[Federal Register Volume 78, Number 52 (Monday, March 18, 2013)]
[Notices]
[Pages 16731-16733]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-06108]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69078; File No. SR-NYSEArca-2013-19]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Amending the NYSE
Arca Options Schedule of Fees and Charges for Exchange Services To
Reduce the Floor Broker Rebate for Qualified Contingent Cross
Transactions
March 8, 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 March 1, 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-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 the
Substance of the Proposed Rule Change
The Exchange proposes to amend the NYSE Arca Options Schedule of
Fees and Charges for Exchange Services (``Fee Schedule'') to (i) reduce
the Floor Broker rebate for Qualified Contingent Cross (``QCC'')
transactions and (ii) remove an outdated reference. The Exchange
proposes to implement the changes on March 1, 2013. 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 proposes to amend the Fee Schedule to (i) reduce the
Floor Broker rebate for QCC transactions and (ii) remove an outdated
reference. The Exchange proposes to implement the changes on March 1,
2013.
Currently, Floor Brokers that execute QCC transactions receive a
rebate of $0.05 per contract side. The Exchange proposes reducing that
rebate to $.035 per contract side. When the Exchange originally adopted
the Floor Broker rebate, the Exchange noted that OTP Holders have two
primary means of bringing a QCC order to the Exchange for possible
execution: (1) They can configure their systems to deliver the QCC
order to the Exchange matching engines for validation and execution; or
[[Page 16732]]
(2) they can utilize the services of another OTP Holder acting as a
Floor Broker.\4\ With the latter means, a Floor Broker who is in
receipt of such a QCC order can enter the order through an Exchange-
provided system to be delivered to the Exchange matching engines for
validation and potential execution.
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\4\ See Securities Exchange Act Release No. 65730 (November 10,
2011), 76 FR 71410 (November 17, 2011) (SR-NYSEArca-2011-79)
(``Approval Order'').
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Because the Exchange does not offer a front-end for order entry,
unlike some competing exchanges,\5\ the Exchange believed that it was
necessary from a competitive standpoint to offer this rebate to the
executing Floor Broker on a QCC order. In doing so, the Exchange
expected that the rebate would allow Floor Brokers to price their
services at a level that would enable them to attract QCC order flow
from participants who would otherwise utilize the front-end order entry
mechanism offered by the Exchange's competitors instead of incurring
the cost in time and money to develop their own internal systems to
deliver QCC orders directly to the Exchange system. The Exchange
believed that to the extent Floor Brokers were able to attract QCC
orders, they would gain important information that would allow them to
solicit the parties to the QCC orders for participation in other
trades.\6\ The Exchange further believed that this would, in turn,
benefit other Exchange participants through the additional liquidity
that would occur as a result.
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\5\ The International Securities Exchange offers PRECISE TRADE
as a means for users to enter orders and Chicago Board Options
Exchange has a similar front-end order entry system called PULSE.
Such systems do not require users to develop their own internal
front-end order entry systems and may provide savings to users in
terms of development time and costs.
\6\ See Approval Order, supra note 4; see also Securities
Exchange Act Release No. 65797 (November 21, 2011), 76 FR 72988
(November 28, 2011) (SR-NYSEArca-2011-83) (clarifying amendments to
the description of the QCC rebate amount).
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Although the rebate has not incented additional liquidity and price
discovery as expected, the Exchange believes that it is still necessary
to keep the rebate, albeit in a lower amount, in order for Floor
Brokers to competitively price their services and for the Exchange to
remain competitive with other exchanges that offer a similar rebate.\7\
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\7\ See Securities Exchange Act Release No. 65472 (October 3,
2011), 76 FR 62887 (October 11, 2011) (SR-NYSEAmex-2011-72) and the
NASDAQ OMX PHLX fee schedule (describing a rebate program for QCC
orders that can range as high as $0.11 per contract), available at
http://nasdaqomxphlx.cchwallstreet.com/NASDAQOMXPHLXTools/PlatformViewer.asp?selectednode=chp%5F1%5F4&manual=%2Fnasdaqomxphlx%2Fphlx%2Fphlx%2Drulesbrd%2F.
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The Exchange also proposes to eliminate an obsolete reference in
the Fee Schedule concerning the Options Regulatory Fee. Specifically,
prior to December 1, 2012, the Options Regulatory Fee was $0.004 per
contract. As reflected in the current Fee Schedule, the fee rose to
$0.005 per contract on December 1, 2012. The Exchange proposes to
remove the outdated reference to the $0.004 per contract fee in order
to make clearer that the current Options Regulatory Fee is $0.005 per
contract.
The proposed change is not otherwise intended to address any other
problem, and the Exchange is not aware of any significant problem that
the affected market participants 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,\8\ in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5) 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) and (5).
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The Exchange believes that reducing the Floor Broker rebate for QCC
transactions is reasonable. Specifically, although the rebate has not
incented additional liquidity and price discovery as expected, the
Exchange believes that it is still necessary to keep the rebate, albeit
at a lower amount, in order for Floor Brokers to competitively price
their services and for the Exchange to remain competitive with other
exchanges that offer a similar rebate. The Exchange believes the
proposed rebate is equitable and not unfairly discriminatory because it
would uniformly apply to all QCC orders entered by a Floor Broker for
validation by the system and potential execution. The rebate is not
unfairly discriminatory to firms that enter QCC orders directly into
the Exchange's system through an electronic connection because the fee
for the QCC order is the same whether it is entered electronically or
through a Floor Broker. In addition, under Commentary .01 to NYSE Arca
Options Rule 6.90, only Floor Brokers may enter a QCC order from the
Floor; therefore, providing the rebate to Floor Brokers does not
discriminate against other QCC orders entered into the Exchange's
system. Furthermore, any participant will be able to engage a rebate-
receiving Floor Broker in a discussion surrounding the appropriate
level of fees that they may be charged for entrusting the entry of the
QCC order to the Floor Broker into the Exchange systems for validation
and execution. In addition, the Exchange believes that removing the
outdated reference concerning the Options Regulatory Fee will make the
Fee Schedule more user-friendly for Exchange participants.
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. In particular, reducing the
rebate for QCC transactions will not impose a burden on competition
because the rebate has not encouraged liquidity and price discovery as
originally intended. Instead, reducing the rebate for QCC transactions
will promote competition because, while the rebate has not incented
additional liquidity and price discovery as expected, the Exchange
believes that it is still necessary to keep the rebate, albeit at a
lower amount, in order for Floor Brokers to competitively price their
services and for the Exchange to remain competitive with other
exchanges that offer a similar rebate. The Exchange does not believe
that Exchange participants will be adversely affected by the reduced
rebate because they were not availing themselves of it in the manner
intended by the Exchange. Moreover, eliminating the obsolete reference
to the Options Regulatory Fee will not have an effect on competition
because the amendment is technical in nature.
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.
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.
[[Page 16733]]
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) \10\ of the Act and subparagraph (f)(2) of Rule
19b-4 \11\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 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) \12\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\12\ 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-2013-19 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-2013-19. 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 20549-1090, 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 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-2013-19, and should be submitted on or before April 8, 2013.
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. 2013-06108 Filed 3-15-13; 8:45 am]
BILLING CODE 8011-01-P