[Federal Register Volume 84, Number 242 (Tuesday, December 17, 2019)]
[Notices]
[Pages 68960-68985]
[FR Doc No: 2019-26816]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87681; File No. 4-443]

Joint Industry Plan; Notice of Filing of Amendment No. 5 to the
Plan for the Purpose of Developing and Implementing Procedures Designed
To Facilitate the Listing and Trading of Standardized Options To Adopt
a Penny Interval Program

December 9, 2019.

I. Introduction

    Pursuant to Section 11A(a)(3) of the Securities Exchange Act of
1934 (``Act'') \1\ and Rule 608 thereunder,\2\ notice is hereby given
that on July 18, 2019, BOX Exchange LLC; Cboe BZX Exchange, Inc.; Cboe
C2 Exchange, Inc.; Cboe Exchange, Inc.; Cboe EDGX Exchange, Inc.; Miami
International Securities Exchange, LLC; MIAX Emerald, LLC; MIAX PEARL,
LLC; Nasdaq BX, Inc.; Nasdaq GEMX, LLC; Nasdaq ISE, LLC; Nasdaq MRX,
LLC; Nasdaq PHLX LLC; The Nasdaq Stock Market LLC; NYSE American, LLC;
NYSE Arca, Inc. (collectively, ``Exchanges''); and The Options Clearing
Corporation (``OCC'' and together with OCC, ``Plan Sponsors'') filed
Amendment No. 5 to the Plan for the Purpose of Developing and
Implementing Procedures to Facilitate the Listing and Trading of
Standardized Options (``OLPP'').\3\ The proposal reflects changes
unanimously approved by the Plan Sponsors. The Amendment No. 5 proposes
to adopt provisions that (i) establish a Program for quoting certain
classes in penny increments; (ii) establish an annual review process to
add to and/or remove option classes from the Penny Program; (iii) allow
an option class to be added to the Penny Program if it is a newly
listed option class and it meets certain criteria; (iv) allow an option
class with significant growth in activity to be added to the Penny
Program if it meets certain criteria; (v) provide that if a corporate
action involves one or more option classes in the Penny Program, all
adjusted and unadjusted series of the option class shall be included in
the Penny Program; (vi) provide that any series in an option class
participating in the Penny Program in which the underlying security has
been delisted, or are identified by OCC as ineligible for opening
customer transactions, will continue to quote pursuant to the rules of
the Penny Program until all such options have expired; and (vii)
establish an amendment process for the Penny Program. A copy of a
report submitted by the Exchanges in support of the Amendment is
attached as Exhibit A hereto. A copy of the Plan, as proposed to be
amended, is attached as Exhibit B hereto. The Commission is publishing
this notice to solicit comments from interested persons on the
Amendment No. 5.\4\
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    \1\ 15 U.S.C. 78k-1(a)(3).
    \2\ 17 CFR 242.608.
    \3\ See Letter from BOX Exchange LLC, CBOE BZX Exchange, Inc.,
CBOE Exchange, Inc., CBOE C2 Exchange, Inc, CBOE EDGX Exchange,
Inc., Miami International Securities Exchange, LLC, MIAX Emerald,
LLC, MIAX PEARL, LLC, NASDAQ BX, Inc., NASDAQ GEMX, LLC, NASDAQ ISE,
LLC, NASDAQ MRX, LLC, NASDAQ PHLX, LLC, The NASDAQ Stock Market LLC,
NYSE American, LLC, NYSE Arca, Inc., and the OCC, to Vanessa
Countryman, Secretary, Commission, dated July 18, 2019. On July 6,
2001, the Commission approved the OLPP, which was proposed by the
American Stock Exchange LLC, Chicago Board Options Exchange,
Incorporated, International Securities Exchange LLC, OCC,
Philadelphia Stock Exchange, Inc., and Pacific Exchange, Inc. See
Securities Exchange Act Release No. 44521, 66 FR 36809 (July 13,
2001). See also Securities Exchange Act Release Nos. 49199 (February
5, 2004), 69 FR 7030 (February 12, 2004) (adding Boston Stock
Exchange, Inc. as a Plan Sponsor); 57546 (March 21, 2008), 73 FR
16393 (March 27, 2008) (adding The Nasdaq Stock Market, LLC as a
Plan Sponsor); 61528 (February 17, 2010), 75 FR 8415 (February 24,
2010) (adding BATS Exchange, Inc. as a Plan Sponsor); 63162 (October
22, 2010), 75 FR 66401 (October 28, 2010) (adding C2 Options
Exchange Incorporated as a Plan Sponsor); 66952 (May 9, 2012), 77 FR
28641 (May 15, 2012) (adding BOX Options Exchange LLC as a Plan
Sponsor); 67327 (June 29, 2012), 77 FR 40125 (July 6, 2012) (adding
Nasdaq OMX BX, Inc. as a Plan Sponsor); 70765 (October 28, 2013), 78
FR 65739 (November 1, 2013) (adding Topaz Exchange, LLC as a Plan
Sponsor); 70764 (October 28, 2013), 78 FR 65733 (November 1, 2013)
(adding Miami International Securities Exchange, LLC as a Plan
Sponsor); 76822 (January 1, 2016), 81 FR 1251 (January 11, 2016)
(adding EDGX Exchange, Inc. as a Plan Sponsor); 77323 (March 8,
2016), 81 FR 13433 (March 14, 2016) (adding ISE Mercury, LLC as a
Plan Sponsor); 79897 (January 30, 2017), 82 FR 9263 (February 3,
2017) (adding MIAX PEARL, LLC as a Plan Sponsor); and 85228 (March
1, 2019), 84 FR 8355 (March 7, 2019) (adding MIAX Emerald, LLC as a
Plan Sponsor).
    \4\ 17 CFR 242.608. All capitalized and undefined terms used in
this letter have the same meanings assigned to them in the OLPP.

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II. Description of the Plan

    Set forth in this Section I is the statement of the purpose and
summary of Amendment No. 5, along with the information required by Rule
608(a)(4) and (5) under the Exchange Act,\5\ prepared and submitted by
the Plan Sponsors to the Commission.\6\
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    \5\ See 17 CFR 242.608(a)(4) and (a)(5).
    \6\ See Transmittal Letter, supra note 3.
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A. Statement of Purpose and Summary of the Plan Amendment

    The Plan Sponsors have agreed to amend the OLPP to govern the
listing of option classes that quote in one-cent increments and five-
cent increments under a Penny Interval Program (``Penny Program'').\7\
In particular, the Amendment proposes to adopt a new Section 3.1 that
includes provisions to (i) establish an annual review process to add to
and/or remove option classes from the Penny Program; (ii) allow an
option class to be added to the Penny Program if it is a newly listed
option class and it meets certain criteria; (iii) allow an option class
with significant growth in activity to be added to the Penny Program if
it meets certain criteria; (iv) provide that if a corporate action
involves one or more option classes in the Penny Program, all adjusted
and unadjusted series of the option class shall be included in the
Penny Program; (v) provide that any series in an option class
participating in the Penny Program in which the underlying security has
been delisted, or are identified by OCC as ineligible for opening
customer transactions, will continue to quote pursuant to the rules of
the Penny Program until all such options have expired; and (vi)
establish an amendment process for the Penny Program.
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    \7\ This Amendment No. 5 also seeks to make administrative
changes in Section 4 of the OLPP to replace references to the
adjustment panel with OCC. On November 9, 2018, the Commission
approved a Supplement to the Options Disclosure Document. The
Supplement provided for the implementation of modifications to the
OCC By-Laws that transferred the authority to make contract
adjustment determinations from adjustment panels, consisting of
representatives from option exchanges, to OCC. The proposed
modification to Section 4 of the OLPP coincides with these changes
to the OCC By-Laws to reflect that contract adjustment
determinations are now made by OCC. See Securities Exchange Act
Release No. 84565 (November 9, 2018), 83 FR 57778 (November 16,
2018) (SR-ODD-2018-01). See also Securities Exchange Act Release No.
69977 (July 11, 2013), 78 FR 42815 (July 17, 2013) (SR-OCC-2013-05).
This Amendment further seeks to make non-substantive ministerial
changes to update the names and addresses of certain Plan Sponsors,
as set forth in Section 9 of the OLPP.
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    The Plan Sponsors propose to establish the Penny Program as a
permanent replacement to the current Penny Pilot Program (``Penny
Pilot'').\8\ The Penny Program will provide for such designated option
classes to be quoted in $0.01 increments (for all series in such option
classes with a price of less than $3.00) and $0.05 increments (for all
series in such option classes with a price of $3.00 or higher). All
option series in QQQ (PowerShares QQQ TrustSM, Series 1), SPY (SPDR S&P
500 ETF) and IWM (iShares Russell 2000 Index Fund) will continue to
quote in $0.01 increments, regardless of price.
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    \8\ On January 26, 2007, the six options exchanges commenced the
Penny Pilot to quote and trade options on 13 stocks and ETFs in
penny increments after Chairman Cox of the Commission encouraged the
options exchanges in a letter dated June 6, 2006 to begin quoting a
limited number of options in pennies. See Securities Exchange Act
Release Nos. 55153 (January 23, 2007), 72 FR 4553 (January 31, 2007)
(SR-Phlx-2006-74); 55154 (January 23, 2007), 72 FR 4743 (February 1,
2007) (SR-CBOE-2006-92); 55162 (January 24, 2007), 72 FR 4738
(February 1, 2007) (SR-Amex-2006-106); 55161 (January 24, 2007), 72
FR 4754 (January 24, 2007) (SR-ISE-2006-62); 55156 (January 23,
2007), 72 FR 4759 (February 1, 2007) (SR-NYSEArca-2006-73); and
55155 (January 23, 2007), 72 FR 4741 (February 1, 2007) (SR-BSE-
2006-49). The Penny Pilot was subsequently expanded to include
additional option classes. Most notably, the Penny Pilot was
expanded by 22 option classes on September 28, 2007 and 28 option
classes on March 28, 2008. The Penny Pilot was last expanded in 2009
to include the next 300 most actively traded, multiply-listed option
classes that were not yet included in the Penny Pilot, excluding
options with high premiums. See Securities Exchange Act Release Nos.
60711 (September 23, 2009), 74 FR 49419 (September 28, 2009) (SR-
NYSEArca-2009-44); 60865 (October 22, 2009), 74 FR 55880 (October
29, 2009) (SR-ISE-2009-82); 60864 (October 22, 2009), 74 FR 55876
(October 29, 2009) (SR-CBOE-2009-076); 60874 (October 23, 2009), 74
FR 56682 (November 2, 2009) (SR-NASDAQ-2009-091); 60873 (October 23,
2009), 74 FR 56675 (November 2, 2009) (SR-Phlx-2009-91); 60886
(October 27, 2009), 74 FR 56897 (November 3, 2009) (SR-BX-2009-067);
and 61106 (December 3, 2009), 74 FR 65193 (December 9, 2009) (SR-
NYSEAmex-2009-74). Through these expansions, the Penny Pilot now
consists of 363 option classes.
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Initial Selection of Penny Program Classes
    The Penny Program will initially apply only to the 363 \9\ most
actively traded multiply listed option classes, based on OCC's National
Cleared Volume \10\ in the six full calendar months ending in the month
of approval,\11\ that (i) currently quote in penny increments (i.e.,
are already in the Penny Pilot) or, (ii) if not in the Penny Pilot,
overlie securities priced below $200, or any index at an index level
below $200.\12\ Eligibility for inclusion in the Penny Program will be
determined at the close of trading on the monthly expiration Friday of
the second full month following Commission approval of the proposed
Amendment. The changes made pursuant to this initial selection process
will become effective on the first trading day of the third full
calendar month following Commission approval of the proposed
Amendment.\13\ Option classes that are in the Penny Pilot but are not
selected for inclusion in the Penny Program following the initial
selection will be subject to the minimum trading increment as described
in the rules of the Exchanges, effective on the first trading day of
the third full calendar month following the Amendment's approval date.
Once an option class is in the Penny Program, it will remain in the
Penny Program until it is no longer among the 425 most actively traded
multiply listed option classes at the time of annual review. Option
classes will be replaced pursuant to the annual review process
described below.
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    \9\ This figure is taken from the current number of option
classes in the Penny Pilot. See supra note 8.
    \10\ Under the current parameters of the Penny Pilot, whether
for expansion of the Penny Pilot from 2007 to 2010, or for semi-
annual replacements, new issues were selected based on total
national contract volume cleared at OCC (i.e., ``National Cleared
Volume'') over a six month period. In discussions amongst the Plan
Sponsors in creating a permanent Penny Program with an annual
review, it was agreed to continue to rank issues based on National
Cleared Volume. National Cleared Volume includes FLEX transactions
and all listed series transactions, regardless of clearing account
type.
    \11\ For example, if the proposal is approved on November 6, the
volume test for the initial selection into the Penny Program will
include six months of National Cleared Volume beginning in June up
to and including the month of November.
    \12\ Certain option classes that currently quote in penny
increments pursuant to the Penny Pilot that are not among the 363
most actively traded multiply listed option classes at the time of
the initial selection will not be eligible to quote in penny
increments under the Penny Program.
    \13\ For example, if the proposal is approved on November 6, the
price determinant for inclusion into the Penny Program will be the
expiration Friday in January (the second full month following
approval). The changes from the initial selection process will
become effective on the first trading day in February.
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Annual Review
    The Plan Sponsors agree on an annual review process by which
eligible option classes may be added to the Penny Program, or
ineligible option classes may be removed from the Penny Program based
on objective criteria. Specifically, on an annual basis commencing in
December 2020 and each December thereafter, OCC will rank all multiply
listed option classes based on National Cleared Volume for the six full
calendar months from June 1 through November 30 for determination of
the most actively traded option classes. Any option class not yet in
the Penny Program that is among the 300 most actively traded multiply
listed option classes overlying

securities priced below $200, or an index at an index level below $200,
will be added to the Penny Program. Following the annual review, option
classes to be added to the Penny Program will begin quoting in $0.01
increments (for all series in such option classes with a price of less
than $3.00) and $0.05 increments (for all series in such option classes
with a price of $3.00 or higher) on the first trading day of January.
    In addition, following the annual review, any option class in the
Penny Program that falls outside the 425 most actively traded multiply
listed option classes will be removed from the Penny Program.\14\
Option classes that are removed from the Penny Program following an
annual review will be subject to the minimum trading increment as
described in the rules of the Exchanges, effective the first trading
day of April. Each Exchange will announce via bulletin if orders in
their respective order books in option classes being removed from the
Penny Program will be cancelled or if they will be converted to another
order type.\15\ The Plan Sponsors believe that these time periods would
give investors and traders sufficient time to prepare for the change in
quoting increments. Further, the Plan Sponsors believe that the
proposed annual review process provides an objective framework to add
and remove option classes from the Penny Program in a manner that is
designed to promote just and equitable principles of trade, to remove
impediments to and perfect the mechanism of a free and open market and
a national market system, and, in general, to protect investors and the
public interest. As noted above, the proposed parameters of the annual
review process are designed to ensure that the most active eligible
issues (i.e., top 300) are included while preventing high turnovers for
issues that are removed from the Penny Program (i.e., issues that fall
outside the top 425). The Plan Sponsors believe that the proposed
framework would thus promote consistency in the implementation of the
Penny Program, thereby aiding in the maintenance of a fair and orderly
options market system. Following Commission approval of the proposed
Amendment, the Exchanges will continue to monitor the 300, 363 and 425
option class thresholds going forward to determine if they are set at
appropriate levels.
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    \14\ The Plan Sponsors actively discussed the parameters of the
annual review process, and determined that consideration of the top
425 issues struck the appropriate balance between guaranteeing
inclusion of the most active issues (i.e., top 300) in the Penny
Program while maintaining a buffer (of additional eligible issues)
to ensure the least disruptive means for the annual rebalancing for
those issues that were included in the Penny Program (which included
the top 363 issues) that fall below the top 300. It was noted that
the relative rankings of issues may increase or decrease by 20 to 30
spots from year to year, and that automatically including the top
300 (rather than 363), would allow the Penny Program to always
include the most active issues, while maintaining the eligibility of
an issue that is still active, although not as relatively active
because of normal fluctuations in investor interest. Provided the
issue was not less active than the next 62 most active (i.e., not
among the top 425) such issues would remain in the Program. If the
activity level declines to where it is not in the top 425, however,
it should be phased out of the Penny Program. The proposed framework
is therefore designed to allow for consistency and prevent high
turnovers for issues that are removed from the Penny Program.
    \15\ Each Exchange will disseminate a memorandum which will
detail how open orders will be handled on its trading platform for
all series on an option class removed from the Penny Program, since
all the Exchanges do not employ the same process for cancellation of
such orders.
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Newly Listed Option Classes
    In addition to the annual review described above, the Plan Sponsors
agree to allow option classes to be added to the Penny Program if they
are a newly listed option class that meets certain criteria.
Specifically, the Exchanges may add a newly listed option class to the
Penny Program, provided that (i) it is among the 300 most actively
traded multiply listed option classes, as ranked by National Cleared
Volume at OCC, in its first full calendar month of trading, and (ii)
the underlying security is priced below $200 or the underlying index is
at an index level below $200. Any option class added under this
provision will be added on the first trading day of the month after it
qualifies.\16\ Any option class so added shall remain in the Penny
Program for one full calendar year, after which it will be subject to
the annual review. The Plan Sponsors believe that the proposed trading
volume threshold and initial price test, as described herein, provide
objective criteria by which the Exchanges can add new option classes to
the Penny Program in issues with the most demonstrated trading interest
from market participants and investors on an expedited basis prior to
the annual review, in a manner that will benefit market participants
and investors by allowing them to trade these new option classes that
quote and trade in a finer trading increment.
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    \16\ For example, a new issue that began trading on the 20th of
October will have its volume for the month of November evaluated and
ranked. If that issue is among the 300 most actively traded multiply
listed option classes for November, and the underlying security is
priced below $200 or the underlying index is at an index level below
$200, it will be added to the Penny Program on the first trading day
of December.
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Option Classes With Significant Growth in Activity
    In addition to the annual review described above, the Plan Sponsors
agree to allow an option class to be added to the Penny Program if it
is an option class that has a significant growth in activity.
Specifically, the Exchanges may add any option class to the Penny
Program, provided that (i) it is among the 75 most actively traded
multiply listed option classes, as ranked by National Cleared Volume at
OCC, for six full calendar months of trading, and (ii) the underlying
security is priced below $200 or the underlying index is at an index
level below $200. Any option class added under this provision will be
added on the first trading day of the second full month after it
qualifies.\17\ The option class will then remain in the Penny Program
for the rest of the calendar year, after which it will be subject to
the annual review.\18\
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    \17\ For example, if an issue is among the 75 most actively
traded multiply listed option classes for six months ending February
28 (for the period September 1 to February 28), and the underlying
security is priced below $200 or the underlying index is at an index
level below $200, it will be added to the Penny Program on the first
trading day of April.
    \18\ Thus, for example, if an issue was added to the Penny
Program under this provision in October 2020, it would be subject to
the next annual review in December 2020. In contrast, if a new issue
was added to the Penny Program in October 2020 under the process
described above for newly listed options, it would be up for annual
review in December 2021 (i.e., it would remain in the Penny Program
for one full calendar year, after which it would be subject to the
annual review). As discussed below, the Plan Sponsors believe that
it is appropriate for issues added under this provision to have a
shorter lookback period as any issue that was already listed and was
active enough to qualify under the more stringent requirements in
this provision should be active enough to continue to qualify for
the Penny Program.
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    The Plan Sponsors believe that a provision to allow for option
classes to be added to the Penny Program outside of the annual review
process is beneficial to market participants because of the rare
instances when an option class that has been listed for some time
becomes very active for an extended period of time, such as after the
development of a new product. While some issues may become active for a
month or two, the six month activity requirement and the higher
qualification level (among the 75 most active) ensures that only those
option classes with widespread investor interest are added to the Penny
Program outside of the regular process.
    The Plan Sponsors also believe that option classes added outside of
the regular process should be subject to the

next annual review, as any option class that was active enough to
qualify outside of the regular process under this provision should be
active enough to continue to qualify for the Penny Program. The Plan
Sponsors believe that the proposed trading volume threshold and initial
price test, as described herein, provide objective criteria by which
the Exchanges can add an option class to the Penny Program in issues
with the most demonstrated trading interest from market participants
and investors on an expedited basis prior to the annual review, in a
manner that will benefit market participants and investors by allowing
them to trade these new option classes that quote and trade in a finer
trading increment.
Corporate Actions
    The Plan Sponsors agree to provide that if a corporate action
involves one or more option classes in the Penny Program, all adjusted
and unadjusted series of the option class shall be included in the
Penny Program.\19\ No trading volume threshold shall apply and the
initial price test shall not apply to the option class added to the
Penny Program as a result of the corporate action. The newly added
adjusted and unadjusted series of the option class shall remain in the
Penny Program for one full calendar year. After such time, the option
class will be subject to the annual review. The Plan Sponsors believe
that the proposal to allow such new option classes to be included in
the Penny Program will ensure the continuality of liquidity in the
option classes post-corporate action to the benefit of market
participants and investors in a manner that it is designed to promote
just and equitable principles of trade, to remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and, in general, to protect investors and the public interest.
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    \19\ For example, if Company A acquires Company B and Company A
is not in the Penny Program but Company B is in the Penny Program,
once the merger is consummated and an options contract adjustment is
effective, then Company A will be added to the Penny Program and
remain unchanged for one calendar year.
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Delisted or Ineligible Option Classes
    The Plan Sponsors agree to provide that any series in an option
class participating in the Penny Program in which the underlying has
been delisted, or is identified by OCC as ineligible for opening
customer transactions, will continue to quote pursuant to the terms of
the Penny Program until all options series have expired. The Plan
Sponsors believe that the proposal to allow delisted or ineligible
option classes to stay in the Penny Program until they expire will
encourage market participants to continue to provide liquidity in these
issues in a manner that is designed to promote just and equitable
principles of trade, to remove impediments to and perfect the mechanism
of a free and open market and a national market system, and, in
general, to protect investors and the public interest.
Multiply Listed Option Classes; Penny Program Amendments
    The Plan Sponsors agree that references to multiply listed option
classes in proposed Section 3.1 of the OLPP will apply only to option
classes in the Penny Program, and to no other sections of the OLPP.
    The Plan Sponsors further agree to an amendment process that would
only apply to changes to the Penny Program provisions set forth in
proposed Section 3.1 of the OLPP. Currently, any amendments to the OLPP
other than to add new Plan Sponsors must be approved unanimously by the
Plan Sponsors.\20\ As proposed, the Plan Sponsors agree to a separate
amendment process to govern any changes to Section 3.1. Specifically,
not sooner than 60 months following Commission approval of the proposed
Amendment, a super-majority (\2/3\) of the Plan Sponsors may vote to
make changes to the Penny Program. At any time before 60 months have
passed since the adoption of the Penny Program, any changes must be
unanimously approved by the Plan Sponsors. Any changes to the Penny
Program will be subject to SEC review pursuant to Section 11A(a)(3) of
the Securities Exchange Act of 1934 and Rule 608 thereunder.
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    \20\ Section 7 of the OLPP sets forth a discrete process to
effect amendments adding new Plan Sponsors, including requirements
that the Eligible Exchange, as defined therein, execute a copy of
the OLPP and provide each then-current Plan Sponsor with a copy of
such executed Plan.
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Summary of Penny Pilot Reports
    The Plan Sponsors agree to adopt the Penny Program based on results
of the numerous previously published studies regarding the Penny Pilot,
and the most recent data presented in the Report on Activity in Option
Classes Added to the Penny Pilot summarized below. Plan Sponsors note
that the various markets and market participants have previously
studied the Penny Pilot, in 2009 and 2010, when the Penny Pilot was
expanded. The Exchanges have also studied the Penny Pilot throughout
the duration of the program, and consistently found that as an overall
program, the Penny Pilot was of significant benefit to investors and
other market participants and had a minimal negative impact on the
industry.\21\ Through these studies, the options industry gained, and
shared with the Commission, an understanding of the benefits to
investors and other market participants of the Penny Pilot and the
burdens on quote traffic and capacity caused by this program. Over the
duration of the Penny Pilot, the Exchanges have studied quote traffic
with an expectation that quote traffic would increase because of more
quoting price points. However, this would be offset by benefits to the
investing public due to narrowed spreads and more price points, along
with the expectation that the increased quote traffic would provide
increased trading activity. Overall, the Plan Sponsors agree these
benefits remain true and that the Penny Pilot, as a whole, has largely
met these expectations.
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    \21\ For example, the Exchanges' earlier Penny Pilot reports
have generally found the National Best Bid and Offer (``NBBO'')
spread width has narrowed, size available at the NBBO has declined,
quote traffic has increased, and industry volumes have increased.
See e.g., Chicago Board Options Exchange, Penny Pilot Report dated
March 4, 2008; International Securities Exchange Penny Pilot
Analysis Phase 2, dated November 27, 2007; Philadelphia Stock
Exchange Options Penny Pricing Pilot Report, dated February 29,
2007; American Stock Exchange Penny Pilot Report, dated November 2,
2007; New York Stock Exchange Arca Options: Understanding Economic
and Capacity Impact of the Options Penny Pilot, dated November 14,
2007. The Exchanges' Penny Pilot reports are also available at:
https://www.cboe.org/general-info/hybrid-reg-penny-pilot-program;
https://boxoptions.com/regulatory/governing-documents-related-information-nms-plans/pilot-reports/penny/; and https://www.nyse.com/markets/american-options/reports.

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    In addition, the Commission's Division of Economic and Risk
Analysis (``DERA'') recently contracted with Cornerstone Research
(``Cornerstone'') to conduct an independent analysis of the impact of
the Penny Pilot on market quality, using quoted and effective spreads
as measures of market quality (``Cornerstone Analysis'').\22\ The
Cornerstone Analysis is based on data on options added to the Penny
Pilot between January 26, 2007 and January 5, 2016, and thus covers a
time period from the inception of the Penny Pilot. Overall, the
Cornerstone Analysis finds that relative to the control sample of
options that were not included in the Penny Pilot, there is a
statistically significant decrease in effective and quoted spreads for
the most liquid option classes included in the Penny Pilot.\23\
However, for less liquid Penny Pilot option classes, especially in the
later years (the period 2012--2015), the results do not indicate that
inclusion in the Penny Pilot has a significant effect on market
quality.\24\
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    \22\ DERA Memorandum on Cornerstone Analysis, December 18, 2017,
https://www.sec.gov/files/DERA_Memo_on_a_Cornerstone_Penny_Pilot_Analysis.pdf.
    \23\ Id. at 1.
    \24\ Id. at 2.
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Report on Activity in Option Classes Added to the Penny Pilot \25\
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    \25\ The report setting forth the data for these studies,
entitled ``Report on Activity in Options Classes Added to the Penny
Pilot'' (``Report''), is submitted as Exhibit A as part of this
Amendment No. 5.
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    Most recently, on behalf of the U.S. options exchanges
participating in the Penny Pilot, NYSE Group, together with its
subsidiary markets, NYSE American Options and NYSE Arca Options,
studied option quote and trade activity in the eight option classes
listed in the table below (the ``Study Group''). The study examined
trading activity for this Study Group during two time periods: the
Third and Fourth Quarters of 2014 (i.e., before the selected issues
were added to the Penny Pilot (the ``pre- Pilot period'')) and the
Third and Fourth Quarters of 2015 (i.e., after the selected issues were
added to the Penny Pilot (the ``Pilot period'')).\26\
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    \26\ For avoidance of doubt, the phrase, ``Pilot period'' as
used herein refers to solely the limited time period studied for
purposes of the Report and does not include trading activity that is
occurring in the ongoing Penny Pilot.

                    Option Classes in the Study Group
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         Symbol            Underlying security      Date added to Pilot
------------------------------------------------------------------------
BABA...................  Alibaba Group Holding    Jan. 5, 2015.
                          Ltd.
CBS....................  CBS Corp...............  Jan. 5, 2015.
FEYE...................  FireEye Inc............  July 6, 2015.
GPRO...................  GoPro Inc..............  July 6, 2015.
HYG....................  iShares iBoxx $ High     July 6, 2015.
                          Yield Corporate Bond
                          ETF.
OIH....................  Market Vectors Oil       July 6, 2015.
                          Service ETF.
RAD....................  Rite Aid Corp..........  July 6, 2015.
RSX....................  Market Vectors Russia    July 6, 2015.
                          ETF.
------------------------------------------------------------------------

    The data for the Study Group was compiled based on trading activity
that occurred on each Wednesday during the pre-Pilot, and Pilot period
(n=27), in an effort to minimize disruption from options expirations,
which occur on Fridays, and/or the additions of new series, which often
occur on Mondays.
    The quote data was compiled across all series and expirations for
options on each of the eight underlying securities in the Study Group.
To focus on the effect of quoting in $0.01 increments, the quotes in
the Study Group were segregated by those with an offer value less than
or equal to $3.00, and those with an offer greater than $3.00.\27\
Option classes that are not in the Penny Pilot quote in $0.05
increments below $3.00 and $0.10 increments at or above $3.00, whereas
option classes in the Penny Pilot quote in $0.01 increments below
$3.00, and $0.05 increments at or above $3.00.
---------------------------------------------------------------------------

    \27\ Generally, rules on Trading Differentials refer to
``trading at less than $3.00'' or ``trading at $3.00 or above.'' To
accurately evaluate the effect of quotations in one cent increments,
both the bid and the offer (ask) must be in one cent increments,
which requires offers to be at or below $3.00. Markets in Pilot
Issues with an offer above $3.00 are at least $0.05 wide by rule.
---------------------------------------------------------------------------

1. Spread Width
    Spread width is a measure of the benefit to investors, as the costs
of entering and exiting the market are reduced by a narrower
spread.\28\
---------------------------------------------------------------------------

    \28\ Spread width for this study was calculated by subtracting
the National Best Bid from the National Best Offer.
---------------------------------------------------------------------------

    As shown in Figures 1 and 3 of the Report, the study found that the
average spread width for issues in the Study Group was reduced during
the Pilot period as compared to the pre-Pilot period. The results
indicated a more consistent reduction in spread width in the lower-
priced options (i.e., that typically quote and trade below $3.00) than
in the higher-priced options (i.e., that typically quote and trade at
or above $3.00).
    The study also examined the median width of all of the quotes on
issues in the Study Group to determine whether the average spread width
was distorted by higher-priced options in the Study Group. As Figures
4-5 show, the results indicated a reduced median spread width for
lower-priced options during the Pilot period, while the results did not
indicate as consistent a reduction in the median spread width for
higher-priced options during the same period. The Exchanges still
believe that the findings support making the Penny Pilot a permanent
program because of the reduction in quoted spreads, especially for
lower-priced options, which is beneficial to the investing public by
lowering the costs of entering and exiting the market and thus
consistent with the Act.
2. Liquidity; Trades by Quote Width
    The study also examined the number of contracts in the Study Group
offered at the National Best Offer. While most markets submitted to
options exchanges are symmetrical in the number of contracts bid for,
and the number of contracts offered, the common presence of quotes
without a bid in out-of-the-money option series would distort the
average bid size for a given option. With that in mind, the study
focused solely on offer sizes.
    Since the beginning of the Penny Pilot in 2007, there was a focus
on whether the benefit of a reduced spread would be offset by a
decrease in liquidity available at the National Best Bid/Offer
(``NBBO''). As shown in Figure 6 and Table 2 of the Report, the study
found that while there was a reduction in the number of contracts
offered at the NBBO

for the Study Group during the Pilot period, the available size at the
NBBO for the Study Group was, on average, greater than 99% of all
options trades during this same time period.
    As Table 3 shows, an examination of the Study Group trades during
the pre-Pilot and Pilot period also indicated a sizeable percentage of
transactions occurred between the NBBO (i.e., between 36.1% and 44.0%),
a result seen more frequently during the pre-Pilot period than during
the Pilot period.\29\ While the Exchanges recognize that the foregoing
results show that there has been a reduction in displayed size
available at the NBBO in the Study Group issues, the Exchanges believe
the study still supports making the pilot permanent, especially since
the results also show (in Table 2) that the available size at the NBBO
for the Study Group was, on average, greater than 99% of all options
trades during the Pilot period.
---------------------------------------------------------------------------

    \29\ For purposes of this study, all reported trades were
included, regardless of trade condition, including Complex Trades.
Complex Trades are priced at a total or net debit or credit, with
the possibility of each component of the Complex Trade being priced
between the National Best Bid and the National Best Offer. The
observed variation in the percentage of transactions that occurred
between the NBBO in the pre-Pilot and Pilot period could have been,
in part, driven by the variation in the proportion of Complex Trades
over the two periods.
---------------------------------------------------------------------------

    As shown in Figures 7-14 in the Report, further examination of the
Study Group data also demonstrated that having price points available
under $0.10 resulted in trading that was concentrated on narrower
spreads even if this trend did not result in a significant narrowing of
spreads across the universe of series in an underlying class. The data
also indicated that after being added to the Penny Pilot, all but two
classes in the Study Group experienced more than 50% of trading
occurred when the spread width was $0.05 or less. The other two classes
(e.g., HYG and RSX) still experienced a noticeable increase in trading
in that spread width bucket.
3. Quote Traffic Data
    One portion of the quote traffic analysis also observed the same
Study Group and covered time pre-Pilot and Pilot periods of 2014 and
2015, respectively. As Figure 15 of the Report shows, nearly all of the
issues showed an increase in number of quotes once it was included with
the Penny Pilot.\30\ On average, the quote traffic increase between the
two time periods was 121%.\31\
---------------------------------------------------------------------------

    \30\ Alibaba Group Holding (BABA) shows an extreme traffic
increase of 403%, which significantly overshadows the amount of
quote traffic increase of the other additions. This is, in large
part, due to its IPO in September 2014; when it was the largest IPO
in history at that time. Over the two periods, historically, there
were days of higher quote traffic around earnings announcements.
Further, over each of the last two months of 2015, BABA quote
traffic exceeded 2 billion quotes, which was nearly as much as it
experienced, in total, over it first three months of trading.
    \31\ Due to the considerable influence of the BABA traffic
increase, if the percentage increase in quote traffic was calculated
without BABA's quote data, then the value would fall to 81%.
    \32\ Symbol MBLY was voluntarily delisted from NYSE on September
6, 2017, in connection with a tender offer from Intel (INTC) and
subsequently listed on the OTC market. Symbol SDRL filed for Chapter
11 Bankruptcy on September 12, 2017. Subsequent to the bankruptcy
filing, SDRL was delisted from NYSE and listed on an OTC market.
When a security moves to the OTC market, many options exchanges seek
to delist the security as it is not in compliance with continued
listings standards for options. Due to its removal from nearly all
options exchanges, quoting in this security is drastically reduced
and are typically present only when (or if) a customer looks to
close out an open options position.
---------------------------------------------------------------------------

    Additionally, further analysis was conducted on a second study
group to evaluate quote traffic for Penny Pilot issues that were added
to the Penny Pilot in July 2017 (see option classes below, ``July 2017
Study Group'').

                 Option Classes in July 2017 Study Group
------------------------------------------------------------------------
         Symbol            Underlying security      Date added to Pilot
------------------------------------------------------------------------
FEZ....................  SPDR EURO STOXX 50 ETF.  Jul 5, 2017.
HPE....................  Hewlett Packard          Jul 5, 2017.
                          Enterprise Co.
ILG....................  ILG Inc................  Jul 5, 2017.
JNUG...................  Direxion Daily Jr. Gold  Jul 5, 2017.
                          Miners Index Bull 3X
                          Shares.
MBLY...................  Mobileye N.V...........  Jul 5, 2017.
MPC....................  Marathon Petroleum Corp  Jul 5, 2017.
PANW...................  Palo Alto Networks Inc.  Jul 5, 2017.
SDRL...................  Seadrill Ltd...........  Jul 5, 2017
SNAP...................  Snap Inc...............  Jul 5, 2017.
UCO....................  ProShares Ultra          Jul 5, 2017.
                          Bloomberg Crude Oil.
YELP...................  Yelp Inc...............  Jul 5, 2017.
------------------------------------------------------------------------

    Figure 16 in the Report compares two time periods (January-June
2017 and January-June 2018) for the July 2017 Study Group, which
represents the time before and after their inclusion into the Penny
Pilot. As shown in Figure 16, of the July 2017 Study Group issues, only
two (2) experienced a decrease in quote traffic (e.g., MBLY and SDRL),
and such issues are the only issues that have eventually been delisted
from a National Market System.\32\ On average, the July 2017 Study
Group issues have experienced an increase in quote traffic of over 140%
between the two time periods.
    The Report also compares the effect on quote traffic for the
potential removals and additions to the Penny Pilot for the time period
between January 2018 and June 2018, as shown in Figure 17. Over the six
months of 2018, the issues which would be additions to the Penny Pilot
generated nearly 103 billion quotes, and issues which would be removed
generated about 77 billion quotes over the same time period. Thus by
comparison, the additions generated approximately 26 billion more
quotes than the removals during January to June timeframe (or an
average of over 4 billion quotes each month). While the foregoing
findings demonstrate that the increase in quote traffic has been
appreciable, the capacities of the Exchanges' systems and Options Price
Reporting Authority (``OPRA'') have been sufficiently adequate in
handling the quote traffic increase resulting from the Penny Pilot. In
addition, the Exchanges believe that their respective and OPRA's
systems have sufficient quote capacity going forward to accommodate the
projected increase in quote traffic that will result from the initial
selection and annual review process proposed above.

B. Governing or Constitutional Documents

    Not applicable.

C. Description of Amendment Implementation

    The OLPP, as amended, will become effective upon Commission
approval. The Plan Sponsors will implement the OLPP, as amended,
pursuant to the terms of this Amendment No. 5 upon Commission approval.

D. Development and Implementation Phases

    Not applicable.

E. Analysis of Impact on Competition

    The proposed OLPP, as amended, does not impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act. The Plan Sponsors do not believe that this
Amendment No. 5 introduces terms that are unreasonably discriminatory
for the purposes of Section 11A(c)(1)(D) of the Act.\33\ The Plan
Sponsors believe that making the Penny Pilot a permanent program will
allow for continued competition between market participants trading
similar products as their counterparts across the options exchanges,
while at the same time allowing options exchanges to continue to
compete for order flow in option classes trading as part of the Penny
Program.
---------------------------------------------------------------------------

    \33\ 15 U.S.C. 78k-1(c)(1)(D).
---------------------------------------------------------------------------

F. Written Understandings or Agreements Relating to Interpretation of,
or Participation in, the OLPP

    Not applicable.

G. Approval by Plan Sponsors

    This Amendment No. 5 has been approved by the Plan Sponsors in
accordance with the OLPP. The Plan Sponsors have each executed a signed
copy of the Amendment.

H. Terms and Conditions of Access

    Not applicable.

I. Method of Determination and Imposition, and Amount of, Fees and
Charges

    Not applicable.

J. Method and Frequency of Processor Evaluation

    Not applicable.

K. Dispute Resolution

    Not applicable.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the amendment 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<EMAIL_ADDRESS>Please include
File Number 4-443 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 4-443.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 (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed plan amendment that are filed
with the Commission, and all written communications relating to the
amendment between the Commission and any person, other than those that
may be withheld from the public in accordance with the provisions of 5
U.S.C. 552, will be available for website viewing and printing in the
Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of such filing also will be available for inspection
and copying at the Participants' offices. 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 4-443
and should be submitted on or before January 7, 2020.

    By the Commission.

Jill M. Peterson,
Assistant Secretary.

Exhibit A to Amendment No. 5

Report on Activity in Option Classes Added to the Penny Pilot

March 8, 2019

Executive Summary

    On behalf of the U.S. options exchanges participating in the Penny
Pilot program (the ``Penny Pilot'' or ``Pilot''), NYSE Group, together
with its subsidiary markets, NYSE American Options and NYSE Arca
Options, studied option quote and trade activity in the eight option
classes listed in the table below (the ``Study Group''). The study
examined trading activity for this Study Group during two time periods:
The Third and Fourth Quarters of 2014 (i.e., before the selected issues
were added to the Pilot (the ``pre- Pilot period'') and the Third and
Fourth Quarters of 2015 (i.e., after the selected issues were added to
the Pilot (the ``Pilot period'').\1\ The changes in market conditions
could affect quote activity and market quality measures such as spread
width and trading activity examined in this report. This report
utilizes the level and changes in market volatility measured by Cboe
Volatility index (``VIX'') to gauge market condition during the pre-
Pilot period and the Pilot period. In general, an increase in market
volatility could lead to an increase in quote activity, wider spread
widths, and higher trading volume for options.
---------------------------------------------------------------------------

    \1\ For avoidance of doubt, the phrase, ``Pilot period'' as used
herein refers to solely the limited time period studied for purposes
of this report and does not include trading activity that is
occurring in the ongoing Pilot.

               Table 1--Option Classes in the Study Group
------------------------------------------------------------------------
          Symbol              Underlying security    Date added to pilot
------------------------------------------------------------------------
BABA.....................  Alibaba Group Holding     Jan. 5, 2015.
                            Ltd.
CBS......................  CBS Corp................  Jan. 5, 2015.
FEYE.....................  FireEye Inc.............  July 6, 2015.
GPRO.....................  GoPro Inc...............  July 6, 2015.

HYG......................  iShares iBoxx $ High      July 6, 2015.
                            Yield Corporate Bond
                            ETF.
OIH......................  Market Vectors Oil        July 6, 2015.
                            Service ETF.
RAD......................  Rite Aid Corp...........  July 6, 2015.
RSX......................  Market Vectors Russia     July 6, 2015.
                            ETF.
------------------------------------------------------------------------

    The data for the Study Group was compiled based on trading activity
that occurred on each Wednesday during the pre-Pilot, and Pilot period
(n=27), in an effort to minimize disruption from options expirations,
which occur on Fridays, and/or the addition of new series, which often
occur on Mondays.
    The quote data was compiled across all series and expirations for
options on each of the eight underlying securities in the Study Group.
To focus on the effect of quoting in $0.01 increments, the quotes in
the Study Group were segregated by those with an offer value less than
or equal to $3.00, and those with an offer greater than $3.00.\2\
Option classes that are not in the Pilot quote in $0.05 increments
below $3 and $0.10 increments at or above $3.00, whereas option classes
in the Pilot quote in $0.01 increments below $3.00, and $0.05
increments at or above $3.00. Spread width is a measure of benefit to
investors, as the costs of entering and exiting the market are reduced
by a narrower spread.\3\
---------------------------------------------------------------------------

    \2\ Generally, rules on Trading Differentials refer to ``trading
at less than $3'' or ``trading at $3 or above.'' To accurately
evaluate the effect of quotations in one cent increments, both the
bid and the offer (ask) must be in one cent increments, which
requires offers to be at or below $3. Markets in Pilot Issues with
an offer above $3 are at least $0.05 wide by rule.
    \3\ Spread width for this study was calculated by subtracting
the National Best Bid from the National Best Offer.
---------------------------------------------------------------------------

    The study found that the average spread width for issues in the
Study Group was reduced during the Pilot period as compared to the pre-
Pilot period. The results indicated a more consistent reduction in
spread width in the lower-priced options (i.e., that typically quote
and traded below $3) than in the higher-priced options (i.e., that
typically quote and traded at or above $3.00). The study also examined
the median width of all of the quotes on issues in the Study Group to
determine whether the average spread width was distorted by higher-
priced options in the Study Group. The results indicated a reduced
median spread width for lower-priced options during the Pilot period,
while the results did not indicate as consistent a reduction in the
median spread width for higher-priced options during the same period.
    The study also examined the number of contracts in the Study Group
offered at the National Best Offer. While most markets submitted to
options exchanges are symmetrical in the number of contracts bid for,
and the number of contracts offered, the common presence of quotes
without a bid in out-of-the-money option series would distort the
average bid size for a given option. With that in mind, the study
focused solely on offer sizes.
    Since the beginning of the Pilot in 2007, there was a focus on
whether the benefit of a reduced spread would be offset by a decrease
in liquidity available at the National Best Bid/Offer (``NBBO''). The
study found that while there was a reduction in the number of contracts
offered at the NBBO for the Study Group during the Pilot period, the
size traded at the NBBO for the Study Group still vastly exceeded the
available size at the NBBO during this same time period. An examination
of the Study Group trades during the pre-Pilot and Pilot period also
indicated a sizeable percentage of transactions occurred between the
NBBO (i.e., between 36.1% and 44.0%), a result seen more frequently
during the pre-Pilot period than during the Pilot period. This finding
of a reduced effective spread demonstrates that exchanges have used
alternative mechanisms such as price improvement auctions to offset the
artificial spread width caused by the lower minimum quote
increments.\4\
---------------------------------------------------------------------------

    \4\ For purposes of this study, all reported trades were
included, regardless of trade condition, including Complex Trades.
Complex Trades are priced at a total or net debit or credit, with
the possibility of each component of the Complex Trade being priced
between the National Best Bid and the National Best Offer. The
observed variation in the percentage of transactions that occurred
between the NBBO in the pre-Pilot and Pilot period could have been,
in part, driven by the variation in the proportion of complex trades
over the two periods.
---------------------------------------------------------------------------

    Further examination of the Study Group data also demonstrated that
having price points available under $0.10 resulted in trading that was
concentrated on narrower spreads even if this trend did not result in a
significant narrowing of spreads across the universe of series in an
underlying class. The data also indicated that after being added to the
Pilot, all but two classes experienced more than 50% of trading
occurred when the spread width was $0.05 or less. The other two classes
(e.g., HYG and RSX) still showed a noticeable increase in trading in
that spread width bucket.
    The Participants feel the Report demonstrates the benefit to the
investing public of pricing active options classes in $0.01 increments
below $3.00, and $0.05 increments above $3.00. The Report is consistent
with findings from earlier Penny Pilot Reports from 2007 to 2012: The
NBBO spread has narrowed, size available at the NBBO has declined,
quote traffic has increased and industry volumes have increased.
    These findings are also consistent with those of Cornerstone
Research,\5\ that inclusion in the Pilot is associated with a decrease
in quoted spreads.
---------------------------------------------------------------------------

    \5\ Division of Economic and Risk Analysis (``DERA'') of the
U.S. Securities and Exchange Commission contracted with Cornerstone
Research (``Cornerstone''), an economic and financial consulting
firm, to conduct analyses related to investigating the effects on
market quality of the continuing Pilot that allows certain exchange-
traded options to be quoted in reduced price increments. See DERA
Memorandum on Cornerstone Analysis, December 18, 2017, https://www.sec.gov/files/DERA_Memo_on_a_Cornerstone_Penny_Pilot_Analysis.pdf.
---------------------------------------------------------------------------

* * * * *

[GRAPHIC] [TIFF OMITTED] TN17DE19.005

    Except for a two \6\ week period where the Pilot period spread was
higher than or equal to the Pre-Pilot period spread, the Pilot led to
narrower markets across the Study Group in option series quoted in
penny increments. As observed in Figure 2, the levels of market
volatility measured by VIX are similar during the pre-Pilot and Pilot
period. We observed narrower spreads during the Pilot period compared
to those during the pre-Pilot period. The two week period where the
Pilot period spread was higher than or equal to the pre-Pilot period
spread is associated with higher and increasing market volatility.
---------------------------------------------------------------------------

    \6\ Spread width for this study was calculated by subtracting
the National Best Bid from the National Best Offer. No weighting was
applied. Figure 1 represents the arithmetic average of all National
Best Bid/Offer (``NBBO'') quotes in the Study Group with an offer
equal to or less than $3, while Figure 3 represents the arithmetic
average of all NBBO quotes in the Study Group with an offer greater
than $3.
[GRAPHIC] [TIFF OMITTED] TN17DE19.006

    The periods where VIX increased correlated to increased spread
widths.

[GRAPHIC] [TIFF OMITTED] TN17DE19.007

    The study did not demonstrate a consistently narrower market for
higher-priced options.
[GRAPHIC] [TIFF OMITTED] TN17DE19.008

    An examination of the median of all the spreads of lower-priced
options in the Study Group during the Pilot demonstrated a consistent
reduction in the average spread width.

[GRAPHIC] [TIFF OMITTED] TN17DE19.009

    An examination of the median of all spread widths of higher-priced
options in the Study Group did not demonstrate as consistent a
reduction in spread width.
[GRAPHIC] [TIFF OMITTED] TN17DE19.010

                         Table 2--Transactions Grouped by Trade Size (``Trade Buckets'')
----------------------------------------------------------------------------------------------------------------
                   Trade size                        Q3--2014        Q4--2014        Q3--2015        Q4--2015
----------------------------------------------------------------------------------------------------------------
0-10............................................          64,935         276,275         158,229         216,690
11 to 50........................................          13,298          47,541          31,656          36,690
51 to 100.......................................           1,688           5,950           4,277           4,486
101 to 500......................................           1,094           2,587           1,880           1,994
501 to 1,000....................................             254             204             144             143
>1,000..........................................             308             197             136             193
                                                 ---------------------------------------------------------------
                                                          81,577         332,754         196,322         260,196
----------------------------------------------------------------------------------------------------------------

    While the data \7\ indicated a reduction in available liquidity at
the NBBO for options traded in the Study Group during the Pilot period,
the quoted size at the NBBO for the Study Group issues was, on average,
greater than 99% of all options trades during the Pilot period. Only
the trade bucket for the very largest trades (>1,000 Contracts) were in
excess of the average offer size.
---------------------------------------------------------------------------

    \7\ As noted above, the study focused solely on offer sizes
because most markets submitted to options exchanges are symmetrical
(i.e., number of contracts bid for generally equals the number of
contracts offered), and the common presence of quotes without a bid
in out-of-the-money option series would distort the average bid size
for a given option. Figure 6 represents an arithmetic average of all
NBBO offer sizes in the Study Group.

                  Table 3--Breakdown of Trades Executed on Bid, Offer, or Between Bid and Offer
----------------------------------------------------------------------------------------------------------------
                                                   Total trades       At bid          At ask          Between
----------------------------------------------------------------------------------------------------------------
Q3--2014........................................          81,577          18,378          21,881          35,917
                                                  ..............           22.5%           26.8%           44.0%
Q4--2014........................................         332,754          69,451          76,552         152,661
                                                  ..............           20.9%           23.0%           45.9%
Q3--2015........................................         196,322          54,692          57,840          75,908
                                                  ..............           27.9%           29.5%           38.7%
Q4--2015........................................         260,196          78,171          79,544          93,862
                                                  ..............           30.0%           30.6%           36.1%
----------------------------------------------------------------------------------------------------------------

Trades by Quote Width 8
---------------------------------------------------------------------------

    \8\ Quote width for this study was calculated by subtracting the
National Best Bid from the National Best Offer. The quote used for
each trade is the NBBO at the time of trade reporting.
---------------------------------------------------------------------------

    Transactions in the Study Group for the pre-Pilot and Pilot periods
were analyzed by segregating such transactions into the following
``buckets'' of quote widths:

$0.00-$0.05
$0.06-$0.10
$0.11-$0.20
$0.21-$0.40

>$0.40

    A review of the data indicates that significantly higher percentage
of Study Group transactions occurred in the bucket with the narrowest
quote width (i.e., $0.00 to $0.05) following an issue being added to
the Pilot.
BILLING CODE 8011-01-P

[GRAPHIC] [TIFF OMITTED] TN17DE19.011

[GRAPHIC] [TIFF OMITTED] TN17DE19.012

[GRAPHIC] [TIFF OMITTED] TN17DE19.013

[GRAPHIC] [TIFF OMITTED] TN17DE19.014

    This data demonstrates that having price points available under
$0.10 resulted in trading that was concentrated on narrower spreads
even if this trend did not result in a significant narrowing of spreads
across the universe of series in an underlying class. The data also
indicated that after being added to the Pilot, all but two classes
experienced more than 50% of trading occurred when the spread width was
$0.05 or less. The other two classes (e.g., HYG and RSX) still showed a
noticeable increase in trading in that spread width bucket.

Quote Traffic Analysis and Projection 9
---------------------------------------------------------------------------

    \9\ The changes in quote traffic could have been due to factors
unrelated to penny increment pricing. Changes in quote traffic could
have been, in part, driven by differences in market conditions and/
or corporate actions during the pre-Pilot and Pilot period. For
example, when markets are more volatile we would expect market
participants to update or revise quotes more frequently resulting in
higher levels of quote traffic.
---------------------------------------------------------------------------

    As the Plan Sponsors look to amend the Pilot, one of the
modifications to the program will be the inauguration of an annual
review. This review will be conducted every December to allow eligible
issues to be added to the program, while ineligible issues will be
removed from the program. Currently, there are 363 issues in the Pilot.
However, it is assumed that the current issues are not the top 363
issues in the industry based upon volume. The exchanges performed a
test to assess what the impact would be if the annual review would be
conducted present day versus waiting until December to do so. This
would examine not only the issues added/removed, but also how OPRA
quote traffic would be impacted with all changes to the program. For
this projection, the analysis looked at options volume from January
through July 2018 to set the industry's top 363 issues. There were 107
current Penny Pilot issues which did not rank within the top 363
industry issues. Conversely, there were 96 issues that are currently
not in the Pilot, however, that rank in the top 363 industry issues.
There are 11 issues that are within the top 363 issues, but would not
qualify for the Pilot due to the underlying price being greater than
$200.
    The analysis looked at the basket of recent additions to the Penny
Pilot (basket of 8 stocks from earlier analysis) from the years 2014-
2015. As evidenced by the chart below, nearly all of the issues showed
an increase in number of quotes once it was included with the
Pilot.\10\ On average, the quote traffic increase during the time
periods was 121%.\11\
---------------------------------------------------------------------------

    \10\ Alibaba Group Holding (BABA) shows an extreme traffic
increase of 403%, which significantly overshadows the amount of
quote traffic increase of the other additions. This is, in large
part, due to its IPO in September 2014; when it was the largest IPO
in history at that time. Over the two periods, historically, there
were days of higher quote traffic around earnings announcements.
Further, over each of the last two months of 2015, BABA quote
traffic exceeded 2 billion quotes, which was nearly as much as it
experienced, in total, over it first three months of trading.
    \11\ Due to the considerable influence of the BABA traffic
increase, if the percentage increase in quote traffic was calculated
without BABA's quote data, then the value would fall to 81%.

---------------------------------------------------------------------------

[GRAPHIC] [TIFF OMITTED] TN17DE19.015

    Using a different sample set, the analysis examined the quote
traffic for the eleven (11) issues that were added to the Pilot in July
2017 (``July 2017 Study Group''). The below chart depicts the change in
quote traffic based on quote totals from January to June 2017 vs
January to June 2018. There were only two issues which did not
experience an increase in quote traffic for the comparative time
periods.\12\ On average, these issues show that once added to the Penny
pilot, there was an increase of 143% in quotes to the market.
---------------------------------------------------------------------------

    \12\ Symbol MBLY was voluntarily delisted from NYSE on September
6, 2017, in connection with a tender offer from Intel (INTC) and
subsequently listed on the OTC market. Symbol SDRL filed for Chapter
11 Bankruptcy on September 12, 2017. Subsequent to the bankruptcy
filing, SDRL was delisted from NYSE and listed on an OTC market.
When a security moves to the OTC market, many options exchanges seek
to delist the security as it is not in compliance with continued
listings standards for options. Due to its removal from nearly all
options exchanges, quoting in this security is drastically reduced
and are typically present only when (or if) a customer looks to
close out an open options position.
[GRAPHIC] [TIFF OMITTED] TN17DE19.016

    When analyzing the two study groups above, each of them showed a
quote traffic increase over comparative time periods. The average
increase between the samples is 132%.\13\ In looking at the quote
traffic data from the first six months of 2018, there were 107 issues
which fell outside of the top 363 issues, and had a total of nearly
77.5 billion quotes (or an average of approximately 13 billion quotes
per month over a six month period). On the other hand, there are 96
securities that are currently not on the Penny Pilot but are within the
top 363 issues. These 96 issues totaled close to 103 billion quotes (or
an average of about 17 billion quotes per month over a six month
period). The chart below details the month to month activity of the
issues which would be removed and added as a result of a review.
---------------------------------------------------------------------------

    \13\ If BABA's large effect of the total quote traffic was not
used, it would drop the average increase between the samples to
111%.

---------------------------------------------------------------------------

[GRAPHIC] [TIFF OMITTED] TN17DE19.017

BILLING CODE 8011-01-C
    When comparing the January to June 2018 quote traffic for the
potential removals and potential additions to the Penny Pilot, there is
an increase in traffic for each of the six months. It ranges from a 28%
increase in March to a 44% increase in June. The monthly traffic
increase over the six month period averages out to nearly 33%.\14\ Over
the six months of 2018, the issues which would be additions to the
Penny Pilot generated nearly 103 billion quotes. Conversely, the issues
which would be removed generated about 77 billion quotes over the same
time period. Therefore, by comparison, the additions generated
approximately 26 billion more quotes than the removals in the January
to June timeframe (or an average of slightly over 4 billion quotes each
month).\15\ Hence, if the 96 new issues were added to the program, it
can be reasonably concluded that the Penny Pilot would see an increase
in total quote traffic; even while removing the other 107 issues which
would no longer qualify for the program.
---------------------------------------------------------------------------

    \14\ This figure does not represent a constant growth rate of
quote traffic into perpetuity. Historically, there have been issues
in the Penny Pilot program which suffer a decrease in quote traffic
over the years, with some even getting delisted at some point in the
future. For example, issues such as GPRO and RAD have seen their
quote numbers decrease by 83% and 53%, respectively, since their
inclusion in the Penny Pilot from 2014.
    \15\ When comparing on a month to month basis for January to
June 2018, the quote traffic differences between the added and
removed issues are as follows: January 2018--3,261,431,336; February
2018--3,617,834,797; March 2018--3,685,135,946; April 2018--
4,144,730,113, May 2018--4,688,087,205, June 2018--5,990,971,122.
The total quote traffic difference is 25,388,190,519 more quotes
generated by the potential 96 issues.

                                                              Table 4--Reference Data Table
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Appx. median    Appx. median
                Quote date                        Underlying symbol         Spread avg:     Spread avg:    spread:  Ask    spread:  Ask    Avg. ask size
                                                                            Ask <=3.00       Ask >3.00        <=3.00           >3.00
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                      Summary Quote Data for Pre-Pilot period (i.e., Third and Fourth Quarter 2014)
--------------------------------------------------------------------------------------------------------------------------------------------------------
7/2/2014..................................  CBS.........................            0.34            1.15            0.30            1.10           1,091
7/2/2014..................................  FEYE........................            0.25            1.36            0.25            1.10           2,364
7/2/2014..................................  HYG.........................            0.16            1.81            0.10            0.80           1,519
7/2/2014..................................  OIH.........................            0.10            0.84            0.05            0.60           1,949
7/2/2014..................................  RAD.........................            0.11            0.37            0.10            0.30           6,617
7/2/2014..................................  RSX.........................            0.10            0.79            0.10            0.50           1,837
7/9/2014..................................  CBS.........................            0.71            2.04            0.60            1.90             591
7/9/2014..................................  FEYE........................            0.27            1.18            0.25            1.00           2,270
7/9/2014..................................  GPRO........................            0.12            0.66            0.10            0.40             523
7/9/2014..................................  HYG.........................            0.27            2.31            0.25            2.20           2,228
7/9/2014..................................  OIH.........................            0.11            1.18            0.10            0.70           2,011
7/9/2014..................................  RAD.........................            0.15            0.38            0.15            0.40           7,739
7/9/2014..................................  RSX.........................            0.11            0.75            0.10            0.50           2,174
7/16/2014.................................  CBS.........................            0.17            0.71            0.15            0.50           1,755
7/16/2014.................................  FEYE........................            0.25            1.01            0.25            1.00           2,840
7/16/2014.................................  GPRO........................            0.38            1.51            0.30            1.40           1,647
7/16/2014.................................  HYG.........................            0.23            1.23            0.20            0.50           1,652
7/16/2014.................................  OIH.........................            0.14            0.56            0.10            0.50           2,654
7/16/2014.................................  RAD.........................            0.10            0.27            0.10            0.20           6,388
7/16/2014.................................  RSX.........................            0.11            0.55            0.10            0.40           2,330
7/23/2014.................................  CBS.........................            0.31            1.17            0.25            1.00           2,879
7/23/2014.................................  FEYE........................            0.19            0.88            0.15            0.80           2,629

7/23/2014.................................  GPRO........................            0.35            1.45            0.30            1.20           1,679
7/23/2014.................................  HYG.........................            0.26            1.61            0.25            1.30           2,232
7/23/2014.................................  OIH.........................            0.12            1.27            0.10            0.80           1,864
7/23/2014.................................  RAD.........................            0.12            0.30            0.10            0.30           7,091
7/23/2014.................................  RSX.........................            0.12            0.54            0.10            0.50           2,637
7/30/2014.................................  CBS.........................            0.26            1.22            0.25            0.80           1,989
7/30/2014.................................  FEYE........................            0.21            0.71            0.20            0.70           2,212
7/30/2014.................................  GPRO........................            0.33            1.47            0.25            1.30           1,557
7/30/2014.................................  HYG.........................            0.23            2.02            0.15            1.30           1,456
7/30/2014.................................  OIH.........................            0.11            1.31            0.10            1.10           2,325
7/30/2014.................................  RAD.........................            0.11            0.39            0.10            0.30           5,949
7/30/2014.................................  RSX.........................            0.11            0.93            0.10            0.60           2,339
8/6/2014..................................  CBS.........................            0.31            1.35            0.25            1.10           1,842
8/6/2014..................................  FEYE........................            0.28            1.46            0.20            1.40           2,344
8/6/2014..................................  GPRO........................            0.32            1.43            0.30            1.20           1,787
8/6/2014..................................  HYG.........................            0.24            0.95            0.20            0.70           2,257
8/6/2014..................................  OIH.........................            0.11            1.57            0.10            1.40           2,069
8/6/2014..................................  RAD.........................            0.14            0.38            0.10            0.40           6,918
8/6/2014..................................  RSX.........................            0.10            0.74            0.10            0.50           2,425
8/13/2014.................................  CBS.........................            0.25            1.13            0.25            0.90           1,648
8/13/2014.................................  FEYE........................            0.18            0.85            0.15            0.80           2,338
8/13/2014.................................  GPRO........................            0.28            1.63            0.25            1.40           2,005
8/13/2014.................................  HYG.........................            0.20            1.06            0.15            0.80           1,387
8/13/2014.................................  OIH.........................            0.11            0.94            0.10            0.60           2,768
8/13/2014.................................  RAD.........................            0.13            0.29            0.15            0.30           7,232
8/13/2014.................................  RSX.........................            0.10            0.60            0.10            0.50           4,179
8/20/2014.................................  CBS.........................            0.27            1.16            0.25            0.70           1,109
8/20/2014.................................  FEYE........................            0.18            0.86            0.15            0.80           2,662
8/20/2014.................................  GPRO........................            0.32            1.70            0.25            1.60           2,368
8/20/2014.................................  HYG.........................            0.20            0.81            0.20            0.60           2,054
8/20/2014.................................  OIH.........................            0.12            0.76            0.10            0.60           1,831
8/20/2014.................................  RAD.........................            0.12            0.32            0.10            0.30           6,414
8/20/2014.................................  RSX.........................            0.11            0.50            0.10            0.40           3,075
8/27/2014.................................  CBS.........................            0.24            0.80            0.25            0.70           1,500
8/27/2014.................................  FEYE........................            0.18            0.91            0.15            0.90           2,764
8/27/2014.................................  GPRO........................            0.31            1.53            0.25            1.20           1,749
8/27/2014.................................  HYG.........................            0.25            0.89            0.25            0.60           1,881
8/27/2014.................................  OIH.........................            0.12            1.26            0.10            0.90           2,560
8/27/2014.................................  RAD.........................            0.14            0.32            0.15            0.30           7,080
8/27/2014.................................  RSX.........................            0.11            0.71            0.10            0.50           3,080
9/3/2014..................................  CBS.........................            0.25            1.24            0.25            1.10           1,649
9/3/2014..................................  FEYE........................            0.22            1.39            0.20            1.00           3,400
9/3/2014..................................  GPRO........................            0.41            2.00            0.25            2.10           1,479
9/3/2014..................................  HYG.........................            0.22            0.96            0.20            0.80           1,466
9/3/2014..................................  OIH.........................            0.11            0.85            0.10            0.70           2,525
9/3/2014..................................  RAD.........................            0.14            0.61            0.10            0.40           6,192
9/3/2014..................................  RSX.........................            0.11            0.87            0.10            0.60           3,305
9/10/2014.................................  CBS.........................            0.25            1.13            0.25            0.90           1,756
9/10/2014.................................  FEYE........................            0.19            0.98            0.15            0.70           2,826
9/10/2014.................................  GPRO........................            0.41            2.07            0.30            2.30           1,616
9/10/2014.................................  HYG.........................            0.00            0.00            0.00            0.00               0
9/10/2014.................................  OIH.........................            0.11            1.31            0.10            0.90           2,841
9/10/2014.................................  RAD.........................            0.15            0.49            0.10            0.40           6,710
9/10/2014.................................  RSX.........................            0.13            1.13            0.10            0.70           3,641
9/17/2014.................................  CBS.........................            0.27            1.43            0.25            0.80           1,487
9/17/2014.................................  FEYE........................            0.21            1.22            0.20            0.80           2,946
9/17/2014.................................  GPRO........................            0.39            2.10            0.35            2.20           1,709
9/17/2014.................................  HYG.........................            0.31            1.47            0.30            1.20           1,762
9/17/2014.................................  OIH.........................            0.13            1.10            0.10            0.80           3,021
9/17/2014.................................  RAD.........................            0.18            1.01            0.15            0.70           5,996
9/17/2014.................................  RSX.........................            0.12            1.38            0.10            0.80           3,334
9/24/2014.................................  CBS.........................            0.25            1.25            0.25            1.10           2,128
9/24/2014.................................  FEYE........................            0.19            0.82            0.15            0.80           3,146
9/24/2014.................................  GPRO........................            0.26            2.24            0.15            2.60             858
9/24/2014.................................  HYG.........................            0.26            1.14            0.25            0.90           2,415
9/24/2014.................................  OIH.........................            0.12            1.31            0.10            1.10           2,939
9/24/2014.................................  RAD.........................            0.13            0.57            0.05            0.60           7,259
9/24/2014.................................  RSX.........................            0.12            1.22            0.10            0.80           2,334
10/1/2014.................................  BABA........................            0.11            0.77            0.10            0.60           1,753
10/1/2014.................................  CBS.........................            0.26            1.02            0.25            0.80           1,984

10/1/2014.................................  FEYE........................            0.18            0.69            0.15            0.70           2,465
10/1/2014.................................  GPRO........................            0.45            2.24            0.30            2.40           1,101
10/1/2014.................................  HYG.........................            0.21            0.97            0.20            0.70           2,127
10/1/2014.................................  OIH.........................            0.13            1.31            0.10            1.00           2,452
10/1/2014.................................  RAD.........................            0.11            0.31            0.10            0.30           7,347
10/1/2014.................................  RSX.........................            0.11            1.44            0.05            0.80           2,577
10/8/2014.................................  BABA........................            0.18            1.19            0.15            0.90           2,771
10/8/2014.................................  CBS.........................            0.30            1.10            0.25            0.80           1,649
10/8/2014.................................  FEYE........................            0.20            0.72            0.20            0.70           4,029
10/8/2014.................................  GPRO........................            0.52            2.35            0.40            2.50           2,891
10/8/2014.................................  HYG.........................            0.25            1.21            0.25            1.00           2,284
10/8/2014.................................  OIH.........................            0.13            1.59            0.10            1.40           2,900
10/8/2014.................................  RAD.........................            0.13            0.31            0.10            0.30           6,762
10/8/2014.................................  RSX.........................            0.13            1.85            0.10            1.10           3,012
10/15/2014................................  BABA........................            0.30            1.56            0.25            1.50           2,117
10/15/2014................................  CBS.........................            0.56            2.23            0.50            2.00           1,613
10/15/2014................................  FEYE........................            0.33            1.53            0.30            1.50           3,365
10/15/2014................................  GPRO........................            0.63            2.52            0.50            2.50           1,916
10/15/2014................................  HYG.........................            0.34            1.32            0.35            1.00           1,224
10/15/2014................................  OIH.........................            0.17            1.87            0.15            1.90           1,819
10/15/2014................................  RAD.........................            0.15            0.49            0.15            0.40           6,211
10/15/2014................................  RSX.........................            0.15            1.63            0.10            0.80           2,443
10/22/2014................................  BABA........................            0.26            1.30            0.25            1.10           2,818
10/22/2014................................  CBS.........................            0.32            1.54            0.25            1.35           2,337
10/22/2014................................  FEYE........................            0.23            1.06            0.25            1.00           3,753
10/22/2014................................  GPRO........................            0.51            2.44            0.45            2.50           1,731
10/22/2014................................  HYG.........................            0.27            1.45            0.25            1.20           2,756
10/22/2014................................  OIH.........................            0.16            1.37            0.15            1.20           3,444
10/22/2014................................  RAD.........................            0.17            0.88            0.10            0.90           6,843
10/22/2014................................  RSX.........................            0.17            1.35            0.10            0.90           3,707
10/29/2014................................  BABA........................            0.17            1.11            0.10            0.80           1,401
10/29/2014................................  CBS.........................            0.26            1.33            0.25            1.00           2,687
10/29/2014................................  FEYE........................            0.24            0.84            0.25            0.70           2,233
10/29/2014................................  GPRO........................            0.51            2.08            0.50            2.10           1,526
10/29/2014................................  HYG.........................            0.27            1.37            0.20            1.20           2,203
10/29/2014................................  OIH.........................            0.12            1.46            0.10            1.00           2,809
10/29/2014................................  RAD.........................            0.13            0.37            0.10            0.30           6,067
10/29/2014................................  RSX.........................            0.14            1.42            0.10            1.00           3,127
11/5/2014.................................  BABA........................            0.14            1.31            0.10            0.90           1,786
11/5/2014.................................  CBS.........................            0.27            1.44            0.25            1.10           1,514
11/5/2014.................................  FEYE........................            0.18            1.55            0.15            1.50           1,980
11/5/2014.................................  GPRO........................            0.57            2.26            0.50            2.30           1,459
11/5/2014.................................  HYG.........................            0.26            1.36            0.25            1.20           2,608
11/5/2014.................................  OIH.........................            0.12            1.33            0.10            1.10           3,771
11/5/2014.................................  RAD.........................            0.16            0.57            0.10            0.40           6,033
11/5/2014.................................  RSX.........................            0.13            1.10            0.10            0.90           3,516
11/12/2014................................  BABA........................            0.14            1.39            0.10            1.10           1,731
11/12/2014................................  CBS.........................            0.24            1.31            0.20            0.90           1,500
11/12/2014................................  FEYE........................            0.17            0.96            0.15            0.90           2,465
11/12/2014................................  GPRO........................            0.45            2.37            0.30            2.50           1,525
11/12/2014................................  HYG.........................            0.28            1.56            0.25            1.40           3,310
11/12/2014................................  OIH.........................            0.12            1.14            0.10            1.10           3,105
11/12/2014................................  RAD.........................            0.16            0.47            0.15            0.35           5,507
11/12/2014................................  RSX.........................            0.13            0.98            0.10            0.70           3,146
11/19/2014................................  BABA........................            0.16            1.42            0.10            1.20           2,153
11/19/2014................................  CBS.........................            0.24            1.30            0.20            1.00           1,466
11/19/2014................................  FEYE........................            0.18            0.77            0.15            0.70           2,602
11/19/2014................................  GPRO........................            0.57            2.39            0.40            2.40             901
11/19/2014................................  HYG.........................            0.26            1.73            0.25            1.30           2,980
11/19/2014................................  OIH.........................            0.14            1.25            0.10            1.10           3,119
11/19/2014................................  RAD.........................            0.16            0.43            0.15            0.40           5,212
11/19/2014................................  RSX.........................            0.13            1.17            0.10            0.70           3,207
11/26/2014................................  BABA........................            0.17            1.56            0.10            1.40           2,320
11/26/2014................................  CBS.........................            0.29            1.80            0.25            1.20           1,301
11/26/2014................................  FEYE........................            0.24            1.12            0.20            1.10           2,484
11/26/2014................................  GPRO........................            0.43            2.26            0.30            2.50           1,281
11/26/2014................................  HYG.........................            0.29            1.76            0.30            1.50           2,461
11/26/2014................................  OIH.........................            0.12            1.36            0.10            1.10           2,115
11/26/2014................................  RAD.........................            0.20            0.55            0.15            0.40           5,462
11/26/2014................................  RSX.........................            0.13            1.56            0.10            1.10           1,951

12/3/2014.................................  BABA........................            0.15            1.55            0.10            1.70           2,562
12/3/2014.................................  CBS.........................            0.25            1.85            0.20            1.60           1,525
12/3/2014.................................  FEYE........................            0.19            1.51            0.15            1.20           3,131
12/3/2014.................................  GPRO........................            0.40            1.89            0.30            1.90           1,996
12/3/2014.................................  HYG.........................            0.29            2.01            0.30            1.40           3,119
12/3/2014.................................  OIH.........................            0.13            1.92            0.10            1.50           3,492
12/3/2014.................................  RAD.........................            0.14            0.72            0.10            0.60           5,398
12/3/2014.................................  RSX.........................            0.12            1.49            0.05            0.90           3,247
12/10/2014................................  BABA........................            0.15            0.74            0.10            0.60           2,362
12/10/2014................................  CBS.........................            0.32            1.75            0.30            1.30           1,772
12/10/2014................................  FEYE........................            0.25            1.12            0.20            0.80           2,632
12/10/2014................................  GPRO........................            0.44            2.08            0.40            2.20           1,758
12/10/2014................................  HYG.........................            0.00            0.00            0.00            0.00               0
12/10/2014................................  OIH.........................            0.12            2.19            0.10            1.60           2,313
12/10/2014................................  RAD.........................            0.00            0.00            0.00            0.00               0
12/10/2014................................  RSX.........................            0.12            1.96            0.05            1.80           2,837
12/17/2014................................  BABA........................            0.17            0.81            0.15            0.60           2,198
12/17/2014................................  CBS.........................            0.34            1.69            0.25            1.50           1,669
12/17/2014................................  FEYE........................            0.24            0.98            0.20            0.70           2,255
12/17/2014................................  GPRO........................            0.46            2.18            0.45            2.20           1,822
12/17/2014................................  HYG.........................            0.30            1.70            0.25            1.10           2,157
12/17/2014................................  OIH.........................            0.17            2.39            0.15            2.60           2,886
12/17/2014................................  RAD.........................            0.13            0.45            0.10            0.30           5,761
12/17/2014................................  RSX.........................            0.20            2.01            0.15            1.80           2,026
12/24/2014................................  BABA........................            0.19            1.16            0.10            0.80           2,087
12/24/2014................................  CBS.........................            0.30            1.36            0.25            1.00           1,898
12/24/2014................................  FEYE........................            0.27            1.62            0.20            1.20           1,894
12/24/2014................................  GPRO........................            0.37            1.84            0.20            1.90           1,692
12/24/2014................................  HYG.........................            0.31            1.79            0.30            1.20           2,894
12/24/2014................................  OIH.........................            0.20            1.95            0.15            1.60           2,714
12/24/2014................................  RAD.........................            0.20            0.75            0.15            0.60           5,108
12/24/2014................................  RSX.........................            0.21            1.32            0.20            0.90           2,816
12/31/2014................................  BABA........................            0.22            1.63            0.15            1.60           2,261
12/31/2014................................  CBS.........................            0.21            1.09            0.20            0.80           1,131
12/31/2014................................  FEYE........................            0.23            1.38            0.15            1.00           2,594
12/31/2014................................  GPRO........................            0.36            1.78            0.25            1.70           1,770
12/31/2014................................  HYG.........................            0.29            1.72            0.25            1.20           3,374
12/31/2014................................  OIH.........................            0.18            1.82            0.15            1.50           2,526
12/31/2014................................  RAD.........................            0.15            0.62            0.15            0.40           4,285
12/31/2014................................  RSX.........................            0.20            1.26            0.20            1.00           2,440
--------------------------------------------------------------------------------------------------------------------------------------------------------

                                                      Table 5--Summary Quote Data for Pilot Period
                                                          [i.e., third and fourth quarter 2015]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Appx. median    Appx. median
                Quote date                        Underlying symbol         Spread avg:     Spread avg:    spread:  Ask    spread:  Ask    Avg. ask size
                                                                            Ask <=3.00       Ask >3.00        <=3.00           >3.00
--------------------------------------------------------------------------------------------------------------------------------------------------------
7/1/2015..................................  BABA........................            0.05            0.33            0.04            0.35           1,358
7/1/2015..................................  CBS.........................            0.23            1.29            0.20            0.85           2,000
7/1/2015..................................  FEYE........................            0.24            1.11            0.20            0.90           2,180
7/1/2015..................................  GPRO........................            0.27            1.64            0.20            1.40           2,164
7/1/2015..................................  HYG.........................            0.17            1.63            0.10            1.30           2,789
7/1/2015..................................  OIH.........................            0.12            1.56            0.05            1.30           3,174
7/1/2015..................................  RAD.........................            0.11            0.45            0.05            0.40           3,252
7/1/2015..................................  RSX.........................            0.13            0.94            0.05            0.50           1,986
7/8/2015..................................  BABA........................            0.09            0.60            0.08            0.55           1,273
7/8/2015..................................  CBS.........................            0.24            1.44            0.21            1.15           1,795
7/8/2015..................................  FEYE........................            0.29            1.38            0.27            1.20           2,244
7/8/2015..................................  GPRO........................            0.26            1.27            0.19            1.00           2,102
7/8/2015..................................  HYG.........................            0.14            1.49            0.10            1.25           1,997
7/8/2015..................................  OIH.........................            0.09            1.54            0.04            1.10           1,811
7/8/2015..................................  RAD.........................            0.09            0.37            0.05            0.35           3,283
7/8/2015..................................  RSX.........................            0.00            0.00            0.00            0.00               0
7/15/2015.................................  BABA........................            0.05            0.31            0.04            0.30           1,546
7/15/2015.................................  CBS.........................            0.28            0.80            0.29            0.75           1,765
7/15/2015.................................  FEYE........................            0.17            0.88            0.14            0.65           1,883
7/15/2015.................................  GPRO........................            0.22            1.22            0.14            0.95           1,914
7/15/2015.................................  HYG.........................            0.13            1.25            0.09            0.70           2,535

7/15/2015.................................  OIH.........................            0.11            1.15            0.07            0.95           1,980
7/15/2015.................................  RAD.........................            0.07            0.23            0.04            0.20           2,839
7/15/2015.................................  RSX.........................            0.14            0.81            0.13            0.60           2,637
7/22/2015.................................  BABA........................            0.05            0.32            0.04            0.30           1,840
7/22/2015.................................  CBS.........................            0.22            0.76            0.19            0.65           1,870
7/22/2015.................................  FEYE........................            0.20            0.97            0.17            0.65           2,680
7/22/2015.................................  GPRO........................            0.22            1.56            0.11            1.50           1,615
7/22/2015.................................  HYG.........................            0.16            1.72            0.10            1.15           2,165
7/22/2015.................................  OIH.........................            0.13            1.65            0.12            1.30           3,805
7/22/2015.................................  RAD.........................            0.10            0.31            0.08            0.30           3,866
7/22/2015.................................  RSX.........................            0.20            0.46            0.17            0.40           2,302
7/29/2015.................................  BABA........................            0.06            0.31            0.05            0.25           1,395
7/29/2015.................................  CBS.........................            0.20            0.97            0.17            0.75           1,780
7/29/2015.................................  FEYE........................            0.28            0.98            0.21            0.60           1,912
7/29/2015.................................  GPRO........................            0.24            1.33            0.21            1.25           2,692
7/29/2015.................................  HYG.........................            0.18            1.60            0.12            1.15           2,245
7/29/2015.................................  OIH.........................            0.10            1.38            0.06            1.15           3,903
7/29/2015.................................  RAD.........................            0.10            0.64            0.05            0.60           3,883
7/29/2015.................................  RSX.........................            0.16            0.83            0.12            0.70           2,483
8/5/2015..................................  BABA........................            0.05            0.35            0.04            0.30           1,102
8/5/2015..................................  CBS.........................            0.29            0.97            0.22            0.80           1,881
8/5/2015..................................  FEYE........................            0.24            1.50            0.21            1.47           1,362
8/5/2015..................................  GPRO........................            0.18            1.24            0.16            1.20           1,859
8/5/2015..................................  HYG.........................            0.15            1.44            0.11            1.10           2,338
8/5/2015..................................  OIH.........................            0.08            1.00            0.05            0.75           2,818
8/5/2015..................................  RAD.........................            0.09            0.32            0.07            0.30           1,658
8/5/2015..................................  RSX.........................            0.14            0.63            0.10            0.55           2,495
8/12/2015.................................  BABA........................            0.08            0.79            0.06            0.70           1,456
8/12/2015.................................  CBS.........................            0.22            0.72            0.19            0.60           2,031
8/12/2015.................................  FEYE........................            0.21            0.96            0.18            0.80           2,505
8/12/2015.................................  GPRO........................            0.26            1.43            0.16            1.30           1,643
8/12/2015.................................  HYG.........................            0.13            1.28            0.10            1.00           2,494
8/12/2015.................................  OIH.........................            0.10            0.99            0.07            0.90           2,903
8/12/2015.................................  RAD.........................            0.08            0.24            0.05            0.20           2,066
8/12/2015.................................  RSX.........................            0.13            0.52            0.09            0.35           2,073
8/19/2015.................................  BABA........................            0.05            0.47            0.05            0.50           2,267
8/19/2015.................................  CBS.........................            0.25            0.84            0.25            0.70           1,880
8/19/2015.................................  FEYE........................            0.17            0.93            0.15            0.80           2,167
8/19/2015.................................  GPRO........................            0.19            1.30            0.15            1.25           2,705
8/19/2015.................................  HYG.........................            0.13            2.14            0.09            1.40           1,807
8/19/2015.................................  OIH.........................            0.09            1.18            0.05            1.00           2,485
8/19/2015.................................  RAD.........................            0.08            0.25            0.04            0.25           2,747
8/19/2015.................................  RSX.........................            0.11            0.89            0.05            0.75           2,205
8/26/2015.................................  BABA........................            0.16            1.23            0.14            1.00           1,757
8/26/2015.................................  CBS.........................            0.30            1.01            0.31            0.90           1,675
8/26/2015.................................  FEYE........................            0.27            1.29            0.25            1.15           1,751
8/26/2015.................................  GPRO........................            0.28            1.54            0.20            1.50           2,395
8/26/2015.................................  HYG.........................            0.30            1.57            0.28            1.15           1,577
8/26/2015.................................  OIH.........................            0.18            0.91            0.16            0.70           2,142
8/26/2015.................................  RAD.........................            0.12            0.30            0.13            0.30           1,743
8/26/2015.................................  RSX.........................            0.21            0.84            0.18            0.50           1,558
9/2/2015..................................  BABA........................            0.12            1.01            0.13            0.80           2,357
9/2/2015..................................  CBS.........................            0.23            1.29            0.16            1.05           1,693
9/2/2015..................................  FEYE........................            0.24            1.33            0.24            1.20           2,281
9/2/2015..................................  GPRO........................            0.22            1.62            0.15            1.70           1,852
9/2/2015..................................  HYG.........................            0.28            1.56            0.29            1.10           2,242
9/2/2015..................................  RAD.........................            0.11            0.26            0.12            0.25           3,314
9/2/2015..................................  RSX.........................            0.22            1.19            0.17            0.95           2,573
9/9/2015..................................  BABA........................            0.16            1.03            0.17            0.85           2,237
9/9/2015..................................  CBS.........................            0.26            0.82            0.25            0.70           1,897
9/9/2015..................................  FEYE........................            0.20            0.98            0.19            0.90           2,109
9/9/2015..................................  GPRO........................            0.18            1.27            0.18            1.15           2,249
9/9/2015..................................  HYG.........................            0.27            1.28            0.26            1.05           1,676
9/9/2015..................................  RAD.........................            0.10            0.29            0.12            0.30           3,610
9/9/2015..................................  RSX.........................            0.17            0.54            0.11            0.50           2,838
9/16/2015.................................  BABA........................            0.10            1.01            0.09            0.90           1,686
9/16/2015.................................  CBS.........................            0.16            0.92            0.12            0.75           1,679
9/16/2015.................................  FEYE........................            0.19            0.82            0.16            0.60           1,998
9/16/2015.................................  GPRO........................            0.19            1.34            0.17            1.35           1,932

9/16/2015.................................  HYG.........................            0.21            1.80            0.17            1.30           2,610
9/16/2015.................................  RAD.........................            0.10            0.29            0.08            0.25           3,333
9/16/2015.................................  RSX.........................            0.13            0.59            0.07            0.55           2,245
9/23/2015.................................  BABA........................            0.08            0.67            0.06            0.60           1,937
9/23/2015.................................  CBS.........................            0.19            0.83            0.16            0.70           1,590
9/23/2015.................................  FEYE........................            0.15            0.89            0.13            0.80           2,004
9/23/2015.................................  GPRO........................            0.22            1.27            0.19            1.30           2,352
9/23/2015.................................  HYG.........................            0.19            1.27            0.13            1.00           2,401
9/23/2015.................................  OIH.........................            0.11            0.77            0.07            0.68           3,167
9/23/2015.................................  RAD.........................            0.10            0.31            0.12            0.30           3,277
9/23/2015.................................  RSX.........................            0.12            0.45            0.07            0.40           2,450
9/30/2015.................................  BABA........................            0.10            0.92            0.09            0.85           1,560
9/30/2015.................................  CBS.........................            0.18            0.77            0.16            0.65           1,697
9/30/2015.................................  FEYE........................            0.20            0.96            0.19            0.95           1,693
9/30/2015.................................  GPRO........................            0.24            1.50            0.21            1.50           2,074
9/30/2015.................................  HYG.........................            0.25            2.23            0.23            1.65           1,560
9/30/2015.................................  OIH.........................            0.10            0.70            0.05            0.60           1,489
9/30/2015.................................  RAD.........................            0.09            0.22            0.06            0.20           1,953
9/30/2015.................................  RSX.........................            0.13            0.41            0.09            0.35           1,770
10/7/2015.................................  BABA........................            0.10            0.50            0.06            0.40           1,069
10/7/2015.................................  CBS.........................            0.18            0.80            0.17            0.80           1,555
10/7/2015.................................  FEYE........................            0.22            1.05            0.22            1.05           1,997
10/7/2015.................................  GPRO........................            0.17            1.38            0.13            1.35           2,167
10/7/2015.................................  HYG.........................            0.22            2.21            0.18            2.00           1,855
10/7/2015.................................  OIH.........................            0.12            1.24            0.06            1.05           2,360
10/7/2015.................................  RAD.........................            0.12            0.37            0.11            0.30           4,144
10/7/2015.................................  RSX.........................            0.14            0.51            0.08            0.50           2,917
10/14/2015................................  BABA........................            0.08            0.55            0.06            0.40           1,191
10/14/2015................................  CBS.........................            0.16            0.85            0.14            0.75           1,588
10/14/2015................................  FEYE........................            0.18            1.24            0.17            0.95           1,792
10/14/2015................................  GPRO........................            0.15            1.08            0.12            1.00           2,034
10/14/2015................................  HYG.........................            0.19            2.15            0.15            1.85           1,963
10/14/2015................................  OIH.........................            0.10            1.02            0.06            0.80           2,157
10/14/2015................................  RAD.........................            0.12            0.41            0.10            0.30           3,669
10/14/2015................................  RSX.........................            0.14            0.61            0.08            0.50           2,486
10/21/2015................................  BABA........................            0.07            0.46            0.05            0.35           1,020
10/21/2015................................  CBS.........................            0.19            0.80            0.16            0.80           1,215
10/21/2015................................  FEYE........................            0.17            1.05            0.16            0.85           1,982