[Federal Register Volume 78, Number 32 (Friday, February 15, 2013)]
[Notices]
[Pages 11261-11263]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-03572]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68898; File No. SR-NYSEArca-2013-11]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend the NYSE
Arca Options Fee Schedule To Introduce a New Electronic Customer Rate
for Certain Executions That Take Liquidity
February 11, 2013.
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 January 29, 2013, 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-
[[Page 11262]]
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 Options Fee Schedule
(the ``Fee Schedule'') to introduce a new electronic Customer rate for
certain executions that take liquidity. 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 purpose of this filing is to amend the Exchange's Fee Schedule
to introduce a new electronic Customer rate of $0.67 per contract for
executions that take liquidity in a non-Penny Pilot class from the
trading interest of a Lead Market Maker (``LMM''), if the OTP Holder or
OTP Firm entering the Customer's order satisfies certain volume
thresholds. The Exchange proposes to implement the fee changes on
February 1, 2013.
An electronic Customer execution in a non-Penny Pilot class is
currently subject to a take fee of $0.79 per contract. Unlike an
execution in a Penny Pilot class, the rate for an electronic execution
in a non-Penny Pilot class is not currently dependent on the account
type of the counterparty. The Exchange proposes to introduce a new
electronic Customer take rate of $0.67 per contract for executions that
take liquidity in a non-Penny Pilot class from the trading interest of
an LMM (including orders and quotes) if the OTP Holder or OTP Firm
entering the Customer's order, during the month, (i) transacts an
average daily volume (``ADV'') on the Exchange of at least 15,000
contracts from electronic Customer orders that take liquidity in non-
Penny Pilot classes or (ii) transacts a combined ADV on the Exchange of
at least 30,000 contracts in non-Penny Pilot classes from electronic
Customer orders that take liquidity and affiliated electronic Market
Maker orders and quotes that post liquidity in non-Penny Pilot
classes.\4\
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\4\ For purposes of calculating ADV for the qualification, the
Take Liquidity threshold does not include orders that are routed to
other exchanges for execution at the National Best Bid and Offer
(``NBBO''); Post or Take Liquidity calculations do not include
volume from Electronic Complex Orders.
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The Exchange believes that the proposed rate, which would only
apply to the Customer side of an execution that takes liquidity against
trading interest of an LMM, will incent additional posted liquidity at
the NBBO by LMMs as well as additional Customer orders being sent to
the Exchange for execution.
The Exchange notes that the proposed change is not otherwise
intended to address any other issues, and the Exchange is not aware of
any problems that Customers, LMMs, OTP Holders or OTP Firms would have
in complying with the proposed change.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\5\ in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\6\ 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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\5\ 15 U.S.C. 78f(b).
\6\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange believes that the proposed change is reasonable
because the proposed rate, which would only apply to the Customer side
of an execution that takes liquidity against trading interest of an
LMM, will incent additional posted liquidity at the NBBO by LMMs as
well as additional Customer orders being sent to the Exchange for
execution. First, the proposed lower Customer rate would incent an OTP
Holder or OTP Firm to send additional Customer orders to the Exchange
because its customers' transaction costs could be decreased. Second, an
OTP Holder or OTP Firm that is affiliated with an LMM on the Exchange
would be incented to send additional Customer order flow to the
Exchange for execution in order to increase the likelihood that its LMM
will interact with those orders. Third, and building on the two points
above, an LMM would be incented to post additional liquidity at the
NBBO, thereby rendering a Customer order that executes against the
LMM's trading interest a taker of liquidity and eligible for the lower
Customer take rate.
The Exchange believes that the proposed new rate and related
thresholds are reasonable because they are set at levels that will
encourage OTP Holders and OTP Firms to send additional Customer orders
to the Exchange. Further, the Exchange believes that the proposed
thresholds are reasonable because, despite being set at levels that OTP
Holders and OTP Firms do not currently satisfy, the Exchange believes
they are achievable for OTP Holders and OTP Firms that send Customer
orders to the Exchange, whether they are OTP Holders and OTP Firms that
predominantly send Customer orders to the Exchange or OTP Holders and
OTP Firms that are affiliated with a Market Maker on the Exchange.
The Exchange believes that the proposed new rate is equitable and
not unfairly discriminatory because it will be available to all OTP
Holders and OTP Firms that transact electronic Customer orders on the
Exchange, on an equal and non-discriminatory basis.
The Exchange further believes that it is equitable and not unfairly
discriminatory to generally charge a lower fee to Customers, as
compared to non-Customers, because Customers are less sophisticated
than non-Customers and the proposed change is intended to attract a
higher level of Customer order flow to the Exchange, which benefits
both Customers and non-Customers. In this regard, the Exchange believes
that the proposed change is equitable and not unfairly discriminatory
because the lower Customer take rate would incent OTP Holders and OTP
Firms to send additional Customer order flow to the Exchange for
execution, which would benefit the quality of the Exchange's market
and, in turn, be beneficial to all market participants. Accordingly,
the proposed new Customer take rate would be reasonably related to the
value to the Exchange's market quality associated with higher volumes
in Customer order flow.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose
[[Page 11263]]
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act. Specifically, 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. In this regard, and for the reasons described above, the
Exchange believes that the proposed rule change reflects this
competitive environment and would permit the Exchange's pricing for
electronic Customer executions in non-Penny Pilot classes that take
liquidity while executing against LMMs to remain competitive with
pricing applicable on other option exchanges.
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) \7\ of the Act and subparagraph (f)(2) of Rule 19b-
4 \8\ thereunder, because it establishes a due, fee, or other charge
imposed by NYSE Arca.
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\7\ 15 U.S.C. 78s(b)(3)(A).
\8\ 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. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \9\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\9\ 15 U.S.C. 78s(b)(2)(B).
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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-NYSEARCA-2013-11 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-2013-11. 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 NYSE'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-NYSEARCA-2013-11, and should be submitted on or before
March 8, 2013.
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\10\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-03572 Filed 2-14-13; 8:45 am]
BILLING CODE 8011-01-P