[Federal Register Volume 77, Number 114 (Wednesday, June 13, 2012)]
[Notices]
[Pages 35437-35439]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-14336]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-67153; File No. SR-NYSEMKT-2012-05]
Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and
Immediate Effectiveness of Proposed Rule Change Modifying the NYSE Amex
Options Fee Schedule To Amend the Rights Fee That Is Charged to
Specialists, e-Specialists and Directed Order Market Makers
June 7, 2012.
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 May 31, 2012, NYSE MKT LLC (the ``Exchange'' or ``NYSE MKT'') 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.
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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 Amex Options Fee Schedule
(``Fee Schedule'') to amend the Rights Fee that is charged to
Specialists, e-Specialists and Directed Order Market Makers. The text
of the proposed rule change is available on the Exchange's Web site at
www.nyse.com, at the principal office of the Exchange, and at the
Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend the Fee Schedule to amend the Rights
Fee that is charged to Specialists, e-Specialists, and Directed Order
Market Makers (``DOMMs''). The Exchange believes the proposed change
will allow it to recoup some of the costs of listing new option classes
that may not generate sufficient trading activity and, in turn,
trading-related revenues.
Presently, the Exchange assesses a monthly Rights Fee to
Specialists, e-Specialists, and DOMMs. The current Rights Fee is
variable, based on the Average Daily National Customer Contracts
traded, calculated over the prior three months, with a one-month lag.
For example, the Average Daily National Customer Contracts traded for
January, February, and March are used to arrive at the Rights Fee
applicable to a particular option for trading in the month of May. The
table below contains the Average Daily National Customer Contracts
traded tiers and the associated Rights Fee:
------------------------------------------------------------------------
Monthly
Average national daily customer contracts per issue base rate
per issue
------------------------------------------------------------------------
0 to 2,000................................................. $75
2,001 to 5,000............................................. 200
5,001 to 15,000............................................ 375
15,001 to 100,000.......................................... 750
Over 100,000............................................... 1,500
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The Exchange proposes to amend the tiers and fees as follows:
------------------------------------------------------------------------
Monthly
Average national daily customer contracts per issue base rate
per issue
------------------------------------------------------------------------
0 to 200................................................... $250
201 to 2,000............................................... 75
2,001 to 5,000............................................. 200
5,001 to 15,000............................................ 375
15,001 to 100,000.......................................... 750
Over 100,000............................................... 1,500
------------------------------------------------------------------------
The 0-to-200 tier will only apply to options listed after June 1,
2012. Options listed before June 1, 2012 will be ``grandfathered'' and,
as such, subject to the monthly base rate per issue of $75 if they fall
into the 0 to 200 contract volume tier. The Exchange will publish on
its Web site a list of all ``grandfathered'' options.
By adding a new, lower volume tier, the Exchange intends to recoup
the costs associated with a new options listing that does not in turn
generate sufficient trading volume and associated
[[Page 35438]]
trade-related revenues. The Exchange believes that the higher Rights
Fee for the new lower volume tier will encourage more efficient use of
the Exchange's resources. Unfettered growth in option listings without
an offsetting growth in volume will ultimately result in increased
costs for all participants. By instituting the proposed Rights Fee for
lower volume issues, the Exchange intends to encourage the delisting of
inactive options. In those instances where participants instead wish to
continue to trade relatively inactive options, they will directly
contribute toward some of the Exchange costs to support that trading
instead of having those costs shared among all Exchange participants.
Additionally, the Exchange wishes to explain the manner in which
the monthly Rights Fee is apportioned among the Specialist, e-
Specialist and DOMM participants in the event that participant volumes
are all zero in a given month. Presently, the Rights Fee is shared
among participants according to the relative amount of trading volume
each participant accounts for.\3\ Consider the following example of an
option that has Average Daily National Customer Contracts traded
between 5,001 and 15,000--such option has a Rights Fee of $375. During
the month, each of the participants accounts for the following volumes:
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\3\ See endnote 1 to the Fee Schedule dated May 1, 2012,
available at http://globalderivatives.nyx.com/sites/globalderivatives.nyx.com/files/nyse_amex_options_fee_schedule_05_01_12.pdf.
------------------------------------------------------------------------
------------------------------------------------------------------------
Specialist................................................... 5,000
e-Specialist................................................. 5,000
DOMM 1....................................................... 2,500
DOMM 2....................................................... 2,500
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15,000
------------------------------------------------------------------------
The participants in aggregate account for 15,000 contracts. Each
participant is then charged based on its proportion of the total
volume. For example:
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Specialist.................................. 5,000/15,000 = 33.3% x $375 =.......................... $125.00
e-Specialist................................ 5,000/15,000 = 33.3% x $375 =.......................... $125.00
DOMM 1...................................... 2,500/15,000 = 16.6% x $375 =.......................... $62.50
DOMM 2...................................... 2,500/15,000 = 16.6% x $375 =.......................... $62.50
----------
$375.00
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In the scenario where the Specialist, the e-Specialist, or DOMMs
transact zero volume in a month, the Exchange splits the Rights Fee
equally among the Specialist and e-Specialist, such that each
Specialist and/or e-Specialist participant is liable for 50% of the
Rights Fee. In the event that there is only a Specialist or e-
Specialist and there are no DOMM volumes, then that sole Specialist or
e-Specialist incurs 100% of the Rights Fee applicable to the option
issue.
Finally, the Exchange proposes to amend the Fee Schedule to reflect
the Exchange's name change to NYSE MKT LLC.
The proposed changes will be operative on June 1, 2012.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6(b) \4\ of the Securities Exchange Act
of 1934 (the ``Act''), in general, and Section 6(b)(4) \5\ 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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\4\ 15 U.S.C. 78f(b).
\5\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that the proposed change to Rights Fees are
reasonable, given the need to offset some of the costs associated with
listing new options that do not subsequently trade sufficiently to
generate trade-related revenues for the Exchange.
The proposed change is reasonable and equitable because it averts
the need to share the costs of supporting low volume option issues
among all Exchange participants. Instead, those participants,
specifically Specialists, e-Specialists, and DOMMs that are subject to
the new, lower volume tier and Rights Fee contribute toward some of the
Exchange's costs in supporting trading in low volume issues. The
Exchange notes that unless a Specialist or e-Specialist applies to be
the Specialist or e-Specialist in a new option issue, it cannot be
subject to the Rights Fee charges. Similarly, a Market Maker can opt
out of receiving Directed Orders on a symbol-by-symbol basis and
thereby avert incurring the Rights Fee. Given this ability to knowingly
incur the fee, or conversely avoid it, the Exchange believes that the
proposal is reasonable, equitable, and not unfairly discriminatory, as
participants may decide of their own accord to subject themselves to
the proposed fee. Further, other Exchange participants are not being
asked to subsidize the listing of new options that subsequently do not
generate sufficient trading revenues to offset the Exchange's costs in
supporting those new option listings.
The Exchange believes that it is reasonable, equitable and not
unfairly discriminatory to apportion the Rights Fee equally among the
Specialist and e-Specialist in the event that none of the Specialist,
e-Specialist or DOMMs have any volume in a given month. Specifically,
the Exchange is unable to list an option unless a Specialist or e-
Specialist opts to include it in their assignment; it is able to list
an option without a DOMM. As such, in the event that participant
volumes are all zero in a given month, limiting the Rights Fee
assessment to the Specialist and e-Specialist is warranted given that,
unlike a DOMM, they can request to have the option delisted if they
feel that the opportunity cost of the listing, i.e. the Rights Fee,
outweighs the benefit of the listing, the potential trading
opportunities.
The proposed change also is not unfairly discriminatory as it
applies equally to all Specialists, e-Specialists, and DOMMs. As noted,
those participants are able to avoid incurring the fee by simply not
applying to trade options listed on or after June 1, 2012. The fee for
options in the newly proposed volume tier of 2 [sic] to 200 Average
National Daily Customer Contracts is only $250 per issue, so any one
participant would never pay more than that per option class. As noted,
the Exchange is implementing this fee for all options listed on or
after June 1, 2012, and then only when the option fails to achieve
greater than 200 Average National Daily Customer Contracts.
For these reasons, the Exchange believes that the proposed change
is reasonable, 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
[[Page 35439]]
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) \6\ of the Act and subparagraph (f)(2) of Rule 19b-
4 \7\ thereunder, because it establishes a due, fee, or other charge
imposed by the NYSE MKT.
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\6\ 15 U.S.C. 78s(b)(3)(A).
\7\ 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-NYSEMKT-2012-05 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-NYSEMKT-2012-05. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSEMKT-2012-05 and should
be submitted on or before July 5, 2012.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\8\
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\8\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-14336 Filed 6-12-12; 8:45 am]
BILLING CODE 8011-01-P