Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of Proposed Change Amending the NYSE American Options Fee Schedule by Revising the Options Regulatory Fee, 49359-49362 [2019-20222]
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Federal Register / Vol. 84, No. 182 / Thursday, September 19, 2019 / Notices
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 No.
SR–NYSEArca–2019–64, and should be
submitted on or before October 10,
2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019–20221 Filed 9–18–19; 8:45 am]
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–86960; File No. SR–
NYSEAMER–2019–35]
Self-Regulatory Organizations; NYSE
American LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Change Amending the NYSE American
Options Fee Schedule by Revising the
Options Regulatory Fee
jbell on DSK3GLQ082PROD with NOTICES
September 13, 2019.
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 August
30, 2019, NYSE American LLC (‘‘NYSE
American’’ or the ‘‘Exchange’’) filed
with the Securities and Exchange
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
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I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
NYSE American Options Fee Schedule
(‘‘Fee Schedule’’) by revising the
Options Regulatory Fee (‘‘ORF’’) and
notice language related to the ORF,
effective August 30, 2019. 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
BILLING CODE 8011–01–P
20 17
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the selfregulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
1. Purpose
The Exchange proposes to amend the
Fee Schedule to revise the ORF charged
solely for the August 30, 2019 trading
day and to modify language regarding
notice requirements for any changes to
the ORF, effective August 30, 2019.
Background Regarding the ORF
As a general matter, the Exchange
may only use regulatory funds such as
ORF ‘‘to fund the legal, regulatory, and
surveillance operations’’ of the
Exchange.4 More specifically, the ORF
is designed to recover a material
4 The Exchange considers surveillance operations
part of regulatory operations. The limitation on the
use of regulatory funds also provides that they shall
not be distributed. See Twelfth Amended and
Restated Operating Agreement of NYSE American
LLC, Article IV, Section 4.05 and Securities
Exchange Act Release No. 79114 (October 18, 2016),
81 FR 73117 (October 24, 2016) (SR–NYSEMKT–
2013–93).
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49359
portion, but not all, of the Exchange’s
regulatory costs for the supervision and
regulation of ATP Holders (the ‘‘ATP
Regulatory Costs’’). The majority of the
ATP Regulatory Costs are direct
expenses, such as the costs related to inhouse staff, third-party service
providers, and technology. The direct
expenses support the day-to-day
regulatory work relating to the ATP
Holders, including surveillance,
investigation, examinations and
enforcement. Such direct expenses
represent approximately 91% of the
Exchange’s total ATP Regulatory Costs.
The indirect expenses include human
resources and other administrative
costs.
The ORF is assessed on ATP Holders
for options transactions that are cleared
by the ATP Holder through the Options
Clearing Corporation (‘‘OCC’’) in the
Customer range regardless of the
exchange on which the transaction
occurs.5 All options transactions must
clear via a clearing firm and such
clearing firms can then choose to pass
through all, a portion, or none of the
cost of the ORF to its customers, i.e., the
entering firms. Because the ORF is
collected from ATP Holder clearing
firms by the OCC on behalf of NYSE
American,6 the Exchange believes that
using options transactions in the
Customer range serves as a proxy for
how to apportion regulatory costs
among such ATP Holders. In addition,
the Exchange notes that the regulatory
costs relating to monitoring ATP
Holders with respect to Customer
trading activity are generally higher
than the regulatory costs associated with
ATP Holders that do not engage in
Customer trading activity, which tends
to be more automated and less laborintensive. By contrast, regulating ATP
Holders that engage in Customer trading
activity is generally more labor
intensive and requires a greater
expenditure of human and technical
resources as the Exchange needs to
review not only the trading activity on
behalf of Customers, but also the ATP
Holder’s relationship with its Customers
via more labor-intensive exam-based
programs.7 As a result, the costs
5 See Fee Schedule, Section VII, Regulatory Fees,
Options Regulatory Fee (‘‘ORF’’), available here,
https://www.nyse.com/publicdocs/nyse/markets/
american-options/NYSE_American_Options_Fee_
Schedule.pdf.
6 See id. The Exchange uses reports from OCC
when assessing and collecting the ORF. The ORF
is not assessed on outbound linkage trades. An ATP
Holder is not assessed the fee until it has satisfied
applicable technological requirements necessary to
commence operations on NYSE American. See id.
7 The Exchange notes that many of the Exchange’s
market surveillance programs require the Exchange
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associated with administering the
customer component of the Exchange’s
overall regulatory program are
materially higher than the costs
associated with administering the noncustomer component (e.g., ATP Holder
proprietary transactions) of its
regulatory program.
ORF Revenue and Monitoring of ORF
Exchange rules establish that the
Exchange may only increase or decrease
the ORF semi-annually, that any such
fee change will be effective on the first
business day of February or August, and
that market participants must be
notified of any such change via Trader
Update at least 30 calendar days prior
to the effective date of the change.8
Because the ORF is based on options
transactions volume, ORF revenue to
the Exchange is variable. For example,
if options transactions reported to OCC
in a given month increase, the ORF
collected from ATP Holders will
increase as well. Similarly, if options
transactions reported to OCC in a given
month decrease, the ORF collected from
ATP Holders will decrease as well.
Accordingly, the Exchange monitors the
amount of revenue collected from the
ORF to ensure that this revenue does
not exceed regulatory costs. If the
Exchange determines regulatory
revenues exceed regulatory costs, the
Exchange will adjust the ORF by
submitting a fee change filing to the
Securities and Exchange Commission
(the ‘‘Commission’’).
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OIP and Current Proposal
In July 2019, the Exchange filed to
lower the ORF to $0.0054 (from
$0.0055) per contract side for the
remainder of 2019 in response to
increased options transaction volumes
in 2018, which reverted (in part) in the
first half of 2019 (the ‘‘July ORF
Filing’’).9 However, on August 30, 2019,
the Commission issued the Suspension
of and Order Instituting Proceedings to
Determine Whether to Approve or
Disapprove a Proposed Rule Change to
Modify the Options Regulatory Fee (the
to look at and evaluate activity across all options
markets, such as surveillance for position limit
violations, manipulation, front-running and
contrary exercise advice violations/expiring
exercise declarations. The Exchange and other
options SROs are parties to a 17d–2 agreement
allocating among the SROs regulatory
responsibilities relating to compliance by the
common members with rules for expiring exercise
declarations, position limits, OCC trade
adjustments, and Large Option Position Report
reviews. See, e.g., Securities Exchange Act Release
No. 61588 (February 25, 2010).
8 See Fee Schedule, supra note 5.
9 See Securities Exchange Act Release No. 86391
(July 16, 2019), 84 FR 35165 (July 22, 2019) (SR–
NYSEAMER–2019–27).
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‘‘OIP’’).10 As a result of the OIP, on
August 30, 2019, the last trading day of
the month, the ORF reverted back to
$0.0055 (from $0.0054).
To ensure consistency of ORF
assessments for the full month of
August 2019, the Exchange proposes to
modify the Fee Schedule to specify that
the amount of ORF that will be collected
by the Exchange for the trading day of
August 30, 2019 will be $0.0054 per
contract side (the ‘‘August 30th ORF
Rate’’).11 The Exchange believes that
revenue generated from the ORF,
including the August 30th ORF Rate,
will continue to cover a material
portion, but not all, of the Exchange’s
regulatory costs.
Per the current Fee Schedule, the
Exchange is required to notify
participants via a Trader Update of any
change in the amount of the fee at least
30 calendar days prior to the effective
date of the change; 12 however, given the
OIP, the Exchange proposes to modify
this requirement with the following
caveat: ‘‘except in the case of the August
30th ORF rate change.’’ 13
For avoidance of doubt, the Exchange
notes that the August 30th Rate applies
for that day only and as a result of the
OIP, the ORF effective September 3,
2019 will be $0.0055—the rate in place
prior to the (now suspended) July ORF
Filing.
Finally, The Exchange proposes to
delete obsolete language in the ORF rule
text, regarding Mini Options, which was
inadvertently not eliminated when the
Exchange filed a ‘‘clean up’’ fee filing to
remove all such references.14
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the provisions of Section 6(b) 15 of the
Act, in general, and Section 6(b)(4) and
(5) 16 of the Act, in particular, in that it
is designed to provide for the equitable
allocation of reasonable dues, fees, and
other charges among its members and
other persons using its facilities and
10 See Securities and Exchange Release No. 86832
(August 30, 2019) (SR–NYSEAMER–2019–27).
11 See proposed Fee Schedule, Section VII,
Regulatory Fees, ORF. This proposal is not intended
to be responsive to the issues raised in the OIP, but
to instead address the immediate issue of billing for
August 30th.
12 See Fee Schedule, Section VII, Regulatory Fees,
ORF.
13 See proposed Fee Schedule, Section VII,
Regulatory Fees, ORF.
14 See id. See also Securities Exchange Act
Release No. 84603 (November 14, 2018), 83 FR
58795 (November 21, 2018) (NYSEAmer–2018–48)
(filing to eliminate obsolete charges, including
removing obsolete references to fees for Mini
Options).
15 15 U.S.C. 78f(b).
16 15 U.S.C. 78f(b)(4) and (5).
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does not unfairly discriminate between
customers, issuers, brokers, or dealers.
The Proposal Is Reasonable
The Exchange believes the proposed
August 30th ORF Rate is reasonable
because it would help maintain fair and
orderly markets and benefit investors
and the public interest because it would
ensure transparency and consistency of
ORF for August 2019. Specifically, the
proposal would ensure that the amount
of ORF collected by the Exchange for
the trading day of August 30, 2019 will
be the same rate collected on every
other trading day in August (i.e.,
$0.0054 per contract side). The
Exchange believes this will avoid
disruption to its OTP Holders and OTP
Firms that are subject to the ORF. As
noted above, the Exchange may only use
regulatory funds such as ORF ‘‘to fund
the legal, regulatory, and surveillance
operations’’ of the Exchange.17
The Exchange believes that the
proposal deleting outdated reference to
products no longer traded (i.e., Mini
Options) is reasonable as it would
streamline the Fee Schedule by
removing superfluous language thereby
making the Fee Schedule easier for
market participants to navigate.18
The Proposal Is an Equitable Allocation
of Fees
The Exchange believes its proposal is
an equitable allocation of fees among its
market participants. The Exchange
believes that the proposed August 30th
ORF Rate would not place certain
market participants at an unfair
disadvantage because all options
transactions must clear via a clearing
firm. Such clearing firms can then
choose to pass through all, a portion, or
none of the cost of the ORF to its
customers, i.e., the entering firms.
Because the ORF is collected from ATP
Holder clearing firms by the OCC on
behalf of NYSE American, the Exchange
believes that using options transactions
in the Customer range serves as a proxy
for how to apportion regulatory costs
among such ATP Holders. In addition,
the Exchange notes that the regulatory
costs relating to monitoring ATP
Holders with respect to Customer
trading activity are generally higher
than the regulatory costs associated with
ATP Holders that do not engage in
Customer trading activity, which tends
to be more automated and less laborintensive. By contrast, regulating ATP
Holders that engage in Customer trading
activity is generally more labor
intensive and requires a greater
17 See
18 See
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supra note 4.
supra note 14.
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expenditure of human and technical
resources as the Exchange needs to
review not only the trading activity on
behalf of Customers, but also the ATP
Holder’s relationship with its Customers
via more labor-intensive exam-based
programs. As a result, the costs
associated with administering the
customer component of the Exchange’s
overall regulatory program are
materially higher than the costs
associated with administering the noncustomer component (e.g., ATP Holder
proprietary transactions) of its
regulatory program. Thus, the Exchange
believes the August 30th ORF (like the
rate assessed for every other trading day
in August 2019) would be equitably
allocated in that it is charged to all OTP
Holders or OTP Firms on all their
transactions that clear in the Customer
range at the OCC.
The Proposed Fee Is Not Unfairly
Discriminatory
The Exchange believes that the
proposal is not unfairly discriminatory.
The Exchange believes that the
proposed August 30th ORF Rate would
not place certain market participants at
an unfair disadvantage because all
options transactions must clear via a
clearing firm. Such clearing firms can
then choose to pass through all, a
portion, or none of the cost of the ORF
to its customers, i.e., the entering firms.
Because the ORF is collected from ATP
Holder clearing firms by the OCC on
behalf of NYSE American, the Exchange
believes that using options transactions
in the Customer range serves as a proxy
for how to apportion regulatory costs
among such ATP Holders. In addition,
the Exchange notes that the regulatory
costs relating to monitoring ATP
Holders with respect to Customer
trading activity are generally higher
than the regulatory costs associated with
ATP Holders that do not engage in
Customer trading activity, which tends
to be more automated and less laborintensive. By contrast, regulating ATP
Holders that engage in Customer trading
activity is generally more labor
intensive and requires a greater
expenditure of human and technical
resources as the Exchange needs to
review not only the trading activity on
behalf of Customers, but also the ATP
Holder’s relationship with its Customers
via more labor-intensive exam-based
programs. As a result, the costs
associated with administering the
customer component of the Exchange’s
overall regulatory program are
materially higher than the costs
associated with administering the noncustomer component (e.g., ATP Holder
proprietary transactions) of its
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17:30 Sep 18, 2019
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regulatory program. Thus, the Exchange
believes the August 30th ORF Rate (like
the rate assessed for every other trading
day in August 2019), is not unfairly
discriminatory because it is charged to
all OTP Holders or OTP Firms on all
their transactions that clear in the
Customer range at the OCC.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange does not believe that the
proposed rule change will impose any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
Intramarket Competition. The
Exchange believes the proposed fee
change would not impose an undue
burden on competition as it is charged
to all ATP Holders on all their
transactions that clear in the Customer
range at the OCC; thus, the amount of
ORF imposed is based on the amount of
Customer volume transacted. The
Exchange believes that the proposed
ORF would not place certain market
participants at an unfair disadvantage
because all options transactions must
clear via a clearing firm. Such clearing
firms can then choose to pass through
all, a portion, or none of the cost of the
ORF to its customers, i.e., the entering
firms. In addition, because the ORF is
collected from ATP Holder clearing
firms by the OCC on behalf of NYSE
American, the Exchange believes that
using options transactions in the
Customer range serves as a proxy for
how to apportion regulatory costs
among such ATP Holders.
Intermarket Competition. The
proposed fee change is not designed to
address any competitive issues. Rather,
the proposed change is designed to help
the Exchange adequately fund its
regulatory activities while seeking to
ensure that total regulatory revenues do
not exceed total regulatory costs.
Finally, the Exchange does not believe
that the proposed deletion of obsolete
references to Mini Options would
impose any burden on competition that
is not necessary or appropriate in
furtherance of the purposes of the Act
as these changes are not intended to
address any competitive issues and
would instead add more specificity,
clarity and transparency regarding this
functionality.
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49361
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) 19 of the Act and
subparagraph (f)(2) of Rule 19b–4 20
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) 21 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 No. SR–
NYSEAMER–2019–35 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 No.
SR–NYSEAMER–2019–35. 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
19 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(2).
21 15 U.S.C. 78s(b)(2)(B).
20 17
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Federal Register / Vol. 84, No. 182 / Thursday, September 19, 2019 / Notices
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 No.
SR–NYSEAMER–2019–35, and should
be submitted on or before October 10,
2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.22
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019–20222 Filed 9–18–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–86959; File No. SR–Phlx–
2019–33]
Self-Regulatory Organizations; Nasdaq
PHLX LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Relating to Specialists
and Registered Options Traders
jbell on DSK3GLQ082PROD with NOTICES
September 13, 2019.
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
September 10, 2019, Nasdaq PHLX LLC
(‘‘Phlx’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III, below, which Items have been
prepared by the Exchange. The
22 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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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 amend
Phlx Rule 1000, titled ‘‘Applicability,
Definitions and References,’’ Rule 1014,
titled ‘‘Obligations and Restrictions
Applicable to Specialists and Registered
Options Traders,’’ Rule 1020, titled
‘‘Registration and Functions of Options
Specialists,’’ Rule 1082, titled ‘‘Firm
Quotations,’’ Rule 1087, titled ‘‘Price
Improvement XL (‘‘PIXL’’), Options 8,
Section 2, titled ‘‘Definitions,’’ Section
11, titled ‘‘Specialist Appointment,’’
Section 39, titled ‘‘Options Minor Rule
Violations and Order and Decorum
Regulations’’ at E–16, titled
‘‘Communications and Equipment.’’ The
Exchange also proposes to relocate Rule
1064, titled ‘‘Crossing Facilitation and
Solicited Orders’’ to Options 8, Section
30. The Exchange also proposes to
relocate other rules, update crossreferences and make various other
technical amendments.
The text of the proposed rule change
is available on the Exchange’s website at
https://nasdaqphlx.cchwallstreet.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
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Phlx proposes to: (1) Amend certain
descriptions within Rule 1000, titled
‘‘Applicability, Definitions and
References’’; (2) amend Rule 1014, titled
‘‘Obligations and Restrictions
Applicable to Specialists and Registered
Options Traders’’ to amend the bid/ask
differentials within current Rule
1014(c), relocate rule text within the
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rule and delete certain obsolete rule
text; (3) amend Rule 1020, ‘‘Registration
and Functions of Options Specialists’’
so that a Specialist is not required to be
appointed to an option series; (4)
relocate other rules, update cross
references in various rules, and make
other technical amendments. Each
change will be described below.
Rule 1000
The Exchange proposes to amend
Rule 1000, titled ‘‘Applicability,
Definitions and References’’ in several
ways. First, the Exchange proposes
some technical amendments to Rule
1000 to format the rule consistently by
placing a title prior to each description
where no title appears. This is a nonsubstantive change to make the rule
consistent. The Exchange also proposes
to update the name of The Options
Clearing Corporation to add a ‘‘The’’
before the name. Second, the Exchange
proposes to add a definition for ‘‘Public
Customer’’ within the Rule 1000(b)(56)
to provide, ‘‘Public Customer shall
mean a person or entity that is not a
broker or dealer in securities and is not
a professional as defined within Phlx
Rule 1000(b)(14).’’ With the addition of
this definition, the Exchange proposes
to amend the description of a
Professional within Rule 1000(b)(14) to
remove the following rule text, ‘‘A
professional will be treated in the same
manner as an off-floor broker-dealer for
purposes of Rules 1014(g), 1033(e),
1064, Commentary .02 (except
professional orders will be considered
customer orders subject to facilitation),
1087 and 1098, as well as Options Floor
Procedure Advices B–6 and F–5.’’
Because the Exchange will be separately
utilizing the terms ‘‘Public Customer’’
and ‘‘Professional’’ 3 throughout the
Rulebook, the Exchange believes that
the citations to other rules within the
definition of ‘‘Professional’’ in Rule
1000(b)(14) are not necessary because
each rule will distinguish whether it
pertains to a Public Customer or a
Professional. Today, the professional
rule distinguishes where professional
orders will be treated as an off-floor
broker-dealer’s orders and other
instances where professional orders will
be considered customer orders. The
Exchange proposes, similar to other
Rulebooks,4 to make clear within the
3 The following rules add both the terms ‘‘Public
Customer’’ and ‘‘Professional’’ in place of
‘‘customer’’ or ‘‘public customer’’: Rule 1017, 1087,
1093 and Options 8, Section 28.
4 Nasdaq ISE, LLC (‘‘ISE’’), Nasdaq GEMX, LLC
(‘‘GEMX’’) and Nasdaq MRX, LLC (‘‘MRX’’), Nasdaq
BX, Inc.(‘‘BX’’) and NOM Rules separately define
Professional and Priority Customer and Public
Customer, respectively within Options 1, Section
E:\FR\FM\19SEN1.SGM
19SEN1
]]>Agencies
[Federal Register Volume 84, Number 182 (Thursday, September 19, 2019)]
[Notices]
[Pages 49359-49362]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-20222]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-86960; File No. SR-NYSEAMER-2019-35]
Self-Regulatory Organizations; NYSE American LLC; Notice of
Filing and Immediate Effectiveness of Proposed Change Amending the NYSE
American Options Fee Schedule by Revising the Options Regulatory Fee
September 13, 2019.
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 August 30, 2019, NYSE American LLC (``NYSE American'' or
the ``Exchange'') filed with the Securities and Exchange Commission
(the ``Commission'') the proposed rule change as described in Items I,
II, and III below, which Items have been prepared by the self-
regulatory organization. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend the NYSE American Options Fee
Schedule (``Fee Schedule'') by revising the Options Regulatory Fee
(``ORF'') and notice language related to the ORF, effective August 30,
2019. 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
1. Purpose
The Exchange proposes to amend the Fee Schedule to revise the ORF
charged solely for the August 30, 2019 trading day and to modify
language regarding notice requirements for any changes to the ORF,
effective August 30, 2019.
Background Regarding the ORF
As a general matter, the Exchange may only use regulatory funds
such as ORF ``to fund the legal, regulatory, and surveillance
operations'' of the Exchange.\4\ More specifically, the ORF is designed
to recover a material portion, but not all, of the Exchange's
regulatory costs for the supervision and regulation of ATP Holders (the
``ATP Regulatory Costs''). The majority of the ATP Regulatory Costs are
direct expenses, such as the costs related to in-house staff, third-
party service providers, and technology. The direct expenses support
the day-to-day regulatory work relating to the ATP Holders, including
surveillance, investigation, examinations and enforcement. Such direct
expenses represent approximately 91% of the Exchange's total ATP
Regulatory Costs. The indirect expenses include human resources and
other administrative costs.
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\4\ The Exchange considers surveillance operations part of
regulatory operations. The limitation on the use of regulatory funds
also provides that they shall not be distributed. See Twelfth
Amended and Restated Operating Agreement of NYSE American LLC,
Article IV, Section 4.05 and Securities Exchange Act Release No.
79114 (October 18, 2016), 81 FR 73117 (October 24, 2016) (SR-
NYSEMKT-2013-93).
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The ORF is assessed on ATP Holders for options transactions that
are cleared by the ATP Holder through the Options Clearing Corporation
(``OCC'') in the Customer range regardless of the exchange on which the
transaction occurs.\5\ All options transactions must clear via a
clearing firm and such clearing firms can then choose to pass through
all, a portion, or none of the cost of the ORF to its customers, i.e.,
the entering firms. Because the ORF is collected from ATP Holder
clearing firms by the OCC on behalf of NYSE American,\6\ the Exchange
believes that using options transactions in the Customer range serves
as a proxy for how to apportion regulatory costs among such ATP
Holders. In addition, the Exchange notes that the regulatory costs
relating to monitoring ATP Holders with respect to Customer trading
activity are generally higher than the regulatory costs associated with
ATP Holders that do not engage in Customer trading activity, which
tends to be more automated and less labor-intensive. By contrast,
regulating ATP Holders that engage in Customer trading activity is
generally more labor intensive and requires a greater expenditure of
human and technical resources as the Exchange needs to review not only
the trading activity on behalf of Customers, but also the ATP Holder's
relationship with its Customers via more labor-intensive exam-based
programs.\7\ As a result, the costs
[[Page 49360]]
associated with administering the customer component of the Exchange's
overall regulatory program are materially higher than the costs
associated with administering the non-customer component (e.g., ATP
Holder proprietary transactions) of its regulatory program.
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\5\ See Fee Schedule, Section VII, Regulatory Fees, Options
Regulatory Fee (``ORF''), available here, https://www.nyse.com/publicdocs/nyse/markets/american-options/NYSE_American_Options_Fee_Schedule.pdf.
\6\ See id. The Exchange uses reports from OCC when assessing
and collecting the ORF. The ORF is not assessed on outbound linkage
trades. An ATP Holder is not assessed the fee until it has satisfied
applicable technological requirements necessary to commence
operations on NYSE American. See id.
\7\ The Exchange notes that many of the Exchange's market
surveillance programs require the Exchange to look at and evaluate
activity across all options markets, such as surveillance for
position limit violations, manipulation, front-running and contrary
exercise advice violations/expiring exercise declarations. The
Exchange and other options SROs are parties to a 17d-2 agreement
allocating among the SROs regulatory responsibilities relating to
compliance by the common members with rules for expiring exercise
declarations, position limits, OCC trade adjustments, and Large
Option Position Report reviews. See, e.g., Securities Exchange Act
Release No. 61588 (February 25, 2010).
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ORF Revenue and Monitoring of ORF
Exchange rules establish that the Exchange may only increase or
decrease the ORF semi-annually, that any such fee change will be
effective on the first business day of February or August, and that
market participants must be notified of any such change via Trader
Update at least 30 calendar days prior to the effective date of the
change.\8\
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\8\ See Fee Schedule, supra note 5.
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Because the ORF is based on options transactions volume, ORF
revenue to the Exchange is variable. For example, if options
transactions reported to OCC in a given month increase, the ORF
collected from ATP Holders will increase as well. Similarly, if options
transactions reported to OCC in a given month decrease, the ORF
collected from ATP Holders will decrease as well. Accordingly, the
Exchange monitors the amount of revenue collected from the ORF to
ensure that this revenue does not exceed regulatory costs. If the
Exchange determines regulatory revenues exceed regulatory costs, the
Exchange will adjust the ORF by submitting a fee change filing to the
Securities and Exchange Commission (the ``Commission'').
OIP and Current Proposal
In July 2019, the Exchange filed to lower the ORF to $0.0054 (from
$0.0055) per contract side for the remainder of 2019 in response to
increased options transaction volumes in 2018, which reverted (in part)
in the first half of 2019 (the ``July ORF Filing'').\9\ However, on
August 30, 2019, the Commission issued the Suspension of and Order
Instituting Proceedings to Determine Whether to Approve or Disapprove a
Proposed Rule Change to Modify the Options Regulatory Fee (the
``OIP'').\10\ As a result of the OIP, on August 30, 2019, the last
trading day of the month, the ORF reverted back to $0.0055 (from
$0.0054).
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\9\ See Securities Exchange Act Release No. 86391 (July 16,
2019), 84 FR 35165 (July 22, 2019) (SR-NYSEAMER-2019-27).
\10\ See Securities and Exchange Release No. 86832 (August 30,
2019) (SR-NYSEAMER-2019-27).
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To ensure consistency of ORF assessments for the full month of
August 2019, the Exchange proposes to modify the Fee Schedule to
specify that the amount of ORF that will be collected by the Exchange
for the trading day of August 30, 2019 will be $0.0054 per contract
side (the ``August 30th ORF Rate'').\11\ The Exchange believes that
revenue generated from the ORF, including the August 30th ORF Rate,
will continue to cover a material portion, but not all, of the
Exchange's regulatory costs.
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\11\ See proposed Fee Schedule, Section VII, Regulatory Fees,
ORF. This proposal is not intended to be responsive to the issues
raised in the OIP, but to instead address the immediate issue of
billing for August 30th.
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Per the current Fee Schedule, the Exchange is required to notify
participants via a Trader Update of any change in the amount of the fee
at least 30 calendar days prior to the effective date of the change;
\12\ however, given the OIP, the Exchange proposes to modify this
requirement with the following caveat: ``except in the case of the
August 30th ORF rate change.'' \13\
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\12\ See Fee Schedule, Section VII, Regulatory Fees, ORF.
\13\ See proposed Fee Schedule, Section VII, Regulatory Fees,
ORF.
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For avoidance of doubt, the Exchange notes that the August 30th
Rate applies for that day only and as a result of the OIP, the ORF
effective September 3, 2019 will be $0.0055--the rate in place prior to
the (now suspended) July ORF Filing.
Finally, The Exchange proposes to delete obsolete language in the
ORF rule text, regarding Mini Options, which was inadvertently not
eliminated when the Exchange filed a ``clean up'' fee filing to remove
all such references.\14\
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\14\ See id. See also Securities Exchange Act Release No. 84603
(November 14, 2018), 83 FR 58795 (November 21, 2018) (NYSEAmer-2018-
48) (filing to eliminate obsolete charges, including removing
obsolete references to fees for Mini Options).
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6(b) \15\ of the Act, in general, and
Section 6(b)(4) and (5) \16\ of the Act, in particular, in that it is
designed to provide for the equitable allocation of reasonable dues,
fees, and other charges among its members and other persons using its
facilities and does not unfairly discriminate between customers,
issuers, brokers, or dealers.
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\15\ 15 U.S.C. 78f(b).
\16\ 15 U.S.C. 78f(b)(4) and (5).
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The Proposal Is Reasonable
The Exchange believes the proposed August 30th ORF Rate is
reasonable because it would help maintain fair and orderly markets and
benefit investors and the public interest because it would ensure
transparency and consistency of ORF for August 2019. Specifically, the
proposal would ensure that the amount of ORF collected by the Exchange
for the trading day of August 30, 2019 will be the same rate collected
on every other trading day in August (i.e., $0.0054 per contract side).
The Exchange believes this will avoid disruption to its OTP Holders and
OTP Firms that are subject to the ORF. As noted above, the Exchange may
only use regulatory funds such as ORF ``to fund the legal, regulatory,
and surveillance operations'' of the Exchange.\17\
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\17\ See supra note 4.
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The Exchange believes that the proposal deleting outdated reference
to products no longer traded (i.e., Mini Options) is reasonable as it
would streamline the Fee Schedule by removing superfluous language
thereby making the Fee Schedule easier for market participants to
navigate.\18\
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\18\ See supra note 14.
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The Proposal Is an Equitable Allocation of Fees
The Exchange believes its proposal is an equitable allocation of
fees among its market participants. The Exchange believes that the
proposed August 30th ORF Rate would not place certain market
participants at an unfair disadvantage because all options transactions
must clear via a clearing firm. Such clearing firms can then choose to
pass through all, a portion, or none of the cost of the ORF to its
customers, i.e., the entering firms. Because the ORF is collected from
ATP Holder clearing firms by the OCC on behalf of NYSE American, the
Exchange believes that using options transactions in the Customer range
serves as a proxy for how to apportion regulatory costs among such ATP
Holders. In addition, the Exchange notes that the regulatory costs
relating to monitoring ATP Holders with respect to Customer trading
activity are generally higher than the regulatory costs associated with
ATP Holders that do not engage in Customer trading activity, which
tends to be more automated and less labor-intensive. By contrast,
regulating ATP Holders that engage in Customer trading activity is
generally more labor intensive and requires a greater
[[Page 49361]]
expenditure of human and technical resources as the Exchange needs to
review not only the trading activity on behalf of Customers, but also
the ATP Holder's relationship with its Customers via more labor-
intensive exam-based programs. As a result, the costs associated with
administering the customer component of the Exchange's overall
regulatory program are materially higher than the costs associated with
administering the non-customer component (e.g., ATP Holder proprietary
transactions) of its regulatory program. Thus, the Exchange believes
the August 30th ORF (like the rate assessed for every other trading day
in August 2019) would be equitably allocated in that it is charged to
all OTP Holders or OTP Firms on all their transactions that clear in
the Customer range at the OCC.
The Proposed Fee Is Not Unfairly Discriminatory
The Exchange believes that the proposal is not unfairly
discriminatory. The Exchange believes that the proposed August 30th ORF
Rate would not place certain market participants at an unfair
disadvantage because all options transactions must clear via a clearing
firm. Such clearing firms can then choose to pass through all, a
portion, or none of the cost of the ORF to its customers, i.e., the
entering firms. Because the ORF is collected from ATP Holder clearing
firms by the OCC on behalf of NYSE American, the Exchange believes that
using options transactions in the Customer range serves as a proxy for
how to apportion regulatory costs among such ATP Holders. In addition,
the Exchange notes that the regulatory costs relating to monitoring ATP
Holders with respect to Customer trading activity are generally higher
than the regulatory costs associated with ATP Holders that do not
engage in Customer trading activity, which tends to be more automated
and less labor-intensive. By contrast, regulating ATP Holders that
engage in Customer trading activity is generally more labor intensive
and requires a greater expenditure of human and technical resources as
the Exchange needs to review not only the trading activity on behalf of
Customers, but also the ATP Holder's relationship with its Customers
via more labor-intensive exam-based programs. As a result, the costs
associated with administering the customer component of the Exchange's
overall regulatory program are materially higher than the costs
associated with administering the non-customer component (e.g., ATP
Holder proprietary transactions) of its regulatory program. Thus, the
Exchange believes the August 30th ORF Rate (like the rate assessed for
every other trading day in August 2019), is not unfairly discriminatory
because it is charged to all OTP Holders or OTP Firms on all their
transactions that clear in the Customer range at the OCC.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange does not
believe that the proposed rule change will impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act.
Intramarket Competition. The Exchange believes the proposed fee
change would not impose an undue burden on competition as it is charged
to all ATP Holders on all their transactions that clear in the Customer
range at the OCC; thus, the amount of ORF imposed is based on the
amount of Customer volume transacted. The Exchange believes that the
proposed ORF would not place certain market participants at an unfair
disadvantage because all options transactions must clear via a clearing
firm. Such clearing firms can then choose to pass through all, a
portion, or none of the cost of the ORF to its customers, i.e., the
entering firms. In addition, because the ORF is collected from ATP
Holder clearing firms by the OCC on behalf of NYSE American, the
Exchange believes that using options transactions in the Customer range
serves as a proxy for how to apportion regulatory costs among such ATP
Holders.
Intermarket Competition. The proposed fee change is not designed to
address any competitive issues. Rather, the proposed change is designed
to help the Exchange adequately fund its regulatory activities while
seeking to ensure that total regulatory revenues do not exceed total
regulatory costs.
Finally, the Exchange does not believe that the proposed deletion
of obsolete references to Mini Options would impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act as these changes are not intended to address any
competitive issues and would instead add more specificity, clarity and
transparency regarding this functionality.
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) \19\ of the Act and subparagraph (f)(2) of Rule
19b-4 \20\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\19\ 15 U.S.C. 78s(b)(3)(A).
\20\ 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) \21\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\21\ 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 No. SR-NYSEAMER-2019-35 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 No. SR-NYSEAMER-2019-35. 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
[[Page 49362]]
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 No. SR-NYSEAMER-2019-35, and should be submitted
on or before October 10, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
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\22\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-20222 Filed 9-18-19; 8:45 am]
BILLING CODE 8011-01-P
