Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and Immediate Effectiveness of Proposed Change Modifying the NYSE Amex Options Fee Schedule, 3052-3055 [2017-00221]
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Federal Register / Vol. 82, No. 6 / Tuesday, January 10, 2017 / Notices
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 No. SR–NYSE–
2016–92, and should be submitted on or
before January 31, 2017.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.38
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–00214 Filed 1–9–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–79737; File No. SR–
NYSEMKT–2016–127]
Self-Regulatory Organizations; NYSE
MKT LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Change Modifying the NYSE Amex
Options Fee Schedule
January 4, 2017.
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on December
28, 2016, NYSE MKT LLC (‘‘Exchange’’
or ‘‘NYSE MKT’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the self-regulatory
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 Substance of
the Proposed Rule Change
The Exchange proposes to modify the
NYSE Amex Options Fee Schedule. The
proposed change is available on the
Exchange’s Web site at www.nyse.com,
at the principal office of the Exchange,
and at the Commission’s Public
Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
Tier
Market maker electronic monthly volume as a percentage of ICADV
1 ...........
2 ...........
3 ...........
1. Purpose
The purpose of this filing is to modify
the Fee Schedule to: (1) Adjust the
qualification thresholds and transaction
fees for electronic transactions by NYSE
Amex Options Marker Makers (‘‘Sliding
Scale’’); 4 and (2) modify the
prepayment programs offered by the
Exchange, including adding a new
prepay option (the ‘‘Prepayment
Programs’’).5
Market Maker Sliding Scale
Section I.C. of the Fee Schedule sets
forth the Sliding Scale of transaction
fees charged to NYSE Amex Options
Marker Makers (referred to as Market
Makers herein), which per contract fees
decrease as Market Maker trades higher
monthly volumes.6 Currently, Market
Makers that have monthly volume on
the Exchange of 0.10% or less of total
ICADV are charged a base rate of $0.25
per contract and, these same market
participants, upon reaching certain
volume thresholds, or Tiers, receive a
reduction of this per contract rate.7 In
addition, the Exchange charges a lower
per contract rate to Market Makers that
participate in one of the Prepayment
Programs or that post monthly volume
greater than 0.85% of total ICADV.
Effective January 3, 2017, the
Exchange proposes to modify the
qualification thresholds and associated
transaction fees for all Marker Makers as
follows (with new rates/thresholds
underlined and deleted rates/thresholds
in brackets):
*
*
*
*
*
0.00% to [0.10%]0.15% ..................................................................................................
[>0.10%]>0.15% to 0.60% ..............................................................................................
>0.60% to [1.25%]1.10% ................................................................................................
38 17
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
CFR 200.30–3(a)(12).
U.S.C.78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
4 See Fee Schedule, Section I. C. (NYSE Amex
Options Market Maker Sliding Scale—Electronic),
available here, https://www.nyse.com/publicdocs/
nyse/markets/amex-options/NYSE_Amex_Options_
Fee_Schedule.pdf.
5 See id., Section I. D. (Prepayment Program).
1 15
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6 See Fee Schedule, supra note 4. The volume
thresholds are based on an NYSE Amex Options
Market Maker’s volume transacted Electronically as
a percentage of total industry Customer equity and
ETF options volumes (‘‘ICADV’’) as reported by the
Options Clearing Corporation (the ‘‘OCC’’). Total
ICADV is comprised of those equity and ETF
contracts that clear in the Customer account type
at OCC and does not include contracts that clear in
either the Firm or Market Maker account type at
OCC or contracts overlying security other than an
PO 00000
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Rate per contract
$0.25
$0.22
[$0.12]$0.14
Rate per contract if
monthly volume from
posted volume is more
than .85% of total
ICADV or for any NYSE
Amex Market Maker participating in a prepayment program pursuant
to Section I.D.
[$0.20]$0.23
[$0.17]$0.18
[$0.07]$0.08
equity or ETF security. See OCC Monthly Statistics
Reports, available here, https://www.theocc.com/
webapps/monthly-volume-reports.
7 In calculating an NYSE Amex Options Market
Maker Electronic volumes, the Exchange excludes
any volumes attributable to Mini Options, QCC
trades, CUBE Auctions, and Strategy Execution Fee
Caps, as these transactions are subject to separate
pricing described in Fee Schedule Sections I.B., I.F.,
I.G., and I.J, respectively. See Fee Schedule, Section
I.C, supra note 4.
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Tier
Market maker electronic monthly volume as a percentage of ICADV
4 ...........
5 ...........
6 ...........
[>1.25% to 1.40%]>1.10% to 1.45% ..............................................................................
[>1.40% to 1.75%]>1.45% to 1.80% ..............................................................................
[>1.75%]>1.80% ..............................................................................................................
The proposed changes are designed to
incent Market Makers to electronically
trade a more meaningful percentage of
ICADV by increasing the percentage of
ICADV required for Tiers 2, 5 and 6, and
to make Tier 4 more achievable by
lowering the percentage of ICADV
required.8 In connection with the
adjustment to the qualification
thresholds for the various tiers, the
Exchange proposes to increase the per
contract rate for Tier 3, which is
designed to both offset the lower
threshold to Tier 4 and to encourage
participants to achieve Tier 4. For those
participants that achieve Tier 4, as
modified, the per contract rate
differential remains the same (i.e., $0.05
per contract for those who achieve
0.85% of IADV from Posted Volume, or
participate in a Prepayment Program; as
compared to $0.10 per contract for
anyone else that achieves Tier 4), which
is designed to encourage Market Makers
to qualify for the more easily achievable
Tier 4 and to qualify for the enhanced
rates by enrolling in a prepayment
program or meeting the Posted Volume
criterion. In addition, the Exchange
proposes to increase the discounted per
contract rates to Market Makers that
participate in one of the Prepayment
Programs or that trade more than 0.85%
of total ICADV based on posted volume.
The Exchange believes the proposed
modifications would encourage Market
Makers to execute more volume on the
Exchange and provide additional
incentive to enroll in one of the
Prepayment Programs, including as
modified herein.
Prepayment Program
In January 2015, the Exchange
introduced a two Prepayment
Programs—for a 1- or 3-year term—to
allow Market Makers to prepay a
portion of the charges incurred for
transactions executed on the Exchange.9
Although the 3-Year Prepayment
Program, now in its final year, is closed
to new entrants, the Exchange proposes
to modify the terms of the 1 Year
Prepayment Program, as well as to offer
a new prepay option to be available
throughout 2017.10 The proposed
modifications to the Prepayment
Program are designed to encourage
broader participation by Market Maker
firms.
The Exchange proposes to reduce the
prepayment amount for the 1 Year
Rate per contract
$0.10
$0.07
$0.05
3rd Quarter
$2,475,000, due by April 28 .........
$1,800,000, due by July 31 ..........
Similar to the current 1- and 3-Year
Prepayment Programs, a Market Maker
that participates in the Balance of the
8 See
proposed Fee Schedule, Section I.C.
Exchange Act Release No. 74086 (January
16, 2015) 80 FR 3701 (January 23, 2015) (SR–
NYSEMKT–2015–4). See also Fee Schedule,
Section I.D (Prepayment Programs), supra at note 4
(describing the 1- and 3-Year Prepayment Programs,
including requisite timelines for committing and
prepaying as well as various conditions to opt out
of the 3-Year Prepayment Program).
10 See proposed Fee Schedule, Section I.D
(Prepayment Programs) (modifying the description
of the 3 Year Prepayment Program to make clear
that it is closed to new participants, that one year
remains for any Market Maker that enrolled in 2015,
that participants retain the ability to opt out by the
specified date, including because there are fewer
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9 See
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$0.05
[$0.02]$0.04
[$0.00]$0.02
Prepayment Program from $4 million to
$3 million, which would align with the
final prepayment for participants in the
3 Year Prepayment Program. The
Exchange does not propose to alter any
other aspects of the 1 Year Prepayment
Program.11 Participants in the 1 Year
Prepayment Program would continue to
qualify its Affiliated (or Appointed) OFP
to be eligible to receive the enhanced
credit(s) under the Amex Customer
Engagement Program.12 To enroll in the
modified 1 Year Prepayment Program, a
Market Maker would have until
December 30, 2016 to notify the
Exchange, and until January 31, 2017 to
remit the $3 million prepayment.13
The Exchange is also proposing to
offer a new option, the ‘‘Balance of the
Year’’ program, which would allow
Market Makers to commit to prepay a
portion of their transaction charges for
some portion of the calendar year, for a
maximum of three-quarters of the year.
The prepayment amount and payment
schedule for the proposed Balance of
the Year Program would be based on the
quarter in which the Market Maker
joins, as set forth below:
2nd Quarter
Prepayment Amount and Payment
Schedule.
Rate per contract if
monthly volume from
posted volume is more
than .85% of total
ICADV or for any NYSE
Amex Market Maker participating in a prepayment program pursuant
to Section I.D.
4th Quarter
$975,000, due by October 31.
Year Program would receive a credit
equal to its prepayment amount (i.e.,
$2,475,000; $1,800,000; or $975,000,
respectively) toward fees it incurs under
than 4 participants in the 1- or 3-Year programs as
of January 3, 2017, as well as to update the
description of the program to reflect the current and
upcoming calendar year). The Exchange does not
propose to modify the ($3 million) amount of, or
deadline (of January 31, 2017) for, the final payment
in connection with the 3 Year Prepayment Program.
11 See proposed Fee Schedule, Section I.C.
(providing that the Exchange will apply the
prepayment as a credit against charges incurred
under Section I.C., I.G., or III.A. of the Fee Schedule
and, once the prepayment credit has been
exhausted, the Exchange will invoice the NYSE
Amex Options Market Maker at the appropriate
rates, and noting that if the NYSE Amex Options
Market Maker does not conduct sufficient activity
to exhaust the entirety of their prepayment credit
within the calendar year, there will be no refunds
issued for any unused portion of their prepayment
credit).
12 See Fee Schedule, Section I.E. (Amex Customer
Engagement (‘‘ACE’’) Program—Standard Options).
13 See proposed Fee Schedule, Section I.D
(Prepayment Programs) (modifying the description
of the 1Year Prepayment Programs, including
reducing the prepayment amount and updating the
deadlines to reflect the current and upcoming
calendar year). As is the case today, Market Makers
would have until the last business day of 2016 to
notify the Exchange of their commitment to the
Program by sending an email the Exchange at
optionsbilling@nyse.com.
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Section I.C., I.G., and III.A.14 As
proposed, Marker Makers that enroll in
the Balance of the Year Program would
be required to notify the Exchange by
the last business day before the start of
the new (following) quarter.15 Thus, to
participate for the last three-quarters of
2017, notice would have to be given by
March 31, 2017—the last business day
of the first quarter.
The Exchange believes the proposed
Balance of the Year Program would
allow a Market Maker that had not
committed to the 1- or 3-Year
Prepayment Program the option to
enroll at a later date, for a shorter
duration, and to nonetheless receive the
benefits of participating in the
Prepayment Program for the duration of
their commitment. Specifically, during
the period of their participation, Market
Makers enrolled in the Balance of the
Year Program would be entitled to
qualify for the reduced per contract
Sliding Scale rates (see supra note 8),
and a discount on Rights Fees.16 The
Exchange likewise proposes to offer
participants in the Balance of the Year
Program enhanced ACE credits in the
same amount as those available to
participants in the 1 Year Prepayment
Program, and to modify the Fee
Schedule accordingly.17 Although the
prepay commitment rates for partial
Balance of the Year participation is not
proportional to the time left in the year
(i.e., the later in the year a Market Maker
joins, the higher his prepayment amount
relative to the annual cost), the
Exchange believes this cost structure
would incentivize interested Market
Makers to commit to the Program earlier
in the year.
The Exchange is not proposing any
other fee changes at this time.
14 See proposed Fee Schedule, Section I.D
(Prepayment Programs). Similarly, just as with the
1- and 3-Year Prepayment Programs, the Exchange
would apply the prepayment as a credit against
charges incurred under Section I.C., I.G., or III.A.
of the Fee Schedule. Once the prepayment credit
has been exhausted, the Exchange would invoice
the NYSE Amex Options Market Maker at the
appropriate rates. In the event that a NYSE Amex
Options Market Maker does not conduct sufficient
activity to exhaust the entirety of their prepayment
credit within the calendar year, there would be no
refunds issued for any unused portion of their
prepayment credit. See id.
15 See id. (providing that Market Makers would be
required to notify the Exchange of their
commitment to the Program by sending an email
the Exchange at optionsbilling@nyse.com).
16 See Fee Schedule, Section III.C (e-Specialist,
DOMM and Specialist Monthly Rights Fees)
(describing Rights Fee Discount based on ACE tier
achieved). See also infra, note 17.
17 See proposed Fee Schedule, Section I.E.
(modifying ACE Program to provide for ‘‘1 Year/
Balance of the Year Program Enhanced Customer
Volume Credits’’ in the same amount).
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2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act,18 in general, and
furthers the objectives of Sections
6(b)(4) and (5) of the Act,19 in particular,
because it provides for the equitable
allocation of reasonable dues, fees, and
other charges among its members,
issuers and other persons using its
facilities and does not unfairly
discriminate between customers,
issuers, brokers or dealers.
The Exchange believes that the
proposed modifications to the Sliding
Scale are reasonable, equitable and not
unfairly discriminatory for a number of
reasons. First, the Sliding Scale is
available to all NYSE Amex Options
Market Makers and is based on the
amount of business transacted on—and
is designed to attract greater volume
to—the Exchange. The proposed
adjustments are designed to encourage
Market Makers to commit to directing
their order flow to the Exchange, which
would increase volume and liquidity, to
the benefit of all market participants by
providing more trading opportunities
and tighter spreads. Further, the
proposed Sliding Scale thresholds and
rates are competitive with fees charged
by other exchanges and are designed to
attract (and compete for) order flow to
the Exchange, which provides a greater
opportunity for trading by all market
participants.20
The Exchange proposal to modify the
Prepayment Programs, including by
reducing the prepay commitment for the
1 Year Prepayment Program and adding
the Balance of the Year Program, are
also reasonable, equitable and not
unfairly discriminatory for the following
reasons. First, all of the Prepayment
Programs offered on the Exchange are
optional and Market Makers can elect to
participate (or elect not to participate).
In addition, the Exchange believes that
reducing the prepay commitment for all
participants in the 1 Year Prepayment
Program, as well as offering Market
Makers the flexibility to join at various
points in the year, may encourage
broader participation in the Prepayment
Programs, which anticipated greater
capital commitment and resulting
liquidity on the Exchange would benefit
all market participants (including nonMarket Makers). Moreover, the
18 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4) and (5).
20 See e.g., CBOE fee schedule, available here,
https://www.cboe.com/publish/feeschedule/
CBOEFeeSchedule.pdf (the ‘‘Liquidity Provider
Sliding Scale’’); and MIAX fee schedule, available
here, https://www.miaxoptions.com/sites/default/
files/MIAX_Options_Fee_Schedule_11012016B.pdf
(‘‘Market Maker Sliding Scale’’).
19 15
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Exchange notes that other options
exchanges likewise offer Prepayment
Programs to market makers that may be
joined after the start of the year. For
example, under CBOE’s Liquidity
Provider Sliding Scale, a CBOE market
maker may be eligible for the lower rates
associated with certain tiers by
prepaying $2.4 million in fees on an
annual basis, or prepaying $200,000 in
fees on a monthly basis.21 The Exchange
also notes that, similar to the Sliding
Scale, the Prepayment Program is
designed to incent Market Makers to
commit to directing their order flow to
the Exchange, which would benefit all
market participants by expanding
liquidity, providing more trading
opportunities and tighter spreads, even
to those market participants that are not
eligible for the Programs. Thus, the
Exchange believes the Prepayment
Program, as modified, is reasonable,
equitable and not unfairly
discriminatory to others.
Finally, the Exchange is subject to
significant competitive forces, as
described below in the Exchange’s
statement regarding the burden on
competition.
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,22 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 changes relating to the Sliding
Scale and the Prepayment Program may
increase both intermarket and
intramarket competition by incenting
participants to direct their orders to the
Exchange, which would enhance the
quality of quoting and may increase the
volume of contracts traded on the
Exchange. To the extent that there is an
additional competitive burden on nonNYSE Amex Market Makers, the
Exchange believes that this is
appropriate because the proposal should
incent market participants to direct
additional order flow to the Exchange,
and thus provide additional liquidity
that enhances the quality of its markets
and increases the volume of contracts
traded here. To the extent that this
purpose is achieved, all of the
Exchange’s market participants should
21 CBOE fee schedule, at fn 10 (providing that a
market maker may be permitted to pay a pro-rated
amount of the $2.4 million if, for example, they join
the program mid-year), supra note 20.
22 15 U.S.C. 78f(b)(8).
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benefit from the improved market
liquidity. Enhanced market quality and
increased transaction volume that
results from the anticipated increase in
order flow directed to the Exchange will
benefit all market participants and
improve competition on the Exchange.
Given the robust competition for
volume among options markets, many of
which offer the same products,
implementing programs to attract order
flow similar to the ones being proposed
in this filing, are consistent with the
above-mentioned goals of the Act. 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.
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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) 23 of the Act and
subparagraph (f)(2) of Rule 19b–4 24
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) 25 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
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(2).
25 15 U.S.C. 78s(b)(2)(B).
14:59 Jan 09, 2017
Paper Comments
January 4, 2017.
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street, NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSEMKT–2016–127. 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, 100 F Street NE.,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–
NYSEMKT–2016–127 and should be
submitted on or before January 31, 2017.
I. Introduction
On November 8, 2016, the
International Securities Exchange, LLC
(the ‘‘Exchange’’ or ‘‘ISE’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
amend ISE Rules 716 (Block Trades) and
723 (Price Improvement Mechanism for
Crossing Transactions) to modify the
response times in the Block Order
Mechanism, Facilitation Mechanism,
Solicited Order Mechanism, and Price
Improvement Mechanism (‘‘PIM’’) from
500 milliseconds to a time period
designated by the Exchange of no less
than 100 milliseconds and no more than
1 second. The proposed rule change was
published for comment in the Federal
Register on November 25, 2016.3 No
comment letters were received on the
proposed rule change. This order
approves the proposed rule change.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.26
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–00221 Filed 1–9–17; 8:45 am]
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[Release No. 34–79733; File No. SR–ISE–
2016–26]
Self-Regulatory Organizations;
International Securities Exchange,
LLC; Order Approving a Proposed
Rule Change To Modify the Response
Times in the Block Mechanism,
Facilitation Mechanism, Solicited
Order Mechanism, and Price
Improvement Mechanism
24 17
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SECURITIES AND EXCHANGE
COMMISSION
• 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–2016–127 on the subject
line.
BILLING CODE 8011–01–P
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II. Description of the Proposed Rule
Change
ISE Rule 716 (Block Trades) contains
the requirements applicable to the
execution of orders using the Block
Order Mechanism, Facilitation
Mechanism, and Solicited Order
Mechanism. The Block Order
Mechanism allows ISE members to
obtain liquidity for the execution of a
block-size order.4 The Facilitation and
Solicited Order Mechanisms allow ISE
members to enter cross transactions
seeking price improvement.5 ISE Rule
723 (Price Improvement Mechanism for
Crossing Transactions) contains the
requirements applicable to the
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 79352
(November 18, 2016), 81 FR 85277 (‘‘Notice’’).
4 Block-size orders are orders for 50 contracts or
more. See ISE Rule 716(a).
5 Only block-size orders can be entered into the
Facilitation Mechanism, whereas only orders for
500 contracts or more can be entered into the
Solicited Order Mechanism. See ISE Rule 716(d)
and (e).
2 17
E:\FR\FM\10JAN1.SGM
10JAN1
]]>Agencies
[Federal Register Volume 82, Number 6 (Tuesday, January 10, 2017)]
[Notices]
[Pages 3052-3055]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-00221]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-79737; File No. SR-NYSEMKT-2016-127]
Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and
Immediate Effectiveness of Proposed Change Modifying the NYSE Amex
Options Fee Schedule
January 4, 2017.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on December 28, 2016, NYSE MKT LLC (``Exchange'' or ``NYSE MKT'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I, II, and III below, which
Items have been prepared by the self-regulatory organization. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C.78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to modify the NYSE Amex Options Fee Schedule.
The proposed change is available on the Exchange's Web site at
www.nyse.com, at the principal office of the Exchange, and at the
Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of this filing is to modify the Fee Schedule to: (1)
Adjust the qualification thresholds and transaction fees for electronic
transactions by NYSE Amex Options Marker Makers (``Sliding Scale'');
\4\ and (2) modify the prepayment programs offered by the Exchange,
including adding a new prepay option (the ``Prepayment Programs'').\5\
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\4\ See Fee Schedule, Section I. C. (NYSE Amex Options Market
Maker Sliding Scale--Electronic), available here, https://www.nyse.com/publicdocs/nyse/markets/amex-options/NYSE_Amex_Options_Fee_Schedule.pdf.
\5\ See id., Section I. D. (Prepayment Program).
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Market Maker Sliding Scale
Section I.C. of the Fee Schedule sets forth the Sliding Scale of
transaction fees charged to NYSE Amex Options Marker Makers (referred
to as Market Makers herein), which per contract fees decrease as Market
Maker trades higher monthly volumes.\6\ Currently, Market Makers that
have monthly volume on the Exchange of 0.10% or less of total ICADV are
charged a base rate of $0.25 per contract and, these same market
participants, upon reaching certain volume thresholds, or Tiers,
receive a reduction of this per contract rate.\7\ In addition, the
Exchange charges a lower per contract rate to Market Makers that
participate in one of the Prepayment Programs or that post monthly
volume greater than 0.85% of total ICADV.
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\6\ See Fee Schedule, supra note 4. The volume thresholds are
based on an NYSE Amex Options Market Maker's volume transacted
Electronically as a percentage of total industry Customer equity and
ETF options volumes (``ICADV'') as reported by the Options Clearing
Corporation (the ``OCC''). Total ICADV is comprised of those equity
and ETF contracts that clear in the Customer account type at OCC and
does not include contracts that clear in either the Firm or Market
Maker account type at OCC or contracts overlying security other than
an equity or ETF security. See OCC Monthly Statistics Reports,
available here, https://www.theocc.com/webapps/monthly-volume-reports.
\7\ In calculating an NYSE Amex Options Market Maker Electronic
volumes, the Exchange excludes any volumes attributable to Mini
Options, QCC trades, CUBE Auctions, and Strategy Execution Fee Caps,
as these transactions are subject to separate pricing described in
Fee Schedule Sections I.B., I.F., I.G., and I.J, respectively. See
Fee Schedule, Section I.C, supra note 4.
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Effective January 3, 2017, the Exchange proposes to modify the
qualification thresholds and associated transaction fees for all Marker
Makers as follows (with new rates/thresholds underlined and deleted
rates/thresholds in brackets):
* * * * *
----------------------------------------------------------------------------------------------------------------
Rate per contract if
monthly volume from
posted volume is more
than .85% of total
Market maker electronic monthly volume ICADV or for any NYSE
Tier as a percentage of ICADV Rate per contract Amex Market Maker
participating in a
prepayment program
pursuant to Section
I.D.
----------------------------------------------------------------------------------------------------------------
1........................... 0.00% to [0.10%]0.15%................. $0.25 [$0.20]$0.23
2........................... [>0.10%]0.15% to 0.60%..... $0.22 [$0.17]$0.18
3........................... >0.60% to [1.25%]1.10%................ [$0.12]$0.14 [$0.07]$0.08
[[Page 3053]]
4........................... [>1.25% to 1.40%]1.10% to $0.10 $0.05
1.45%.
5........................... [>1.40% to 1.75%]1.45% to $0.07 [$0.02]$0.04
1.80%.
6........................... [>1.75%]1.80%.............. $0.05 [$0.00]$0.02
----------------------------------------------------------------------------------------------------------------
The proposed changes are designed to incent Market Makers to
electronically trade a more meaningful percentage of ICADV by
increasing the percentage of ICADV required for Tiers 2, 5 and 6, and
to make Tier 4 more achievable by lowering the percentage of ICADV
required.\8\ In connection with the adjustment to the qualification
thresholds for the various tiers, the Exchange proposes to increase the
per contract rate for Tier 3, which is designed to both offset the
lower threshold to Tier 4 and to encourage participants to achieve Tier
4. For those participants that achieve Tier 4, as modified, the per
contract rate differential remains the same (i.e., $0.05 per contract
for those who achieve 0.85% of IADV from Posted Volume, or participate
in a Prepayment Program; as compared to $0.10 per contract for anyone
else that achieves Tier 4), which is designed to encourage Market
Makers to qualify for the more easily achievable Tier 4 and to qualify
for the enhanced rates by enrolling in a prepayment program or meeting
the Posted Volume criterion. In addition, the Exchange proposes to
increase the discounted per contract rates to Market Makers that
participate in one of the Prepayment Programs or that trade more than
0.85% of total ICADV based on posted volume. The Exchange believes the
proposed modifications would encourage Market Makers to execute more
volume on the Exchange and provide additional incentive to enroll in
one of the Prepayment Programs, including as modified herein.
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\8\ See proposed Fee Schedule, Section I.C.
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Prepayment Program
In January 2015, the Exchange introduced a two Prepayment
Programs--for a 1- or 3-year term--to allow Market Makers to prepay a
portion of the charges incurred for transactions executed on the
Exchange.\9\ Although the 3-Year Prepayment Program, now in its final
year, is closed to new entrants, the Exchange proposes to modify the
terms of the 1 Year Prepayment Program, as well as to offer a new
prepay option to be available throughout 2017.\10\ The proposed
modifications to the Prepayment Program are designed to encourage
broader participation by Market Maker firms.
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\9\ See Exchange Act Release No. 74086 (January 16, 2015) 80 FR
3701 (January 23, 2015) (SR-NYSEMKT-2015-4). See also Fee Schedule,
Section I.D (Prepayment Programs), supra at note 4 (describing the
1- and 3-Year Prepayment Programs, including requisite timelines for
committing and prepaying as well as various conditions to opt out of
the 3-Year Prepayment Program).
\10\ See proposed Fee Schedule, Section I.D (Prepayment
Programs) (modifying the description of the 3 Year Prepayment
Program to make clear that it is closed to new participants, that
one year remains for any Market Maker that enrolled in 2015, that
participants retain the ability to opt out by the specified date,
including because there are fewer than 4 participants in the 1- or
3-Year programs as of January 3, 2017, as well as to update the
description of the program to reflect the current and upcoming
calendar year). The Exchange does not propose to modify the ($3
million) amount of, or deadline (of January 31, 2017) for, the final
payment in connection with the 3 Year Prepayment Program.
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The Exchange proposes to reduce the prepayment amount for the 1
Year Prepayment Program from $4 million to $3 million, which would
align with the final prepayment for participants in the 3 Year
Prepayment Program. The Exchange does not propose to alter any other
aspects of the 1 Year Prepayment Program.\11\ Participants in the 1
Year Prepayment Program would continue to qualify its Affiliated (or
Appointed) OFP to be eligible to receive the enhanced credit(s) under
the Amex Customer Engagement Program.\12\ To enroll in the modified 1
Year Prepayment Program, a Market Maker would have until December 30,
2016 to notify the Exchange, and until January 31, 2017 to remit the $3
million prepayment.\13\
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\11\ See proposed Fee Schedule, Section I.C. (providing that the
Exchange will apply the prepayment as a credit against charges
incurred under Section I.C., I.G., or III.A. of the Fee Schedule
and, once the prepayment credit has been exhausted, the Exchange
will invoice the NYSE Amex Options Market Maker at the appropriate
rates, and noting that if the NYSE Amex Options Market Maker does
not conduct sufficient activity to exhaust the entirety of their
prepayment credit within the calendar year, there will be no refunds
issued for any unused portion of their prepayment credit).
\12\ See Fee Schedule, Section I.E. (Amex Customer Engagement
(``ACE'') Program--Standard Options).
\13\ See proposed Fee Schedule, Section I.D (Prepayment
Programs) (modifying the description of the 1Year Prepayment
Programs, including reducing the prepayment amount and updating the
deadlines to reflect the current and upcoming calendar year). As is
the case today, Market Makers would have until the last business day
of 2016 to notify the Exchange of their commitment to the Program by
sending an email the Exchange at optionsbilling@nyse.com.
---------------------------------------------------------------------------
The Exchange is also proposing to offer a new option, the ``Balance
of the Year'' program, which would allow Market Makers to commit to
prepay a portion of their transaction charges for some portion of the
calendar year, for a maximum of three-quarters of the year. The
prepayment amount and payment schedule for the proposed Balance of the
Year Program would be based on the quarter in which the Market Maker
joins, as set forth below:
----------------------------------------------------------------------------------------------------------------
2nd Quarter 3rd Quarter 4th Quarter
----------------------------------------------------------------------------------------------------------------
Prepayment Amount and Payment $2,475,000, due by $1,800,000, due by July $975,000, due by
Schedule. April 28. 31. October 31.
----------------------------------------------------------------------------------------------------------------
Similar to the current 1- and 3-Year Prepayment Programs, a Market
Maker that participates in the Balance of the Year Program would
receive a credit equal to its prepayment amount (i.e., $2,475,000;
$1,800,000; or $975,000, respectively) toward fees it incurs under
[[Page 3054]]
Section I.C., I.G., and III.A.\14\ As proposed, Marker Makers that
enroll in the Balance of the Year Program would be required to notify
the Exchange by the last business day before the start of the new
(following) quarter.\15\ Thus, to participate for the last three-
quarters of 2017, notice would have to be given by March 31, 2017--the
last business day of the first quarter.
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\14\ See proposed Fee Schedule, Section I.D (Prepayment
Programs). Similarly, just as with the 1- and 3-Year Prepayment
Programs, the Exchange would apply the prepayment as a credit
against charges incurred under Section I.C., I.G., or III.A. of the
Fee Schedule. Once the prepayment credit has been exhausted, the
Exchange would invoice the NYSE Amex Options Market Maker at the
appropriate rates. In the event that a NYSE Amex Options Market
Maker does not conduct sufficient activity to exhaust the entirety
of their prepayment credit within the calendar year, there would be
no refunds issued for any unused portion of their prepayment credit.
See id.
\15\ See id. (providing that Market Makers would be required to
notify the Exchange of their commitment to the Program by sending an
email the Exchange at optionsbilling@nyse.com).
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The Exchange believes the proposed Balance of the Year Program
would allow a Market Maker that had not committed to the 1- or 3-Year
Prepayment Program the option to enroll at a later date, for a shorter
duration, and to nonetheless receive the benefits of participating in
the Prepayment Program for the duration of their commitment.
Specifically, during the period of their participation, Market Makers
enrolled in the Balance of the Year Program would be entitled to
qualify for the reduced per contract Sliding Scale rates (see supra
note 8), and a discount on Rights Fees.\16\ The Exchange likewise
proposes to offer participants in the Balance of the Year Program
enhanced ACE credits in the same amount as those available to
participants in the 1 Year Prepayment Program, and to modify the Fee
Schedule accordingly.\17\ Although the prepay commitment rates for
partial Balance of the Year participation is not proportional to the
time left in the year (i.e., the later in the year a Market Maker
joins, the higher his prepayment amount relative to the annual cost),
the Exchange believes this cost structure would incentivize interested
Market Makers to commit to the Program earlier in the year.
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\16\ See Fee Schedule, Section III.C (e-Specialist, DOMM and
Specialist Monthly Rights Fees) (describing Rights Fee Discount
based on ACE tier achieved). See also infra, note 17.
\17\ See proposed Fee Schedule, Section I.E. (modifying ACE
Program to provide for ``1 Year/Balance of the Year Program Enhanced
Customer Volume Credits'' in the same amount).
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The Exchange is not proposing any other fee changes at this time.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\18\ in general, and furthers the
objectives of Sections 6(b)(4) and (5) of the Act,\19\ 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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\18\ 15 U.S.C. 78f(b).
\19\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange believes that the proposed modifications to the
Sliding Scale are reasonable, equitable and not unfairly discriminatory
for a number of reasons. First, the Sliding Scale is available to all
NYSE Amex Options Market Makers and is based on the amount of business
transacted on--and is designed to attract greater volume to--the
Exchange. The proposed adjustments are designed to encourage Market
Makers to commit to directing their order flow to the Exchange, which
would increase volume and liquidity, to the benefit of all market
participants by providing more trading opportunities and tighter
spreads. Further, the proposed Sliding Scale thresholds and rates are
competitive with fees charged by other exchanges and are designed to
attract (and compete for) order flow to the Exchange, which provides a
greater opportunity for trading by all market participants.\20\
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\20\ See e.g., CBOE fee schedule, available here, https://www.cboe.com/publish/feeschedule/CBOEFeeSchedule.pdf (the
``Liquidity Provider Sliding Scale''); and MIAX fee schedule,
available here, https://www.miaxoptions.com/sites/default/files/MIAX_Options_Fee_Schedule_11012016B.pdf (``Market Maker Sliding
Scale'').
---------------------------------------------------------------------------
The Exchange proposal to modify the Prepayment Programs, including
by reducing the prepay commitment for the 1 Year Prepayment Program and
adding the Balance of the Year Program, are also reasonable, equitable
and not unfairly discriminatory for the following reasons. First, all
of the Prepayment Programs offered on the Exchange are optional and
Market Makers can elect to participate (or elect not to participate).
In addition, the Exchange believes that reducing the prepay commitment
for all participants in the 1 Year Prepayment Program, as well as
offering Market Makers the flexibility to join at various points in the
year, may encourage broader participation in the Prepayment Programs,
which anticipated greater capital commitment and resulting liquidity on
the Exchange would benefit all market participants (including non-
Market Makers). Moreover, the Exchange notes that other options
exchanges likewise offer Prepayment Programs to market makers that may
be joined after the start of the year. For example, under CBOE's
Liquidity Provider Sliding Scale, a CBOE market maker may be eligible
for the lower rates associated with certain tiers by prepaying $2.4
million in fees on an annual basis, or prepaying $200,000 in fees on a
monthly basis.\21\ The Exchange also notes that, similar to the Sliding
Scale, the Prepayment Program is designed to incent Market Makers to
commit to directing their order flow to the Exchange, which would
benefit all market participants by expanding liquidity, providing more
trading opportunities and tighter spreads, even to those market
participants that are not eligible for the Programs. Thus, the Exchange
believes the Prepayment Program, as modified, is reasonable, equitable
and not unfairly discriminatory to others.
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\21\ CBOE fee schedule, at fn 10 (providing that a market maker
may be permitted to pay a pro-rated amount of the $2.4 million if,
for example, they join the program mid-year), supra note 20.
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Finally, the Exchange is subject to significant competitive forces,
as described below in the Exchange's statement regarding the burden on
competition.
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,\22\ 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
changes relating to the Sliding Scale and the Prepayment Program may
increase both intermarket and intramarket competition by incenting
participants to direct their orders to the Exchange, which would
enhance the quality of quoting and may increase the volume of contracts
traded on the Exchange. To the extent that there is an additional
competitive burden on non-NYSE Amex Market Makers, the Exchange
believes that this is appropriate because the proposal should incent
market participants to direct additional order flow to the Exchange,
and thus provide additional liquidity that enhances the quality of its
markets and increases the volume of contracts traded here. To the
extent that this purpose is achieved, all of the Exchange's market
participants should
[[Page 3055]]
benefit from the improved market liquidity. Enhanced market quality and
increased transaction volume that results from the anticipated increase
in order flow directed to the Exchange will benefit all market
participants and improve competition on the Exchange.
---------------------------------------------------------------------------
\22\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------
Given the robust competition for volume among options markets, many
of which offer the same products, implementing programs to attract
order flow similar to the ones being proposed in this filing, are
consistent with the above-mentioned goals of the Act. 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) \23\ of the Act and subparagraph (f)(2) of Rule
19b-4 \24\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\23\ 15 U.S.C. 78s(b)(3)(A).
\24\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------
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) \25\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\25\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
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-2016-127 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEMKT-2016-127. 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, 100 F Street NE.,
Washington, DC 20549 on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSEMKT-2016-127 and should
be submitted on or before January 31, 2017.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\26\
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\26\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-00221 Filed 1-9-17; 8:45 am]
BILLING CODE 8011-01-P
