[Federal Register Volume 78, Number 137 (Wednesday, July 17, 2013)]
[Notices]
[Pages 42811-42813]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-17098]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69975; File No. SR-NYSE-2013-45]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Amending its Price List To Change the Monthly Fees For the Use of
Certain Ports
July 11, 2013.
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 June 28, 2013, 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, II,
and III 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 amend its Price List to change the monthly
fees for the use of certain ports. The Exchange proposes to implement
the fee changes on July 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 Price List to change the monthly
fees for the use of certain ports.\3\ The Exchange proposes to
implement the fee changes on July 1, 2013.\4\
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\3\ The Exchange has a Common Customer Gateway (``CCG'') that
accesses the equity trading systems that it shares with its
affiliates, NYSE MKT LLC (``NYSE MKT'') and NYSE Arca, Inc. (``NYSE
Arca''), and all ports connect to the CCG. See, e.g., Securities
Exchange Act Release No. 64542 (May 25, 2011), 76 FR 31659 (June 1,
2011) (SR-NYSE-2011-13). All NYSE member organizations are also NYSE
MKT member organizations and, accordingly, a member organization
utilizes its ports for activity on both NYSE and/or NYSE MKT and is
charged port fees based on the total number of ports connected to
the CCG, whether the ports are used to quote and trade on NYSE, NYSE
MKT, and/or both, because those trading systems are integrated. The
NYSE Arca trading platform is not integrated in the same manner.
Therefore, it does not share its ports with NYSE or NYSE MKT.
\4\ The Exchange notes that billing for ports is based on the
number of ports on the third business day prior to the end of the
month. In addition, the level of activity with respect to a
particular port does not affect the assessment of monthly fees, such
that, except for ports that are not charged, even if a particular
port is not used, a port fee still applies.
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The Exchange currently makes ports available that provide
connectivity to the Exchange's trading systems (i.e., ports for entry
of orders and/or quotes (``order/quote entry ports'')) and charges $200
per port per month.\5\ The Exchange proposes that the $200 fee per port
per month would apply to users with five or fewer order/quote entry
ports and that the fee for users with more than five order/quote entry
ports would be $500 per port per month, including for the first five
ports.\6\ The Exchange is proposing this change in order to permit the
Exchange to offset, in part, its infrastructure costs associated with
making such ports available. The proposed change would also encourage
users to become more efficient with, and reduce the number of, their
order/quote ports, thereby resulting in a corresponding increase in the
efficiency that the Exchange would be able to realize with respect to
managing its own infrastructure. In this regard, as users decrease the
number of order/quote ports that they utilize, the Exchange would
similarly be able to decrease the amount of its hardware that it is
required to support to interface [sic] with such ports.
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\5\ The Price List provides that (i) users of the Exchange's
Risk Management Gateway service (``RMG'') are not charged for order/
quote entry ports if such ports are designated as being used for RMG
purposes, and (ii) Designated Market Makers (``DMMs'') are not
charged for order/quote entry ports that connect to the Exchange via
the DMM Gateway. See Securities Exchange Act Release No. 68229
(November 14, 2012), 77 FR 69688 (November 20, 2012) (SR-NYSE-2012-
60). Two methods are available to DMMs to connect to the Exchange:
DMM Gateway and CCG. The two methods are quite distinct, however.
Only DMMs may utilize the DMM Gateway, and they may only use DMM
Gateway when acting in their capacity as a DMM. DMMs are required to
use the DMM Gateway for certain DMM-specific functions that relate
to the DMM's role on the Exchange and the obligations attendant
therewith, which are not applicable to other market participants on
the Exchange. By contrast, non-DMMs as well as DMMs may use the CCG,
use of the CCG by a DMM is optional, and a DMM that connects to the
Exchange via CCG can use the relevant order/quote entry port for
orders and quotes both in its capacity as a DMM and for orders and
quotes in other securities. Accordingly, because DMMs are required
to utilize DMM Gateway, but not CCG, to be able to fulfill their
functions as DMMs, DMMs are not charged for order/quote entry ports
that connect to the Exchange via the DMM Gateway, but DMMs, like
other market participants, are charged for order/entry ports that
connect to the Exchange via the CCG. DMMs can elect to use the DMM
Gateway, the CCG, or both for their connectivity to the Exchange.
However, the DMM Gateway must be used for certain DMM-specific
functions that relate to the DMM's role on the Exchange and the
obligations attendant therewith.
\6\ For example, a user with five ports would be charged $200
per port per month for a total of $1,000 per month for all five
ports. A user with six ports would be charged $500 per port per
month, including for the first five ports, for a total of $3,000 per
month for all six ports.
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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 member organizations would have in complying with the
proposed change.
The Exchange believes that it is subject to significant competitive
forces, as described below in the Exchange's statement regarding the
burden on competition.
[[Page 42812]]
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\7\ in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\8\ 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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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange believes that the proposed change to the monthly rates
is reasonable because the fees charged for order/quote entry ports are
expected to permit the Exchange to offset, in part, its infrastructure
costs associated with making such ports available, including costs
based on gateway software and hardware enhancements and resources
dedicated to gateway development, quality assurance, and support. In
this regard, the Exchange believes that the proposed fees are
competitive with those charged by other exchanges.\9\ The proposed
change is also reasonable because the proposed per port rates would
encourage users to become more efficient with, and reduce the number
of, ports used for order/quote entry, thereby resulting in a
corresponding increase in the efficiency that the Exchange would be
able to realize with respect to managing its own infrastructure.
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\9\ For example, the charge on the NASDAQ Stock Market LLC
(``NASDAQ'') for a FIX Trading Port is $500 per port per month. See
Nasdaq Rule 7015. A separate charge for Pre-Trade Risk Management
ports also is applicable, which ranges from $400 to $600 and is
capped at $25,000 per firm per month. See Nasdaq Rule 7016. EDGA
Exchange, Inc. (``EDGA'') and EDGX Exchange, Inc. (``EDGX'') also
each charge $500 per port per month.
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The Exchange also believes that these changes to the fees are
equitable and not unfairly discriminatory because they would apply to
all users of order/quote entry ports on the Exchange, subject to the
exceptions noted above.\10\ The Exchange also believes that it is
equitable and not unfairly discriminatory to charge a higher fee to
users with more than five order/quote entry ports, as compared to users
with five or fewer order/quote entry ports, because the Exchange
believes that users with more than five order/quote entry ports would
be incentivized to become more efficient with their utilization of
ports.\11\
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\10\ See supra note 5.
\11\ The Exchange also notes that at least one of its
competitors charges different rates depending on the number of ports
utilized. Specifically, EDGA and EDGX each provide the first five
ports for free.
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The Exchange has considered multiple factors in proposing the
tiered approach to order/quote entry port pricing, including that the
fee increase would occur once a user has more than five order/quote
entry ports. The Exchange believes that this approach to pricing is
equitable and not unfairly discriminatory, including for the following
reasons. Specifically, the Exchange believes that there is a
correlation between the number of order/quote entry ports utilized by
users and the level of trading volume sent to the Exchange by such
users, such that a user with significant trading activity sent to the
Exchange likely utilizes a greater number of order/quote entry ports
than a user with minimal trading activity sent to the Exchange.
However, despite this correlation, and regardless of the amount of
activity a user sends to the Exchange via its order/quote entry ports,
or the size of the firm, every user that connects its systems to the
Exchange's trading systems requires at least one port for order/quote
entry. Many users also maintain a certain number of additional order/
quote entry ports for redundancy and/or hardware configuration
purposes. These users have a limited opportunity to become more
efficient with their use of ports. Accordingly, the Exchange believes
that five is a reasonable number of ports that would permit a user that
sends a lesser amount of trading activity to the Exchange to manage its
ports in such a way that it could sufficiently address these redundancy
and configuration concerns without crossing the threshold for which
higher fees apply.
In this regard, the Exchange anticipates that, as a result of the
proposed increase of the order/quote entry port fee under the tiered
structure, users would become more efficient with their utilization of
order/quote entry ports and would decrease the number of order/quote
entry ports so as to qualify for the $200 rate per port. Such a
decrease in order/quote entry port use would result in a corresponding
decrease in the infrastructure that the Exchange is required to support
for connectivity to its trading systems and a decrease in the costs
related thereto.
For the reasons above, the Exchange believes that the proposal is
consistent with the Act.
B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with Section 6(b)(8) of the Act,\12\ 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. Instead, the Exchange believes that the
proposed change will permit the Exchange to set fees for ports that are
competitive with those charged by other exchanges.\13\ Moreover, the
Exchange believes that charging different rates for users with five or
fewer order/quote entry ports as compared to users with more than five
ports would not impose any burden on competition that is not necessary
or appropriate in furtherance of the purposes of the Act because the
Exchange believes that a reduction in the number of order/quote entry
ports would result in a decrease in the infrastructure that the
Exchange is required to support for connectivity to its trading
systems. This would also provide incentive for users to become more
efficient with their use of ports and could therefore result in such
users becoming more competitive due to decreased costs. In this regard,
the Exchange notes that at least one of the Exchange's competitors
charges different rates depending on the number of ports utilized.\14\
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\12\ 15 U.S.C. 78f(b)(8).
\13\ See supra note 9.
\14\ See supra note 11.
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Finally, the Exchange notes that it operates in a highly
competitive market in which market participants can readily favor
competing venues if they deem fee levels at a particular venue to be
excessive. 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 rule 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) \15\ of the Act and subparagraph (f)(2) of Rule
19b-4 \16\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\15\ 15 U.S.C. 78s(b)(3)(A).
\16\ 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
[[Page 42813]]
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) \17\
of the Act to determine whether the proposed rule change should be
approved or disapproved.
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\17\ 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-NYSE-2013-45 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-2013-45. 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-2013-45 and should be
submitted on or before August 7, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013-17098 Filed 7-16-13; 8:45 am]
BILLING CODE 8011-01-P