Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of Proposed Change To Modify the NYSE American Options Fee Schedule, 31205-31210 [2018-14293]
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Federal Register / Vol. 83, No. 128 / Tuesday, July 3, 2018 / Notices
investors and the public interest,
because waiver would allow the pilot
period to continue uninterrupted after
its current expiration date of June 30,
2018, thereby avoiding any potential
investor confusion that could result
from temporary interruption in the
Program. For this reason, the
Commission hereby waives the 30-day
operative delay and designates the
proposal operative upon filing.22
At any time within 60 days of the
filing of the 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
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–
BX–2018–026 on the subject line.
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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–BX–2018–026. This file
22 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f). In
addition, Rule 19b–4(f)(6)(iii) requires the Exchange
to give the Commission written notice of the
Exchange’s intent to file the proposed rule change,
along with a brief description and text of the
proposed rule change, at least five business days
prior to the date of filing of the proposed rule
change, or such shorter time as designated by the
Commission. The Exchange did not provide this
notice, and it has requested that the Commission
waive the requirement for this proposed rule
change in order to allow the Program to continue
uninterrupted. The Exchange asserts this would
benefit market participants and help to eliminate
the potential for investor confusion. For the same
reasons stated above with regard to the
Commission’s waiver of the 30-day operative delay,
the Commission permits this proposed rule change
to be filed without advanced written notice of the
Exchange’s intent to file.
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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 the
filing also will be available for
inspection and copying at the principal
offices 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–BX–2018–026, and should
be submitted on or before July 24, 2018.
The General Counsel of the
Commission, or his designee, has
certified that, in his opinion, one or
more of the exemptions set forth in 5
U.S.C. 552b(c)(3), (5), (6), (7), (8), 9(B)
and (10) and 17 CFR 200.402(a)(3),
(a)(5), (a)(6), (a)(7), (a)(8), (a)(9)(ii) and
(a)(10), permit consideration of the
scheduled matters at the closed meeting.
Commissioner Stein, as duty officer,
voted to consider the items listed for the
closed meeting in closed session.
The subject matters of the closed
meeting will be:
Institution and settlement of
injunctive actions;
Institution and settlement of
administrative proceedings;
Resolution of litigation claims; and
Other matters relating to enforcement
proceedings.
At times, changes in Commission
priorities require alterations in the
scheduling of meeting items.
CONTACT PERSON FOR MORE INFORMATION:
For further information and to ascertain
what, if any, matters have been added,
deleted or postponed; please contact
Brent J. Fields from the Office of the
Secretary at (202) 551–5400.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.23
Eduardo A. Aleman,
Assistant Secretary.
SECURITIES AND EXCHANGE
COMMISSION
Dated: June 28, 2018.
Brent J. Fields,
Secretary.
[FR Doc. 2018–14392 Filed 6–29–18; 11:15 am]
BILLING CODE 8011–01–P
[Release No. 34–83532; File No. SR–
NYSEAMER–2018–32]
[FR Doc. 2018–14284 Filed 7–2–18; 8:45 am]
SECURITIES AND EXCHANGE
COMMISSION
Self-Regulatory Organizations; NYSE
American LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Change To Modify the NYSE American
Options Fee Schedule
Sunshine Act Meetings
June 28, 2018.
BILLING CODE 8011–01–P
TIME AND DATE:
2:00 p.m. on Thursday,
July 5, 2018.
Closed Commission Hearing,
Room 10800.
STATUS: This meeting will be closed to
the public.
MATTERS TO BE CONSIDERED:
Commissioners, Counsel to the
Commissioners, the Secretary to the
Commission, and recording secretaries
will attend the closed meeting. Certain
staff members who have an interest in
the matters also may be present.
PLACE:
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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 June 20,
2018, NYSE American LLC (the
‘‘Exchange’’ or ‘‘NYSE American’’) filed
with the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the selfregulatory organization. The
Commission is publishing this notice to
1 15
U.S.C.78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
23 17
CFR 200.30–3(a)(12), (59).
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Federal Register / Vol. 83, No. 128 / Tuesday, July 3, 2018 / Notices
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 American Options Fee Schedule
(‘‘Fee Schedule’’). The Exchange
proposes to implement the fee change
effective June 20, 2018.4. [sic] The
proposed 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.
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
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1. Purpose
The purpose of this filing is to modify
portions of the Fee Schedule, effective
June 20, 2018, by introducing defined
terms and pricing for new functionality
that facilitates executing Complex
Orders using the Complex CUBE
Auction mechanism (‘‘Complex CUBE’’
or ‘‘Auction’’).
On June 5, 2018, the Exchange
received approval to adopt the Complex
CUBE mechanism, which operates in a
manner substantially similar to the
existing Single-Leg CUBE Auction.5 The
Exchange proposes to adopt fees and
credits for the Complex CUBE Auction
so that such pricing will be in place
once the Complex CUBE Auction
mechanism is implemented on June 11,
2018.
In short, similar to the Single-Leg
CUBE Auction, the Complex CUBE
4 The Exchange originally filed to amend the Fee
Schedule on June 11, 2018 (SR–NYSEAmer–2018–
28) and withdrew such filing on June 20, 2018.
5 See Securities Exchange Act Release Nos. 83384
(June 5, 2018), 83 FR 27061 (June 11, 2018) (SR–
NYSEAMER–2018–05) (‘‘Complex CUBE Approval
Order’’); 82802 (March 2, 2018), 83 FR 9769 (March
7, 2018) (SR–NYSEAMER–2018–05) (‘‘Complex
CUBE Notice’’).
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Auction allows an ATP Holder to
guarantee the execution of an order it
represents as agent on behalf of a public
customer, broker dealer, or any other
entity, via the Complex CUBE Auction
(‘‘Complex CUBE Order’’). The ATP
Holder that submits the Complex CUBE
Order (the ‘‘Initiating Participant’’)
agrees to guarantee the execution of the
Complex CUBE Order by submitting a
contra-side order (‘‘Complex Contra
Order’’) representing principal interest
or interest it has solicited to trade with
the Complex CUBE Order. Although the
Complex Contra Order would guarantee
the execution of the Complex CUBE
Order, the purpose of the Auction is to
provide the Complex CUBE Order the
opportunity for price improvement.
Accordingly, the Exchange will notify
market participants when an Auction is
occurring and interested parties may
submit ‘‘RFR Responses’’ during the
auction.6
Key Terms and Definitions Related to
Complex CUBE
First, the Exchange proposes to add
(or modify) the following to the ‘‘Key
Terms and Definitions’’ section of the
Fee Schedule: 7
• A ‘‘Complex CUBE Auction’’ would
refer to the electronic crossing
mechanism that provides opportunities
for price improvement to Complex
CUBE Orders submitted to such
auctions.
• A ‘‘Single-Leg CUBE Auction’’
would refer to the electronic crossing
mechanism that provides opportunities
for price improvement to CUBE Orders
submitted to such auctions.
• A ‘‘CUBE Auction’’ would refer
collectively to the Single-Leg and
Complex CUBE Auctions available on
the Exchange. The Exchange will use
this reference in the Fee Schedule when
executions in (and resulting volume
from) such auctions are treated the
same.8
6 Complex Orders on the opposite side of the
market as Complex CUBE Order that arrive during
the Auction and are eligible to trade with the
Complex CUBE Order will be treated as RFR
Responses and may trade in the Auction. See
Complex CUBE Notice, id. [sic], 83 FR 9769, 9774–
5.
7 See proposed Fee Schedule, Key Terms and
Definitions.
8 See, e.g., Fee Schedule, Sections I.A., note 6
(exempting executions in CUBE Auctions from
Marketing Fees), I.C. (excluding CUBE Auction
volume from monthly threshold calculations for the
Market Maker Sliding Scale program), I.E.
(including CUBE Auction volume in monthly
threshold calculations for the American Customer
Engagement Program (‘‘ACE’’) Program, but
excluding CUBE Auction executions from eligibility
for enhanced credits under the ACE Program),
available here, https://www.nyse.com/publicdocs/
nyse/markets/american-options/NYSE_American_
Options_Fee_Schedule.pdf. In these instances, the
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• A ‘‘Complex CUBE Order’’ would
refer to an agency Complex Order that
is guaranteed an execution in the
Complex CUBE Auction by a Complex
Contra Order.
D In this regard, the Exchange
proposes to modify the current
definition of ‘‘CUBE Order’’ to specify
that such orders relate to Single-Leg
CUBE Auctions.
• A ‘‘Complex Contra Order’’ would
be either principal interest or solicited
interest an Initiating Participant is using
to guarantee the execution of a Complex
CUBE Order in the Complex CUBE
Auction.
D In this regard, the Exchange
proposes to modify the current
definition of ‘‘Contra Order’’ to specify
that such orders relate to Single-Leg
CUBE Auctions.
• To account for both Single-Leg and
Complex CUBE Auctions, the Exchange
proposes to modify ‘‘Initiating
Participant’’ to refer to ‘‘an ATP Holder
that submits the CUBE Order (or
Complex CUBE Order) and agrees to
guarantee the execution of such order by
submitting a Contra Order (or Complex
Contra Order) representing principal
interest or interest it has solicited to
trade with the CUBE Order (or Complex
CUBE Order).’’
Fees and Credits Related to Complex
CUBE
Section I.G. sets forth fees and credits
related to Single-Leg CUBE Auctions for
single-leg orders.9 The Exchange
proposes to implement a pricing
structure for the Complex CUBE
Auction that mirrors its pricing
structure for Single-Leg CUBE Auctions,
with differences described below.10
As noted above, there are three ways
to participate in a Complex CUBE
Auction: (i) As the Complex CUBE
Order; (ii) as the Complex Contra Order;
and (iii) as an RFR Response. The
Exchange proposes to charge for
participation in the Complex CUBE
Exchange believes it is reasonable to treat Complex
CUBE Volume in the same manner as Single-Leg
CUBE volume because all CUBE Auction volume is
subject to separate fees and credits as set forth in
Section I.G. of the Fee Schedule.
9 See id., Fee Schedule, Section I.G., CUBE
Auction Fees & Credits. The Exchange is not
modifying fees and credits related to the Single-Leg
CUBE Auction. The Exchange proposes to modify
Section I.G. to make clear that the current table
relates to pricing for executions in a ‘‘Single-Leg
CUBE Auction’’ and to add a new table that sets
forth pricing for executions in a ‘‘Complex CUBE
Auction.’’ See proposed Fee Schedule, Section I.G.,
CUBE Auction Fees & Credits.
10 See Securities Exchange Act Release No. 72469
(June 25, 2014), 79 FR 37380 (July 1, 2014) (SR–
NYSEMKT–2014–52) (adopting fees and credits
related to Single-Leg CUBE Auctions).
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Auction based on the following
schedule of fees: 11
*
*
*
*
*
Participant/penny or
non-penny
COMPLEX CUBE AUCTION
Participant/penny or
non-penny
Standard
option per
contract fee
or credit
Complex CUBE Order Fee
Customer—All issues ........
Complex CUBE Order Fee
Non-Customer—All issues
Complex Contra Order
Fee—Penny Pilot issues ...
This proposed pricing is the same as
the pricing for participation in the
Single-Leg CUBE Auction with the
Standard
option per
exception of the Complex Contra Order
contract fee
Fee—Non-Penny Pilot issues, which is
or credit
$0.02 more than what is charged for
such Contra Orders in the Single-Leg
CUBE Auction.
The Exchange is also proposing to
0.07
adopt credits to be paid to Initiating
0.00 Participants for each Complex CUBE
Order contract that does not trade with
0.50 the Complex Contra Order, which
credits increase if the Initiating
Participant achieves Tier 2, 3, 4, or 5 of
1.05
the ACE Program (or ‘‘Program’’), as set
forth below.12
COMPLEX CUBE AUCTION—Continued
$0.00
0.20
0.05
Complex Contra Order
Fee—Non-Penny Pilot
issues ................................
RFR Response Fee Customer—All issues ..............
RFR Response Fee NonCustomer—Penny Pilot .....
RFR Response Fee NonCustomer—Non-Penny
Pilot ...................................
INITIATING PARTICIPANT CREDIT
Base/ACE Tier
Penny pilot
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Base or Tier 1 ..........................................................................................................................................................
Tier 2 ........................................................................................................................................................................
Tier 3 ........................................................................................................................................................................
Tier 4 ........................................................................................................................................................................
Tier 5 ........................................................................................................................................................................
($0.20)
($0.23)
($0.26)
($0.28)
($0.35)
Non-penny
pilot
($0.50)
($0.55)
($0.60)
($0.65)
($0.75)
in the table above) are payable only for
each Complex CUBE Order contract that
does not trade with the Complex Contra
Order.
Thus, as proposed, ATP Holders who
do not participate in the ACE Program
or ACE Program participants who
achieve Tier 1 would be eligible for a
per contract credit of $0.20 or $0.50 for
Complex CUBE Orders in Penny Pilot
issues or non-Penny Pilot issues,
respectively. Further, the Exchange
proposes that ACE Program participants
that achieve at least Tier 2 would
qualify for higher Initiating Credits,
based on the Tier achieved, as outlined
in the table above. In addition, the
Exchange proposes to offer an
alternative (higher) credit to ATP
Holders that achieve Tier 5 and execute
more than 1% TCADV in monthly
Initiating Complex CUBE Orders (the
‘‘enhanced Tier 5 credits’’). The
enhanced Tier 5 credits would be
$(0.45) per contract for Penny Pilot
issues and ($0.90) per contract for nonPenny Pilot issues. The Exchange
believes enhanced Tier 5 credits would
encourage ATP Holders to direct
Complex Order volume to the Exchange,
specifically via the Complex CUBE
mechanism, which benefits all markets
participants, particularly those that
receive price improvement on their
Complex Orders.
The Exchange also proposes to offer
an additional $0.10 per contract rebate
to Initiating Participants in the ACE
Program (the ‘‘ACE Initiating Participant
Rebate’’ or ‘‘ACE Rebate’’). The ACE
Rebate would be available to ATP
Holders that achieve at least Tier 1 of
the Program and would be applied to
each of the first 1,000 Customer
contracts for each leg of a Complex
CUBE Order execution in a Complex
CUBE Auction. The proposed ACE
Rebate is payable in addition to any
other fees or credits accrued from the
Auction (e.g., in addition to the
Initiating Participant Credit for both
Penny and non-Penny Pilot issues).
Thus, as proposed, the maximum
potential Complex CUBE credit for
Penny Pilot issues is $0.55 ($0.10 ACE
Rebate + $0.45 Initiating Participant
Credit for Tier 5 ACE Program
Participants) and for non-Penny Pilot
issues is $1.00 ($0.10 ACE Rebate +
$0.90 Initiating Participant Credit for
Tier 5 ACE Program Participants). The
ACE Rebate is available regardless of
whether the Complex CUBE Order
trades with the Complex Contra Order
or RFR Response(s), whereas the
Initiating Participant Credits (set forth
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act,13 in general, and
furthers the objectives of Sections
6(b)(4) and (5) of the Act,14 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 proposal to add (or modify)
defined terms related to the Complex
CUBE are reasonable, equitable and not
unfairly discriminatory as these terms
would add clarity and transparency to
the Fee Schedule making it easier to
comprehend and navigate. The
Exchange notes that the new definitions
for Complex CUBE mirror the existing
concepts defined in the Fee Schedule
for Single-Leg CUBE and that the
proposed updates to some existing
Single-Leg CUBE definitions are meant
to differentiate each of the auctions.
11 See proposed Fee Schedule, Section I.G., CUBE
Auction Fees & Credits. The Exchange proposes to
modify the Single-Leg CUBE Auction table in
Section I.G. to replace references to ‘‘both Penny
and Non-Penny Pilot’’ with ‘‘all issues’’ in the table
setting forth fees and credits for Single-Leg CUBE
Auctions, which adds clarity, transparency and
internal consistency to the Fee Schedule. See id.
The Exchange likewise proposes to modify note 1
to Section I.G. of the Fee Schedule to make clear
that ‘‘Initiating Participant Credits are payable to
the Initiating Participant for each contract in a
Contra Order paired with a CUBE Order that does
not trade with the CUBE Order because it is
replaced in the auction,’’ which adds clarity,
transparency and internal consistency to the Fee
Schedule. See id.
12 See Fee Schedule, Section I.E., American
Customer Engagement (‘‘ACE’’) Program,’’ supra
note 7 [sic].
13 15 U.S.C. 78f(b).
14 15 U.S.C. 78f(b)(4) and (5).
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Similarly, the proposed modifications to
the current table in Section I.G., which
are designed to streamline the pricing
descriptions or to account for the
addition of Complex CUBE pricing,
would likewise add clarity and
transparency to the Fee Schedule
making it easier to comprehend and
navigate. Finally, the proposal to treat
Complex CUBE Auction executions/
volume in the same manner as Single`
Leg CUBE vis-a-vis other sections of the
Fee Schedule (see supra note 7 [sic]) are
reasonable, equitable and not unfairly
discriminatory because the Complex
CUBE Auction (like the Single-Leg
CUBE auction) will be subject to the
separate fees and credits as proposed
herein.
The Exchange believes that the
proposed fee structure for the Complex
CUBE Auction is reasonable, equitable,
and not unfairly discriminatory. The
proposed fee structure is reasonably
designed because it is intended to
incentivize market participants to send
Complex Order flow to the Exchange in
order to participate in the price
improvement mechanism in a manner
that enables the Exchange to improve its
overall competitiveness and strengthen
its market quality for all market
participants. Complex CUBE Auctions
and the corresponding fees are also
reasonably designed because the
proposed fees and credits are very
similar to ones the Exchange assesses
for Single-Leg CUBE Auctions, and are
within the range of fees and credits
assessed by other exchanges employing
similar fee structures for complex orders
submitted and executed in a price
improvement mechanism.15 Other
competing exchanges offer different fees
and credits for complex agency orders,
contra-side orders, and responders to an
auction in a manner similar to the
proposal.16 Other competing exchanges
also charge different rates for
15 See e.g., Nasdaq ISE, LLC (‘‘ISE’’) Schedule of
Fees, Section I, II, IV.B., available here, https://
ise.cchwallstreet.com/tools/Platform
Viewer.asp?selectednode=chp_1_1_
2&manual=%2Fcontents%2Fise%2Fise-fee%2F
(setting forth fees and credits related to its price
improvement auction or PIM); BOX Options
Exchange (‘‘BOX’’) Fee Schedule, available here,
https://boxoptions.com/assets/BOX-Fee-Scheduleas-of-April-2-2018.pdf (setting forth fees and credits
related to its price improvement auctions—PIP (for
single-leg orders) or COPIP (for complex orders);
MIAX Options fee schedule, available here, https://
www.miaxoptions.com/sites/default/files/fee_
schedule-files/MIAX_Options_Fee_Schedule_
03012018B.pdf (setting forth fees and credits related
to its price improvement auctions—PRIME (for
single-leg orders) or cPRIME (for complex orders);
Cboe fee schedule, available here, https://
www.cboe.com/publish/feeschedule/CBOEFee
Schedule.pdf (setting forth fees and credits related
to its price improvement auction or AIM).
16 See id.
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transactions in their complex price
improvement mechanisms for
Customers versus their non-Customers
in a manner similar to the proposal.17
The Complex CUBE transaction fees
applied are reasonable, equitable, and
not unfairly discriminatory because they
would apply equally amongst all
Customer orders in each category of
Complex CUBE Auction participation
and would also apply equally amongst
all non-Customer orders in each
category of Complex CUBE. Regarding
Customers, all similarly situated orders
for Customers are subject to the same
transaction fee schedule and the
Exchange believes that is equitable and
not unfairly discriminatory that
Customers be charged lower fees in
Complex CUBE Auctions than other
market participants. The exchanges in
general have historically aimed to
improve markets for investors and
develop various features within market
structure for customer benefit.18 The
Exchange assesses Customers lower or
no transactions fees because Customer
order flow enhances liquidity on the
Exchange for the benefit of all market
participants. Customer liquidity benefits
all market participants by providing
more trading opportunities, which
attracts Market Makers. An increase in
the activity of these market participants
in turn facilitates tighter spreads, which
may cause an additional corresponding
increase in order flow from other market
participants.
Regarding Non-Customers, all
similarly situated orders for market
participants that are not Customers are
subject to the same transaction fees and
access to the Exchange is offered on
terms that are not unfairly
discriminatory.19 Moreover, assessing a
higher transaction fee on Non-Customer
interest than on Customer interests for
Complex CUBE Order transactions is
reasonable, equitable, and not unfairly
discriminatory because these types of
market participants are more
17 See id. For example, on ISE, fees for trades in
Select and Non-Select Symbols are $0.00 per
contract for Priority Customer Crossing Orders and
$0.20 per contract for non-Priority Customer
Crossing Orders. Similarly, BOX charges $0.00 per
contract for Customer COPIP orders, but charges
$0.05 per contract for COPIP orders submitted on
behalf of Professional Customers, Broker Dealers or
Market.
18 The Exchange notes that, as discussed below,
certain Non-Customers may be eligible to enhanced
Initiating Participant Credits based on volume
executed on the Exchange, which would offset their
transaction costs.
19 For example, the Exchange offers Customers
preferential rates for other trades executed on the
Exchange such as for Qualified Contingent Cross
(‘‘QCC’’) orders. See, e.g., Fee Schedule, Section
I.F., supra note 7 [sic] (assessing $0.00 per contract
for Customer QCC orders and $0.20 per contract for
non-Customer QCC orders).
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sophisticated and have higher levels of
order flow activity and system usage,
which system usage better equips NonCustomers to both interact with
Auctions and to react to market changes.
This level of trading activity draws on
a greater amount of system resources
than that of Customers, and thus,
generates greater ongoing operational
costs. Further, the Exchange believes
that charging all market participants
that are not Customers the same fee for
all transactions is not unfairly
discriminatory as the fees will apply to
all these market participants equally.
The Exchange likewise believes that it
is reasonable for Complex CUBE Orders
and Complex Contra Orders to be
assessed lower fees than those providing
RFR Responses. Complex Contra Orders
guarantee the Complex CUBE Order,
and are subject to market risk during the
time period that the Complex CUBE
Order is exposed to other market
participants. The Exchange believes that
the market participants entering the
Complex Contra Order plays a critical
role in the Auction as their willingness
to guarantee the Complex CUBE Order
is the keystone to providing that CUBE
Order the opportunity for price
improvement. The Exchange believes
that it is equitable and not unfairly
discriminatory to assess fees to
responders to the Complex CUBE
Auction and credit another participant
to provide incentive for participants to
submit order flow to Complex CUBE
Auctions (as discussed further below).
The Exchange believes that it is
appropriate to provide incentives to
market participants to direct orders to
participate in Complex CUBE Auction.
Further, the Exchange believes that the
proposed transaction fees for
responding to the Auction would not
deter market participants from
providing price improvement.
Similarly, the Exchange believes that
the proposed changes to CUBE Auction
credits are reasonable, equitable and not
unfairly discriminatory. First, as
proposed, all Initiating Participants
would receive a base per contract credit
for each Complex CUBE Order contract
that does not trade with the Complex
Contra Order in a Complex CUBE
Auction, regardless of whether that
Initiating Participant qualifies for the
ACE Program. Thus, the proposed
credits are not applied in a
discriminatory manner. The proposed
credits of $0.20 per contract for Penny
Pilot issues and $0.50 per contract for
non-Penny Pilot issues are consistent
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with ‘‘break up’’ credits offered on other
exchanges.20
The Exchange also believes the
proposal to provide ATP Holders the
opportunity to achieve greater Initiating
Participant Credits, based on Tier, if
those ATP Holders achieve at least Tier
2 of the ACE Program is likewise
reasonable, equitable and not unfairly
discriminatory. The ACE Program is
based on the amount of Customer
business transacted on the Exchange
and offers ATP Holders an enhanced per
contract credit on transaction fees for
Customer volumes above certain
minimum thresholds (established in
Tiers 1–5). Thus, the Exchange believes
this proposed change is reasonably
designed because it would incentivize
providers of Customer order flow to
direct that order flow to the Exchange to
receive greater Complex CUBE credits in
a manner that enables the Exchange to
improve its overall competitiveness and
strengthen its market quality for all
market participants. The proposed
(tiered) rebate is fair, equitable, and not
unreasonably discriminatory because it
would apply equally to all Customer
orders submitted as a Complex CUBE
Order. The Exchange also notes that the
concept of offering a tiered rebate in
connection with a price improvement
auction is not new or novel.21 Finally,
the Exchange believes this proposed
tiered rebate is reasonable because it
would attract more volume and
liquidity to the Exchange generally, and
to Complex CUBE Auctions specifically,
and would therefore benefit all market
participants (including those that do not
participate in the ACE Program) through
increased opportunities to trade at
potentially improved prices as well as
enhancing price discovery. The
Exchange believes enhanced Tier 5
credits would encourage ATP Holders to
direct Complex Order volume to the
Exchange, specifically via the Complex
CUBE mechanism, which benefits all
markets participants, particularly those
that receive price improvement on their
Complex Orders.
The Exchange believes that the
proposed ACE Initiating Participant
credit is likewise reasonable, equitable
and not unfairly discriminatory.
Specifically, the ACE Initiating
Participant Rebate is based on the
amount of business transacted on the
Exchange and is designed to attract
more volume and liquidity to the
20 For example, the ISE pays a volume-based
Complex PIM Break Up Rebate ranging from a base
rate of $0.26 per contract in Select Symbols to $0.85
in the highest tier for contracts submitted to a PIM
that do not trade with their contra order. See ISE
fee schedule, supra note 15.
21 See id.
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Exchange generally, and to CUBE
Auctions specifically, which will
benefit all market participants
(including those that do not participate
in the ACE Program) through increased
opportunities to trade at potentially
improved prices as well as enhancing
price discovery. Furthermore, the
proposed ACE Rebate is reasonably
designed and not unfairly
discriminatory because it is available
regardless of the parties that trade with
the Complex CUBE Order (i.e., whether
the CUBE Order trades with the
Complex Contra Order or otherwise).
The Exchange notes that the proposal to
offer an additional incentive to
participate in the Complex CUBE
Auction to those ATP Holders that have
achieved certain monthly volume
thresholds is also not new or novel.22
Nor it is novel that the Exchange caps
the amount of the potential rebate at the
first 1,000 contracts per leg of a
Complex CUBE Order, as the Exchange
currently caps the potential rebate in the
Single-Leg CUBE at the first 5,000
Customer contracts of a CUBE Order.23
The Exchange notes that although the
proposed ACE Rebate applies solely to
Customer orders, it is nonetheless
equitable and not unfairly
discriminatory because it would
enhance the incentives to ATP Holders
to transact Customer orders on the
Exchange and an increase in Customer
order flow would bring greater volume
and liquidity to the Exchange. Increased
volume to the Exchange benefits all
market participants by providing more
trading opportunities and tighter
spreads, even to those market
participants that do not participate in
the ACE Program.
The Exchange believes that it is
reasonable to assess lower transaction
and credit rates to Penny Pilot option
classes than non-Penny Pilot option
classes. The Exchange believes that
options that trade at these wider spreads
merit offering greater inducement for
market participants. In particular,
within the Complex CUBE Auction,
option classes that typically trade in
minimum increments of $0.05 or $0.10
provide greater opportunity for market
participants to offer price improvement.
As such, the Exchange believes that the
opportunity for additional price
improvement provided by these wider
spreads again merits offering greater
incentive for market participants to
increase the potential price
improvement for customer orders in
these transactions.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
In accordance with Section 6(b)(8) of
the Act,24 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 change would enhance the
competiveness of the Exchange relative
to other exchanges that offer their own
electronic crossing mechanisms,
including for complex orders.25 The
Exchange believes that the proposed
fees and rebates for participation in the
Complex CUBE Auction would not have
an impact on intra-market competition
based on the total cost for participants
to transact in such order types versus
the cost for participants to transact in
the other order types available for
trading on the Exchange.
As noted above, the Exchange
believes that the proposed pricing for
the Complex CUBE Auction is
comparable to its own pricing for
Single-Leg CUBE and that of other
exchanges offering similar electronic
price improvement mechanisms for
complex orders.26 The Exchange
believes that, based on experience with
electronic price improvement crossing
mechanisms on other markets, market
participants understand that the priceimproving benefits offered by the
Complex CUBE Auction justify the
transaction costs associated with the
Auction. To the extent that there is a
difference between non-Complex CUBE
Auction transactions and Complex
CUBE Auction transactions, the
Exchange does not believe this
24 15
U.S.C. 78f(b)(8).
supra note 14. See also Chicago Board
Options Exchange, Inc. (‘‘CBOE’’) Rule 6.74A—
Automated Improvement Mechanism (‘‘AIM’’);
Nasdaq PHLX, LLC (‘‘PHLX’’) Rule 1087—Price
Improvement XL (‘‘PIXL’’); BOX Options Exchange
LLC (‘‘BOX’’) Rule 7245—Complex Order Price
Improvement Period (‘‘COPIP’’); Nasdaq ISE, LLC
(‘‘ISE’’) Rule 723—Price Improvement Mechanism
(‘‘PIM’’); Miami International Securities Exchange,
LLC (‘‘MIAX’’) Rule 515A, Interpretation and
Policies .12—Price Improvement Mechanism
(‘‘PRIME’’).
26 See Fee Schedule, Section I.G., CUBE Auction
Fees & Credits, supra note 8 and supra note 16
(citing the fee schedules of other exchanges that set
forth pricing for price improvement auctions).
25 See
22 For example, MIAX offers an additional per
contract rebate on certain agency orders executed in
PRIME, which provides for a maximum credit of
$0.12 per contract, based on a member achieving
certain monthly volume thresholds. See MIAX fee
schedule, Priority Customer Rebate Program, supra
note 15.
23 Similar to the Exchange, Cboe also caps the
number of contracts submitted to its price
improvement auction that are eligible for additional
volume rebates. Cboe’s cap is at 1,000 contracts per
order for simple executions and at 1,000 contracts
per leg for complex executions. See Cboe fee
schedule, Volume Incentive Program, supra note
15.
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difference would cause participants to
refrain from responding to Complex
CUBE Auctions. The Exchange expects
to see robust competition within the
Complex CUBE Auction to trade against
the Complex CUBE Order.
The Exchange notes that it operates in
a highly competitive market in which
market participants can readily favor
competing venues if they deem fee
levels at a particular venue to be
excessive. In such an environment, the
Exchange must continually adjust its
fees to remain competitive with other
exchanges and to attract order flow to
the Exchange. The Exchange believes
that the proposed rule change reflects
this competitive environment because it
establishes a fee structure in a manner
that encourages market participants to
direct their order flow, to provide
liquidity, and to attract additional
transaction volume to the Exchange.
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) 27 of the Act and
subparagraph (f)(2) of Rule 19b–4 28
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) 29 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
sradovich on DSK3GMQ082PROD with NOTICES
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–
NYSEAMER–2018–32 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–NYSEAMER–2018–32. 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 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.
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–NYSEAMER–2018–32 and
should be submitted on or before July
24, 2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.30
Eduardo A. Aleman,
Assistant Secretary.
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Extend the Pilot
Period for the Exchange’s Retail
Liquidity Program Until December 31,
2018
June 28, 2018.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on June 15,
2018, NYSE Arca, Inc. (the ‘‘Exchange’’
or ‘‘NYSE Arca’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I and
II below, which Items have been
prepared by the Exchange. 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 extend the
pilot period for the Exchange’s Retail
Liquidity Program (the ‘‘Retail Liquidity
Program’’ or the ‘‘Program’’), which is
currently scheduled to expire on June
30, 2018, until December 31, 2018. 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.
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.
[FR Doc. 2018–14293 Filed 7–2–18; 8:45 am]
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(2).
29 15 U.S.C. 78s(b)(2)(B).
1 15
28 17
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]]>Agencies
[Federal Register Volume 83, Number 128 (Tuesday, July 3, 2018)]
[Notices]
[Pages 31205-31210]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-14293]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-83532; File No. SR-NYSEAMER-2018-32]
Self-Regulatory Organizations; NYSE American LLC; Notice of
Filing and Immediate Effectiveness of Proposed Change To Modify the
NYSE American Options Fee Schedule
June 28, 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 June 20, 2018, NYSE American LLC (the ``Exchange'' or
``NYSE American'') 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
[[Page 31206]]
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 Substance
of the Proposed Rule Change
The Exchange proposes to modify the NYSE American Options Fee
Schedule (``Fee Schedule''). The Exchange proposes to implement the fee
change effective June 20, 2018.\4\. [sic] The proposed 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
June 11, 2018 (SR-NYSEAmer-2018-28) and withdrew such filing on June
20, 2018.
---------------------------------------------------------------------------
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 portions of the Fee
Schedule, effective June 20, 2018, by introducing defined terms and
pricing for new functionality that facilitates executing Complex Orders
using the Complex CUBE Auction mechanism (``Complex CUBE'' or
``Auction'').
On June 5, 2018, the Exchange received approval to adopt the
Complex CUBE mechanism, which operates in a manner substantially
similar to the existing Single-Leg CUBE Auction.\5\ The Exchange
proposes to adopt fees and credits for the Complex CUBE Auction so that
such pricing will be in place once the Complex CUBE Auction mechanism
is implemented on June 11, 2018.
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release Nos. 83384 (June 5,
2018), 83 FR 27061 (June 11, 2018) (SR-NYSEAMER-2018-05) (``Complex
CUBE Approval Order''); 82802 (March 2, 2018), 83 FR 9769 (March 7,
2018) (SR-NYSEAMER-2018-05) (``Complex CUBE Notice'').
---------------------------------------------------------------------------
In short, similar to the Single-Leg CUBE Auction, the Complex CUBE
Auction allows an ATP Holder to guarantee the execution of an order it
represents as agent on behalf of a public customer, broker dealer, or
any other entity, via the Complex CUBE Auction (``Complex CUBE
Order''). The ATP Holder that submits the Complex CUBE Order (the
``Initiating Participant'') agrees to guarantee the execution of the
Complex CUBE Order by submitting a contra-side order (``Complex Contra
Order'') representing principal interest or interest it has solicited
to trade with the Complex CUBE Order. Although the Complex Contra Order
would guarantee the execution of the Complex CUBE Order, the purpose of
the Auction is to provide the Complex CUBE Order the opportunity for
price improvement. Accordingly, the Exchange will notify market
participants when an Auction is occurring and interested parties may
submit ``RFR Responses'' during the auction.\6\
---------------------------------------------------------------------------
\6\ Complex Orders on the opposite side of the market as Complex
CUBE Order that arrive during the Auction and are eligible to trade
with the Complex CUBE Order will be treated as RFR Responses and may
trade in the Auction. See Complex CUBE Notice, id. [sic], 83 FR
9769, 9774-5.
---------------------------------------------------------------------------
Key Terms and Definitions Related to Complex CUBE
First, the Exchange proposes to add (or modify) the following to
the ``Key Terms and Definitions'' section of the Fee Schedule: \7\
---------------------------------------------------------------------------
\7\ See proposed Fee Schedule, Key Terms and Definitions.
---------------------------------------------------------------------------
A ``Complex CUBE Auction'' would refer to the electronic
crossing mechanism that provides opportunities for price improvement to
Complex CUBE Orders submitted to such auctions.
A ``Single-Leg CUBE Auction'' would refer to the
electronic crossing mechanism that provides opportunities for price
improvement to CUBE Orders submitted to such auctions.
A ``CUBE Auction'' would refer collectively to the Single-
Leg and Complex CUBE Auctions available on the Exchange. The Exchange
will use this reference in the Fee Schedule when executions in (and
resulting volume from) such auctions are treated the same.\8\
---------------------------------------------------------------------------
\8\ See, e.g., Fee Schedule, Sections I.A., note 6 (exempting
executions in CUBE Auctions from Marketing Fees), I.C. (excluding
CUBE Auction volume from monthly threshold calculations for the
Market Maker Sliding Scale program), I.E. (including CUBE Auction
volume in monthly threshold calculations for the American Customer
Engagement Program (``ACE'') Program, but excluding CUBE Auction
executions from eligibility for enhanced credits under the ACE
Program), available here, https://www.nyse.com/publicdocs/nyse/markets/american-options/NYSE_American_Options_Fee_Schedule.pdf. In
these instances, the Exchange believes it is reasonable to treat
Complex CUBE Volume in the same manner as Single-Leg CUBE volume
because all CUBE Auction volume is subject to separate fees and
credits as set forth in Section I.G. of the Fee Schedule.
---------------------------------------------------------------------------
A ``Complex CUBE Order'' would refer to an agency Complex
Order that is guaranteed an execution in the Complex CUBE Auction by a
Complex Contra Order.
[ssquf] In this regard, the Exchange proposes to modify the current
definition of ``CUBE Order'' to specify that such orders relate to
Single-Leg CUBE Auctions.
A ``Complex Contra Order'' would be either principal
interest or solicited interest an Initiating Participant is using to
guarantee the execution of a Complex CUBE Order in the Complex CUBE
Auction.
[ssquf] In this regard, the Exchange proposes to modify the current
definition of ``Contra Order'' to specify that such orders relate to
Single-Leg CUBE Auctions.
To account for both Single-Leg and Complex CUBE Auctions,
the Exchange proposes to modify ``Initiating Participant'' to refer to
``an ATP Holder that submits the CUBE Order (or Complex CUBE Order) and
agrees to guarantee the execution of such order by submitting a Contra
Order (or Complex Contra Order) representing principal interest or
interest it has solicited to trade with the CUBE Order (or Complex CUBE
Order).''
Fees and Credits Related to Complex CUBE
Section I.G. sets forth fees and credits related to Single-Leg CUBE
Auctions for single-leg orders.\9\ The Exchange proposes to implement a
pricing structure for the Complex CUBE Auction that mirrors its pricing
structure for Single-Leg CUBE Auctions, with differences described
below.\10\
---------------------------------------------------------------------------
\9\ See id., Fee Schedule, Section I.G., CUBE Auction Fees &
Credits. The Exchange is not modifying fees and credits related to
the Single-Leg CUBE Auction. The Exchange proposes to modify Section
I.G. to make clear that the current table relates to pricing for
executions in a ``Single-Leg CUBE Auction'' and to add a new table
that sets forth pricing for executions in a ``Complex CUBE
Auction.'' See proposed Fee Schedule, Section I.G., CUBE Auction
Fees & Credits.
\10\ See Securities Exchange Act Release No. 72469 (June 25,
2014), 79 FR 37380 (July 1, 2014) (SR-NYSEMKT-2014-52) (adopting
fees and credits related to Single-Leg CUBE Auctions).
---------------------------------------------------------------------------
As noted above, there are three ways to participate in a Complex
CUBE Auction: (i) As the Complex CUBE Order; (ii) as the Complex Contra
Order; and (iii) as an RFR Response. The Exchange proposes to charge
for participation in the Complex CUBE
[[Page 31207]]
Auction based on the following schedule of fees: \11\
---------------------------------------------------------------------------
\11\ See proposed Fee Schedule, Section I.G., CUBE Auction Fees
& Credits. The Exchange proposes to modify the Single-Leg CUBE
Auction table in Section I.G. to replace references to ``both Penny
and Non-Penny Pilot'' with ``all issues'' in the table setting forth
fees and credits for Single-Leg CUBE Auctions, which adds clarity,
transparency and internal consistency to the Fee Schedule. See id.
The Exchange likewise proposes to modify note 1 to Section I.G. of
the Fee Schedule to make clear that ``Initiating Participant Credits
are payable to the Initiating Participant for each contract in a
Contra Order paired with a CUBE Order that does not trade with the
CUBE Order because it is replaced in the auction,'' which adds
clarity, transparency and internal consistency to the Fee Schedule.
See id.
---------------------------------------------------------------------------
* * * * *
Complex CUBE Auction
------------------------------------------------------------------------
Standard
option per
Participant/penny or non-penny contract fee
or credit
------------------------------------------------------------------------
Complex CUBE Order Fee Customer--All issues............. $0.00
Complex CUBE Order Fee Non-Customer--All issues......... 0.20
Complex Contra Order Fee--Penny Pilot issues............ 0.05
Complex Contra Order Fee--Non-Penny Pilot issues........ 0.07
RFR Response Fee Customer--All issues................... 0.00
RFR Response Fee Non-Customer--Penny Pilot.............. 0.50
RFR Response Fee Non-Customer--Non-Penny Pilot.......... 1.05
------------------------------------------------------------------------
This proposed pricing is the same as the pricing for participation
in the Single-Leg CUBE Auction with the exception of the Complex Contra
Order Fee--Non-Penny Pilot issues, which is $0.02 more than what is
charged for such Contra Orders in the Single-Leg CUBE Auction.
The Exchange is also proposing to adopt credits to be paid to
Initiating Participants for each Complex CUBE Order contract that does
not trade with the Complex Contra Order, which credits increase if the
Initiating Participant achieves Tier 2, 3, 4, or 5 of the ACE Program
(or ``Program''), as set forth below.\12\
---------------------------------------------------------------------------
\12\ See Fee Schedule, Section I.E., American Customer
Engagement (``ACE'') Program,'' supra note 7 [sic].
Initiating Participant Credit
------------------------------------------------------------------------
Non-penny
Base/ACE Tier Penny pilot pilot
------------------------------------------------------------------------
Base or Tier 1.......................... ($0.20) ($0.50)
Tier 2.................................. ($0.23) ($0.55)
Tier 3.................................. ($0.26) ($0.60)
Tier 4.................................. ($0.28) ($0.65)
Tier 5.................................. ($0.35) ($0.75)
------------------------------------------------------------------------
Thus, as proposed, ATP Holders who do not participate in the ACE
Program or ACE Program participants who achieve Tier 1 would be
eligible for a per contract credit of $0.20 or $0.50 for Complex CUBE
Orders in Penny Pilot issues or non-Penny Pilot issues, respectively.
Further, the Exchange proposes that ACE Program participants that
achieve at least Tier 2 would qualify for higher Initiating Credits,
based on the Tier achieved, as outlined in the table above. In
addition, the Exchange proposes to offer an alternative (higher) credit
to ATP Holders that achieve Tier 5 and execute more than 1% TCADV in
monthly Initiating Complex CUBE Orders (the ``enhanced Tier 5
credits''). The enhanced Tier 5 credits would be $(0.45) per contract
for Penny Pilot issues and ($0.90) per contract for non-Penny Pilot
issues. The Exchange believes enhanced Tier 5 credits would encourage
ATP Holders to direct Complex Order volume to the Exchange,
specifically via the Complex CUBE mechanism, which benefits all markets
participants, particularly those that receive price improvement on
their Complex Orders.
The Exchange also proposes to offer an additional $0.10 per
contract rebate to Initiating Participants in the ACE Program (the
``ACE Initiating Participant Rebate'' or ``ACE Rebate''). The ACE
Rebate would be available to ATP Holders that achieve at least Tier 1
of the Program and would be applied to each of the first 1,000 Customer
contracts for each leg of a Complex CUBE Order execution in a Complex
CUBE Auction. The proposed ACE Rebate is payable in addition to any
other fees or credits accrued from the Auction (e.g., in addition to
the Initiating Participant Credit for both Penny and non-Penny Pilot
issues). Thus, as proposed, the maximum potential Complex CUBE credit
for Penny Pilot issues is $0.55 ($0.10 ACE Rebate + $0.45 Initiating
Participant Credit for Tier 5 ACE Program Participants) and for non-
Penny Pilot issues is $1.00 ($0.10 ACE Rebate + $0.90 Initiating
Participant Credit for Tier 5 ACE Program Participants). The ACE Rebate
is available regardless of whether the Complex CUBE Order trades with
the Complex Contra Order or RFR Response(s), whereas the Initiating
Participant Credits (set forth in the table above) are payable only for
each Complex CUBE Order contract that does not trade with the Complex
Contra Order.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\13\ in general, and furthers the
objectives of Sections 6(b)(4) and (5) of the Act,\14\ 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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\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(4) and (5).
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The proposal to add (or modify) defined terms related to the
Complex CUBE are reasonable, equitable and not unfairly discriminatory
as these terms would add clarity and transparency to the Fee Schedule
making it easier to comprehend and navigate. The Exchange notes that
the new definitions for Complex CUBE mirror the existing concepts
defined in the Fee Schedule for Single-Leg CUBE and that the proposed
updates to some existing Single-Leg CUBE definitions are meant to
differentiate each of the auctions.
[[Page 31208]]
Similarly, the proposed modifications to the current table in Section
I.G., which are designed to streamline the pricing descriptions or to
account for the addition of Complex CUBE pricing, would likewise add
clarity and transparency to the Fee Schedule making it easier to
comprehend and navigate. Finally, the proposal to treat Complex CUBE
Auction executions/volume in the same manner as Single-Leg CUBE vis-
[agrave]-vis other sections of the Fee Schedule (see supra note 7
[sic]) are reasonable, equitable and not unfairly discriminatory
because the Complex CUBE Auction (like the Single-Leg CUBE auction)
will be subject to the separate fees and credits as proposed herein.
The Exchange believes that the proposed fee structure for the
Complex CUBE Auction is reasonable, equitable, and not unfairly
discriminatory. The proposed fee structure is reasonably designed
because it is intended to incentivize market participants to send
Complex Order flow to the Exchange in order to participate in the price
improvement mechanism in a manner that enables the Exchange to improve
its overall competitiveness and strengthen its market quality for all
market participants. Complex CUBE Auctions and the corresponding fees
are also reasonably designed because the proposed fees and credits are
very similar to ones the Exchange assesses for Single-Leg CUBE
Auctions, and are within the range of fees and credits assessed by
other exchanges employing similar fee structures for complex orders
submitted and executed in a price improvement mechanism.\15\ Other
competing exchanges offer different fees and credits for complex agency
orders, contra-side orders, and responders to an auction in a manner
similar to the proposal.\16\ Other competing exchanges also charge
different rates for transactions in their complex price improvement
mechanisms for Customers versus their non-Customers in a manner similar
to the proposal.\17\
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\15\ See e.g., Nasdaq ISE, LLC (``ISE'') Schedule of Fees,
Section I, II, IV.B., available here, https://ise.cchwallstreet.com/tools/PlatformViewer.asp?selectednode=chp_1_1_2&manual=%2Fcontents%2Fise%2Fise-fee%2F (setting forth fees and credits related to its price
improvement auction or PIM); BOX Options Exchange (``BOX'') Fee
Schedule, available here, https://boxoptions.com/assets/BOX-Fee-Schedule-as-of-April-2-2018.pdf (setting forth fees and credits
related to its price improvement auctions--PIP (for single-leg
orders) or COPIP (for complex orders); MIAX Options fee schedule,
available here, https://www.miaxoptions.com/sites/default/files/fee_schedule-files/MIAX_Options_Fee_Schedule_03012018B.pdf (setting
forth fees and credits related to its price improvement auctions--
PRIME (for single-leg orders) or cPRIME (for complex orders); Cboe
fee schedule, available here, https://www.cboe.com/publish/feeschedule/CBOEFeeSchedule.pdf (setting forth fees and credits
related to its price improvement auction or AIM).
\16\ See id.
\17\ See id. For example, on ISE, fees for trades in Select and
Non-Select Symbols are $0.00 per contract for Priority Customer
Crossing Orders and $0.20 per contract for non-Priority Customer
Crossing Orders. Similarly, BOX charges $0.00 per contract for
Customer COPIP orders, but charges $0.05 per contract for COPIP
orders submitted on behalf of Professional Customers, Broker Dealers
or Market.
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The Complex CUBE transaction fees applied are reasonable,
equitable, and not unfairly discriminatory because they would apply
equally amongst all Customer orders in each category of Complex CUBE
Auction participation and would also apply equally amongst all non-
Customer orders in each category of Complex CUBE. Regarding Customers,
all similarly situated orders for Customers are subject to the same
transaction fee schedule and the Exchange believes that is equitable
and not unfairly discriminatory that Customers be charged lower fees in
Complex CUBE Auctions than other market participants. The exchanges in
general have historically aimed to improve markets for investors and
develop various features within market structure for customer
benefit.\18\ The Exchange assesses Customers lower or no transactions
fees because Customer order flow enhances liquidity on the Exchange for
the benefit of all market participants. Customer liquidity benefits all
market participants by providing more trading opportunities, which
attracts Market Makers. An increase in the activity of these market
participants in turn facilitates tighter spreads, which may cause an
additional corresponding increase in order flow from other market
participants.
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\18\ The Exchange notes that, as discussed below, certain Non-
Customers may be eligible to enhanced Initiating Participant Credits
based on volume executed on the Exchange, which would offset their
transaction costs.
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Regarding Non-Customers, all similarly situated orders for market
participants that are not Customers are subject to the same transaction
fees and access to the Exchange is offered on terms that are not
unfairly discriminatory.\19\ Moreover, assessing a higher transaction
fee on Non-Customer interest than on Customer interests for Complex
CUBE Order transactions is reasonable, equitable, and not unfairly
discriminatory because these types of market participants are more
sophisticated and have higher levels of order flow activity and system
usage, which system usage better equips Non-Customers to both interact
with Auctions and to react to market changes. This level of trading
activity draws on a greater amount of system resources than that of
Customers, and thus, generates greater ongoing operational costs.
Further, the Exchange believes that charging all market participants
that are not Customers the same fee for all transactions is not
unfairly discriminatory as the fees will apply to all these market
participants equally.
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\19\ For example, the Exchange offers Customers preferential
rates for other trades executed on the Exchange such as for
Qualified Contingent Cross (``QCC'') orders. See, e.g., Fee
Schedule, Section I.F., supra note 7 [sic] (assessing $0.00 per
contract for Customer QCC orders and $0.20 per contract for non-
Customer QCC orders).
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The Exchange likewise believes that it is reasonable for Complex
CUBE Orders and Complex Contra Orders to be assessed lower fees than
those providing RFR Responses. Complex Contra Orders guarantee the
Complex CUBE Order, and are subject to market risk during the time
period that the Complex CUBE Order is exposed to other market
participants. The Exchange believes that the market participants
entering the Complex Contra Order plays a critical role in the Auction
as their willingness to guarantee the Complex CUBE Order is the
keystone to providing that CUBE Order the opportunity for price
improvement. The Exchange believes that it is equitable and not
unfairly discriminatory to assess fees to responders to the Complex
CUBE Auction and credit another participant to provide incentive for
participants to submit order flow to Complex CUBE Auctions (as
discussed further below). The Exchange believes that it is appropriate
to provide incentives to market participants to direct orders to
participate in Complex CUBE Auction. Further, the Exchange believes
that the proposed transaction fees for responding to the Auction would
not deter market participants from providing price improvement.
Similarly, the Exchange believes that the proposed changes to CUBE
Auction credits are reasonable, equitable and not unfairly
discriminatory. First, as proposed, all Initiating Participants would
receive a base per contract credit for each Complex CUBE Order contract
that does not trade with the Complex Contra Order in a Complex CUBE
Auction, regardless of whether that Initiating Participant qualifies
for the ACE Program. Thus, the proposed credits are not applied in a
discriminatory manner. The proposed credits of $0.20 per contract for
Penny Pilot issues and $0.50 per contract for non-Penny Pilot issues
are consistent
[[Page 31209]]
with ``break up'' credits offered on other exchanges.\20\
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\20\ For example, the ISE pays a volume-based Complex PIM Break
Up Rebate ranging from a base rate of $0.26 per contract in Select
Symbols to $0.85 in the highest tier for contracts submitted to a
PIM that do not trade with their contra order. See ISE fee schedule,
supra note 15.
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The Exchange also believes the proposal to provide ATP Holders the
opportunity to achieve greater Initiating Participant Credits, based on
Tier, if those ATP Holders achieve at least Tier 2 of the ACE Program
is likewise reasonable, equitable and not unfairly discriminatory. The
ACE Program is based on the amount of Customer business transacted on
the Exchange and offers ATP Holders an enhanced per contract credit on
transaction fees for Customer volumes above certain minimum thresholds
(established in Tiers 1-5). Thus, the Exchange believes this proposed
change is reasonably designed because it would incentivize providers of
Customer order flow to direct that order flow to the Exchange to
receive greater Complex CUBE credits in a manner that enables the
Exchange to improve its overall competitiveness and strengthen its
market quality for all market participants. The proposed (tiered)
rebate is fair, equitable, and not unreasonably discriminatory because
it would apply equally to all Customer orders submitted as a Complex
CUBE Order. The Exchange also notes that the concept of offering a
tiered rebate in connection with a price improvement auction is not new
or novel.\21\ Finally, the Exchange believes this proposed tiered
rebate is reasonable because it would attract more volume and liquidity
to the Exchange generally, and to Complex CUBE Auctions specifically,
and would therefore benefit all market participants (including those
that do not participate in the ACE Program) through increased
opportunities to trade at potentially improved prices as well as
enhancing price discovery. The Exchange believes enhanced Tier 5
credits would encourage ATP Holders to direct Complex Order volume to
the Exchange, specifically via the Complex CUBE mechanism, which
benefits all markets participants, particularly those that receive
price improvement on their Complex Orders.
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\21\ See id.
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The Exchange believes that the proposed ACE Initiating Participant
credit is likewise reasonable, equitable and not unfairly
discriminatory. Specifically, the ACE Initiating Participant Rebate is
based on the amount of business transacted on the Exchange and is
designed to attract more volume and liquidity to the Exchange
generally, and to CUBE Auctions specifically, which will benefit all
market participants (including those that do not participate in the ACE
Program) through increased opportunities to trade at potentially
improved prices as well as enhancing price discovery. Furthermore, the
proposed ACE Rebate is reasonably designed and not unfairly
discriminatory because it is available regardless of the parties that
trade with the Complex CUBE Order (i.e., whether the CUBE Order trades
with the Complex Contra Order or otherwise). The Exchange notes that
the proposal to offer an additional incentive to participate in the
Complex CUBE Auction to those ATP Holders that have achieved certain
monthly volume thresholds is also not new or novel.\22\ Nor it is novel
that the Exchange caps the amount of the potential rebate at the first
1,000 contracts per leg of a Complex CUBE Order, as the Exchange
currently caps the potential rebate in the Single-Leg CUBE at the first
5,000 Customer contracts of a CUBE Order.\23\ The Exchange notes that
although the proposed ACE Rebate applies solely to Customer orders, it
is nonetheless equitable and not unfairly discriminatory because it
would enhance the incentives to ATP Holders to transact Customer orders
on the Exchange and an increase in Customer order flow would bring
greater volume and liquidity to the Exchange. Increased volume to the
Exchange benefits all market participants by providing more trading
opportunities and tighter spreads, even to those market participants
that do not participate in the ACE Program.
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\22\ For example, MIAX offers an additional per contract rebate
on certain agency orders executed in PRIME, which provides for a
maximum credit of $0.12 per contract, based on a member achieving
certain monthly volume thresholds. See MIAX fee schedule, Priority
Customer Rebate Program, supra note 15.
\23\ Similar to the Exchange, Cboe also caps the number of
contracts submitted to its price improvement auction that are
eligible for additional volume rebates. Cboe's cap is at 1,000
contracts per order for simple executions and at 1,000 contracts per
leg for complex executions. See Cboe fee schedule, Volume Incentive
Program, supra note 15.
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The Exchange believes that it is reasonable to assess lower
transaction and credit rates to Penny Pilot option classes than non-
Penny Pilot option classes. The Exchange believes that options that
trade at these wider spreads merit offering greater inducement for
market participants. In particular, within the Complex CUBE Auction,
option classes that typically trade in minimum increments of $0.05 or
$0.10 provide greater opportunity for market participants to offer
price improvement. As such, the Exchange believes that the opportunity
for additional price improvement provided by these wider spreads again
merits offering greater incentive for market participants to increase
the potential price improvement for customer orders in these
transactions.
B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with Section 6(b)(8) of the Act,\24\ 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 change
would enhance the competiveness of the Exchange relative to other
exchanges that offer their own electronic crossing mechanisms,
including for complex orders.\25\ The Exchange believes that the
proposed fees and rebates for participation in the Complex CUBE Auction
would not have an impact on intra-market competition based on the total
cost for participants to transact in such order types versus the cost
for participants to transact in the other order types available for
trading on the Exchange.
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\24\ 15 U.S.C. 78f(b)(8).
\25\ See supra note 14. See also Chicago Board Options Exchange,
Inc. (``CBOE'') Rule 6.74A--Automated Improvement Mechanism
(``AIM''); Nasdaq PHLX, LLC (``PHLX'') Rule 1087--Price Improvement
XL (``PIXL''); BOX Options Exchange LLC (``BOX'') Rule 7245--Complex
Order Price Improvement Period (``COPIP''); Nasdaq ISE, LLC
(``ISE'') Rule 723--Price Improvement Mechanism (``PIM''); Miami
International Securities Exchange, LLC (``MIAX'') Rule 515A,
Interpretation and Policies .12--Price Improvement Mechanism
(``PRIME'').
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As noted above, the Exchange believes that the proposed pricing for
the Complex CUBE Auction is comparable to its own pricing for Single-
Leg CUBE and that of other exchanges offering similar electronic price
improvement mechanisms for complex orders.\26\ The Exchange believes
that, based on experience with electronic price improvement crossing
mechanisms on other markets, market participants understand that the
price-improving benefits offered by the Complex CUBE Auction justify
the transaction costs associated with the Auction. To the extent that
there is a difference between non-Complex CUBE Auction transactions and
Complex CUBE Auction transactions, the Exchange does not believe this
[[Page 31210]]
difference would cause participants to refrain from responding to
Complex CUBE Auctions. The Exchange expects to see robust competition
within the Complex CUBE Auction to trade against the Complex CUBE
Order.
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\26\ See Fee Schedule, Section I.G., CUBE Auction Fees &
Credits, supra note 8 and supra note 16 (citing the fee schedules of
other exchanges that set forth pricing for price improvement
auctions).
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The Exchange notes that it operates in a highly competitive market
in which market participants can readily favor competing venues if they
deem fee levels at a particular venue to be excessive. In such an
environment, the Exchange must continually adjust its fees to remain
competitive with other exchanges and to attract order flow to the
Exchange. The Exchange believes that the proposed rule change reflects
this competitive environment because it establishes a fee structure in
a manner that encourages market participants to direct their order
flow, to provide liquidity, and to attract additional transaction
volume to the Exchange.
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) \27\ of the Act and subparagraph (f)(2) of Rule
19b-4 \28\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\27\ 15 U.S.C. 78s(b)(3)(A).
\28\ 17 CFR 240.19b-4(f)(2).
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At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \29\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\29\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NYSEAMER-2018-32 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-NYSEAMER-2018-32. 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 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. 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-NYSEAMER-2018-32 and should be submitted
on or before July 24, 2018.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\30\
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\30\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-14293 Filed 7-2-18; 8:45 am]
BILLING CODE P
