securities
February 12, 2014.
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 January
31, 2014, Financial Industry Regulatory
Authority, Inc. (‘‘FINRA’’) (f/k/a
National Association of Securities
26 15
29 17
27 17
1 15
VerDate Mar<15>2010
16:15 Feb 18, 2014
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
Jkt 232001
PO 00000
Frm 00080
Fmt 4703
Sfmt 4703
9535
Dealers, Inc. (‘‘NASD’’)) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I, II,
and III below, which Items have been
prepared by FINRA. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
FINRA is proposing to amend the
provisions addressing per share
estimated valuations for unlisted direct
participation program (‘‘DPP’’) and real
estate investment trust (‘‘REIT’’)
securities. The text of the proposed rule
change is available on FINRA’s Web site
at https://www.finra.org, at the principal
office of FINRA 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,
FINRA 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 these statements
may be examined at the places specified
in Item IV below. FINRA has prepared
summaries, set forth in sections A, B,
and C below, of the most significant
aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
FINRA proposes to amend (1) NASD
Rule 2340 (Customer Account
Statements) to modify the requirements
relating to the inclusion of a per share
estimated value for unlisted DPP and
REIT securities on a customer account
statement; and (2) FINRA Rule 2310
(Direct Participation Programs) to
modify the requirements applicable to
members’ participation in a public
offering of DPP or REIT securities.
Proposed Amendments to NASD Rule
2340 (Customer Account Statements)
NASD Rule 2340 generally requires
that general securities members 3
3 NASD Rule 2340(d)(2) defines ‘‘general
securities member’’ as any member that conducts a
general securities business and is required to
calculate its net capital pursuant to the provisions
of Rule 15c3–1(a) under the Act. A member that
does not carry customer accounts and does not hold
Continued
E:\FR\FM\19FEN1.SGM
19FEN1
]]>Agencies
[Federal Register Volume 79, Number 33 (Wednesday, February 19, 2014)]
[Notices]
[Pages 9531-9535]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-03562]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71531; File No. SR-NYSEMKT-2014-16]
Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and
Immediate Effectiveness of Proposed Rule Change Amending the NYSE Amex
Options Fee Schedule in a Number of Different Ways
February 12, 2014.
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 January 31, 2014, NYSE MKT LLC (the ``Exchange'' or
``NYSE MKT'') 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
The Exchange proposes to amend the NYSE Amex Options Fee Schedule
(``Fee Schedule'') in a number of different ways. The proposed changes
will be operative on February 3, 2014. The text of 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 amend the Fee Schedule in a number of
different ways as described below. The proposed changes will be
operative on February 3, 2014.
First, the Exchange proposes to eliminate the existing Professional
Customer and Broker Dealer Electronic average daily volume (``ADV'')
Tiers For Taking Liquidity and the associated endnote 16. Instead, the
Exchange will adopt a flat fee of $0.32 per contract for electronically
executed Professional Customer and Broker Dealer volumes. The fee of
$0.32 per contract is the same rate presently charged to Professional
Customers and/or Broker Dealers for their electronic volumes up to and
including 16,999 contracts of ADV in taking liquidity volume.\4\
---------------------------------------------------------------------------
\4\ See Securities and Exchange Release No. 34-68407 (December
11, 2012), 77 FR 74710 (December 17, 2012) (SR-NYSEMKT-2012-74).
---------------------------------------------------------------------------
Second, the Exchange proposes to make changes to what qualifies as
a Firm Facilitation trade for purposes of the Fee Schedule by modifying
Firm Facilitation to read as Firm Facilitation Manual and making edits
to the associated endnote 6. Currently, Firm Facilitation trades are
charged a rate of $0.00 per contract and are defined in endnote 6 as
follows: ``The firm facilitation rate applies to trades that clear in
the firm range (clearance account ``F'') and customer on the contra
(clearance account ``C'') with the same clearing firm symbol on both
sides of the trade''. At this time, the Exchange does not offer an
electronic means for crossing a facilitation trade.\5\ Consequently,
the only manner that a Facilitation Cross Transaction can be executed
is by trading in open outcry.\6\ The Exchange proposes to revise
endnote 6 to make clear that the Firm Facilitation rate of $0.00 per
contract will apply only to those Facilitation Cross Transactions
executed manually or in open outcry. In addition, the Exchange proposes
to capitalize and revise the term ``firm facilitation'' as it appears
in endnote 6 to ``Firm Facilitation Manual'' to conform to the amended
Fee Schedule.
---------------------------------------------------------------------------
\5\ Although the Exchange does not currently offer an electronic
means of executing Facilitation Cross Transactions, Firms have in
the past received the Firm Facilitation rate for electronic trades
by sheer happenstance, which would happen when an electronic Firm
Proprietary order traded with an electronic Customer order where
both sides of the trade had the same clearing firm symbol. When this
has occurred, the Firm did not receive any participation
entitlements or priority advantages, etc. that would normally be
associated with a Facilitation Cross Transaction. The Exchange
believes that, when this has occurred, it appropriately charged any
Firms the Firm Facilitation rate of $0.00 for electronic trades and
the Exchange will continue to charge this rate under these
circumstances, until the effective date of this filing. Upon the
effective date of this filing, if an electronic Firm Proprietary
order were to execute against an electronic Customer order, where
the same clearing firm symbol is present on both sides of the trade,
the Firm Proprietary order would be subject to the Firm Proprietary
Electronic charge of $0.32 per contract, as proposed herein and
discussed below, and the electronic Customer order would be subject
to the current Non BD Customer Electronic charge of $0.00 per
contract.
\6\ See Rule 934.1NY (Facilitation Cross Transactions).
---------------------------------------------------------------------------
Third, the Exchange proposes to eliminate the Firm Proprietary
Electronic ADV Tiers. Instead, the Exchange proposes to adopt a flat
fee of $0.32 per contract for electronically executed Firm Proprietary
volumes. The fee of $0.32 per contract is the same rate presently
charged to Firms Proprietary trades for their electronic volumes up to
and including .21% of Total Industry Customer equity and Exchange-
Traded Funds (``ETF'') option ADV.\7\
---------------------------------------------------------------------------
\7\ See Securities Exchange Act Release 34-71275 (January 9,
2014), 79 FR 2723 (January 15, 2014) (SR-NYSEMKT-2014-04).
---------------------------------------------------------------------------
Fourth, the Exchange proposes a non-substantive change to the Fee
Schedule designed to make it easier to navigate. The Exchange recently
submitted a filing to adopt a Market Access and Connectivity Subsidy
(the ``MAC Subsidy'').\8\ In proposing the MAC
[[Page 9532]]
Subsidy, the Exchange added a new section to the end of the Fee
Schedule entitled, ``NYSE AMEX OPTIONS: TRADE-RELATED REBATES OR
SUBSIDIES FOR STANDARD OPTIONS''. The Exchange believes that creating
this separate section for trade-related rebates and subsidies would
make it easier for participants to navigate and locate the relevant
parts of the Fee Schedule. Accordingly, the Exchange is proposing to
move the existing subsection entitled ``Customer Electronic Complex
Order ADV Tiers'' and the associated per contract rebates to this
recently added section of the Fee Schedule (i.e., ``NYSE AMEX OPTIONS:
TRADE-RELATED REBATES OR SUBSIDIES FOR STANDARD OPTIONS''), with no
other change to either the qualifying volumes, the tiers, or the rebate
per contract, per tier associated with the existing Customer Electronic
Complex Order ADV Tiers. As proposed, the Customer Electronic Complex
Order ADV Tiers and the associated per contract rebates would appear
directly below the Mac [sic] Subsidy rebate in the Fee Schedule.
---------------------------------------------------------------------------
\8\ See SR-NYSEMKT-2014-12. Because the Exchange has previously
filed the MAC Subsidy filing, which is immediately effective upon
filing, the Exchange has not included as new rule text in the
accompanying Exhibit 5 the subsection entitled ``NYSE AMEX OPTIONS:
TRADE-RELATED REBATES OR SUBSIDIES FOR STANDARD OPTIONS'', even
though the MAC Subsidy is not operative until February 3, 2014.
---------------------------------------------------------------------------
Fifth, the Exchange proposes to modify the existing criteria and
tiers used by Order Flow Providers (``OFPs'') to qualify and earn a
rebate under the Customer Electronic ADV Tiers. The Exchange proposes
to eliminate the existing Customer Electronic ADV Tiers and will
instead adopt a single tier (Tier 1) with two parts--A and B--each of
which provides OFPs an alternate means of earning a rebate. The newly
proposed Tier 1A and Tier 1B, and language describing the qualifying
criteria and the associated rebate is shown below:
------------------------------------------------------------------------
------------------------------------------------------------------------
OFP Electronic ADV Tiers............... Rebate Per Contract For Certain
Electronic Equity and ETF
Option Volume (excludes volume
from QCC Orders, Strategy
Executions, Complex Orders and
orders routed away in
connection with the Options
Order Protection and Locked/
Crossed Market Plan referenced
in Rule 991NY).
TIER 1A--Electronic Customer volume of $0.06.
at least 2.0% of Total Industry
Customer equity and ETF option ADV--
rebate paid on Customer electronic
contract volumes in excess of 200,000
ADV only.
OR
TIER 1B--Electronic volume of at least $0.06.
.75% of Total Industry Customer equity
and ETF option ADV where 40% of the
electronic volume consists of Non-NYSE
Amex Options Market Maker, Firm,
Professional Customer and/or Broker
Dealer--rebate paid on all Customer
electronic contract volumes.
------------------------------------------------------------------------
The Exchange proposes that both Tier 1A and Tier 1B would be based
on the Total Industry Customer equity and ETF option ADV, as is current
practice.\9\ For reference, the 3-month average of Total Industry
Customer equity and ETF option ADV as of December 31, 2013 was
11,867,765 contracts. Under the current proposal, an OFP would be
eligible to earn a rebate under one of the two tiers. First, to be
eligible to receive the $0.06 per contact rebate under Tier 1A, an OFP
would need to have executed electronic Customer ADV of at least 2.0% of
Total Industry Customer equity and ETF options volume or 237,355
contracts ADV. Under Tier 1A, the rebate would only be paid on
electronic Customer volumes in excess of 200,000 contracts ADV.
Alternatively, to be eligible to receive the $0.06 per contact rebate
under Tier 1B, an OFP would need to have executed electronic ADV of at
least .75% of Total Industry Customer equity and ETF options volume or
89,008 contracts ADV and, of those 89,008 contracts ADV executed
electronically, the OFP must have 40%--or at least 35,603 contracts--of
electronic ADV executed on behalf of any combination of Non-NYSE Amex
Options Market Maker, Firm Proprietary, Professional Customer or Broker
Dealer business. As proposed, provided the foregoing criteria are met,
the rebate under Tier 1B would be paid on all Customer electronic
volumes.
---------------------------------------------------------------------------
\9\ Total Industry Customer equity and ETF option ADV will be
that which is reported for the month by The Options Clearing
Corporation (``OCC'') in the month in which the OFP may earn a
rebate for certain electronic volumes. For example, February 2014
Total Industry Customer equity and ETF option ADV will be used in
determining what, if any, rebate a qualifying OFP may be eligible
for on select electronic Customer volumes it executes in February
2014 relative to Total Industry Customer equity and ETF option ADV.
Total Industry Customer equity and ETF option ADV comprises 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.
---------------------------------------------------------------------------
As with the existing Customer Electronic ADV Tiers, as proposed,
volumes attributable to Qualified Contingent Cross (``QCC'') Orders,
Strategy Executions, Complex Orders and orders routed away in
connection with the Options Order Protection and Locked/Crossed Market
Plan referenced in Rule 991NY would not count toward achieving either
Tier 1A or Tier 1B and would not be eligible for the per contract
rebate that might be paid under Tier 1A or Tier 1B. In the event that
an OFP qualifies for a rebate under both Tier 1A and Tier 1B, the
Exchange proposes that the OFP would only be paid under the Tier--A or
B--that yields the greatest total rebate and the Exchange proposes to
reflect this change in a revised endnote 17. In addition, the Exchange
proposes to move the modified Customer Electronic ADV Tiers to the end
of the newly proposed subsection of the Fee Schedule entitled ``NYSE
AMEX OPTIONS: TRADE-RELATED REBATES OR SUBSIDIES FOR STANDARD OPTIONS''
\10\ and retitle that section ``OFP Electronic ADV Tiers'' to more
accurately reflect how different types of electronic volumes will now
be capable of earning a rebate for the OFP on certain types of
electronic Customer volumes.
---------------------------------------------------------------------------
\10\ See supra note 8.
---------------------------------------------------------------------------
Finally, the Exchange is proposing to eliminate the service fee for
any capped participants who are trading as part of a QCC. Currently,
the Exchange assesses a service fee or surcharge for Firms,
Specialists, e-Specialists, and Market Makers (both Directed and non-
Directed) who have exceeded their monthly fee cap. The amount of the
service fee is the same for all enumerated participants and only varies
based on whether the contra party is a Customer, in which case the
service fee is $0.10, or a non-Customer in which case the service fee
is $0.05. With this proposed change, the service fee would be
eliminated such that any Firm, Specialist, e-Specialist or Market Maker
(Directed or non-Directed) that has exceeded their applicable monthly
fee
[[Page 9533]]
cap \11\ would not pay any incremental service fee when they
participate in a QCC trade. Concurrent with this change, the Exchange
would also adopt language to limit the amount of the Floor Broker
Rebate for Executed QCC orders to a maximum of $375,000 per month per
Floor Brokerage firm, which changes would be reflected in the section
for ``NYSE AMEX OPTIONS: QUALIFIED CONTINGENT CROSS (`QCC') FEES'' and
related endnotes 5, 6 and 15.
---------------------------------------------------------------------------
\11\ See NYSE Amex Options Fee Schedule available here https://globalderivatives.nyx.com/sites/globalderivatives.nyx.com/files/nyse_amex_options_fee_schedule_for_1-8-14.pdf at endnotes 5
and 6 (describing Market Maker and Firm monthly fee caps).
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6(b) \12\ of the Act, in general, and
Section 6(b)(4) and (5) \13\ of the Act, in particular, in that it is
designed to provide for the equitable allocation of reasonable dues,
fees, and other charges among its members and other persons using its
facilities and does not unfairly discriminate between customers,
issuers, brokers, or dealers.
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
The Exchange believes that the proposal to eliminate the existing
Professional Customer and Broker Dealer Electronic ADV Tiers For Taking
Liquidity and to instead adopt flat, per contract, pricing of $0.32 is
reasonable, equitable and not unfairly discriminatory for the following
reasons. First, the Exchange notes that the proposed per contract fee
of $0.32 is within the range of fees charged by other exchanges for
Professional Customers and Broker Dealers.\14\ Further, the Exchange
notes that the proposed $0.32 fee is the same fee that the Exchange
currently charges for Professional Customers and Broker Dealers who
execute electronically less than 17,000 contracts per day in taking
liquidity volume, and, as noted by the Exchange when it adopted the
fee, the fee is reasonable, equitable and not unfairly
discriminatory.\15\ For these reasons, the Exchange believes that the
proposal to charge $0.32 per contract for electronic volumes from
Professional Customers and Broker Dealers while eliminating volume-
based tiers at the same time is reasonable, equitable and not unfairly
discriminatory, particularly as it will apply equally to all
Professional Customers and Broker Dealers electronically executed
volumes on the Exchange.
---------------------------------------------------------------------------
\14\ See Chicago Board of Options (``CBOE'') Fee Schedule
available at https://www.cboe.com/publish/feeschedule/CBOEFeeSchedule.pdf (charging a $0.30 per contract for Professional
Customers and either $0.45 or $0.60 per contract in Penny/Non-Penny
issues for Broker Dealers). See also Nasdaq Options Market (``NOM'')
Fee Schedule available at https://www.nasdaqtrader.com/Micro.aspx?id=OptionsPricing (charging $0.49 per contract in Penny
issues and $.89 per contract in Non-Penny issues to both
Professional Customers and Broker Dealers who take liquidity).
\15\ See supra note 4.
---------------------------------------------------------------------------
In addition, the Exchange believes that the proposal to modify the
criteria for what qualifies as a Firm Facilitation trade for purposes
of the Fee Schedule is reasonable given that the change will make clear
that Firms wishing to qualify for the Firm Facilitation charge of $0.00
per contract must do so using the procedures of Rule 934.1NY
Facilitation Cross Transactions. Further, the Exchange believes this
proposed change is also equitable and not unfairly discriminatory as it
will apply equally to all Firms that trade on the Exchange. The
Exchange notes that other exchanges that offer open outcry trading have
also limited the application of the Firm Facilitation rate to those
trades effected in open outcry.\16\ For these reasons the Exchange
believes the proposal to limit the application of the Firm Facilitation
rate to those transactions executed in open outcry utilizing the
procedures set forth in Rule 934.1NY are reasonable, equitable and not
unfairly discriminatory.
---------------------------------------------------------------------------
\16\ See NASDAQ OMX PHLX (``PHLX'') Fee Schedule available at
https://www.nasdaqtrader.com/Micro.aspx?id=PHLXPricing (``The Firm
Floor Options Transaction Charges will be waived for members
executing facilitation orders pursuant to Exchange Rule 1064
[Crossing, Facilitation and Solicited Orders] when such members are
trading in their own proprietary account (including `Cabinet Options
Transaction Charges')'').
---------------------------------------------------------------------------
The Exchange likewise believes that the proposal to eliminate the
existing Firm Proprietary Electronic ADV Tiers and to adopt flat per
contract pricing of $0.32 per contract is reasonable, equitable and not
unfairly discriminatory for the following reasons. First, the Exchange
notes that the proposed per contract fee of $0.32 is within the range
of fees charged by other exchanges for Firm Proprietary Electronic
volumes.\17\ Further, the Exchange notes that the proposed fee is the
same fee that the Exchange currently charges for Firms that execute
electronically less than .21% of Total Industry Customer equity and ETF
option ADV, and, as noted by the Exchange when it adopted the fee, the
fee is reasonable, equitable and not unfairly discriminatory.\18\ For
these reasons, the Exchange believes that the proposal to charge $0.32
per contract for electronic volumes from Firms and to eliminate volume-
based tiers at the same time is reasonable, equitable and not unfairly
discriminatory, particularly as it will apply equally to all Firm
Proprietary electronically executed volumes on the Exchange.
---------------------------------------------------------------------------
\17\ See International Securities Exchange (``ISE'') Fee
Schedule, available at https://www.ise.com/assets/documents/OptionsExchange/legal/fee/ISE_fee_schedule.pdf (charging a flat
fee of $0.30 per contract for Firm Proprietary transactions in Non-
Select Symbols). See also NOM Fee Schedule, available at https://www.nasdaqtrader.com/Micro.aspx?id=OptionsPricing (charging a flat
fee of $0.49 per contract in Penny issues and $0.89 per contract in
Non-Penny issues to Firms who take liquidity).
\18\ See supra note 7.
---------------------------------------------------------------------------
The Exchange believes that the proposal to re-locate the existing
Customer Electronic Complex Order ADV Tiers to a new section of the Fee
Schedule, entitled ``NYSE AMEX OPTIONS: TRADE RELATED REBATES OR
SUBSIDIES FOR STANDARD OPTIONS'' is reasonable, equitable and not
unfairly discriminatory as it will make it easier for participants to
locate all standard options rebates and/or subsidies within the Fee
Schedule. The Exchange further notes that there are no changes, aside
from the location of the text describing the existing Customer
Electronic Complex Order ADV Tiers and, as the Exchange noted when it
adopted these volume-based tiers, the rebates are reasonable, equitable
and not unfairly discriminatory.\19\
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\19\ See Securities and Exchange Release No. 34-67635 (August 9,
2012), 77 FR 49035 (August 15, 2012) (SR-NYSEMKT-2012-34).
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The Exchange believes that the proposal to modify the existing
criteria and tiers used by Order Flow Providers (``OFPs'') to qualify
and earn a rebate under the Customer Electronic ADV Tiers by the
adoption of Tier 1A and Tier 1B is reasonable, equitable and not
unfairly discriminatory for the following reasons.
First, the Exchange is providing OFPs with two alternate means of
potentially earning a rebate on certain of their electronic Customer
volumes. Under the first, Tier 1A, an OFP would need to have executed
electronic Customer ADV of at least 2.0% of Total Industry Customer
equity and ETF options volume, in which case they would be eligible for
a rebate of $0.06 per contract on certain Customer electronic volumes
over 200,000 contracts ADV. Under the second, Tier 1B, an OFP would
need to have executed electronic ADV of at least .75% of Total Industry
Customer equity and ETF options volume, of which 40% must be comprised
of any combination of Non-NYSE Amex Options Market Maker, Firm,
Professional Customer or Broker Dealer business in order to qualify for
the rebate of $0.06 per
[[Page 9534]]
contract for their electronic Customer volumes. Offering OFPs an
alternate means to earn a rebate is nothing new or novel. In fact, at
least one exchange offers OFPs three different ways to earn the same
rebate per contract.\20\ The Exchange believes that offering OFPs a
$0.06 per contract rebate under the terms outlined in Tier 1A--beyond
the level of 200,000 contracts ADV--is reasonable as the rebate is
designed to attract additional Customer volumes to the Exchange which
benefits all other participants by increasing the opportunities to
trade, enhancing transparency and price discovery. By only offering the
rebate to qualifying OFPs for Customer electronic volumes in excess of
200,000 contracts ADV the Exchange is intending to attract new business
to the Exchange and to avoid paying for existing business, which the
Exchange believes is a reasonable approach lest the Exchange risk
raising costs for other participants to fund a rebate for existing
business.
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\20\ See NOM Fee Schedule available here: https://www.nasdaqtrader.com/Micro.aspx?id=OptionsPricing and Tiers 4, 5,
and 6 (The Customer and Professional Rebate to Add Liquidity in
Penny Pilot Options) (offering alternate means of achieving a $0.45
rebate for NOM participants with Customer and Professional volumes
that add liquidity).
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Similarly, the Exchange believes that offering OFPs a $0.06 per
contract rebate under the terms and conditions outlined in Tier 1B is
also reasonable as the rebate is designed to attract additional
Customer volumes along with Non-NYSE Amex Options Market Maker, Firm
Proprietary, Professional Customer and Broker Dealer volumes to the
Exchange which benefits all other participants by increasing the
opportunities to trade, enhancing transparency and price discovery.
Requiring a certain level and type of activity before qualifying for a
rebate on a different type of activity is also not new or novel and has
not been viewed as being unreasonable, inequitable or unfairly
discriminatory. Specifically, the Exchange notes the fee arrangements
available on two other exchanges that require participants to commit to
a certain level and type of activity before qualifying for a rebate on
other activity.\21\
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\21\ See CBOE Fee Schedule available here: https://www.cboe.com/publish/feeschedule/CBOEFeeSchedule.pdf (offering the CBOE
Proprietary Products Sliding Scale which provides Clearing Trading
Permit Holders reduced rates in CBOE Proprietary Products (SPX, VIX,
etc.) if the Clearing Trading Permit Holder achieves certain ADV
thresholds in multiply-listed options). See also PHLX Fee Schedule
available here https://www.nasdaqtrader.com/Micro.aspx?id=PHLXPricing
(offering the Customer Rebate Program and Tier 3 where, ``The
Exchange will pay a $0.02 per contract rebate in addition to the
applicable Tier 3 rebate to a Specialist or Market Maker or its
member or member organization affiliate under Common Ownership
provided the Specialist or Market Maker has reached the Monthly
Market Maker Cap, as defined in Section II'').
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In addition, the Exchange believes that excluding certain volumes
from being eligible for the rebate, specifically QCC volumes,
electronic Customer Complex volumes, Strategy Executions and orders
routed away in conjunction with the Options Order Protection and
Locked/Crossed Market Plan referenced in Rule 991NY is also reasonable
as these volumes are already eligible for either reduced rates, rebates
or capped fees and offering additional discounts on these volumes is
not desirable as to do so may lead to increased costs for other
participants.
As the Exchange noted when it established OFP Rebates with
exclusions for the above-described volumes, excluding such volumes is
reasonable, equitable and not unfairly discriminatory as well.\22\ The
Exchange also believes that paying OFPs that qualify under both Tier 1A
and Tier 1B from the tier that generates the largest rebate for the OFP
is also reasonable, as to do otherwise might result in having to raise
fees for other participants in order to fund a rebate for any
participant who qualified for both Tier 1A and Tier 1B. As the proposed
OFP Electronic ADV Tiers and the associated rebates will be available
to all participants who route electronic Customer business, the
Exchange believes the proposal is also equitable and not unfairly
discriminatory.
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\22\ See Securities and Exchange Release No. 34-68036 (October
11, 2012), 77 FR 63900 (October 17, 2012) (SR-NYSEMKT-2012-50).
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The Exchange believes that the proposal to eliminate the service
fee of either $0.10 or $0.05 per contract for any capped participants
who are trading as part of a QCC is also reasonable, equitable and not
unfairly discriminatory. First, the Exchange notes that other exchanges
that offer QCC trading do not charge a service fee for capped
participants who are party to a QCC trade.\23\ The Exchange believes
that the elimination of the service fee for capped participants will
better enable our Floor Broker participants to compete for QCC orders,
enhancing the competitiveness of the Exchange relative to those
exchanges that either do not charge a service fee for capped
participants engaged in QCC trades or those that pay a higher per
contract rebate for QCC volumes.\24\ To enhance the competiveness of
the Exchange is reasonable, as higher overall volume levels on the
Exchange can benefit all participants potentially in the form of more
complete information and enhanced price discovery. The Exchange also
believes that the elimination of the of the [sic] service fee for
capped participants that are party to a QCC trade is also equitable and
not unfairly discriminatory as all capped participants are being
treated the same in this regard.
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\23\ See PHLX Fee Schedule available here https://www.nasdaqtrader.com/Micro.aspx?id=PHLXPricing (QCC Transaction
Fees).
\24\ See ISE Fee Schedule available here https://www.ise.com/assets/documents/OptionsExchange/legal/fee/ISE_fee_schedule.pdf
(offering QCC rebates up to $0.11 per contract compared to $0.10 on
NYSE Amex). See also supra note 20 [sic].
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Finally, the Exchange believes that adopting a maximum Floor Broker
Rebate for QCC trades of $375,000 per month is reasonable, particularly
in light of the elimination of the service fee for capped participants
who are party to a QCC trade. The Exchange believes that absent a cap
on the maximum to be paid under the monthly QCC rebate program, costs
of the program may need to be shared by other participants on the
Exchange, even those who do not engage in QCC trading. As such, the
Exchange believes it is reasonable and equitable to adopt such a cap.
The Exchange further notes that at least one other exchange with a QCC
rebate has also adopted a similar cap or maximum rebate to be paid.\25\
As the proposed monthly maximum rebate to be paid under the Floor
Broker Rebate program for QCC is applying to all ATP Holders acting as
Floor Brokers equally, the Exchange believes the proposal is also
equitable and not unfairly discriminatory.
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\25\ See supra note 20 [sic] (PHLX Fee Schedule, regarding QCC
Transaction Fees, ``The maximum QCC Rebate to be paid in a given
month will not exceed $375,000.'').
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B. Self-Regulatory Organization's Statement on Burden on Competition
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 will enhance the competiveness of the Exchange
relative to other exchanges. The Exchange notes that it operates in a
highly competitive market in which market participants can readily
favor competing venues if they deem fee levels at a particular venue to
be excessive. In such an environment, the Exchange must continually
review, and consider adjusting, its fees and credits to remain
competitive with other
[[Page 9535]]
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) \26\ of the Act and subparagraph (f)(2) of Rule
19b-4 \27\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\26\ 15 U.S.C. 78s(b)(3)(A).
\27\ 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) \28\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\28\ 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 (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-NYSEMKT-2014-16 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEMKT-2014-16. 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 (https://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 at 100 F Street NE.,
Washington, DC 20549-1090 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-
NYSEMKT-2014-16, and should be submitted on or before March 12, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\29\
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\29\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-03562 Filed 2-18-14; 8:45 am]
BILLING CODE 8011-01-P
