[Federal Register Volume 77, Number 158 (Wednesday, August 15, 2012)]
[Notices]
[Pages 49035-49037]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-19986]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-67635; File No. SR-NYSEMKT-2012-34]
Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and
Immediate Effectiveness of Proposed Rule Change Relating to Amendments
to the NYSE Amex Options Fee Schedule Regarding a Rebate for Order Flow
Providers, an Increase in the Service Fee Applicable to Market Makers,
and a Fee for Market Maker Executions of SPY Options
August 9, 2012.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on July 31, 2012, NYSE MKT LLC (the ``Exchange'' or ``NYSE
MKT'') 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 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\ 15 U.S.C. 78a.
\3\ 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 proposes to [sic] amend the NYSE Amex
Options Fee Schedule to (i) Establish a rebate for Order Flow Providers
(``OFPs'') \4\ based on the average daily volume (``ADV'') of Customer
\5\ Electronic Complex Orders \6\ executed by an OFP on the Exchange;
(ii) increase the service fee applicable to NYSE Amex Options Market
Makers \7\ that have reached the monthly Market Maker fee cap, from
$0.05 per contract to $0.10 per contract for executions of Electronic
Complex Orders; and (iii) establish a fee of $0.10 per contract for
NYSE Amex Options Market Maker executions of SPY options as part of an
Electronic Complex Order. 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.
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\4\ An OFP is any ATP Holder that submits, as agent, orders to
the Exchange. See Rule 900.2NY(57).
\5\ The term ``Customer'' means an individual or organization
that is not a broker-dealer. See Rule 900.2NY(18).
\6\ See Rule 980NY.
\7\ References herein to Market Makers include Specialists and
e-Specialists. See Rule 900.2NY(76). See also Rule 927.4NY.
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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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend the Fee Schedule to (i) Establish a
rebate for OFPs based on the ADV of Customer Electronic Complex Orders
executed by an OFP on the Exchange; (ii) increase the service fee
applicable to NYSE Amex Options Market Makers that have reached the
monthly Market Maker fee cap, from $0.05 per contract to $0.10 per
contract for executions of Electronic Complex Orders; and (iii)
establish a fee of $0.10 per contract for NYSE Amex Options Market
Maker executions of SPY options as part of an Electronic Complex Order.
The Exchange proposes to implement these changes on August 1, 2012.
The Exchange proposes to establish a rebate for OFPs based on the
ADV of Customer Electronic Complex Orders
[[Page 49036]]
executed by an OFP on the Exchange. An OFP would be required to execute
an ADV of at least 35,000 contracts of Customer Electronic Complex
Orders to qualify for the rebate. The proposed volume tiers and the
corresponding per contract rebate would be as follows: \8\
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\8\ The Exchange proposes that the highest rebate amount
achieved by an OFP for the calendar month would apply retroactively
to all Customer Electronic Complex Orders executed by the OFP during
such calendar month.
------------------------------------------------------------------------
Rebate per contract for
all customer electronic
complex orders
Customer electronic complex order ADV tiers (retroactive to the
first contract traded
during the month)
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35,000 to 49,999............................... $0.04
50,000 to 69,999............................... 0.06
70,000 to 109,999.............................. 0.08
110,000 and greater............................ 0.10
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In addition to this proposed rebate, the Exchange proposes to amend
the rate for the incremental service fee charged to NYSE Amex Options
Market Makers that have reached the monthly fee cap for their
executions of Electronic Complex Orders. Currently, and as described in
endnote 5 to the Fee Schedule, NYSE Amex Options Market Maker fees are
aggregated and capped at $350,000 per month. An incremental service fee
of $0.01 per contract applies for NYSE Amex Options Market Maker volume
executed in excess of 3,500,000 contracts per month. However, the
incremental service fee is $0.05 for an execution of an Electronic
Complex Order. The Exchange is proposing to increase this incremental
service fee for Electronic Complex Order executions from $0.05 per
contract to $0.10 per contract.
The Exchange is also proposing to implement a fee of $0.10 per
contract for any NYSE Amex Options Market Maker executions of SPY
options as part of an Electronic Complex Order. NYSE Amex Options
Market Makers that execute Electronic Complex Orders in options other
than SPY would continue to pay the existing transaction charges, as
provided in the Fee Schedule.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act, in general, and furthers the objectives
of Section 6(b)(4) of the Act,\9\ in particular, because it provides
for the equitable allocation of reasonable dues, fees, and other
charges among its members and issuers and other persons using its
facilities and does not unfairly discriminate between customers,
issuers, brokers or dealers.
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\9\ 15 U.S.C. 78f(b)(4).
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The proposal to establish a tiered rebate for OFPs that execute the
requisite ADV of Customer Electronic Complex Orders on the Exchange is
reasonable because it is designed to attract additional Customer
Electronic Complex Order volume to the Exchange, which would benefit
all participants by offering greater price discovery, increased
transparency and an increased opportunity to trade on the Exchange.
Additionally, the Exchange believes that the rates proposed for the
rebate are reasonable because they would incentivize OFPs to submit
Customer Electronic Complex Orders to the Exchange and would result in
a rebate that is reasonably related to an exchange's market quality
that is associated with higher volumes. The Exchange also believes that
the proposed thresholds for the tiers are reasonable because they will
reward OFPs with a greater rebate when they bring a larger number of
orders to the Exchange. The Exchange also believes that retroactively
applying the highest rebate amount achieved by an OFP to all Customer
Electronic Complex Orders executed by the OFP during the calendar month
is reasonable because it will increase the incentive for OFPs to
achieve a higher tier. Moreover, the Exchange believes that the
proposed rebate is equitable and not unfairly discriminatory because it
will be available to all OFPs that execute Customer Electronic Complex
Orders on the Exchange on an equal and non-discriminatory basis. The
Exchange also believes that the proposed rebate is reasonable because
it is not new or novel. Instead, the Exchange understands that at least
two other option exchanges currently offer a rebate specifically for
Customer Complex Order volume.\10\
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\10\ For example, the International Securities Exchange
(``ISE'') Schedule of Fees provides that a rebate of $0.32 per
contract per leg will apply to Priority Customer Complex orders in
the Select Symbols (excluding SPY) that trade with non-Priority
Customer orders in the ISE Complex Order book; provided, however,
that a greater rebate shall apply to an ISE Member during a calendar
month that achieves a certain ADV of Priority Customer Complex Order
contracts executed during the calendar month, as follows: if the ISE
Member achieves an ADV of 75,000 Priority Customer Complex Order
contracts, the rebate amount shall be $0.33 per contract per leg; if
the ISE Member achieves an ADV of 125,000 Priority Customer Complex
Order contracts, the rebate amount shall be $0.34 per contract per
leg; and if the ISE Member achieves an ADV of 250,000 Priority
Customer Complex Order contracts, the rebate amount shall be $0.35
per contract per leg. Similar to the Exchange's proposal, the
highest rebate amount achieved by the ISE Member for a calendar
month applies retroactively to all contracts executed by the ISE
Member during such month. See endnote 3 [sic] of the ISE Schedule of
Fees. Similarly, NASDAQ OMX PHLX (``PHLX'') provides a rebate for
Customer Complex Orders. See Section I, Part B of the PHLX Pricing
Schedule.
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The Exchange believes that the proposal to increase the capped NYSE
Amex Market Maker service fee from $0.05 to $0.10 for executions of
Electronic Complex Orders is reasonable because the capped NYSE Amex
Options Market Maker would still be incentivized to continue to trade
sufficient volume once it has achieved the fee cap, thereby lowering
the effective rate for its executions over the course of the month.
Specifically, the Exchange believes that the proposed new rate is
reasonable because, among other things, the new rate would be factored
into an NYSE Amex Options Market Maker's overall transaction costs,
including the rebate proposed herein for Customer Electronic Complex
Order executions. The Exchange also believes that the proposed new rate
is reasonable because the anticipated increase in Customer Electronic
Complex Order volume that would result from the proposed rebate will
directly benefit capped NYSE Amex Options Market Makers, as they will
have an increased opportunity to trade. The Exchange believes that the
increased opportunity to trade reasonably balances the proposed
increase in the service fee, which would continue to be less than the
rate that the NYSE Amex Options Market Maker
[[Page 49037]]
would pay if it was not capped. In this regard, the Exchange believes
that the proposed rate is reasonable because it would continue to
incentivize NYSE Amex Options Market Makers to trade sufficient volume
to achieve the fee cap. The Exchange believes that this aspect of the
proposed rule change is equitable and not unfairly discriminatory
because it will apply to all capped NYSE Amex Options Market Makers on
an equal and non-discriminatory basis.
The Exchange believes that the proposal to charge $0.10 per
contract to all NYSE Amex Options Market Makers that execute SPY
options as part of an Electronic Complex Order is reasonable because
the rate is set at a level that the Exchange believes may attract
greater Market Maker participation in the Exchange's Complex Order Book
for SPY options. Additionally, the Exchange notes that NYSE Amex
Options Market Makers will continue to be assessed Marketing Charges
when they execute SPY options as part of an Electronic Complex Order
where the contra party is a Customer. The Marketing Charges for SPY
options are currently $0.25 per contract, which, when coupled with the
proposed $0.10 per contract rate, results in a $0.35 per contract
charge. This all-in cost is reasonable because it is comparable to what
other participants on the Exchange will pay under the proposal, ranging
from $0.20 per contract for firms trading electronically to $0.43 per
contract for non-NYSE Amex Options Market Makers trading
electronically. In this regard, the fee is equitable and not unfairly
discriminatory, particularly when considering the quoting obligations
that NYSE Amex Options Market Makers must satisfy. The Exchange notes
that Market Maker quotes establish the Exchange's best bid and best
offer, which serve as an important price discovery tool for
participants that enter Complex Orders into the Exchange's Complex
Order Book. Accordingly, the Exchange believes that the proposed change
is reasonable, equitable and not unfairly discriminatory. The Exchange
also believes that the proposed rule change is equitable and not
unfairly discriminatory because it will apply to all NYSE Amex Options
Market Makers on an equal and non-discriminatory basis.
For these reasons, the Exchange believes that the entire proposal
is reasonable, equitable and not unfairly discriminatory. 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 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.
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) \11\ of the Act and subparagraph (f)(2) of Rule
19b-4 \12\ thereunder, because it establishes a due, fee, or other
charge imposed by NYSE MKT.
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\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 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-2012-34 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-2012-34. 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 Section, 100 F Street
NE., Washington, DC 20549-1090 on official business days between the
hours of 10 a.m. and 3 p.m. Copies of the filing will also be available
for inspection and copying at the Exchange's principal office and on
its Internet Web site at www.nyse.com. 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-2012-34 and should be submitted
on or before September 5, 2012.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-19986 Filed 8-14-12; 8:45 am]
BILLING CODE 8011-01-P