[Federal Register Volume 78, Number 69 (Wednesday, April 10, 2013)]
[Notices]
[Pages 21443-21447]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-08385]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69305; File No. SR-NYSEArca-2013-32]
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
April 4, 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 25, 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
[[Page 21444]]
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 its Schedule of Fees and Charges for
Exchange Services (``Fee Schedule'') to (i) amend Step Up Tier 1 and
Step Up Tier 2 (the ``Step Up Tiers'') to increase the volume threshold
requirements needed to be eligible for each respective tier; (ii) amend
the Cross-Asset Tier to replace the numeric benchmark needed to be
eligible for the tier with a benchmark based on a percentage of options
contract volume; (iii) add a new Retail Order Cross-Asset Tier; (iv)
raise the fee charged for transactions in securities with a per share
price below $1.00; and (v) amend the options-related volume
requirements in certain tiers in the Fee Schedule to exclude volume in
mini options from contributing to the volume requirements of the
affected tiers. The Exchange proposes to implement the changes on April
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 its Fee Schedule to (i) amend the
Step Up Tiers to increase the volume threshold requirements needed to
be eligible for each respective tier; (ii) amend the Cross-Asset Tier
to replace the numeric benchmark needed to be eligible for the tier
with a benchmark based on a percentage of options contract volume;
(iii) add a new Retail Order Cross-Asset Tier; (iv) raise the fee
charged for transactions in securities with a per share price below
$1.00; and (v) amend the options-related volume requirements in certain
tiers in the Fee Schedule to exclude volume in mini options from
contributing to the volume requirements of the affected tiers. The
Exchange proposes to implement the changes on April 1, 2013.
Step Up Tiers
Currently, in order to qualify for Step Up Tier 1, an ETP Holder on
a daily basis, measured monthly, must directly execute providing volume
on NYSE Arca in an amount that is an increase of no less than 0.15% of
U.S. consolidated average daily volume (``US CADV'') in Tape A, Tape B,
and Tape C securities for that month over the ETP Holder's average
daily providing volume in June 2011 (the ``Baseline Month''), subject
to a minimum increase of 15 million average daily providing shares.\4\
The Exchange proposes to increase the eligibility requirement for Step
Up Tier 1 to no less than 0.20% of US CADV for the month over the ETP
Holder's average daily providing volume in the Baseline Month, subject
to a minimum increase of 20 million average daily providing shares.
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\4\ US 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. Transactions
that are not reported to the Consolidated Tape are not included in
US CADV. The Exchange currently makes this data publicly available
on a T + 1 basis from a link at http://www.nyxdata.com/US-and-European-Volumes.
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Similarly, in order to qualify for Step Up Tier 2, an ETP Holder on
a daily basis, measured monthly, must directly execute providing volume
on NYSE Arca in an amount that is an increase of no less than 0.10% of
US CADV for that month over the ETP Holder's average daily providing
volume in the Baseline Month, subject to a minimum increase of 10
million average daily providing shares. The Exchange proposes to
increase the eligibility requirement for Step Up Tier 2 to no less than
0.12% of US CADV for the month over the ETP Holder's average daily
providing volume in the Baseline Month, subject to a minimum increase
of 12 million average daily providing shares.
By way of example, if an ETP Holder executed an average daily
providing volume of 5 million shares in the Baseline Month, then to
qualify for Step Up Tier 2 in a month where US CADV is 11 billion
shares, that ETP Holder would need to increase its average daily
providing volume by at least 13.2 million shares, or 0.12% of that
month's US CADV, for a total average daily providing volume of at least
18.2 million shares. If that same ETP Holder in that same month
increased its average daily providing volume by at least 22 million
shares, or 0.20% of that month's US CADV, for a total average daily
providing volume average of at least 27 million shares, then that ETP
Holder would qualify for Step Up Tier 1.\5\
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\5\ In addition, for both Step Up Tiers, those ETP Holders that
did not directly provide volume to NYSE Arca in the Baseline Month
will be treated as having an average daily providing volume of zero
for the Baseline Month. With respect to the increased percentage of
US CADV, the volume requirements to reach the Step Up Tiers' pricing
levels will adjust each calendar month based on the US CADV for that
given month.
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As previously explained,\6\ the goal of the Step Up Tiers is to
incent ETP Holders to increase the orders sent directly to NYSE Arca
and therefore provide liquidity that supports the quality of price
discovery and promotes market transparency. In the Step Up Tiers
Release, the Exchange explained that the Step Up Tiers were expected to
benefit ETP Holders whose increased order flow provided added levels of
liquidity (thereby contributing to the depth and market quality of the
Book) but who are still not eligible for Tier 1, 2 or 3, or Investor
Tier 1 or 2.\7\ For similar reasons, the Exchange believes that raising
the volume requirements needed to be eligible for each respective Step
Up Tier will continue to incent ETP Holders to increase the orders sent
directly to NYSE Arca and therefore provide liquidity that supports the
quality of price discovery and promotes market transparency. The
Exchange believes that this especially is the case given that the
credits for Tape A and Tape C securities under Step Up Tier 1
($0.00295) and Step Up Tier 2 ($0.0029) are substantially higher that
the credits for Tape A and Tape C securities under the Basic Rates
($0.0021) and Tier 3 ($0.0025).
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\6\ See Securities Exchange Act Release No. 64820 (July 6,
2011), 76 FR 40974 (July 12, 2011) (SR-NYSEArca-2011-41) (``Step Up
Tiers Release'').
\7\ Id. at 76 FR 40975.
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Cross-Asset Tier
Currently, under the Cross-Asset Tier, ETP Holders and Market
Makers that (1) provide liquidity of 0.45% or more of the US CADV per
month in Tape A, Tape B, and Tape C securities combined, and (2) are
affiliated with an NYSE Arca Options Trading Permit (``OTP'') Holder or
OTP Firm that provides an average daily volume (``ADV'') of electronic
posted Customer executions in Penny Pilot issues on NYSE Arca Options
of at least 90,000 contracts receive a per share credit of $0.0030 for
orders in Tape A, Tape B
[[Page 21445]]
and Tape C securities that provide liquidity to the Book. The Exchange
proposes to replace the current fixed 90,000-contract requirement with
a variable requirement of at least 0.95% of total Customer equity and
exchange-traded fund (``ETF'') option (as discussed below, excluding
mini options) ADV, as reported by the Options Clearing Corporation
(``OCC'').\8\ The Exchange is proposing these changes to the Cross-
Asset Tier in order to make the eligibility requirement consistent with
the Exchange's other variable eligibility requirements that are based
on percentage of volume. The Exchange believes that using an
eligibility requirement based on percentage of volume will better
reflect fluctuations in trading volumes. In this respect, the Exchange
notes that Equity and ETF Customer volume is a widely followed
benchmark of industry volume and is indicative of industry market
share. The Exchange also notes that based on current volume, the 0.95%
volume requirement is consistent with the original 110,000 contract
requirement which was lowered July 1, 2012 due to concerns over
temporarily lower volume on NYSE Arca Options.\9\ The proposed changes
to the Cross-Asset Tier would thus eliminate the need to modify a fixed
number requirement because a threshold based on volume would
automatically make the necessary adjustments.
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\8\ The OCC provides volume information in two product
categories: equity and ETF volume and index volume, and the
information can be filtered to show only Customer, firm, or market
maker account type. Equity and ETF Customer volume numbers are
available directly from the OCC each morning, or may be transmitted,
upon request, free of charge from the Exchange. Total Industry
Customer equity and ETF option ADV is comprised of those equity and
ETF option contracts that clear in the customer account type at OCC,
including Exchange-Traded Fund Shares, Trust Issued Receipts,
Partnership Units, and Index-Linked Securities such as Exchange-
Traded Notes (see NYSE Arca Options Rule 5.3(g)-(j)), and does not
include contracts that clear in either the firm or market maker
account type at OCC or contracts overlying a security other than an
equity or ETF security. The Exchange notes that there is one Penny
Pilot issue, Mini NDX 100 Stock Index, that does not overlie an
equity or ETF security that is eligible for the Customer posting
credit. This Penny Pilot issue is not included in equity and ETF
option ADV; however, the Exchange expects that the effect on the
calculations for the qualification thresholds for tiered Customer
posting credits to be negligible. Under the proposed rule change,
Total Industry Customer equity and ETF option ADV will be that which
is reported for the month by OCC in the month in which the credits
may apply. The Exchange currently makes this data publicly available
on a T+1 basis from a link at http://www.nyxdata.com/factbook.
\9\ See Securities Exchange Act Release Nos. 67180 (June 11,
2012), 77 FR 36027 (June 15, 2012) (SR-NYSEArca-2012-56) and 67424
(July 12, 2012), 77 FR 42347 (July 18, 2012) (SR-NYSE-Arca-2012-70).
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Retail Order Cross-Asset Tier
The Exchange also is proposing a new Retail Cross-Asset Tier. Under
the Retail Cross-Asset Tier, firms that execute at least 0.30% of US
CADV in retail orders and are affiliated with an NYSE Arca OTP Holder
or OTP Firm that provides an ADV of electronic posted Customer
executions in customer penny pilot options of at least 0.50% of total
Customer equity and ETF option (as discussed below, excluding mini
options) ADV would qualify for a $.0034 rebate for retail orders that
provide liquidity. The Retail Cross-Asset Tier would provide firms with
a second way to qualify for the $0.0034 rebate (in addition to Investor
Tier 1) using equity retail and options customer post. The Exchange
notes that the $0.0034 rebate is $.0001 higher than the current Retail
Order Tier in light of the tier including an additional options
requirement and a higher equity retail requirement.
Sub-$1.00 Securities
Currently, a fee of 0.2% of the total dollar value of the
transaction is charged for transactions with a per share price below
$1.00 that take liquidity from the Book. The Exchange proposes raising
the fee from 0.2% of the total dollar value of the transaction to 0.3%
of the total dollar value of the transaction. The Exchange is proposing
these changes as they are consistent with similar fee amounts charged
by other exchanges.\10\
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\10\ See, e.g., DirectEdge Fee Schedule, available at http://www.directedge.com/Membership/FeeSchedule/EDGXFeeSchedule.aspx; and
Nasdaq Fee Schedule, available at http://www.nasdaqtrader.com/Trader.aspx?id=PriceListTrading2#execution.
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Mini Options
The Exchange proposes to amend the Fee Schedule to specifically
exclude volume in mini options from contributing to the volume
requirements for tiers with an options volume-related component.
Specifically, the proposed amendment would exclude volume in mini
options from contributing to the volume requirements in Tier 1 and the
Cross-Asset Tier. Mini option volume similarly would be excluded from
the proposed Retail Order Cross-Asset Tier discussed above.
The proposed changes are 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 changes.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\11\ in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\12\ 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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\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange believes that the proposed amendments to the Step Up
Tiers that raise the volume requirements needed to be eligible for each
respective tier are reasonable because the proposed changes are
designed to further incent ETP Holders to increase the orders sent
directly to NYSE Arca and therefore provide liquidity that supports the
quality of price discovery and promotes market transparency. The
Exchange believes that this is especially the case given that the
credits for Tape A and Tape C securities under Step Up Tier 1
($0.00295) and Step Up Tier 2 ($0.0029) are substantially higher than
the credits for Tape A and Tape C securities under Basic Rates
($0.0021) and Tier 3 ($0.0025). The Exchange further believes that the
proposed amendments to the Step Up Tiers are equitable and not unfairly
discriminatory because they will benefit ETP Holders whose increased
order flow provides added levels of liquidity (thereby contributing to
the depth and market quality of the Book), but who may still not be
eligible for Tier 1, 2 or 3, or other tiers. Moreover, the Step Up
Tiers are available for all ETP Holders to satisfy.
The Exchange believes that the proposal to amend the Cross-Asset
Tier to replace the current fixed benchmark needed to be eligible for
the tier with a variable benchmark based on a percentage of volume is
reasonable because it will make the eligibility requirement consistent
with the Exchange's other variable eligibility requirements that also
are based on percentage of volume. In addition, the Exchange believes
that expanding the basis for the Cross-Asset Tier to include all
Customer equity and ETF options ADV will better reflect the correlation
between options trading and the underlying securities, which trade at
the Exchange, including ETFs. In this respect, the Exchange notes that
Equity and ETF Customer volume is a widely followed benchmark of
industry volume and is indicative of industry market
[[Page 21446]]
share.\13\ In addition, the Exchange believes that the proposed
amendments to the Cross-Asset Tier are equitable and not unfairly
discriminatory because they will apply to all ETP Holders and Market
Makers.
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\13\ See supra note 8.
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Moreover, the Cross-Asset Tier is available for all ETP Holders to
satisfy, except for those ETP Holders that are not affiliated with an
NYSE Arca Options OTP Holder or OTP Firm. However, the Exchange notes
that ETP Holders that are not affiliated with an NYSE Arca Options OTP
Holder or OTP Firm are still eligible for the $0.0030 Cross-Asset Tier
rate when they qualify for one of the other Tiers described in the Fee
Schedule (e.g., Tier 1).
The Exchange believes that the proposal to add the new Retail Order
Cross-Asset Tier is reasonable because it would provide firms with a
way in which to qualify for $0.0034 rebate through equity retail and
options customer orders. The Exchange further believes that the
proposed Retail Order Cross-Asset Tier is equitable and not unfairly
discriminatory because a firm that does not submit options orders can
still be eligible for the $0.0034 rebate available from Investor Tier
1.
The Exchange believes that the proposal to raise the fee charged
for transactions with a per share price below $1.00 that take liquidity
from the Book from 0.2% to 0.3% of the total dollar value of the
transaction is reasonable because the proposed new rate is consistent
with similar fee amounts charged by other exchanges.\14\ The Exchange
further believes that the proposed fee increase is equitable and not
unfairly discriminatory because it will apply to all transactions that
take liquidity from the Exchange in securities with a per share price
below $1.00.
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\14\ See supra note 10.
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Finally, the Exchange believes that the proposal to exclude volume
in mini options from contributing to the option volume requirements for
Tier 1, the Cross-Asset Tier and the proposed Retail Order Cross-Asset
Tier is reasonable because the options volume requirement currently in
place in the fee schedule were established prior to the existence of
mini options, a new product on NYSE Arca Options. Because mini options
are such a new product, the Exchange believes it is reasonable to
exclude mini option volume in this way. The Exchange further believes
that the proposal to exclude volume in mini options from the tiers
mentioned above is equitable and not unfairly discriminatory because
all market participants that are eligible for the affected tiers will
be similarly situated.
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, the proposed
amendments to the Step Up Tiers that raise the volume requirement
needed to be eligible for each respective tier are designed to incent
ETP Holders and Market Makers to increase the volume of orders sent
directly to NYSE Arca and therefore provide liquidity that supports the
quality of price discovery and promotes market transparency.
The proposal to amend the Cross-Asset Tier to replace the numeric
benchmark needed to be eligible for the tier with a benchmark based on
a percentage of volume will not place an undue burden on competition
because it will apply uniformly to all ETP Holders and Market Makers.
The proposal to add the new Retail Order Cross-Asset Tier will not
place an undue burden on competition because all firms can be eligible
for the $0.0034 credit, as those firms that do not submit options
orders can still qualify to receive the $0.0034 rebate by meeting the
requirements of Investor Tier 1.
The proposal to raise the fee charged for transactions with a per
share price below $1.00 from 0.2% to 0.3% of the total value of orders
that take liquidity from the Book is consistent with similar fees
charged by other exchanges. Finally, the proposal to exclude volume in
mini options from contributing to the option volume requirements for
Tier 1, the Cross-Asset Tier and the proposed Retail Order Cross-Asset
Tier will not place an undue burden on competition because all market
participants will be similarly situated in their inability to the use
volume in mini options to satisfy the options volume requirements of
the affected tiers.
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.
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)(ii) of the Act \15\ because it establishes a due,
fee, or other charge imposed by NYSE Arca. At any time within 60 days
of the filing of such proposed rule change, the Securities and Exchange
Commission (``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) \16\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\15\ 15 U.S.C. 78s(b)(3)(A)(ii).
\16\ 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-2013-32 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-2013-32. 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
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(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 the
principal offices of NYSE Arca. 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-2013-32, and should be submitted on or before
May 1, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-08385 Filed 4-9-13; 8:45 am]
BILLING CODE 8011-01-P