[Federal Register Volume 76, Number 222 (Thursday, November 17, 2011)]
[Notices]
[Pages 71410-71411]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-29676]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-65730; File No. SR-NYSEArca-2011-79]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Amending the NYSE
Arca Options Fee Schedule To Modify the Fees Relating to Qualified
Contingent Cross Orders
November 10, 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 November 1, 2011, NYSE Arca, Inc. (``NYSE Arca'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the Exchange. The
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 Options Fee Schedule
(``Fee Schedule'') to modify the fees relating to Qualified Contingent
Cross (``QCC'') orders. The text of the proposed rule change is
available at the Exchange, the Commission's Public Reference Room, and
www.nyse.com.
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 the proposal is to modify the fees relating to QCC
orders. Specifically, the Exchange intends to adopt a rebate of $.10
per contract for executed QCC orders. The rebate will be credited to
the executing Floor Broker.
The Exchange notes that the terms of a QCC order are negotiated and
agreed to prior to being brought to an exchange for possible execution.
In bringing a QCC order to the Exchange for execution, OTP Holders have
two primary means of doing so. They can configure their systems to
deliver the QCC order to the Exchange matching engines for validation
and execution. Alternatively they can utilize the services of another
OTP Holder acting as a Floor Broker. In turn, the Floor Broker who is
in receipt of such an order can enter the order through an Exchange-
provided system \3\ to be delivered to the Exchange matching engine for
validation and potential execution. In light of the fact that the
Exchange does not offer a front-end for order entry, unlike some of the
competing exchanges,\4\ the Exchange believes it is necessary from a
competitive standpoint to offer this rebate to the executing Floor
Broker on a QCC order. The Exchange expects that the rebate offered to
executing Floor Brokers will allow them to price their services at a
level that will enable them to attract QCC order flow from participants
who would otherwise utilize an existing front-end order entry mechanism
offered by the Exchange's competitors instead of incurring the cost in
time and money to develop their own internal systems to be able to
deliver QCC orders directly to the Exchange systems. To the extent that
Floor Brokers are able to attract these QCC orders, they will gain
important information that will allow them to solicit the parties to
the QCC orders for participation in other trades, which will in turn
benefit all other Exchange participants through the additional
liquidity and price discovery that may occur as a result. The Exchange
notes that at least two other exchanges offer a similar rebate.\5\
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\3\ Floor Brokers are required by NYSE Arca Options Rule 6.67 to
have systematized orders prior to representing them in open outcry.
Using the same Electronic Order Capture System, Floor Brokers will
be able to enter QCC orders for validation by the Exchange matching
engines and potential execution.
\4\ The International Securities Exchange offers PRECISE TRADE
as a means for users to enter orders and Chicago Board Options
Exchange has a similar front-end order entry system called PULSE.
Such systems do not require users to develop their own internal
front-end order entry systems and may provide savings to users in
terms of development time and costs.
\5\ See Securities Exchange Act Release No. 65472 (October 3,
2011), 76 FR 62887 (October 11, 2011) (SR-NYSEAmex-2011-72) and
NASDAQ OMX PHLX fee schedule dated September 12, 2011, page 21
(describing a Floor Broker Subsidy that can range as high as $.09
per contract), available at http://www.nasdaqtrader.com/content/marketregulation/membership/phlx/feesched.pdf.
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The proposed change will be operative on November 1, 2011.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6(b) \6\ of the Securities Exchange Act
of 1934 (the ``Act''), in general, and Section 6(b)(4) \7\ of the Act,
in particular, in that it is designed to provide for the equitable
allocation of reasonable dues, fees, and other charges among its
members and other persons using its facilities.
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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(4).
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The Exchange believes the proposed $.10 per contract rebate for
Floor Brokers who enter QCC orders that execute is reasonable because
it will allow Floor Brokers the opportunity to compete for QCC orders
that would otherwise be entered into front-end order entry systems of
competing exchanges.\8\ The proposed rebate is comparable to that found
on other exchanges \9\ in that it is being offered to Floor Brokers as
an inducement that may allow them to competitively price their services
offered to all participants. To the extent that the rebate is
successful in attracting additional order flow to the Exchange, all
participants should benefit. As such, the Exchange believes that the
rebate is appropriate and reasonable.
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\8\ See supra note 4.
\9\ See supra note 5.
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The Exchange believes the proposal to adopt a $.10 per contract
rebate is equitable and not unfairly discriminatory because it would
uniformly apply to all QCC orders entered by a Floor Broker for
validation by the system and potential execution. The rebate is not
unfairly discriminatory to firms that enter QCC orders directly into
the NYSE Arca System through electronic connection, because the fee for
the QCC order is the same whether it is entered electronically or
through a Floor Broker. In addition, under Commentary .01 to Arca
Options Rule 6.90, only Floor Brokers may enter a QCC order from the
Floor; therefore,
[[Page 71411]]
providing the rebate to Floor Brokers does not discriminate against
other QCC orders entered into the NYSE Arca System from on the Floor.
Any participant will be able to engage a rebate-receiving Floor Broker
in a discussion surrounding the appropriate level of fees that they may
be charged for entrusting the entry of the QCC order to the Floor
Broker into the Exchange systems for validation and execution. The
additional order flow attracted by this rebate should benefit all
participants. The rebate is meant to assist Floor Brokers to recruit
business on an agency basis from both OTP Holders and non-OTP Holder
firms. The Floor Broker may use all or part of the rebate to offset the
Floor Brokerage charges billed to the Firm. For this reason the
Exchange believes the adoption of the proposed rebate is both equitable
and not unfairly discriminatory.
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) \10\ of the Act and subparagraph (f)(2) of Rule
19b-4 \11\ thereunder, because it establishes a due, fee, or other
charge imposed by the NYSE Arca.
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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 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 email to [email protected]. Please include
File Number SR-NYSEArca-2011-79 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-2011-79. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of 10
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-2011-79 and should
be submitted on or before December 8, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
\12\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-29676 Filed 11-16-11; 8:45 am]
BILLING CODE 8011-01-P