Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”) and Rule 19b-4 thereunder, notice is hereby given that, on June 9, 2016, NYSE MKT LLC (the “Exchange” or “NYSE MKT”) filed with the Securities and Exchange Commission (the “Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.
15 U.S.C. 78a.
I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
The Exchange proposes to modify the NYSE Amex Options Fee Schedule (“Fee Schedule”). The Exchange proposes to implement the fee change effective June 9, 2016. The proposed change is available on the Exchange's Web site at www.nyse.com,, at the principal office of the Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of this filing is to amend Sections I. E. and G. of the Fee Schedule to adjust fees and credits payable, effective on June 9, 2016.
See Fee Schedule, Sections I. E. (Amex Customer Engagement (“ACE”) Program—Standard Options) and G. (CUBE Auction Fees & Credits), available here, https://www.nyse.com/publicdocs/nyse/markets/amex-options/NYSE_Amex_Options_Fee_Schedule.pdf.
Proposed changes to ACE Program
Section I.E. of the Fee Schedule describes the Exchange's ACE Program, which features five tiers expressed as a percentage of total industry Customer equity and Exchange Traded Fund (“ETF”) option average daily volume and provides two alternative methods through which Order Flow Providers (each an “OFP”) may receive per contract credits for Electronic Customer volume that the OFP, as agent, submits to the Exchange.
The volume thresholds are based on an NYSE Amex Options Market Makers' volume transacted Electronically as a percentage of total industry Customer equity and ETF options volumes as reported by the Options Clearing Corporation (the “OCC”). Total industry Customer equity and ETF option volume is comprised of those equity and ETF contracts that clear in the Customer account type at OCC and does not include contracts that clear in either the Firm or Market Maker account type at OCC or contracts overlying a security other than an equity or ETF security. See OCC Monthly Statistics Reports, available here, http://www.theocc.com/webapps/monthly-volume-reports.
The Exchange proposes to modify the ACE Program by increasing certain of the credits available for Tiers 2 through 5 as illustrated in the table below, with proposed additions appearing underscored and proposed deletions appearing in brackets:
| ACE Program—Standard Options | Credits Payable On Customer Volume Only | |||||
|---|---|---|---|---|---|---|
| Tier | Customer Electronic ADV as a % of Industry Customer Equity and ETF Options ADV | OR | Total Electronic ADV (of which 20% or greater of the minimum qualifying volume for each Tier must be Customer) as a % of Industry Customer Equity and ETF Options ADV | Customer Volume Credits | 1 Year Enhanced Customer Volume Credits | 3 Year Enhanced Customer Volume Credits |
| 1 | 0.00% to 0.60% | N/A | $0.00 | $0.00 | $0.00 | |
| 2 | >0.60% to 0.80% or ≥0.35% over October 2015 volumes | N/A | [(0.16] (0.18) | [(0.16)] (0.18) | [(0.16)] (0.18) | |
| 3 | >0.80% to 1.25% | 1.50% to 2.50% of which 20% or greater of 1.50% must be Customer | [(0.17)] (0.19) | [(0.18)] (0.20) | [(0.19)] (0.21) | |
| 4 | >1.25 to 1.75% | >2.50% to 3.50% of which 20% or greater of 2.50% must be Customer | [(0.18)] (0.20) | [(0.19)] (0.21) | [(0.21)] (0.22) | |
| 5 | >1.75% | >3.50% of which 20% or greater of 3.5% must be Customer | [(0.19)] (0.22) | [(0.21)] (0.23) | [(0.23)] (0.24) |
The proposed amendments to the ACE Program are designed to enhance the rebates, which the Exchange believes would attract more volume and liquidity to the Exchange to the benefit of Exchange participants through increased opportunities to trade as well as enhancing price discovery.
Proposed Changes to CUBE Pricing
Section I.G. of the Fee Schedule sets forth the rates for per contract fees and credits for executions associated with a CUBE Auction. The Exchange is proposing to adjust rates for RFR Response fees and Initiating Credits and Rebates. Specifically, the Exchange proposes to adjust RFR Response fees for Non-Customers to $0.50 for symbols in the Penny Pilot, from $0.12; and to adjust RFR Response fees for Non-Customers for symbols not in the Penny Pilot to $1.05, from $0.12. The Exchange also proposes to adjust the Initiating Participant credits and rebates to $0.30 for symbols in the Penny Pilot, $0.70 for symbols not in the Penny Pilot, an increase from the $0.05 Initiating Participant credit in all names. The Exchange also proposes to increase the ACE Initiating Participant Rebate from $0.05 to $0.12.
The proposed changes are designed to increase incentives for submission of CUBE Orders, which should maximize price improvement opportunities for Customers.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act, in general, and furthers the objectives of Sections 6(b)(4) and (5) of the Act, 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.
15 U.S.C. 78f(b)(4) and (5).
The Exchange believes that the proposed amendments to the ACE Program are reasonable, equitable and not unfairly discriminatory because they would enhance the incentives to Order Flow Providers to transact Customer orders on the Exchange, which would benefit all market participants by providing more trading opportunities and tighter spreads, even to those market participants that do not participate in the ACE Program. Additionally, the Exchange believes the proposed changes to the ACE Program are consistent with the Act because they may attract greater volume and liquidity to the Exchange, which would benefit all market participants by providing tighter quoting and better prices, all of which perfects the mechanism for a free and open market and national market system.
The Exchange believes that the proposed changes to CUBE Auction fees are reasonable, equitable and not unfairly discriminatory. Specifically, the proposed increases to both the Initiating Participant Credits (for both Penny Pilot and Non-Penny Pilot) as well as the fees associated with RFR Responses that participate in the CUBE are reasonable, equitable and non-discriminatory because they apply equally to all ATP Holders that choose to participate in the CUBE, and access to the Exchange is offered on terms that are not unfairly discriminatory.
The Exchange believes the proposed changes to CUBE are reasonable, as they are similar to fees charged for similar auction mechanisms on other markets, such as BOX Options Exchange LLC (“BOX”), which charges a total fee of $1.05 for a Market Maker response to a PIP auction in a non-Penny Pilot issue. Similarly, the Exchange also notes that the proposed change to charge $0.50 for RFR Responses in Penny Pilot Issues is consistent with, or lower than, rates charged by competing option exchanges, including BOX (charging total response fee of $0.65 to market makers and $0.72 to all other participants); NASDAQ PHLX (“PHLX”) (charging a total response fee of $0.55 to market makers and $0.48 for all other participants) and Miami International Securities Exchange, Inc. (“MIAX”) (charging response fee of $0.50 to market participants).
See BOX Fee Schedule, available here, http://boxexchange.com/assets/BOX_Fee_Schedule.pdf .
See BOX Fee Schedule, at id.; PHLX fee schedule, available here, http://www.nasdaqtrader.com/Micro.aspx?id=phlxpricing; and MIAX fee schedule, available here, https://www.miaxoptions.com/content/fees .
The Exchange likewise believes the proposed increase of the ACE Initiating Participant Credit is reasonable, equitable and not unfairly discriminatory for the following reasons. First, 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 would 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 Exchange notes that the ACE Initiating Participant Rebate is equitable and not unfairly discriminatory because it would continue to incent 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.
Finally, the Exchange believes the proposed changes are consistent with the Act because to the extent the modifications permit the Exchange to continue to attract greater volume and liquidity, the proposed change would improve the Exchange's overall competitiveness and strengthen its market quality for all market participants.
For these reasons, the Exchange believes that the proposal is consistent with the Act.
B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with Section 6(b)(8) of the Act, 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 the proposed amendments to the ACE Program are pro-competitive as the proposed increased rebates may encourage OFPs to direct Customer order flow to the Exchange and any resulting increase in volume and liquidity to the Exchange would benefit all Exchange participants through increased opportunities to trade as well as enhancing price discovery. Further, the Exchange believes the proposed amendments to CUBE Auction pricing are pro-competitive as the fees and credits are designed to incent increases in the number of CUBE Auctions brought to the Exchange, which would benefit all Exchange participants through increased opportunities to trade as well as enhancing price discovery.
The Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues. In such an environment, the Exchange must continually review, and consider adjusting, its fees and credits to remain competitive with other exchanges. For the reasons described above, the Exchange believes that the proposed rule change reflects this competitive environment.
C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action
The foregoing rule change is effective upon filing pursuant to Section 19(b)(3)(A) of the Act and subparagraph (f)(2) of Rule 19b-4 thereunder, because it establishes a due, fee, or other charge imposed by the Exchange.
17 CFR 240.19b-4(f)(2).
At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings under Section 19(b)(2)(B) 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 ( http://www.sec.gov/rules/sro.shtml ); or
- Send an email to rule-comments@sec.gov. Please include File Number SR-NYSEMKT-2016-60 on the subject line.
Paper Comments
- Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEMKT-2016-60. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( http://www.sec.gov/rules/sro.shtml ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission's Public Reference Room, 100 F Street NE., Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NYSEMKT-2016-60, and should be submitted on or before July 18, 2016.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Brent J. Fields,
Secretary.
[FR Doc. 2016-15066 Filed 6-24-16; 8:45 am]
BILLING CODE 8011-01-P