[Federal Register Volume 77, Number 178 (Thursday, September 13, 2012)]
[Notices]
[Pages 56683-56685]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-22523]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-67806; File No. SR-NYSEArca-2012-97]
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
Eliminate the Tape A Step Up Tier, Modify the Remaining Tape Step Up
Tiers and Introduce an Alternative Method of Qualifying for Tier 1
September 7, 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 August 27, 2012, 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 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 amend the NYSE Arca Equities Schedule of
Fees and Charges for Exchange Services (``Fee Schedule'') to (i)
eliminate the Tape A Step Up Tier; (ii) modify the remaining Tape Step
Up Tiers to exclude ETP Holders that qualify for the Cross-Asset Tier
or Investor Tier 4; and (iii) introduce an alternative method of
qualifying for Tier 1. The Exchange proposes to implement the fee
changes on September 1, 2012. 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend the Fee Schedule to (i) eliminate
the Tape A Step Up Tier; (ii) modify the remaining Tape Step Up Tiers
to exclude ETP Holders that qualify for the Cross-Asset Tier or
Investor Tier 4; and (iii) introduce an alternative method of
qualifying for Tier 1. The Exchange proposes to implement the fee
changes on September 1, 2012.
The Exchange proposes to eliminate the Tape A Step Up Tier, which
currently provides for a $0.0029 per share fee for orders of qualifying
ETP Holders that take liquidity from the Book in Tape A Securities.\4\
The Exchange has determined to eliminate the Tape A Step Up Tier
because it has generally not incentivized ETP Holders to submit
additional liquidity in Tape A Securities.
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\4\ Because the first instance of footnote 4 in the Fee
Schedule, which describes average daily volume (``ADV''), is
currently included within the Tape A Step Up Tier, the Exchange
proposes to instead make the first instance of footnote 4 in the Fee
Schedule appear with the proposed new footnote 4 reference in Tier
1.
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The Exchange also proposes to specify in the Fee Schedule that ETP
Holders that qualify for the Cross-Asset Tier or Investor Tier 4 would
not be eligible to qualify for the Tape B and Tape C Step Up Tiers and
the Tape C Step Up Tier 2.\5\ Currently, Investor Tier 1-3 ETP Holders
are ineligible to qualify for the reduced fees provided under the Tape
B and Tape C Step Up Tiers and the Tape C Step Up Tier 2. The Exchange
believes that the credit per share of $0.0030 is sufficient enough that
an ETP Holder
[[Page 56684]]
that qualifies for the Cross-Asset Tier or Investor Tier 4 should not
also be eligible for the reduced fees applicable to the Tape B and Tape
C Step Up Tiers and the Tape C Step Up Tier 2.
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\5\ As described above, the Exchange has proposed to eliminate
the Tape A Step Up Tier.
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Finally, the Exchange proposes to introduce an alternative method
of qualifying for Tier 1. Currently, an ETP Holder must provide
liquidity an average daily share volume per month of 0.70% or more of
the U.S. consolidated ADV (``CADV'') \6\ to qualify for Tier 1 and the
applicable rates thereunder. As proposed, an ETP Holder, including a
Market Maker, could alternatively qualify for Tier 1 by (a) providing
liquidity an average daily share volume per month of 0.15% or more of
the U.S. CADV and (b) being affiliated with an NYSE Arca Options
Trading Permit (``OTP'') Holder or OTP Firm that provides an ADV of
electronic posted executions (including all account types, e.g., Firm,
Customer, Broker Dealer or Market Maker) in Penny Pilot issues on NYSE
Arca Options of at least 100,000 contracts during the month, of which
at least 25,000 contracts must be for the account of a Market Maker.\7\
The Exchange believes that, by providing for an additional method of
qualifying for Tier 1, this proposed change will provide a greater
incentive to attract additional equity and option liquidity so as to
qualify for the Tier 1 rates.
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\6\ U.S. CADV means United States Consolidated Average Daily
Volume for transactions reported to the Consolidated Tape and
excludes volume on days when the market closes early.
\7\ The Exchange notes that the Fee Schedule currently includes
a Cross-Asset Tier for which qualification is similarly determined
based on an ETP Holder's equity activity on the Exchange as well as
the option activity of an affiliated OTP Holder or OTP Firm on NYSE
Arca Options. For purposes of the proposed alternative Tier 1
qualifying method, and as is the case for the existing Cross-Asset
Tier, an affiliate of an ETP Holder would be a person or firm that
directly, or indirectly through one or more intermediaries, controls
or is controlled by, or is under common control with, the ETP
Holder. See NYSE Arca Rule 1.1(b). Also, as provided under NYSE Arca
Options Rule 6.72, options on certain issues have been approved to
trade with a minimum price variation of $0.01 as part of a pilot
program that is currently scheduled to expire on December 31, 2012.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Securities Exchange Act of 1934 (the
``Act''),\8\ 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, issuers and other persons using its facilities and does not
unfairly discriminate between customers, issuers, brokers or dealers.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that the proposed rule change is reasonable
because eliminating the Tape A Step Up Tier would remove a pricing tier
from the Fee Schedule that has generally not incentivized ETP Holders
to submit additional liquidity in Tape A Securities. Removal of the
Tape A Step Up Tier is also equitable and not unfairly discriminatory
because it would be eliminated for all ETP Holders.
The Exchange believes that making ETP Holders that qualify for the
Cross-Asset Tier or Investor Tier 4 ineligible to qualify for the Tape
B and Tape C Step Up Tiers and the Tape C Step Up Tier 2 is reasonable
because the ETP Holders that qualify for the Cross-Asset Tier or
Investor Tier 4 would already receive a higher credit for such
executions and would therefore not require the added economic incentive
of decreased execution fees in order to encourage greater amounts of
liquidity. Furthermore, the Exchange believes that this is equitable
and not unfairly discriminatory because all ETP Holders that qualify
for the Cross-Asset Tier or Investor Tier 4 would be ineligible to
qualify for the Tape B and Tape C Step Up Tiers and the Tape C Step Up
Tier 2.
The Exchange also believes that the proposed rule change is
reasonable because the proposed new method of qualifying for Tier 1
would provide ETP Holders, including Market Makers, with an additional
method of qualifying for the applicable rates thereunder. In this
regard, the Exchange believes that the Tier 1 rates are reasonable
because they would directly relate to the activity of an ETP Holder and
an affiliated OTP Holder or OTP Firm on NYSE Arca Options, thereby
encouraging increased trading activity on both the NYSE Arca equity and
option markets. Additionally, the Exchange believes that the proposed
change is reasonable because the opportunity to qualify for the Tier 1
rates would incentivize ETP Holders to provide liquidity on the
Exchange and would result in rates that are reasonably related to an
exchange's market quality that is associated with higher volumes. In
this regard, the proposal is also designed to bring additional posted
order flow to NYSE Arca Options, so as to provide additional
opportunities for all OTP Holders and OTP Firms to trade on NYSE Arca
Options. Accordingly, the Exchange believes that this may incentivize
ETP Holders and their affiliates to increase the orders sent directly
to the Exchange's equity and option markets and therefore provide
liquidity that supports the quality of price discovery and promotes
market transparency.
The Exchange also believes that the proposed thresholds for the new
method of qualifying for Tier 1 are reasonable because they are
designed to encourage increased trading activity on both the NYSE Arca
equity and option markets. The Exchange also believes that the proposed
thresholds are reasonable because they are comparable to thresholds
that are already in place on the Exchange. For example, while the
proposed equities threshold of 0.15% is lower than that of the Cross-
Asset Tier (i.e., 0.45%), it is balanced by the proposed options
threshold of 100,000 contracts, which is higher than that of the Cross-
Asset Tier (i.e., 90,000 contracts). Furthermore, while the options
threshold for the Cross-Asset Tier considers only Customer executions,
the proposed options threshold considers executions for all account
types (e.g., Firm, Customer, Broker Dealer and Market Maker). The
Exchange also believes that the proposed thresholds are reasonable
because they are comparable to the thresholds that are already in place
on at least one other exchange. Specifically, the NASDAQ Stock Market
provides a credit of $0.0029 per share when a member adds displayed
liquidity that is greater than 0.15% of U.S. CADV and greater than
100,000 total contracts (added and removed) on the NASDAQ Options
Market. Additionally, requiring that at least 25,000 of the 100,000
contract threshold be for the account of a Market Maker on NYSE Arca
Options is reasonable because it would reasonably ensure that an ETP
Holder that qualifies for Tier 1 according to this newly proposed
method is affiliated with an OTP Holder or OTP Firm that submits option
volume that is not exclusively for Customers.\10\
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\10\ The Cross-Asset Tier is designed to incentivize additional
liquidity from ETP Holders that are affiliated with OTP Holders or
OTP Firms that submit Customer flow on NYSE Arca Options.
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The proposed new method of qualifying for Tier 1 is also equitable
and not unfairly discriminatory because it would be available to all
ETP Holders on an equal and non-discriminatory basis. In this regard,
the Exchange notes that ETP Holders that are not affiliated with an OTP
Holder or OTP Firm on NYSE Arca Options would continue to have the
opportunity to qualify for Tier 1 by satisfying the existing
requirements, which would not change as a result of this proposal.
[[Page 56685]]
Finally, 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 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 Arca.
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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-NYSEArca-2012-97 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-2012-97. 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-2012-97 and should
be submitted on or before October 4, 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. 2012-22523 Filed 9-12-12; 8:45 am]
BILLING CODE 8011-01-P