[Federal Register Volume 76, Number 133 (Tuesday, July 12, 2011)]
[Notices]
[Pages 40974-40976]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-17427]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64820; File No. SR-NYSEArca-2011-41]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Amending the NYSE
Arca Equities Schedule of Fees and Charges for Exchange Services To
Introduce Two New Pricing Tiers, Step-Up Tier 1 and Step-Up Tier 2
July 6, 2011.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that, on June 30, 2011, NYSE Arca, Inc. (the ``Exchange'' or ``NYSE
Arca'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend the NYSE Arca Equities Schedule of
Fees and Charges for Exchange Services (the ``Schedule'') to introduce
two new pricing tiers, Step-Up Tier 1 and Step-Up Tier 2. The text of
the proposed rule change is available at the Exchange, at http://www.nyse.com, at the Commission's Public Reference Room, and at the
Commission's Web site at http://www.sec.gov.
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
[[Page 40975]]
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
Effective July 1, 2011, NYSE Arca proposes to introduce two new
pricing tier levels, Step-Up Tier 1 and Step-Up Tier 2.
Step-Up Tier 1 will allow members to earn a credit of $0.00295 per
share for executed orders that provide liquidity to the Book for Tape A
and Tape C securities and a credit of $0.0023 per share for executed
orders that provide liquidity to the Book for Tape B securities.
Additionally, such members will be charged a fee of $0.0028 per share
for orders that take liquidity from the Book for Tape B securities and
a fee of $0.0029 per share for orders routed outside the Book to any
away market centers for Tape B securities. Finally, such members also
will be charged a fee of $0.0023 per share for orders routed outside
the Book to the NYSE for Tape A securities. Step-Up Tier 2 will allow
members to earn a credit of $0.0029 per share for executed orders that
provide liquidity to the Book for Tape A and Tape C securities.
Additionally, such members will be charged a fee of $0.0028 per share
for orders that take liquidity from the Book for Tape B securities and
a fee of $0.0029 per share for orders routed outside the Book to any
away market centers for Tape B securities. Finally, such members also
will be charged a fee of $0.0023 per share for orders routed outside
the Book to the NYSE for Tape A securities. All other fees and credits
will be at the existing tiered and basic rates based on the members'
qualifying levels.
In order to qualify for the Step-Up Tier 1, a member on a daily
basis, measured monthly, must directly execute providing volume on NYSE
Arca in an amount that is an increase of no less than 0.15% of US
average daily consolidated share volume in Tape A, Tape B, Tape C
securities (``US ADV'') for that month over the member's average daily
providing volume in June 2011 (the ``Baseline Month''), subject to a
minimum increase of 15 million average daily providing shares. In order
to qualify for the Step-Up Tier 2, a member on a daily basis, measured
monthly, must directly execute providing volume on NYSE Arca in an
amount that is an increase of no less than 0.10% of US ADV for that
month over the member's average daily providing volume in the Baseline
Month, subject to a minimum increase of 10 million average daily
providing shares.
By way of example, if a member provided an average daily volume of
5 million shares in the Baseline Month, then to qualify for Step-Up
Tier 2 in a month where US ADV is 11 billion shares, that member would
need to increase its average daily provide by at least 11 million
shares, or 0.10% of that month's US ADV, for a total daily providing
average of at least 16 million shares. If that same member in that same
month increased its average daily provide by at least 16.5 million
shares, or 0.15% of that month's US ADV, for a total daily providing
average of at least 21.5 million shares, then that member would then
qualify for Step-Up Tier 1.
In addition, for both Step-Up Tier 1 and Step-Up Tier 2, those
members that did not directly provide volume to NYSE Arca in the
Baseline Month will be treated as having an Arca average daily
providing volume of zero for the Baseline Month. With respect to the
increased percentage of US ADV, the volume requirements to reach the
Step-Up Tiers pricing levels will adjust each calendar month based on
the US ADV for that given month. For purposes of clarification, US ADV
is equal to the volume reported by all exchanges and trade reporting
facilities to the Consolidated Tape Association (``CTA'') Plan for
Tapes A, B and C securities, however, US ADV does not include trades on
days when the market closes early.
Transactions that are not reported to the Consolidated Tape, such
as odd-lots and Crossing Session 2 transactions, are not included in US
ADV. The Exchange currently makes this data publicly available on a T +
1 basis from a link at http://www.nyxdata.com/US-and-European-Volumes.
The Exchange notes that members may be able to qualify for more
than one Tier in a given month, in such case, the most favorable rates
would apply. For example, if a member directly provided 8 million
average daily shares in the Baseline Month, and then increases the
average daily providing volume by 12 million shares to 20 million
shares in a subsequent month (where US ADV is 8 billion shares) and
such provided liquidity meets all the requirements of Investor Tier 2
as well as Step-up Tier 2, then such member would receive Investor Tier
2 credits of $.0030 per share for providing liquidity, and would be
charged Step-Up Tier 2 fees for taking liquidity and routing.
The goal of the Step-Up Tiers is to incentivize members to increase
the orders sent directly to NYSE Arca and therefore provide liquidity
that supports the quality of price discovery and promotes market
transparency. These Tiers would be expected to benefit members whose
increased order flow provides added levels of liquidity, but may not be
eligible for Tier 1, 2 and 3, or Investor Tier 1 and 2, thereby
contributing to the depth and market quality of the Book. Additionally,
a previous month baseline approach for rebates and fees has also been
adopted by NASDAQ Stock Market LLC and EDGX for liquidity providers.\3\
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\3\ See Securities Exchange Act Release No. 63628 (January 3,
2011), 76 FR 1201 (January 7, 2011); and Securities Exchange Act
Release No. 64632 (June 8, 2011), 76 FR 34792 (June 14, 2011). See
EDGX Exchange Fee Schedule, n. 1 at http://www.directedge.com/Membership/FeeSchedule/EDGXFeeSchedule.aspx.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Securities Exchange Act of 1934
(the ``Act''),\4\ in general, and Section 6(b)(4) of the Act,\5\ in
particular, in that it is designed to provide for the equitable
allocation of reasonable dues, fees, and other charges among its
members and other persons using its facilities. The Exchange believes
that the proposal does not constitute an inequitable allocation of
fees, as all similarly situated member organizations and other market
participants will be charged the same amount and access to the
Exchange's market is offered on fair and non-discriminatory terms.
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\4\ 15 U.S.C. 78f(b).
\5\ 15 U.S.C. 78f(b)(4).
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NYSE Arca believes that the Step-Up Tiers are equitable because
they are open to all members on an equal basis and provide credits that
are reasonably related to the value to an exchange's market quality
associated with higher volumes. As stated above, the Exchange believes
that the Step-Up Tiers may incentivize members to increase the orders
sent directly to NYSE Arca and therefore provide liquidity that
supports the quality of price discovery and promotes market
transparency. Moreover, the addition of such Tiers would benefit
members whose increased order flow provides meaningful added levels of
liquidity, but may not be eligible for the current Tiers, thereby
contributing to the depth and market quality of the Book. In addition,
by offering two Step-Up Tiers the Exchange believes more members may
provide increased order flow and
[[Page 40976]]
more members will be eligible to receive the credits for such orders.
NYSE Arca also believes that the higher rebates would incent liquidity,
and such increased volume increases potential revenue to the Exchange,
allowing the Exchange to pass on the savings to members in the form of
a higher rebate. Similar to the Baseline Month approach, NASDAQ and
EDGX have established credits and fees which are based on increased
volumes from a previous month baseline.\6\
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\6\ See n.4 above.
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Finally, the Exchange notes that it operates in a highly
competitive market in which market participants can readily favor
competing venues if they deem fee levels at a particular venue to be
excessive. In such an environment, the Exchange must continually adjust
its fees to remain competitive with other exchanges and with
alternative trading systems that have been exempted from compliance
with the statutory standards applicable to exchanges. The Exchange
believes that the proposed rule change reflects this competitive
environment because it will broaden the conditions under which members
may qualify for higher liquidity provider credits.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
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) \7\ of the Act and subparagraph (f)(2) of Rule 19b-
4 \8\ thereunder, because it establishes a due, fee, or other charge
imposed by the NYSE Arca.
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\7\ 15 U.S.C. 78s(b)(3)(A).
\8\ 17 CFR 240.19b-4(f)(2).
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At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
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 e-mail to [email protected]. Please include
File Number SR-NYSEArca-2011-41 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEArca-2011-41. This
file number should be included on the subject line if e-mail is used.
To help the Commission process and review your comments more
efficiently, please use only one method. The Commission will post all
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments,
all written statements with respect to the proposed rule change that
are filed with the Commission, and all written communications relating
to the proposed rule change between the Commission and any person,
other than those that may be withheld from the public in accordance
with the provisions of 5 U.S.C. 552, will be available for Web site
viewing and printing in the Commission's Public Reference Room, 100 F
Street, NE., Washington, DC 20549, on official business days between
the hours of 10 a.m. and 3 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; the
Commission does not edit personal identifying information from
submissions. You should submit only information that you wish to make
available publicly. All submissions should refer to File Number SR-
NYSEArca-2011-41 and should be submitted on or before August 2, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\9\
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\9\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-17427 Filed 7-11-11; 8:45 am]
BILLING CODE 8011-01-P