[Federal Register Volume 77, Number 179 (Friday, September 14, 2012)]
[Notices]
[Pages 56886-56890]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-22641]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-67816; File No. SR-NSX-2012-14]
Self-Regulatory Organizations; National Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Clarify the Purpose of, and Statutory Basis for, the September 4, 2012
Changes to the NSX Fee and Rebate Schedule
September 10, 2012.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on September 4, 2012, National Stock Exchange, Inc. filed with the
Securities and Exchange Commission (``Commission'') the proposed rule
change, as described in Items I and II below, which Items have been
prepared by the Exchange. The Commission is publishing this notice to
solicit comment 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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[[Page 56887]]
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
National Stock Exchange, Inc. (``NSX[supreg]'' or ``Exchange'') is
proposing to amend its Fee and Rebate Schedule (the ``Fee Schedule'')
issued pursuant to Exchange Rule 16.1(a) to introduce different Fee
Schedules including liquidity adding rebates and liquidity removal
fees. The Exchange proposes to adopt a Fee Schedule which allows Equity
Trading Permit (``ETP'') Holders to choose one of two pricing options
which can be applied to shares executed on the Exchange in Automatic
Execution Mode \3\ for securities quoted at prices equal to or greater
than one dollar. ETP Holders can choose between a Variable Fee
Schedule, which offers a liquidity adding rebate, a fixed liquidity
removal fee along with market data rebates, and a Fixed Fee Schedule
which sets forth a fixed liquidity adding rebate and a fixed liquidity
removal fee.
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\3\ See NSX Rule 11.13(b)(1).
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The proposed rule filing also offers ETP Holders that execute
orders using the Order Delivery Mode \4\ an alternate fee schedule
(``Alternate Fee Schedule'') for securities quoted at prices equal to
or greater than one dollar. The Alternate Fee Schedule may provide
these ETP Holders with an incentive to execute additional orders on the
Exchange using the Automatic Execution Mode. ETP Holders that are order
delivery participants automatically receive the Alternate Fee Schedule
upon meeting the minimum ADV threshold of 1,500,000 in Order Delivery
Mode and 10,000,000 shares in Automatic Execution Mode. Under the
Alternate Fee Schedule, ETP Holders will receive up to an additional
$0.0003 liquidity adding rebate over the tiered rebates contained in
the Primary Fee Schedule when the tier requirements are met. The
Exchange is also proposing to reduce the liquidity adding rebates and
increase the number of ADV tiers on the current Primary Fee Schedule
(as defined in further detail below).
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\4\ See NSX Rule 11.13(b)(2).
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The text of the proposed rule change is available on the Exchange's
Web site at http://www.nsx.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
Purpose
The Exchange is proposing to modify the Fee Schedule for securities
quoted in prices equal to or greater than one dollar. The Exchange will
not change the Fee Schedule for securities priced less than one dollar.
First, the Exchange is proposing to introduce a Fixed Fee Schedule
which will be the default Fee Schedule for shares executed in Automatic
Execution Mode. Second, the Exchange proposes to require ETP Holders to
pay a $0.0030 liquidity removal fee under both the Fixed Fee Schedule
and the Variable Fee Schedule unless the ETP Holder provides and
executes 50,000 shares of liquidity per month on the Exchange in
Automatic Execution Mode. ETP Holders that exceed the 50,000 liquidity
providing threshold will be charged the liquidity removal rate from the
appropriate ADV tier on the default Fixed Fee Schedule or the elected
Variable Fee Schedule. Third, the Exchange proposes to reduce the per
share liquidity adding rebate and increase the number of ADV tiers for
securities quoted at prices equal to or more than one dollar for ETP
Holders that use the Order Delivery Mode. Fourth, an Alternate Fee
Schedule will be proposed by the Exchange for ETP Holders executing
orders using the Order Delivery Mode. Under the Alternate Fee Schedule,
shares executed under the Automatic Execution Mode by an ETP Holder
that is an order delivery participant will be attributed to the per
share average daily volume (``ADV'') calculation \5\ used by the
Exchange to determine the tiered rebate applicable to Order Delivery
Mode. Fifth, the Exchange is proposing to amend the definition of the
ADV used to determine whether the Alternate or Primary Fee Schedule
applies to an ETP Holder using Order Delivery Mode. Finally, the
Exchange is proposing to clarify the Fee Schedule's endnotes, and
present the fee structure in a table format.
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\5\ See Endnote 4. The Exchange proposes to define the ADV as
the average number of shares the ETP Holder has executed on the
Exchange in all NMS stocks quoted at prices equal to or greater than
a dollar when the Exchange is open for trading (excluding partial
trading days) in Auto-Ex Mode or in Order Delivery Mode during the
calendar month (or partial month, as applicable \3\) [sic]. Shares
executed by an ETP Holder in Auto-Ex Mode will only be used by the
Exchange to calculate the minimum ADV contained in Section I of the
Fee Schedule. Likewise, shares executed by an ETP Holder in Order
Delivery Mode as an order delivery participant will only be used by
the Exchange to calculate the minimum ADV contained in Section II of
the Fee Schedule.
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1. Introduction of Fixed Fee Schedule for Automatic Execution Mode
The Exchange's current tiered pricing schedule for ETP Holders
executing transactions using the Automatic Execution Mode includes a
liquidity adding rebate, a liquidity removal fee and a market data
revenue rebate which causes variable pricing (``Variable Fee
Schedule''). The Exchange will not change the rates currently contained
in the Variable Fee Schedule. The Exchange changed the presentation of
the Variable Fee Schedule by representing the liquidity adding rebates,
liquidity removal fees and market data revenue rebates in a table
format.
The proposed rule change introduces a Fixed Fee Schedule applicable
to transactions executed by ETP Holders using the Automatic Execution
Mode. The Fixed Fee Schedule will be the Exchange's default pricing for
shares executed in Automatic Execution Mode. However, an ETP Holder may
elect to apply the Variable Fee Schedule instead of the Fixed Fee
Schedule by indicating its preference in an email to the Exchange prior
to the first of the month.\6\ ETP Holders may elect the Variable Fee
Schedule following the effectiveness of this rule filing by emailing
the Exchange by September 10, 2012.\7\
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\6\ See Endnote 3.
\7\ See Endnote 3. ETP Holders may elect to adopt the ``Variable
Fee Schedule'' by sending an email indicating this preference to
[email protected].
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The Fixed Fee Schedule provides fixed tier pricing and no market
data revenue rebate. ETP Holders will receive a fixed rebate when
executing displayed orders that add liquidity, and be charged a fixed
fee when executing orders that remove liquidity from the Exchange.
Under the Fixed Fee Schedule, a per share liquidity adding rebate will
be paid for displayed orders in securities quoted with a price equal to
or greater than a dollar at a rate of $0.0024, $0.0030, $0.0031,
$0.0032, or $0.0033 per share depending on an ETP Holder's ADV. An ETP
Holder will receive a $0.0024 per share rebate when the ETP Holder's
ADV is less than 500,000 shares; a $0.0030 per share rebate when the
ETP Holder's ADV is at least 500,000 shares but less than 1,500,000
shares; a $0.0031 per share rebate when the ETP Holder's ADV is at
least 1,500,000 shares but less than 5,000,000 shares; a $0.0032 per
share rebate when the ETP Holder's ADV is at least 5,000,000 shares but
less than 10,000,000 shares; and a $0.0033 per share rebate when the
ETP Holder's ADV is at least 10,000,000 shares.
In addition, the Fixed Fee Schedule will charge ETP Holders a
tiered liquidity removal fee at a rate of $0.0030, $0.0029, $0.0028, or
$0.0027 per share depending on an ETP Holder's
[[Page 56888]]
ADV. A $0.0030 per share fee applies when the ETP Holder's ADV is less
than 500,000 shares; a $0.0029 per share fee applies when the ETP
Holder's ADV is at least 500,000 shares but less than 5,000,000 shares;
a $0.0028 per share fee applies when the ETP Holder's ADV is at least
5,000,000 shares but less than 10,000,000 shares; and a $0.0027 per
share fee applies when the ETP Holder's ADV is at least 10,000,000
shares.
2. Tiered Pricing Contingency
The proposed rule change will also make the availability of the
lower tiered pricing for liquidity removal contained in the Fixed Fee
Schedule and the Variable Fee Schedule contingent upon an ETP Holder's
use of the Automatic Execution Mode to execute 50,000 shares per month
of displayed orders which add liquidity to the Exchange.
3. Reduction of Per Share Liquidity Rebate for Order Delivery Mode
As currently reflected in Section II of the Fee Schedule, ETP
Holders that execute orders using the Order Delivery Mode receive a
liquidity adding rebate for displayed orders of securities quoted at
prices equal to or better than one dollar, and a market data revenue
rebate attributable to these orders is available at certain ADV levels.
The Exchange currently offers a per share rebate of $0.0008, $0.0024 or
$0.0027 per share depending on an ETP Holder's ADV (``Primary Fee
Schedule''). A current $0.0008 per share rebate (with no market data
revenue sharing) applies when the ETP Holder's ADV is less than
15,000,000 shares; a current $0.0024 per share rebate (with no market
data revenue sharing) applies when the ETP Holder's ADV is at least
15,000,000 shares but less than 25,000,000 shares; a current $0.0027
per share rebate (plus 25% market data revenue sharing) applies when
the ETP Holder's ADV is at least 25,000,000 shares but less than
30,000,000 shares; and a current $0.0027 per share rebate (plus 50%
market data revenue sharing) applies when the ETP Holder's ADV is at
least 30,000,000 shares.
The Exchange is proposing to reduce the liquidity adding rebates
and increase the number of tier sizes offered under the Primary Fee
Schedule. The proposed changes include an $0.0008 per share rebate
(with no market data revenue sharing) when the ETP Holder's ADV is less
than 10,000,000 shares; a $0.0011 per share rebate (with no market data
revenue sharing) when the ETP Holder's ADV is at least 10,000,000
shares but less than 12,000,000 shares; a $0.0015 per share rebate
(with no market data revenue sharing) when the ETP Holder's ADV is at
least 12,000,000 shares but less than 15,000,000 shares; a $0.0021 per
share rebate (with no market data revenue sharing) when the ETP
Holder's ADV is at least 15,000,000 shares but less than 20,000,000; a
$0.0021 per share rebate (plus 25% market data revenue sharing) when
the ETP Holder's ADV is at least 20,000,000 shares but less than
25,000,000; and a $0.0024 per share rebate (plus 25% market data
revenue sharing) when the ETP Holder's ADV is equal to or greater than
25,000,000 shares.
An ETP Holder may be eligible for an additional $0.0001 rebate on
the Primary Fee Schedule if the ETP Holder executes an ADV of 3,000,000
to 4,999,999 shares using the Automatic Execution Mode in addition to a
minimum ADV of 1,500,000 shares in Order Delivery Mode. An ETP Holder
may also be eligible for an addition $0.0002 rebate on the Primary Fee
Schedule by executing an ADV of 5,000,000 to 9,999,999 shares using the
Automatic Execution Mode in addition to a minimum of 1,500,000 shares
in Order Delivery Mode.
4. Alternate Fee Schedule
The Exchange is also proposing to adopt an ``Alternate Fee
Schedule'' which will automatically apply when an ETP Holder that uses
the Order Delivery Mode as an order delivery participant meets the
minimum ADV threshold by executing 1,500,000 shares using the Order
Delivery Mode and 10,000,000 using the Automatic Execution Mode.\8\ The
Alternate Fee Schedule will be in lieu of the Primary Fee Schedule. ETP
Holders that are not order delivery participants will not be subject to
this fee schedule.
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\8\ See Endnote 9.
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As stated above, an ETP Holder that is an Order Delivery
participant will automatically receive the Alternate Fee Schedule by
meeting a minimum ADV of 1,500,000 shares in Order Delivery Mode and
10,000,000 shares in Automatic Execution Mode. The Alternate Fee
Schedule increases an ETP Holder's liquidity adding rebates from the
tiered liquidity adding rates in the Primary Fee Schedule by $0.0003
per tier. Thus, a $0.0011 per share liquidity adding rebate (with no
market data revenue sharing) applies when the ETP Holder's ADV is less
than 10,000,000 shares; a $0.0014 per share liquidity adding rebate
(with no market data revenue sharing) applies when the ETP Holder's ADV
is at least 10,000,000 shares but less than 12,000,000 shares; a
$0.0018 per share liquidity adding rebate (with no market data revenue
sharing) applies when the ETP Holder's ADV is at least 12,000,000
shares but less than 15,000,000 shares; a $0.0024 per share liquidity
adding rebate (with no market data revenue sharing) applies when the
ETP Holder's ADV is at least 15,000,000 shares but less than
20,000,000; a $0.0024 per share liquidity adding rebate (plus 25%
market data revenue sharing, as further described below) applies when
the ETP Holder's ADV is at least 20,000,000 shares but less than
25,000,000; and a $0.0027 per share liquidity adding rebate (plus 25%
market data revenue sharing) applies when the ETP Holder's ADV is
greater than 25,000,000 shares. The Alternate Fee Schedule attributes
the number of shares executed by the ETP Holder using the Automatic
Execution Mode in the per share ADV calculation used by the Exchange to
determine the applicable tiered rebates available in Order Delivery
Mode.
5. Amended ADV Definition for Order Delivery Mode
The Exchange proposes a clarification in endnote 8 providing that
marketable orders entered by an ETP Holder that is an order delivery
participant with a handling instruction other than Post Only through
the order delivery session is [sic] subject to the Automatic Execution
Mode Fee Schedule. Furthermore, these orders will be counted towards
the minimum ADV for Automatic Execution Mode for determining whether
the Alternate Fee Schedule will automatically apply.
6. Amended Endnotes and Table Presentation
The Exchange also proposes to make certain amendments to the Fee
Schedule in order to clarify language used in the endnotes. The
Exchange proposes to clarify the definition of (i) Displayed Orders
contained in endnote 2, (ii) ADV contained in endnote 4, and (iii)
Market Data Revenue (``MDR'') Rebates contained in endnote 5. These
proposed amendments do not represent a substantive change to the
current definitions. Also, the Exchange moved endnotes 7 through 10 in
the proposed Fee Schedule. Subject to the changes discussed in this
filing, there are no additional substantive changes made to endnotes 7
through 10. Finally, the Exchange is proposing to change the
presentation of its multiple fee schedules by using tables to set forth
the different rebates and fees.
6. [sic] Rationale
The Exchange believes these changes are necessary to create
incentives for ETP Holders to submit increased
[[Page 56889]]
volumes of orders to the Exchange and, ultimately, to increase the
revenues of the Exchange for the purpose of continuing to adequately
fund its regulatory and general business functions. The Exchange
believes that these changes will not impair its ability to carry out
its regulatory responsibilities. The proposed modifications are
reasonable and equitably allocated to those ETP Holders that opt to
submit orders in the Automatic Execution Mode (as liquidity provider or
taker) and the Order Delivery Mode, and are not unfairly discriminatory
because ETP Holders are free to elect whether or not to send such
orders to the Exchange. In addition, the proposed modifications, by
providing a market data rebate for displayed orders only (and not Zero
Display Reserve Orders), may provide incentives for ETP Holders to
submit displayed orders over Zero Display Reserve Orders. Based upon
the information above, the Exchange believes that the proposed rule
change is consistent with the protection of investors and the public
interest.
Operative Date and Notice
The Exchange currently intends to make the proposed modifications,
which are effective on filing of this proposed rule, operative as of
commencement of trading on September 4, 2012. Pursuant to Exchange Rule
16.1(c), the Exchange will ``provide ETP Holders with notice of all
relevant dues, fees, assessments and charges of the Exchange'' through
the issuance of a Regulatory Circular of the changes to the Fee
Schedule and will post a copy of the rule filing on the Exchange's Web
site (www.nsx.com).
Statutory Basis
The Exchange believes that the proposed rule changes are consistent
with the provisions of Section 6(b) of the Securities Exchange Act of
1934 \9\ (the ``Act''), in general, and Section 6(b)(4) of the Act,\10\
in particular in that each change is designed to provide for the
equitable allocation of reasonable dues, fees and other charges among
its members and other persons using the facilities of the Exchange.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(4).
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The proposed changes that introduce the two different pricing
options are equitably allocated and not unfairly discriminatory because
all qualified ETP Holders are eligible to choose which Fee Schedule
they would like to apply. The adjustments are reasonable methods to
incentivize the submission of orders on the Exchange. These proposed
changes are equitable because they are open to all members on an equal
basis.
The proposed changes that to [sic] the Automatic Execution Mode
Section of the Fee Schedule are equitably allocated and not unfairly
discriminatory because all qualified ETP Holders are eligible to submit
(or not submit) displayed liquidity providing orders of securities
priced at least one dollar in Automatic Execution Mode on the Exchange.
The volume adjustments are reasonable methods to incentivize the
submission of such orders. All similarly situated members are subject
to the same fee structure, and access to the Exchange is offered on
terms that are not unfairly-discriminatory. Volume-based rebates and
discounts have been widely adopted in the equities markets, and are
equitable because they are open to all members on an equal basis and
provide rebates that are reasonably related to the value of an
exchange's market quality associated with the requirements for the
favorable pricing tier.
The proposed changes to the rebates payable for executions in
securities priced at least one dollar in Order Delivery Mode are
reasonable because they are in the same range of rebates offered by
other comparable exchanges. The proposed changes are equitably
allocated and not unfairly discriminatory because all qualified ETP
Holders are eligible to submit (or not submit) displayed liquidity
providing orders of securities priced at least one dollar in Order
Delivery Mode on the Exchange. The volume adjustments are reasonable
methods to incentivize the submission of such orders. All similarly
situated members are subject to the same fee structure, and access to
the Exchange is offered on terms that are not unfairly-discriminatory
[sic]. Volume-based rebates and discounts have been widely adopted in
the equities markets, and are equitable because they are open to all
members on an equal basis and provide rebates that are reasonably
related to the value of an exchange's market quality associated with
the requirements for the favorable pricing tier.
The proposed visual changes to the Fee Schedule is [sic] reasonable
because it allows [sic] Exchange ETP Holders to better understand the
different Fee Schedules.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any inappropriate burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange has neither solicited nor received written comments on
the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act.\11\ 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. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or disapproved.
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\11\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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-NSX-2012-14 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-NSX-2012-14. 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
[[Page 56890]]
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
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-NSX-2012-14 and should be submitted on or before October
5, 2012.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-22641 Filed 9-13-12; 8:45 am]
BILLING CODE 8011-01-P