[Federal Register Volume 81, Number 55 (Tuesday, March 22, 2016)]
[Rules and Regulations]
[Pages 15154-15156]
[FR Doc No: 2016-06372]

=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. FAA-2016-2701; Directorate Identifier 2016-NE-03-AD;
Amendment 39-18440; AD 2016-06-09]
RIN 2120-AA64

Airworthiness Directives; Turbomeca S.A. Turboshaft Engines

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Final rule; request for comments.

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

SUMMARY: We are adopting a new airworthiness directive (AD) for certain
Turbomeca S.A. Makila 2A and 2A1 turboshaft engines. This AD requires
tightening the nut attaching the swivel union to the engine power
turbine module M04. This AD was prompted by two occurrences of
commanded in-flight shutdown following low oil pressure warning. We are
issuing this AD to prevent loosening of the nut and oil leakage from
the low-pressure oil system, which could lead to in-flight shutdown of
the engine and forced landing.

DATES: This AD becomes effective April 6, 2016.
    We must receive comments on this AD by May 6, 2016.

ADDRESSES: You may send comments by any of the following methods:
     Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the instructions for submitting comments.
     Mail: U.S. Department of Transportation, 1200 New Jersey
Avenue SE., West Building Ground Floor, Room W12-140, Washington, DC
20590-0001.
     Hand Delivery: Deliver to Mail address above between 9
a.m. and 5 p.m., Monday through Friday, except Federal holidays.
     Fax:<PHONE_NUMBER>.
    For service information identified in this AD, contact Turbomeca
S.A., 40220 Tarnos, France; phone: 33 0 5 59 74 40 00; telex: 570 042;
fax: 33 0 5 59 74 45 16. You may view this service information at the
FAA, Engine & Propeller Directorate, 1200 District Avenue, Burlington,
MA 01803. For information on the availability of this material at the
FAA, call<PHONE_NUMBER>. It is also available on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2016-
2701.

Examining the AD Docket

    You may examine the AD docket on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2016-
2701; or in person at the Docket Operations office between 9 a.m. and 5
p.m., Monday through Friday, except Federal holidays. The AD docket
contains this AD, the mandatory continuing airworthiness information
(MCAI), regulatory evaluation, any comments received, and other
information. The address for the Docket Office (phone:<PHONE_NUMBER>) is
in the ADDRESSES section. Comments will be available in the AD docket
shortly after receipt.

FOR FURTHER INFORMATION CONTACT: Besian Luga, Aerospace Engineer,
Engine Certification Office, FAA, Engine & Propeller Directorate, 1200
District Avenue, Burlington, MA 01803; phone:<PHONE_NUMBER>; fax: 781-
238-7199; email<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

Comments Invited

    This AD is a final rule that involves requirements affecting flight
safety, and we did not precede it by notice and opportunity for public
comment. We invite you to send any written relevant data, views, or
arguments about this AD. Send your comments to an address listed under
the ADDRESSES section. Include ``Docket No. FAA-2016-2701; Directorate
Identifier 2016-NE-03-AD'' at the beginning of your comments. We
specifically invite comments on the overall regulatory, economic,
environmental, and energy aspects of this AD. We will consider all
comments received by the closing date and may amend this AD because of
those comments.
    We will post all comments we receive, without change, to http://

www.regulations.gov, including any personal information you provide. We
will also post a report summarizing each substantive verbal contact
with FAA personnel concerning this AD.

Discussion

    The European Aviation Safety Agency (EASA), which is the Technical
Agent for the Member States of the European Community, has issued EASA
AD 2016-0016, dated January 15, 2016 (referred to hereinafter as ``the
MCAI''), to correct an unsafe condition for the specified products. The
MCAI states:

    Two occurrences of commanded in-flight shut down following low
oil pressure warning were reported. In both cases the nut attaching
the swivel union to the power turbine module 04 was found completely
loose. After further investigation, it was determined that the
application of Turbomeca Service Bulletin (SB) No. 298 79 2831 may
have led to incorrect torque application or loosening of the nut.

    Turbomeca S.A. has issued Alert Mandatory Service Bulletin No. A298
79 2835, Version A, dated January 14, 2016, to provide guidance to
assist operators in resolving this unsafe condition. You may obtain
further information by examining the MCAI in the AD docket on the
Internet at http://www.regulations.gov by searching for and locating
Docket No. FAA-2016-2701.

FAA's Determination and Requirements of This AD

    This product has been approved by the aviation authority of France
and is approved for operation in the United States. Pursuant to our
bilateral agreement with the European Community, EASA has notified us
of the unsafe condition described in the MCAI and service information
referenced above. We are issuing this AD because we evaluated all
information provided by EASA and determined the unsafe condition exists
and is likely to exist or develop on other products of the same type
design. This AD requires tightening the nut attaching the swivel union
to the engine power turbine module M04.

Related Service Information

    Turbomeca S.A. has issued Alert Mandatory Service Bulletin No. A298
79 2835, Version A, dated January 14, 2016. The service information
describes procedures for tightening the nut attaching the swivel union
to the engine power turbine module (M04). This service information is
reasonably available because the interested parties have access to it
through their normal course of business or by the means identified in
the ADDRESSES section of this document.

FAA's Determination of the Effective Date

    An unsafe condition exists that requires the immediate adoption of
this AD. The FAA has found that the risk to the flying public justifies
waiving notice and comment prior to adoption of this rule because
operators are required to take action with 7 days or 30 engine hours
after the effective date of this AD. Therefore, we find that notice and
opportunity for prior public comment are impracticable and that good
cause exists for making this amendment effective in less than 30 days.

Costs of Compliance

    We estimate that this AD affects 10 engines installed on airplanes
of U.S. registry. We also estimate that it will take about 1 hour per
engine to comply with this AD. The average labor rate is $85 per hour.
No additional parts are required. Based on these figures, we estimate
the total cost of the AD to U.S. operators to be $850.

Authority for This Rulemaking

    Title 49 of the United States Code specifies the FAA's authority to
issue rules on aviation safety. Subtitle I, section 106, describes the
authority of the FAA Administrator. ``Subtitle VII: Aviation
Programs,'' describes in more detail the scope of the Agency's
authority.
    We are issuing this rulemaking under the authority described in
``Subtitle VII, Part A, Subpart III, Section 44701: General
requirements.'' Under that section, Congress charges the FAA with
promoting safe flight of civil aircraft in air commerce by prescribing
regulations for practices, methods, and procedures the Administrator
finds necessary for safety in air commerce. This regulation is within
the scope of that authority because it addresses an unsafe condition
that is likely to exist or develop on products identified in this
rulemaking action.

Regulatory Findings

    We determined that this AD will not have federalism implications
under Executive Order 13132. This AD will not have a substantial direct
effect on the States, on the relationship between the national
government and the States, or on the distribution of power and
responsibilities among the various levels of government.
    For the reasons discussed above, I certify this AD:
    (1) Is not a ``significant regulatory action'' under Executive
Order 12866,
    (2) Is not a ``significant rule'' under the DOT Regulatory Policies
and Procedures (44 FR 11034, February 26, 1979),
    (3) Will not affect intrastate aviation in Alaska to the extent
that it justifies making a regulatory distinction, and
    (4) Will not have a significant economic impact, positive or
negative, on a substantial number of small entities under the criteria
of the Regulatory Flexibility Act.

List of Subjects in 14 CFR Part 39

    Air transportation, Aircraft, Aviation safety, Incorporation by
reference, Safety.

Adoption of the Amendment

    Accordingly, under the authority delegated to me by the
Administrator, the FAA amends 14 CFR part 39 as follows:

PART 39--AIRWORTHINESS DIRECTIVES

0
1. The authority citation for part 39 continues to read as follows:

    Authority: 49 U.S.C. 106(g), 40113, 44701.

Sec.  39.13  [Amended]

0
2. The FAA amends Sec.  39.13 by adding the following new airworthiness
directive (AD):

2016-06-09 Turbomeca S.A.: Amendment 39-18440; Docket No. FAA-2016-
2701; Directorate Identifier 2016-NE-03-AD.

(a) Effective Date

    This AD is effective April 6, 2016.

(b) Affected ADs

    None.

(c) Applicability

    This AD applies to all Turbomeca S.A. Makila 2A and 2A1
turboshaft engines that have incorporated Turbomeca S.A. Service
Bulletin No. 298 79 2831, Version B, dated November 13, 2015, or
earlier.

(d) Reason

    This AD was prompted by two occurrences of in-flight shutdowns
as a result of the nut, attaching the swivel union to the power
turbine module M04, coming loose. We are issuing this AD to prevent
loosening of the nut, and oil leakage from the low pressure oil
system, which could lead to in-flight shutdown of the engine and
forced landing.

(e) Actions and Compliance

    Comply with this AD within the compliance times specified,
unless already done.
    (1) Within 30 engine hours or 7 days after the effective date of
this AD, whichever occurs first, apply 15 Newton-meters torque to
the nut, part number<PHONE_NUMBER>, attaching the swivel union to the
engine power turbine module M04. Use a backup wrench to prevent the
swivel union from rotating.

(f) Alternative Methods of Compliance (AMOCs)

    The Manager, Engine Certification Office, FAA, may approve AMOCs
for this AD. Use the procedures found in 14 CFR 39.19 to make your
request. You may email your request to<EMAIL_ADDRESS>
(g) Related Information

    (1) For more information about this AD, contact Besian Luga,
Aerospace Engineer, Engine Certification Office, FAA, Engine &
Propeller Directorate, 1200 District Avenue, Burlington, MA 01803;
phone:<PHONE_NUMBER>; fax:<PHONE_NUMBER>; email<EMAIL_ADDRESS>    (2) Refer to MCAI European Aviation Safety Agency AD 2016-0016,
dated January 15, 2016, for more information. You may examine the
MCAI in the AD docket on the Internet at http://www.regulations.gov
by searching for and locating it in Docket No. FAA-2016-2701.
    (3) Turbomeca S.A. Alert Mandatory Service Bulletin No. A298 79
2835, Version A, dated January 14, 2016, which is not incorporated
by reference in this AD, can be obtained from Turbomeca S.A., using
the contact information in paragraph (g)(4) of this AD.
    (4) For service information identified in this AD, contact
Turbomeca S.A., 40220 Tarnos, France; phone: 33 0 5 59 74 40 00;
telex: 570 042; fax: 33 0 5 59 74 45 16.
    (5) You may view this service information at the FAA, Engine &
Propeller Directorate, 1200 District Avenue, Burlington, MA 01803.
For information on the availability of this material at the FAA,
call<PHONE_NUMBER>.

(h) Material Incorporated by Reference

    None.

    Issued in Burlington, Massachusetts, on March 14, 2016.
Ann C. Mollica,
Acting Manager, Engine & Propeller Directorate, Aircraft Certification
Service.
[FR Doc. 2016-06372 Filed 3-21-16; 8:45 am]
BILLING CODE 4910-13-P


[Federal Register Volume 85, Number 8 (Monday, January 13, 2020)]
[Notices]
[Pages 1835-1840]
[FR Doc No: 2020-00262]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87901; File No. SR-NYSEArca-2020-04]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend the NYSE
Arca Options Fee Schedule Regarding the Floor Broker Prepayment Program

January 7, 2020.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that on January 2, 2020, NYSE Arca, Inc. (``NYSE Arca'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to amend the NYSE Arca Options Fee Schedule
(``Fee Schedule'') regarding the Floor Broker Prepayment Program. The
Exchange proposes to implement the fee change effective January 2,
2020. The proposed rule change is available on the Exchange's website
at www.nyse.com, at the principal office of the Exchange, and at the
Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this filing is to modify and extend the prepayment
incentive program for Floor Broker organizations (each a ``Floor
Broker'') which allows Floor Brokers to prepay certain annual costs in
exchange for volume rebates, as set forth in the Fee Schedule (the ``FB
Prepay Program'' or ``Program'').\4\
---------------------------------------------------------------------------

    \4\ See Fee Schedule, FLOOR BROKER FIXED COST PREPAYMENT
INCENTIVE PROGRAM (the ``FB Prepay Program''), available here,
https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf.
---------------------------------------------------------------------------

    Pursuant to the current FB Prepay Program, the Exchange offers
Floor Brokers a 10% discount on their ``Eligible Fixed Costs'' if such
costs are prepaid in advance of the year (the ``10% Discount'') \5\ and
an opportunity to qualify for the Percentage Growth Incentive (the
``Growth Incentive''), which is designed to encourage Floor Brokers to
increase their average daily volume (``ADV'') in billable manual
contract sides by certain percentages (correlated with Tiers) as
measured against (the greater of) one of two benchmarks.\6\
---------------------------------------------------------------------------

    \5\ See id. (providing that Eligible Fixed Costs include: OTP
Trading Participant Rights--Floor Broker; Floor Broker Order Capture
Device- Market Data Fees; Floor Booths; Options Floor Access Fee;
and Wire Services).
    \6\ The Percentage Growth Incentive excludes Customer volume,
Firm Facilitation and Broker Dealer facilitating a Customer trades,
and QCCs. Any volume calculated to achieve the Firm and Broker
Dealer Monthly Fee Cap and the Limit of Fees on Options Strategy
Executions, are likewise excluded from the Percentage Growth
Incentive because fees on such volume is already capped and
therefore does not increase billable manual volume. See id.
---------------------------------------------------------------------------

    The Exchange proposes to make several changes to this Program,
including to make it renewable annually, to remove the 10% Discount,
and to offer an alternative annual fixed rebate amount if a participant
qualifies for the Growth Incentive. Currently, if a Floor Broker
qualifies for the Growth Incentive, it would be eligible for specified
percentage reductions of its pre-paid annual fixed costs. The Exchange
proposes to offer an alternative to receive a specified annual fixed
rebate if a Floor Broker qualifies for the Growth Incentive.
Participants that qualify would receive the greater of the two rebates.
The Exchange also proposes to adjust the qualifying baseline volumes
and benchmarks.
    The Exchange proposes to implement the fee change effective January
2, 2020.
Background
    The Commission has repeatedly expressed its preference for
competition over regulatory intervention in determining prices,
products, and services in the securities markets. In Regulation NMS,
the Commission highlighted the importance of market forces in
determining prices and SRO revenues and, also, recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \7\
---------------------------------------------------------------------------

    \7\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005) (S7-10-04) (``Reg NMS
Adopting Release'').
---------------------------------------------------------------------------

    There are currently 16 registered options exchanges competing for
order flow. Based on publicly-available information, and excluding
index-based options, no single exchange has more than 16% of the market
share of executed volume of multiply-listed equity and ETF options
trades.\8\ Therefore, no exchange possesses significant pricing power
in the execution of multiply-listed equity & ETF options order flow.
More specifically, in the third quarter of 2019, the Exchange had less
than 10% market share of executed volume of multiply-listed equity &
ETF options trades.\9\
---------------------------------------------------------------------------

    \8\ The OCC publishes options and futures volume in a variety of
formats, including daily and monthly volume by exchange, available
here: https://www.theocc.com/market-data/volume/default.jsp.
    \9\ Based on OCC data, see id., the Exchange's market share in
equity-based options declined from 9.57% for the month of January to
9.52% for the month of September.
---------------------------------------------------------------------------

    The Exchange believes that the ever-shifting market share among the
exchanges from month to month demonstrates that market participants can
shift order flow, or discontinue or reduce use of certain categories of
products, in response to fee changes. Accordingly, competitive forces
constrain options exchange transaction fees. To respond to this
competitive marketplace, the Exchange has established incentives for
Floor Brokers, as such participants serve an important function in
facilitating the execution of orders via open outcry, which promotes
price discovery on the public markets. To the extent that these
incentives succeed, the increased liquidity on the Exchange would
result in enhanced market quality for all participants.
Proposed Rule Change
    The Exchange proposes to modify the Floor Broker Prepayment Program
in several ways. First, the Exchange proposes to remove reference to
specific years and to add rule text making clear that the Program is
renewable on an annual basis.\10\ The Exchange also proposes to remove
language regarding the 10% Discount, as that would no longer be
included in the Program.\11\ In addition, the Exchange proposes to
expand the Growth Incentive to provide an annual fixed-rebate option.
---------------------------------------------------------------------------

    \10\ See proposed Fee Schedule, FLOOR BROKER FIXED COST
PREPAYMENT INCENTIVE PROGRAM (the ``FB Prepay Program'') (including
removing reference to specific years and adding references to Floor
Brokers prepaying for the ``the following calendar year'' after
committing thereto by ``the last business day of December in the
current year''; being invoiced in January for Eligible Fixed Costs
based on annualizing their Eligible Fixed Costs incurred in the
previous November;'' and participants receiving their rebate ``in
the following January.'' See id. For example, if a participating
Floor Broker incurred $6,000 in Eligible Fixed Costs in November,
that Floor Broker would be invoiced in January of the following year
in the amount of $72,000 to prepay such costs for the entire year.
    \11\ See proposed Fee Schedule, FLOOR BROKER FIXED COST
PREPAYMENT INCENTIVE PROGRAM (the ``FB Prepay Program''). For
consistency, the Exchange would also remove reference to ``larger
discounts'' as it related to the smaller 10% Discount and replace
this reference with the word ``rebates.'' See id.
---------------------------------------------------------------------------

    Currently, to qualify for the Growth Incentive, the minimum
threshold that a participant needs to exceed is the greater of: 11,000
contract sides in billable manual ADV; or 110% of the Floor Broker's
total billable manual ADV in contract sides during the second half of
2017--i.e., July through December 2017.\12\
---------------------------------------------------------------------------

    \12\ See Fee Schedule, FLOOR BROKER FIXED COST PREPAYMENT
INCENTIVE PROGRAM (the ``FB Prepay Program'').
---------------------------------------------------------------------------

    The Exchange proposes to revise the minimum thresholds that a
participant needs to exceed to qualify for the Growth Incentive as
follows: 20,000 contract sides (up from 11,000) in billable manual ADV;
or 105% of the Floor Broker's total billable manual ADV in contract
sides (down from 110%) during the second half of 2017--i.e., July
through December 2017.\13\ The Exchange believes that 20,000 ADV is a
reasonable minimum threshold above which a participating Floor Broker
would need to increase volume in order to qualify for the Growth
Incentive given the increased options volume executed by Floor Brokers
in the past year. The Exchange also notes that Floor Brokers that are
new to the Exchange would be able to qualify for the Growth Incentive
based on the minimum threshold of 20,000 contract sides. In addition,
because Floor Broker volume has increased, the Exchange believes that
Floor Brokers that previously participated in the Program would be able
to achieve this proposed minimum

threshold. The Exchange likewise believes it is appropriate to reduce
the requisite percentage to meet the 2017 benchmark because it would
make this alternative more achievable for Floor Brokers that do not
meet the billable manual ADV threshold. The Exchange notes that the
changes to the Program are designed to encourage those Floor Brokers
that have previously enrolled in the Program to reenroll for the
upcoming year as well as to attract Floor Brokers that have not yet
participated.
---------------------------------------------------------------------------

    \13\ See proposed Fee Schedule, FLOOR BROKER FIXED COST
PREPAYMENT INCENTIVE PROGRAM (the ``FB Prepay Program'').
---------------------------------------------------------------------------

    Regardless of which benchmark a Floor Broker's growth is measured
against, all Floor Brokers that aim to qualify for the Growth Incentive
would be required to increase volume executed on the Exchange. The
total annual rebate available for achieving each Tier would be the same
regardless of whether the Floor Broker relied on the minimum (proposed)
20,000 ADV contract sides as the benchmark or 105% of the second half
of 2017 volume.
    The Exchange also proposes to add an option for a Floor broker to
receive a fixed rebate instead of a percentage reduction of pre-paid
annual fixed costs if it qualifies for the Growth Incentive. To reflect
this new option, the Exchange proposes to add rule text providing that
``[e]ligible Floor Broker organizations are entitled to an annual
rebate that is the greater of the `Total Percentage Reduction of pre-
paid annual Eligible Fixed Costs' or the `Alternative Rebate' based
upon the Percentage Growth Incentive Tier achieved, as set forth in the
table below''.
    As in prior years, the Exchange is proposing rebates based on the
growth in ADV in contract sides, but proposes to modify (and make more
achievable) the requisite Percentage Growth requirements to as low as
5% to achieve an annual rebate of 25% of prepaid Eligible Fixed Costs
or $4,000/month, whichever is greater, to Growth Incentive as high as
150% to achieve an annual rebate of 100% Eligible Fixed Costs or
$18,000/month (under new Tier 5), whichever is greater.\14\ Just as the
total percentage reduction increases as the Percentage Growth
increases, the Exchange proposes that the annual Alternative Rebate,
with fixed dollar amounts tied to each Tier, would also increase as the
Percentage Growth increases. Participants that qualify for one of the
Tiers would receive only the higher of the two potential rebates, paid
annually.
---------------------------------------------------------------------------

    \14\ See id. The Exchange notes that new Tier 4 effectively
replacing current Tier 3 in terms of growth requirement and
potential rebate, as the Exchange has lowered (and made more
achievable) proposed Tier 3. See id.
---------------------------------------------------------------------------

    The following table reflects the proposed changes (with deletions
in brackets and new text italicized): \15\
---------------------------------------------------------------------------

    \15\ Given that the annual Alternative Rebate will be available
for all Tiers (and not just Tier 3 as is currently the case), the
Exchange also proposes to delete the following language from the Fee
Schedule as obsolete: ``*Participants in the FB Prepay Program that
qualify for Tier 3 will be rebated the greater of 100% of their pre-
paid annual Eligible Fixed Costs, or $10,000/month.'' See id.

                                        FB Prepayment Program Incentives
                     [Based on annual ADV in contract sides for the calendar year (in 2019)]
----------------------------------------------------------------------------------------------------------------
                                                                    Total percentage
                                          Percentage growth      reduction of pre-paid
                 Tier                         incentive          annual eligible fixed      Alternative rebate
                                                                    costs [for 2019]
----------------------------------------------------------------------------------------------------------------
Tier 1...............................                    [30]5                   [40]25  $4,000/month.
Tier 2...............................                   [65]25                   [75]50  $6,000/month.
Tier 3...............................                  [100]50                 [100*]75  $8,000/month.
Tier 4...............................                      100                       80  $14,000/month.
Tier 5...............................                      150                      100  $18,000/month.
----------------------------------------------------------------------------------------------------------------

    Thus, as proposed, a participating Floor Broker would qualify for
the proposed Growth Incentive by executing ADV growth in manual
billable contract sides that is 5%, 25%, 50%, 100% or 150%, over the
greater of (i) 20,000 contract sides ADV; or (ii) 105% of their ADV
during the second half of 2017 (i.e., July through December).
Participants that qualify for Tiers 1, 2, 3, 4 or 5 would be eligible
for 25%, 50%, 75%, 80% or 100% of their pre-paid annual Eligible Fixed
costs, respectively. However, if the amount of the annual Alternative
Rebate works out to be greater than the rebate available under the
Growth Incentive program, the Floor Broker would be entitled to that
amount.
    Although this program relates to fixed costs, the Exchange believes
the Program (as modified) would continue to incent Floor Brokers to
increase their billable volume executed in open outcry on the Exchange,
which would benefit all market participants by expanding liquidity and
providing more trading opportunities, even to those market participants
that have not committed to the Program. Regardless of which benchmark a
participating Floor Broker's growth is measured against, all Floor
Broker's that opt to participate would be required to increase volume
executed on the Exchange in order to receive the enhanced discount. The
Exchange cannot predict with certainty whether any Floor Brokers would
avail themselves of this proposed fee change. However, all Floor
brokers are eligible for this Program.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\16\ in general, and furthers the
objectives of Sections 6(b)(4) and (5) of the Act,\17\ in particular,
because it provides for the equitable allocation of reasonable dues,
fees, and other charges among its members, issuers and other persons
using its facilities and does not unfairly discriminate between
customers, issuers, brokers or dealers.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

The Proposed Rule Change Is Reasonable
    The Exchange operates in a highly competitive market. The
Commission has repeatedly expressed its preference for competition over
regulatory intervention in determining prices, products, and services
in the securities markets. In Regulation NMS, the Commission
highlighted the importance of market forces in determining prices and
SRO revenues and, also, recognized that current regulation of the
market system ``has been remarkably successful in promoting market
competition in its

broader forms that are most important to investors and listed
companies.'' \18\
---------------------------------------------------------------------------

    \18\ See Reg NMS Adopting Release, supra note 7, at 37499.
---------------------------------------------------------------------------

    There are currently 16 registered options exchanges competing for
order flow. Based on publicly-available information, and excluding
index-based options, no single exchange has more than 16% of the market
share of executed volume of multiply-listed equity and ETF options
trades.\19\ Therefore, no exchange possesses significant pricing power
in the execution of multiply-listed equity & ETF options order flow.
More specifically, in the third quarter of 2019, the Exchange had less
than 10% market share of executed volume of multiply-listed equity &
ETF options trades.\20\
---------------------------------------------------------------------------

    \19\ See supra note 8.
    \20\ Based on OCC data, see supra note 9, in 2019, the
Exchange's market share in equity-based options declined from 9.57%
for the month of January to 9.23% for the month of September.
---------------------------------------------------------------------------

    The Exchange believes that the ever-shifting market share among the
exchanges from month to month demonstrates that market participants can
shift order flow, or discontinue or reduce use of certain categories of
products, in response to fee changes. Accordingly, competitive forces
constrain options exchange transaction fees. Stated otherwise, changes
to exchange transaction fees can have a direct effect on the ability of
an exchange to compete for order flow.
    The Exchange believes the FB Prepay Program, as modified, is
reasonable because the Program is optional and Floor Brokers can elect
to participate or not. In addition, the Exchange is continuing to offer
two alternative means to achieve the same enhanced rebate to ensure
that Floor Brokers that are new to the Exchange (or Floor Brokers that
did not execute more than 20,000 ADV in contract sides) could also
participate in the Program. The Exchange believes that increasing one
of the alternate requirements to 20,000 ADV is a reasonable minimum
threshold above which a participating Floor Broker would need to
increase volume in order to realize the proposed Growth Incentive
because numerous Floor brokers exceeded this volume requirement in
2019, even though it was not required. Because Floor Brokers are
already performing at this level, the Exchange believes it is
reasonable to adjust the eligibility requirement for the Growth
Incentive to match current performance levels. Having demonstrated an
ability to meet this higher volume threshold, the Exchange is seeking
to encourage Floor Brokers to sustain this volume threshold throughout
the year. The Exchange also believes it is reasonable to use each Floor
Broker's historical volume in the second half of 2017 as a benchmark
against which to measure future growth to achieve the proposed Growth
Incentive, and to lower from 110% to 105% the requisite increase over
the Floor Broker's 2017 volume, because it makes the Growth Incentive
more achievable and provides an opportunity for more Floor Brokers to
qualify for the Growth Incentive Program.
    The Exchange further believes that the proposed changes to add more
tiers to the Growth Incentive is reasonable because it will provide
greater opportunities to Floor Brokers to be eligible for one of the
two rebates by providing lower thresholds to qualify. Overall, the
proposed changes to the Growth Incentive program are designed to make
the existing Tiers more achievable while adding new Tiers 4 and 5 to
encourage increased executions by Floor Brokers on the Exchange, which
activity (even with lower volume thresholds) would benefit all market
participants.
    The Exchange also believes it is reasonable to provide an annual
alternative fixed rebate because it provides an option for Floor
brokers to earn the higher of the percentage reduction rebate, or the
fixed-rebate amount.
    Moreover, the FB Prepay Program provides Floor Brokers the
opportunity to receive rebates on its Eligible Fixed Costs that they
otherwise would not receive, based on trading activity. Such rebates
may encourage Floor Brokers to increase their billable volume executed
in open outcry on the Exchange, which would benefit all market
participants by expanding liquidity and providing more trading
opportunities, even to non-Floor Broker market participants (including
participating Floor Brokers who do not hit the volume thresholds).
    Finally, to the extent the proposed change continues to attract
greater volume and liquidity to the Exchange (including to the Floor),
the Exchange believes the proposed change would improve the Exchange's
overall competitiveness and strengthen its market quality for all
market participants. In the backdrop of the competitive environment in
which the Exchange operates, the proposed rule change is a reasonable
attempt by the Exchange to increase the depth of its market and improve
its market share relative to its competitors.
    The Exchange cannot predict with certainty whether any Floor
Brokers would avail themselves of this proposed fee change. However,
all Floor brokers are eligible to participate in the Program.
The Proposed Rule Change Is an Equitable Allocation of Credits and Fees
    The Exchange believes the proposed rule change is an equitable
allocation of its fees and credits. The proposal is based on the amount
and type of business transacted on the Exchange and Floor Brokers can
opt to avail themselves of the Program or not, and to attempt to trade
sufficient volume to achieve one of the Tiers, or not. All
participating Floor Brokers have the ability to qualify for the same
enhanced rebate under two alternatives means offered (i.e., the greater
of at least 20,000 contract sides in billable ADV or 105% of the Floor
Broker's total billable manual ADV in the second half of 2017). The
Exchange notes that the changes to the Program are designed to
encourage those Floor Brokers that have previously enrolled in the
Program to reenroll for the upcoming year as well as to attract Floor
Brokers that have not yet participated.
    Moreover, the proposed change applies to qualifying Floor Brokers
equally and because Floor Brokers serve an important function in
facilitating the execution of orders via open outcry, which as a price-
improvement mechanism, the Exchange wishes to encourage and support.
    To the extent that the proposed change continues to attract more
participation in the programs of the Exchange, the increased order flow
would continue to make the Exchange a more competitive venue for, among
other things, order execution. Thus, the Exchange believes the proposed
rule change would improve market quality for all market participants on
the Exchange and, as a consequence, attract more order flow to the
Exchange thereby improving market-wide quality and price discovery.
The Proposed Rule Change Is Not Unfairly Discriminatory
    The Exchange believes it is not unfairly discriminatory to modify
the FB Prepayment program because the proposed modification would be
available to all similarly-situated Floor Brokers on an equal and non-
discriminatory basis.
    The proposed modified Program is not unfairly discriminatory to
non-Floor Brokers because Floor Brokers serve an important function in
facilitating the execution of orders via open outcry, which as a price-
improvement mechanism, the Exchange wishes to encourage and support. To
the extent that the proposed change continues to

attract more participation in the programs of the Exchange, the
increased order flow would continue to make the Exchange a more
competitive venue for, among other things, order execution. Thus, the
Exchange believes the proposed rule change would improve market quality
for all market participants on the Exchange and, as a consequence,
attract more order flow to the Exchange thereby improving market-wide
quality and price discovery.
    Moreover, the proposal is based on the amount and type of business
transacted on the Exchange and Floor Broker organizations are not
obligated to participate in the Program and, if they do, they are not
obligated to try to achieve any of the Tiers.
    To the extent that the proposed change attracts a variety of
transactions to the Exchange, this increased order flow would continue
to make the Exchange a more competitive venue for order execution.
Thus, the Exchange believes the proposed rule change would improve
market quality for all market participants on the Exchange and, as a
consequence, attract more order flow to (the Floor of) the Exchange
thereby improving market-wide quality and price discovery. The
resulting increased volume and liquidity would provide more trading
opportunities and tighter spreads to all market participants and thus
would promote just and equitable principles of trade, 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.
    Finally, the Exchange believes that it is subject to significant
competitive forces, as described below in the Exchange's statement
regarding the burden on competition.

B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act, the Exchange does
not believe that the proposed rule change would impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act. Instead, as discussed above, the Exchange believes
that the proposed changes would encourage the submission of additional
liquidity to a public exchange, thereby promoting market depth, price
discovery and transparency and enhancing order execution opportunities
for all market participants. As a result, the Exchange believes that
the proposed change furthers the Commission's goal in adopting
Regulation NMS of fostering integrated competition among orders, which
promotes ``more efficient pricing of individual stocks for all types of
orders, large and small.'' \21\
---------------------------------------------------------------------------

    \21\ See Reg NMS Adopting Release, supra note 7, at 37499.
---------------------------------------------------------------------------

    Intramarket Competition. The Exchange believes the proposed
Program, as modified, should continue to encourage order flow to be
directed to the (Floor of the) Exchange, which would enhance the
quality of quoting and may increase the volumes of contracts trade on
the Exchange. To the extent that there is an additional competitive
burden on non-Floor Brokers, the Exchange believes that this is
appropriate because Floor Brokers serve an important function in
facilitating the execution of orders via open outcry, which as a price-
improvement mechanism, the Exchange wishes to encourage and support.
    To the extent that this function is achieved, all of the Exchange's
market participants should benefit from the improved market liquidity.
Enhanced market quality and increased transaction volume that results
from the anticipated increase in order flow directed to the Exchange
will benefit all market participants and improve competition on the
Exchange.
    Intermarket Competition. The Exchange believes that the proposed
change could promote competition between the Exchange and other
execution venues, by encouraging additional orders to be sent to the
(Floor of the) Exchange for execution. The proposed adjustments to the
Program are designed to make the incentives more achievable and to
continue to encourage Floor Brokers to execute orders on the Floor of
the Exchange, which would increase volume and liquidity, to the benefit
of all market participants by providing more trading opportunities and
tighter spreads.
    Given the robust competition for volume among options markets, many
of which offer the same products, implementing programs to attract
order flow, such as the proposed modification to the FB Prepayment
Program, are consistent with the above-mentioned goals of the Act.
    The Exchange notes that it operates in a highly competitive market
in which market participants can readily favor competing venues. In
such an environment, the Exchange must continually review, and consider
adjusting, its fees and credits to remain competitive with other
exchanges. For the reasons described above, the Exchange believes that
the proposed rule change reflects this competitive environment.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

    The foregoing rule change is effective upon filing pursuant to
Section 19(b)(3)(A) \22\ of the Act and subparagraph (f)(2) of Rule
19b-4 \23\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
---------------------------------------------------------------------------

    \22\ 15 U.S.C. 78s(b)(3)(A).
    \23\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \24\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \24\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-NYSEArca-2020-04 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEArca-2020-04. 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 rule change that
are filed with the Commission, and all written communications relating
to the proposed rule change between the Commission and any person,
other than those that may be withheld from the public in accordance
with the provisions of 5 U.S.C. 552, will be available for website
viewing and printing in the Commission's Public Reference Room, 100 F
Street NE, Washington, DC 20549, on official business days between the
hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be
available for inspection and copying at the principal office of the
Exchange. All comments received will be posted without change. Persons
submitting comments are cautioned that we do not redact or edit
personal identifying information from comment submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSEArca-2020-04, and should
be submitted on or before February 3, 2020.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\25\
---------------------------------------------------------------------------

    \25\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-00262 Filed 1-10-20; 8:45 am]
 BILLING CODE 8011-01-P