[Federal Register Volume 77, Number 239 (Wednesday, December 12, 2012)]
[Notices]
[Pages 74034-74037]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-29966]
[[Page 74034]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68377; File No. SR-NYSE-2012-72]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Modifying the Manner in Which New York Stock Exchange LLC Calculates
Certain Volume, Liquidity and Quoting Thresholds Applicable to Billing
on the Exchange in Relation to a Systems Issue Experienced by the
Exchange on November 12, 2012
December 6, 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 November 30, 2012, New York Stock Exchange LLC (the
``Exchange'' or ``NYSE'') 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 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 modify the manner in which it calculates
certain volume, liquidity and quoting thresholds applicable to billing
on the Exchange in relation to a systems issue experienced by the
Exchange on November 12, 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
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange is proposing to modify the manner in which it
calculates certain volume, liquidity and quoting thresholds applicable
to billing on the Exchange in relation to a systems issue experienced
by the Exchange on November 12, 2012 shortly after the opening of
trading, which affected one of its matching engines handling trading
for 216 securities (the ``systems issue'').\3\ The Exchange halted
trading in these 216 symbols and did not resume trading in the 216
affected symbols on November 12, 2012.
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\3\ The systems issue was limited to the Exchange's market and
did not impact the markets of its affiliates NYSE MKT LLC and NYSE
Arca, Inc.
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The halting of trading in the 216 securities affected by the
systems issue resulted in a significant decrease in trading volume on
the Exchange on November 12, 2012, not only for the 216 securities
impacted by the systems issue, but also across a majority of the
securities trading on the Exchange. It also affected the ability of
member organizations on the Exchange, including Designated Market
Makers (``DMMs''), Supplemental Liquidity Providers (``SLPs'') and
Retail Liquidity Providers (``RLPs''), to demonstrate typical trading,
quoting and liquidity in such securities.
As provided in the Exchange's Price List, several of the Exchange's
transaction fees and credits are based on trading, quoting and
liquidity thresholds that member organizations must satisfy in order to
qualify for the particular rates. The Exchange believes that the
halting of trading that resulted from the systems issue may affect the
ability of member organizations to meet certain of these thresholds
during November 2012.\4\ Accordingly, the Exchange proposes to exclude
November 12, 2012 from such calculations, in order to reasonably ensure
that a member organization that would otherwise qualify for a
particular threshold during November 2012, and the corresponding
transaction rate, would not be negatively impacted by the systems issue
and the resulting halting of the securities.
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\4\ The Exchange notes that it does not perform the calculations
necessary to determine whether these thresholds have been met until
after the particular billing month has ended.
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First, for all securities traded on the Exchange, the Exchange
proposes to exclude November 12, 2012 for purposes of determining
transaction fees and credits that are based on average daily volume
(``ADV'') during the billing month, either directly or as a percentage
of consolidated average daily volume in NYSE-listed securities (``NYSE
CADV'') or of September 2012 Adding ADV (``SLP Baseline ADV''). If the
Exchange did not exclude November 12, 2012 when calculating ADV for
November, as a result of the decreased trading volume on November 12,
2012, the numerator for the calculation (e.g., trading volume) would be
correspondingly lower, but the denominator for the threshold
calculations (e.g., the number of trading days) would not be decreased.
The impacted billing rates in the Price List are as follows:
The threshold for market at-the-close (``MOC'') and limit
at-the-close (``LOC'') orders of an ADV of 0.375% of NYSE CADV that
relates to the fee of $0.00055 per share;
The thresholds of ADV of 1.5%, 0.375%, 0.8%, 0.12%, 0.15%,
0.5%, 0.12% and 15% of NYSE CADV that relate to the credit of $0.0018
per share;
The thresholds of ADV of 0.20% and 0.10% of NYSE CADV that
relate to the credit of $0.0017 per share;
The threshold of ADV of 0.22% of NYSE CADV that relates to
the SLP credit of $0.0023 (or $0.0018 if a Non-Displayed Reserve Order)
per share;
The thresholds of ADV of 0.22% of NYSE CADV and 0.18% of
SLP Baseline ADV, as well as the minimum provide ADV of 12 million
shares that relate to the SLP credit of $0.0025 per share;
The threshold of ADV of 0.22% of NYSE CADV that relates to
the SLP credit of $0.0005 per share; and
The 500,000-share ADV threshold that relates to the non-
Retail Liquidity Provider (``RLP'') member organization rate of $0.00.
Second, for the 216 securities impacted by the systems issue, the
Exchange proposes to exclude November 12, 2012 for purposes of
determining transaction fees and credits that are based on quoting and/
or liquidity levels of DMMs, SLPs and RLPs. The calculations of such
quoting and liquidity levels include the amount of time that the
relevant DMM, SLP or RLP quoted at the National Best Bid or Offer
(``NBBO'').\5\ If the Exchange did not exclude November 12, 2012 when
calculating the quoting or liquidity levels for November, as a result
of the decreased trading volume on November 12, 2012, the numerator for
the calculation (e.g., time during which the DMM, SLP or RLP quoted at
the NBBO) would be lower, but the denominator (e.g., total time that
the U.S. equity
[[Page 74035]]
markets quote during regular trading hours) would not be decreased. The
impacted billing rates in the Price List are as follows:
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\5\ See Rules 107B(g) and 107C(f).
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For DMMs, (1) the 10% ``More Active Securities Quoting
Requirement'' that relates to the rebates of $0.0025, $0.0026, $0.0030,
$0.0029 and $0.0015, respectively, per share; and (2) the 15% ``Less
Active Securities Quoting Requirement'' that relates to the rebates of
$0.0035 and $0.0015, respectively, per share;
For SLPs, the 10% average or more quoting requirement in
an assigned security pursuant to Rule 107B that relates to the credits
of $0.0023 (or $0.0018 if a Non-Displayed Reserve Order) and $0.0025,
respectively, per share; and
For RLPs, the applicable percentage requirement of Rule
107C that relates to the fees of $0.00 and $0.0003, respectively, per
share.
The Exchange notes that the proposed exclusions would be similar to
the current provision in the Price List whereby, for purposes of
transaction fees and SLP credits, ADV calculations exclude early
closing days.\6\ Generally, this applies to certain days before or
after a holiday observed by the Exchange.\7\
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\6\ See footnote 4 in the Price List.
\7\ For example, the Exchange is closed on Thanksgiving Day and
closes early on the Friday immediately following Thanksgiving Day
(e.g., Friday, November 23, 2012).
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Finally, the Exchange does not propose to exclude November 12, 2012
for purposes of the DMM thresholds in the Price List that are based
solely on consolidated ADV (``CADV''), quoted size or intraday adding
liquidity.\8\ The thresholds that are based solely on CADV consider
volume across all markets, not only the Exchange's, and, unlike the
transaction fees and credits discussed above that are based on ADV
during the billing month as a percentage of NYSE CADV or SLP Baseline
ADV, the DMM thresholds based solely on CADV do not take CADV as a
percentage of another metric. Therefore the systems issue and the
resulting halting of securities on the Exchange would not necessarily
have had a significant impact on CADV for these securities. This is
also true for the thresholds that are based on quoted size or intraday
adding liquidity because, while the numerator of the related threshold
calculation (e.g., the DMM's quoted size or DMM intraday adding
liquidity) may have decreased because of the systems issue and the
resulting trading halts, so too would the denominator of the related
threshold calculation (e.g., the NYSE quoted size or NYSE total
intraday adding liquidity). These billing rates in the Price List, for
which the Exchange is not excluding activity on November 12, 2012 for
purposes of determining transaction fees and credits, are as follows:
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\8\ CADV includes all volume reported to the Consolidated Tape
Association Plan for Tapes A, B and C securities.
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The ADV threshold of 1,000,000 shares or more that
determines ``More Active Securities'' and that relates to the rebates
of $0.0025, $0.0026, $0.0030, $0.0029, $0.0015 and $0.0004,
respectively, per share;
The ADV threshold of less than 1,000,000 shares that
determines ``Less Active Securities'' and that relates to the rebates
of $0.0035, $0.0015 and $0.0004, respectively, per share;
The ``More Active Securities Quoted Size Ratio
Requirement'' that relates to the rebates of $0.0026, $0.0030 and
$0.0029, respectively, per share; \9\ and
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\9\ See footnote 7 in the Price List.
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The 15% and 30% thresholds of NYSE total intraday adding
liquidity in each security that relate to the rebates of $0.0026,
$0.0030 and $0.0029 per share.
The Exchange notes that the proposed change is not otherwise
intended to address any other issues surrounding billing for activity
on the Exchange and the Exchange is not aware of any negative impact on
member organizations that would result from the proposed change.
2. Statutory Basis
The Exchange believes that the proposed change is consistent with
Section 6(b) of the Securities Exchange Act of 1934 (the ``Act''),\10\
in general, and furthers the objectives of Section 6(b)(4) of the
Act,\11\ 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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\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(4).
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Specifically, the Exchange believes that excluding November 12,
2012 for all securities traded on the Exchange for purposes of
determining transaction fees and credits that are based on ADV during
the billing month, either directly or as a percentage of NYSE CADV or
of SLP Baseline ADV, is reasonable because the halting of trading in
the 216 securities impacted by the systems issue resulted in a
significant decrease in trading volume on the Exchange on November 12,
2012, not only for the 216 securities impacted by the systems issue,
but also across a majority of the securities trading on the Exchange.
This is reasonable because, without this exclusion, as a result of the
decreased trading volume on November 12, 2012, the numerator for the
calculations of ADV (e.g., trading volume) would be correspondingly
lower, but the denominator for the calculations (e.g., the number of
trading days) would not be decreased. The Exchange believes that
excluding activity on November 12, 2012 for purposes of determining
transaction fees and credits that are based on ADV during the billing
month is equitable and not unfairly discriminatory because, in addition
to applying equally to all market participants on the Exchange, it will
apply to all securities traded on the Exchange, including the 216
securities impacted by the systems issue. In this regard, excluding
November 12, 2012 from such ADV calculations is equitable and not
unfairly discriminatory because the exclusion would reasonably ensure
that a member organization that would otherwise qualify for a
particular threshold for November 2012, and the corresponding
transaction rate, would not be negatively impacted by the systems issue
and the resulting halting of securities. As noted above, the impact of
the systems issue on trading volume on the Exchange was not isolated to
the 216 securities, but also affected a majority of the securities
trading on the Exchange.
The Exchange also believes that excluding November 12, 2012 for the
216 securities impacted by the systems issue for purposes of
determining transaction fees and credits that are based on quoting and/
or liquidity levels of DMMs, SLPs and RLPs is reasonable because,
unlike general order flow that is sent to the Exchange, DMM, SLP and
RLP activity is typically specific to particular securities. The
calculations of such quoting and liquidity levels include the amount of
time that the relevant DMM, SLP or RLP quoted at the NBBO. In this
regard, excluding November 12, 2012 from these quoting and liquidity
calculations is reasonable because, without this exclusion, as a result
of the decreased trading volume on November 12, 2012, the numerator for
the calculations (e.g., time during which the DMM, SLP or RLP quoted at
the NBBO) would be lower, but the denominator for the threshold
calculations (e.g., total time that the U.S. equity markets quote
during regular trading hours) would not be decreased. As a result,
without this exclusion, a member organization that would
[[Page 74036]]
otherwise qualify for a particular threshold for November 2012, and the
corresponding transaction rate may be negatively impacted by the
systems issue. This is equitable and not unfairly discriminatory
because DMMs, SLPs and RLPs have specific performance metrics that must
be satisfied for assigned securities in order to qualify for the
particular rates in the Price List.
Finally, the Exchange believes that not excluding activity on
November 12, 2012 for purposes of determining transaction fees and
credits related to the DMM thresholds in the Price List that are based
solely on CADV and quoted size is reasonable. This is because the
thresholds that are based solely on CADV consider volume across all
markets, not only the Exchange's, and, unlike the transaction fees and
credits discussed above that are based on ADV during the billing month
as a percentage of NYSE CADV or SLP Baseline ADV, the DMM thresholds
based solely on CADV do not take CADV as a percentage of another
metric. Therefore the systems issue and the resulting halting of
securities on the Exchange would not necessarily have had a significant
impact on CADV for these securities. This is also true for the
thresholds that are based on quoted size or intraday adding liquidity
because, while the numerator of the related threshold calculation
(e.g., the DMM's quoted size or DMM intraday adding liquidity) may have
decreased because of the systems issue and the resulting trading halts,
so too would the denominator of the related threshold calculation
(e.g., the NYSE quoted size or NYSE intraday adding liquidity). This is
equitable and not unfairly discriminatory because, in addition to
applying to all DMMs on the Exchange, the Exchange believes that the
systems issue did not have a significant impact on these thresholds
and, therefore, including activity on November 12, 2012 will have an
equal impact for all DMMs.
The Exchange also believes that the proposed rule change furthers
the objectives of Section 6(b)(5) of the Act,\12\ in particular,
because it is designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, to remove impediments to, and
perfect the mechanisms of, a free and open market and a national market
system and, in general, to protect investors and the public interest
and because it is not designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
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\12\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposed exclusions would remove
impediments to and perfect the mechanism of a free and open market and
a national market system because they would reasonably ensure that a
member organization that would otherwise qualify for a particular
threshold during the month, and the corresponding transaction rate,
would not be negatively impacted by the systems issue and the resulting
halting of securities. In particular, the Exchange believes that the
proposed exclusions promote just and equitable principles of trade
because they account for the impact on trading volume, liquidity and
quoting that resulted from the systems issue, for the 216 securities
impacted by the systems issue and, more broadly, for all securities
traded on the Exchange. The Exchange further believes that the proposed
exclusions remove impediments to and perfect the mechanism of a free
and open market and a national market system because they provide
transparency for member organizations and the public regarding the
manner in which the Exchange will calculate certain volume, liquidity
and quoting thresholds related to billing for activity on the Exchange
on November 12, 2012 and for the month of November 2012. In this
regard, the Exchange believes that the proposed exclusions are
consistent with the Act because they address inquiries from member
organizations regarding how the Exchange will treat November 12, 2012
for purposes of billing. Also, the proposed exclusions are not designed
to permit unfair discrimination between customers, issuers, brokers, or
dealers, but are instead designed to provide transparency for all
member organizations and the public regarding the manner in which the
Exchange will calculate certain volume, liquidity and quoting
thresholds in relation to the systems issue. The Exchange is not aware
of any negative impact on member organizations that would result from
the proposed change.
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
Because the foregoing proposed rule change does not significantly
affect the protection of investors or the public interest, does not
impose any significant burden on competition, and, by its terms, does
not become operative for 30 days from the date on which it was filed,
or such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \13\ and Rule 19b-
4(f)(6) thereunder.\14\
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\13\ 15 U.S.C. 78s(b)(3)(A).
\14\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the Exchange to give the Commission written notice of the
Exchange's intent to file the proposed rule change, along with a
brief description and text of the proposed rule change, at least
five business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission. The
Exchange has satisfied this requirement.
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The Exchange has requested that the Commission waive the 30-day
operative delay. The Commission believes that waiver of the operative
delay is consistent with the protection of investors and the public
interest because the proposal will allow the Exchange to immediately
implement the proposed change, thereby reducing the potential for
confusion among member organizations and the public regarding how the
Exchange will calculate certain volume, liquidity and quoting
thresholds related to billing for activity on the Exchange during
November 2012 and, more specifically, on November 12, 2012. The
Commission believes that the requested waiver will also assist the
Exchange in determining transaction fees and credits for member
organizations in a timely manner after the end of the billing month of
November 2012. Therefore, the Commission designates the proposal
operative upon filing.\15\
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\15\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the 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
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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-NYSE-2012-72 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-NYSE-2012-72. 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 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-NYSE-2012-72 and should be
submitted on or before January 2, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-29966 Filed 12-11-12; 8:45 am]
BILLING CODE 8011-01-P