Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the NYSE Arca Options Fee Schedule, 18374-18376 [2018-08725]
Download as PDF
<![CDATA[
18374
Federal Register / Vol. 83, No. 81 / Thursday, April 26, 2018 / Notices
Services, 100 F Street NE, Washington,
DC 20549–2736.
amozie on DSK30RV082PROD with NOTICES
Extension:
Form 1–K, SEC File No. 270–662, OMB
Control No. 3235–0720.
Notice is hereby given that, pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.), the Securities
and Exchange Commission
(‘‘Commission’’) is soliciting comments
on the collection of information
summarized below. The Commission
plans to submit this existing collection
of information to the Office of
Management and Budget for extension
and approval.
Form 1–K (17 CFR 239.91) is used to
file annual reports by Tier 2 issuers
under Regulation A, an exemption from
registration under the Securities Act of
1933 (15 U.S.C. 77a et seq.). Tier 2
issuers under Regulation A conducting
offerings of up to $50 million within a
12-month period are required to file
Form 1–K. Form 1–K provides audited
year-end financial statements and
information about the issuer’s business
operation, ownership, management,
liquidity, capital resources and
operations on an annual basis. In
addition, Part I of the Form 1–K collects
information on any offerings under
Regulation A that have been terminated
or completed unless it has been
previous reported on Form 1–Z. The
purpose of the Form 1–K is to better
inform the public about companies that
have conducted Tier 2 offerings under
Regulation A. We estimate that
approximately 24 issuers file Form 1–K
annually. We estimate that Form 1–K
takes approximately 600 hours to
prepare. We estimate that 75% of the
600 hours per response (450 hours) is
prepared by the company for a total
annual burden of 10,800 hours (450.0
hours per response × 24 responses).
Written comments are invited on: (a)
Whether the proposed collection of
information is necessary for the proper
performance of the functions of the
agency, including whether the
information will have practical utility;
(b) the accuracy of the agency’s estimate
of the burden imposed by the collection
of information; (c) ways to enhance the
quality, utility, and clarity of the
information collected; and (d) ways to
minimize the burden of the collection of
information on respondents, including
through the use of automated collection
techniques or other forms of information
technology. Consideration will be given
to comments and suggestions submitted
in writing within 60 days of this
publication.
An agency may not conduct or
sponsor, and a person is not required to
VerDate Sep<11>2014
18:15 Apr 25, 2018
Jkt 244001
respond to, a collection of information
unless it displays a currently valid
control number.
Please direct your written comments
to Pamela Dyson, Director/Chief
Information Officer, Securities and
Exchange Commission, c/o Remi PavlikSimon, 100 F Street NE, Washington,
DC 20549; or send an email to: PRA_
Mailbox@sec.gov.
Dated: April 23, 2018.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–08817 Filed 4–25–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–83074; File No. SR–
NYSEArca–2018–24]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend the NYSE Arca
Options Fee Schedule
April 20, 2018.
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 April 12,
2018, NYSE Arca, Inc. (the ‘‘Exchange’’
or ‘‘NYSE Arca’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of the Substance
of the Proposed Rule Change
The Exchange proposes to amend the
NYSE Arca Options Fee Schedule (‘‘Fee
Schedule’’). The Exchange proposes to
implement the fee change effective
April 12, 2018.4 The proposed rule
change is available on the Exchange’s
website at www.nyse.com, at the
principal office of the Exchange, and at
the Commission’s Public Reference
Room.
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
4 The Exchange originally filed to amend the Fee
Schedule on April 2, 2018 (SR–NYSEArca–2018–
21) and withdrew and re-filed on April 3, 2018 (SR–
NYSEArca–2018–22).
2 15
PO 00000
Frm 00113
Fmt 4703
Sfmt 4703
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 purpose of this filing is to modify
the Fee Schedule to adopt a prepayment
incentive program for Floor Broker
organizations (each a ‘‘Floor Broker’’).
Currently, Floor Brokers that operate
on the Exchange incur certain monthly
fixed costs that rarely change from
month-to-month (and, in some cases,
year-to-year). Floor Brokers receive an
invoice from the Exchange each month
for the fixed cost incurred the prior
month. The Exchange proposes to offer
Floor Brokers a 10% discount on their
‘‘Eligible Fixed Costs’’ (described in the
table below) if Floor Brokers prepay
such costs for the remaining nine
months of 2018 —i.e., April through
December (the ‘‘FB Prepay Program’’ or
‘‘Program’’).5
Eligible Fixed Costs
OTP trading participant rights.
Floor Broker order capture device—market
data fees.
Floor booths.
Telephones.
Options floor access fee.
Wire services.
Vendor equipment room/cabinet fee.
A Floor Broker that commits to the
proposed Program would be invoiced in
April 2018 for its estimated Eligible
5 To participate in the FB Prepay Program, Floor
Broker organizations would have to notify the
Exchange in writing by emailing optionsbilling@
nyse.com, indicating a commitment to submit
prepayment, by no later than April 13, 2018. The
email to enroll in the Program would have to
originate from an officer of the Floor Broker
organization and, except as provided for below,
represents a binding commitment through the end
of 2018. To participate in the Program, pre-payment
for the balance of the year must be received by the
close of business on April 30, 2018. See proposed
Fee Schedule, NYSE Arca OPTIONS: FLOOR and
EQUIPMENT and CO–LOCATION FEES, FLOOR
BROKER FIXED COST PREPAYMENT INCENTIVE
PROGRAM.
E:\FR\FM\26APN1.SGM
26APN1
18375
Federal Register / Vol. 83, No. 81 / Thursday, April 26, 2018 / Notices
Fixed Costs, through the end of 2018,
less 10%. The estimated Eligible Fixed
Costs for April through December 2018
for each participating Floor Broker
would be based on that Floor Broker’s
February 2018 invoice for such costs.
For example, if a participating Floor
Broker incurred $6,000 in Eligible Fixed
Costs in February 2018, that Floor
Broker would be invoiced in April 2018
in the amount of $48,600 to prepay such
costs for the balance of the year (i.e.,
$54,000 (to pre-pay Eligible Fixed Costs
for April through December) minus
$5,400 (10% discount) equals $48,600).
The Exchange also proposes to offer
participants in the FB Prepay Program
the opportunity to qualify for larger
discounts (i.e., more than 10% of the
remaining of 2018 Eligible Fixed Costs)
through the Percentage Growth
Incentive (the ‘‘Incentive’’), which is
designed to encourage Floor Brokers to
increase their average daily volume
(‘‘ADV’’) in billable manual contract
sides by certain percentages (correlated
with Tiers) as measured against one of
two benchmarks.6 Specifically, to
qualify for the Incentive, a participating
Floor Broker must increase its manual
billable ADV in contract sides during
the final nine months of 2018 (i.e., April
through December) by percentages (set
forth below) above the greater of:
i. 10,000 Contract sides in billable
manual ADV; or
ii. The Floor Broker’s total billable
manual ADV in contract sides during
the second half of 2017—i.e., July
through December 2017.
As proposed, a participating Floor
Broker would qualify for the proposed
Incentive by executing, in the final nine
months of 2018, ADV growth in manual
billable contract sides that is 30%, 65%,
or 100% over the greater of (i) 10,000
contract sides ADV; or (ii) their ADV
during the second half of 2017 (i.e., June
through December). For example, a
Floor Broker that is new to the Exchange
(or one that did not execute at least
10,000 contract sides in billable manual
ADV in the second half of 2017) would
have the ability to qualify for the
Incentive by executing at least 10,000
contract sides in manual billable ADV
increased by the specified percentages.
Such a Floor Broker would qualify for
each Tier, respectively, by executing
billable manual ADV in contract sides of
13,000 (Tier 1), 16,500 (Tier 2), and
20,000 (Tier 3) during April through
December 2018.
Similarly, a Floor Broker that
executed 50,000 billable manual ADV in
the second half of 2017, would qualify
for each Tier, respectively, by executing
ADV in contracts sides of 65,000 (Tier
1), 82,500 (Tier 2), and 100,000 (Tier 3)
during April through December 2018.
The total rebate available for
achieving each Tier is the same
regardless of whether the Floor Broker
relied on its second half of 2017 volume
or the minimum 10,000 ADV contract
sides as the benchmark. As proposed,
Floor Brokers that earn the Percentage
Growth Incentive would receive their
2018 rebate in January 2019.7
The Exchange proposes to specify the
proposed Incentive on the Fee Schedule
with the following table:
FB PREPAYMENT PROGRAM INCENTIVES
[based on ADV in contract sides between April 1—December 31, 2018]
Percentage
growth incentive
Tier
Tier 1 ............................................................................................................................................................
Tier 2 ............................................................................................................................................................
Tier 3 ............................................................................................................................................................
The Exchange is not proposing any
other changes to the Fee Schedule at
this time.
2. Statutory Basis
amozie on DSK30RV082PROD with NOTICES
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act,9 in general, and
furthers the objectives of Sections
6(b)(4) and (5) of the Act,10 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.
6 The Percentage Growth Incentive would exclude
Customer volume, Firm Facilitation and Broker
Dealer facilitating a Customer trades, and QCCs.
Any volume calculated to achieve the Firm and
Broker Dealer Monthly Fee Cap and the Limit of
Fees on Options Strategy Executions (‘‘Strategy
Cap’’), regardless of whether either of these caps is
achieved, will likewise be excluded from the
Percentage Growth Incentive because fees on such
VerDate Sep<11>2014
16:58 Apr 25, 2018
Jkt 244001
30
65
100
Total percentage
reduction of eligible fixed costs for
April–December
2018
40
75
8 100
The proposal to introduce the FB
Prepayment Program is reasonable,
equitable and not unfairly
discriminatory for the following
reasons. First, the Program is optional
and Floor Brokers can elect to
participate (or elect not to participate).
In addition, the Exchange is offering two
alternative means to achieve the same
enhanced discount to ensure that Floor
Brokers that are new to the Exchange (or
Floor Brokers that did not execute more
than 10,000 ADV in contract sides)
could nonetheless participate in the
Program. The Exchange believes that
10,000 ADV is a reasonable minimum
threshold above which a participating
Floor Broker would need to increase
volume in order to realize the proposed
Incentive (on a similar playing field
with Floor Brokers that exceeded this
volume requirement in 2017). For Floor
Brokers that exceeded the 10,000 ADV
in the second half of 2017, the Exchange
believes it is reasonable to use each
Floor Broker’s historical volume as a
benchmark against which to measure
future growth to achieve the proposed
Incentive.
Moreover, the Exchange notes that
prepayment programs such as the FB
Prepay Program are not new or novel as
other options exchanges provide
incentives to other specific market
participants for prepayment of certain
Exchange fees/costs—including the
volume are already capped and therefore such
volume does not increase billable manual volume.
See id.
7 The Exchange would not issue any refunds in
the event that a Floor Broker’s prepaid Eligible
Fixed Costs exceeds such actual costs for the nine
month period. See id.
8 Participants in the FB Prepay Program that
qualify for Tier 3 (i.e., increased 2018 volume (from
April through December) by 100% over the Floor
Broker’s volume from the second half of 2017, or
the 10,0000 ADV in contract sides) would be
rebated the greater of 100% of their pre-paid
Eligible Fixed Costs, or $10,000/month for April
through December 2018. See id.
9 15 U.S.C. 78f(b).
10 15 U.S.C. 78f(b)(4) and (5).
PO 00000
Frm 00114
Fmt 4703
Sfmt 4703
E:\FR\FM\26APN1.SGM
26APN1
18376
Federal Register / Vol. 83, No. 81 / Thursday, April 26, 2018 / Notices
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, such as the proposed FB
Prepayment Program, 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.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
amozie on DSK30RV082PROD with NOTICES
prepayment programs offered to market
makers on NYSE American and the
Chicago Board of Options Exchange
(Cboe).11 Although these market maker
prepay programs apply to transaction
costs as opposed to fixed costs, the
Exchange believes the proposed
program would similarly incent Floor
Brokers to increase their billable volume
executed in open outcry on the
Exchange, which would benefit all
market participants by expanding
liquidity and providing more trading
opportunities, even to those market
participants that have not committed to
the Program. Regardless of which
benchmark a participating Floor
Broker’s growth is measured against, all
Floor Broker’s [sic] that opt to
participate would be required to
increase volume executed on the
Exchange in order to receive the
enhanced discount. Thus, the Exchange
believes the proposed Program, is
reasonable, equitable and not unfairly
discriminatory to others.
No written comments were solicited
or received with respect to the proposed
rule change.
In accordance with Section 6(b)(8) of
the Act, 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 FB Prepayment Program may
increase both inter-market 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 nonExchange participants, 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 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 would benefit all market
11 See NYSE American Fee Schedule, Section I.D.
(Prepayment Program), available here, https://www.
nyse.com/publicdocs/nyse/markets/americanoptions/NYSE_American_Options_Fee_
Schedule.pdf; Cboe fee schedule, Liquidity Provider
Sliding Scale, available here, https://www.cboe.com/
publish/feeschedule/CBOEFeeSchedule.pdf.
VerDate Sep<11>2014
16:58 Apr 25, 2018
Jkt 244001
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
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) 12 of the Act and
subparagraph (f)(2) of Rule 19b–4 13
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) 14 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–
NYSEArca–2018–24 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE, Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSEArca2018–24. 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 website (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 website 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.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–NYSEArca–2018–24, and
should be submitted on or before May
17, 2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–08725 Filed 4–25–18; 8:45 am]
BILLING CODE 8011–01–P
12 15
U.S.C. 78s(b)(3)(A).
13 17 CFR 240.19b–4(f)(2).
14 15 U.S.C. 78s(b)(2)(B).
PO 00000
Frm 00115
Fmt 4703
Sfmt 4703
15 17
E:\FR\FM\26APN1.SGM
CFR 200.30–3(a)(12).
26APN1
]]>Agencies
[Federal Register Volume 83, Number 81 (Thursday, April 26, 2018)]
[Notices]
[Pages 18374-18376]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-08725]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-83074; File No. SR-NYSEArca-2018-24]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend the NYSE
Arca Options Fee Schedule
April 20, 2018.
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 April 12, 2018, NYSE Arca, Inc. (the ``Exchange'' or
``NYSE Arca'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\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 Arca Options Fee Schedule
(``Fee Schedule''). The Exchange proposes to implement the fee change
effective April 12, 2018.\4\ The proposed rule change is available on
the Exchange's website at www.nyse.com, at the principal office of the
Exchange, and at the Commission's Public Reference Room.
---------------------------------------------------------------------------
\4\ The Exchange originally filed to amend the Fee Schedule on
April 2, 2018 (SR-NYSEArca-2018-21) and withdrew and re-filed on
April 3, 2018 (SR-NYSEArca-2018-22).
---------------------------------------------------------------------------
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 purpose of this filing is to modify the Fee Schedule to adopt a
prepayment incentive program for Floor Broker organizations (each a
``Floor Broker'').
Currently, Floor Brokers that operate on the Exchange incur certain
monthly fixed costs that rarely change from month-to-month (and, in
some cases, year-to-year). Floor Brokers receive an invoice from the
Exchange each month for the fixed cost incurred the prior month. The
Exchange proposes to offer Floor Brokers a 10% discount on their
``Eligible Fixed Costs'' (described in the table below) if Floor
Brokers prepay such costs for the remaining nine months of 2018 --i.e.,
April through December (the ``FB Prepay Program'' or ``Program'').\5\
---------------------------------------------------------------------------
\5\ To participate in the FB Prepay Program, Floor Broker
organizations would have to notify the Exchange in writing by
emailing [email protected], indicating a commitment to submit
prepayment, by no later than April 13, 2018. The email to enroll in
the Program would have to originate from an officer of the Floor
Broker organization and, except as provided for below, represents a
binding commitment through the end of 2018. To participate in the
Program, pre-payment for the balance of the year must be received by
the close of business on April 30, 2018. See proposed Fee Schedule,
NYSE Arca OPTIONS: FLOOR and EQUIPMENT and CO-LOCATION FEES, FLOOR
BROKER FIXED COST PREPAYMENT INCENTIVE PROGRAM.
------------------------------------------------------------------------
-----------------------------------------------------------------------
Eligible Fixed Costs
OTP trading participant rights.
Floor Broker order capture device--market data fees.
Floor booths.
Telephones.
Options floor access fee.
Wire services.
Vendor equipment room/cabinet fee.
------------------------------------------------------------------------
A Floor Broker that commits to the proposed Program would be
invoiced in April 2018 for its estimated Eligible
[[Page 18375]]
Fixed Costs, through the end of 2018, less 10%. The estimated Eligible
Fixed Costs for April through December 2018 for each participating
Floor Broker would be based on that Floor Broker's February 2018
invoice for such costs. For example, if a participating Floor Broker
incurred $6,000 in Eligible Fixed Costs in February 2018, that Floor
Broker would be invoiced in April 2018 in the amount of $48,600 to
prepay such costs for the balance of the year (i.e., $54,000 (to pre-
pay Eligible Fixed Costs for April through December) minus $5,400 (10%
discount) equals $48,600).
The Exchange also proposes to offer participants in the FB Prepay
Program the opportunity to qualify for larger discounts (i.e., more
than 10% of the remaining of 2018 Eligible Fixed Costs) through the
Percentage Growth Incentive (the ``Incentive''), which is designed to
encourage Floor Brokers to increase their average daily volume
(``ADV'') in billable manual contract sides by certain percentages
(correlated with Tiers) as measured against one of two benchmarks.\6\
Specifically, to qualify for the Incentive, a participating Floor
Broker must increase its manual billable ADV in contract sides during
the final nine months of 2018 (i.e., April through December) by
percentages (set forth below) above the greater of:
---------------------------------------------------------------------------
\6\ The Percentage Growth Incentive would exclude Customer
volume, Firm Facilitation and Broker Dealer facilitating a Customer
trades, and QCCs. Any volume calculated to achieve the Firm and
Broker Dealer Monthly Fee Cap and the Limit of Fees on Options
Strategy Executions (``Strategy Cap''), regardless of whether either
of these caps is achieved, will likewise be excluded from the
Percentage Growth Incentive because fees on such volume are already
capped and therefore such volume does not increase billable manual
volume. See id.
---------------------------------------------------------------------------
i. 10,000 Contract sides in billable manual ADV; or
ii. The Floor Broker's total billable manual ADV in contract sides
during the second half of 2017--i.e., July through December 2017.
As proposed, a participating Floor Broker would qualify for the
proposed Incentive by executing, in the final nine months of 2018, ADV
growth in manual billable contract sides that is 30%, 65%, or 100% over
the greater of (i) 10,000 contract sides ADV; or (ii) their ADV during
the second half of 2017 (i.e., June through December). For example, a
Floor Broker that is new to the Exchange (or one that did not execute
at least 10,000 contract sides in billable manual ADV in the second
half of 2017) would have the ability to qualify for the Incentive by
executing at least 10,000 contract sides in manual billable ADV
increased by the specified percentages. Such a Floor Broker would
qualify for each Tier, respectively, by executing billable manual ADV
in contract sides of 13,000 (Tier 1), 16,500 (Tier 2), and 20,000 (Tier
3) during April through December 2018.
Similarly, a Floor Broker that executed 50,000 billable manual ADV
in the second half of 2017, would qualify for each Tier, respectively,
by executing ADV in contracts sides of 65,000 (Tier 1), 82,500 (Tier
2), and 100,000 (Tier 3) during April through December 2018.
The total rebate available for achieving each Tier is the same
regardless of whether the Floor Broker relied on its second half of
2017 volume or the minimum 10,000 ADV contract sides as the benchmark.
As proposed, Floor Brokers that earn the Percentage Growth Incentive
would receive their 2018 rebate in January 2019.\7\
---------------------------------------------------------------------------
\7\ The Exchange would not issue any refunds in the event that a
Floor Broker's prepaid Eligible Fixed Costs exceeds such actual
costs for the nine month period. See id.
---------------------------------------------------------------------------
The Exchange proposes to specify the proposed Incentive on the Fee
Schedule with the following table:
---------------------------------------------------------------------------
\8\ Participants in the FB Prepay Program that qualify for Tier
3 (i.e., increased 2018 volume (from April through December) by 100%
over the Floor Broker's volume from the second half of 2017, or the
10,0000 ADV in contract sides) would be rebated the greater of 100%
of their pre-paid Eligible Fixed Costs, or $10,000/month for April
through December 2018. See id.
FB Prepayment Program Incentives
[based on ADV in contract sides between April 1--December 31, 2018]
------------------------------------------------------------------------
Total percentage
reduction of
Percentage growth eligible fixed
Tier incentive costs for April-
December 2018
------------------------------------------------------------------------
Tier 1............................ 30 40
Tier 2............................ 65 75
Tier 3............................ 100 \8\ 100
------------------------------------------------------------------------
The Exchange is not proposing any other changes to the Fee Schedule
at this time.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\9\ in general, and furthers the
objectives of Sections 6(b)(4) and (5) of the Act,\10\ 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.
---------------------------------------------------------------------------
\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
The proposal to introduce the FB Prepayment Program is reasonable,
equitable and not unfairly discriminatory for the following reasons.
First, the Program is optional and Floor Brokers can elect to
participate (or elect not to participate). In addition, the Exchange is
offering two alternative means to achieve the same enhanced discount to
ensure that Floor Brokers that are new to the Exchange (or Floor
Brokers that did not execute more than 10,000 ADV in contract sides)
could nonetheless participate in the Program. The Exchange believes
that 10,000 ADV is a reasonable minimum threshold above which a
participating Floor Broker would need to increase volume in order to
realize the proposed Incentive (on a similar playing field with Floor
Brokers that exceeded this volume requirement in 2017). For Floor
Brokers that exceeded the 10,000 ADV in the second half of 2017, the
Exchange believes it is reasonable to use each Floor Broker's
historical volume as a benchmark against which to measure future growth
to achieve the proposed Incentive.
Moreover, the Exchange notes that prepayment programs such as the
FB Prepay Program are not new or novel as other options exchanges
provide incentives to other specific market participants for prepayment
of certain Exchange fees/costs--including the
[[Page 18376]]
prepayment programs offered to market makers on NYSE American and the
Chicago Board of Options Exchange (Cboe).\11\ Although these market
maker prepay programs apply to transaction costs as opposed to fixed
costs, the Exchange believes the proposed program would similarly
incent Floor Brokers to increase their billable volume executed in open
outcry on the Exchange, which would benefit all market participants by
expanding liquidity and providing more trading opportunities, even to
those market participants that have not committed to the Program.
Regardless of which benchmark a participating Floor Broker's growth is
measured against, all Floor Broker's [sic] that opt to participate
would be required to increase volume executed on the Exchange in order
to receive the enhanced discount. Thus, the Exchange believes the
proposed Program, is reasonable, equitable and not unfairly
discriminatory to others.
---------------------------------------------------------------------------
\11\ See NYSE American Fee Schedule, Section I.D. (Prepayment
Program), available here, https://www.nyse.com/publicdocs/nyse/markets/american-options/NYSE_American_Options_Fee_Schedule.pdf;
Cboe fee schedule, Liquidity Provider Sliding Scale, available here,
https://www.cboe.com/publish/feeschedule/CBOEFeeSchedule.pdf.
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with Section 6(b)(8) of the Act, the Exchange does
not believe that the proposed rule change 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 FB
Prepayment Program may increase both inter-market and intra-market
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-Exchange participants,
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 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 would 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, such as the proposed FB Prepayment Program, 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) \12\ of the Act and subparagraph (f)(2) of Rule
19b-4 \13\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 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) \14\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
---------------------------------------------------------------------------
\14\ 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 [email protected]. Please include
File Number SR-NYSEArca-2018-24 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEArca2018-24. 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 website (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 website 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. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NYSEArca-2018-24, and should be
submitted on or before May 17, 2018.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
---------------------------------------------------------------------------
\15\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-08725 Filed 4-25-18; 8:45 am]
BILLING CODE 8011-01-P
