[Federal Register Volume 78, Number 190 (Tuesday, October 1, 2013)]
[Notices]
[Pages 60364-60366]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-23901]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70503; File No. SR-NYSEArca-2013-95]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Amending the NYSE
Arca Options Fee Schedule To Add an Additional Tier to the Lead Market
Maker Rights Fees
September 25, 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 September 19, 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 Fee Schedule
(``Fee Schedule'') to add an additional tier to the Lead Market Maker
(``LMM'') rights fees. The Exchange proposes to implement the fee
change effective October 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 add an
additional tier to the LMM rights fees. The Exchange proposes to
implement the fee change effective October 1, 2013.
OTP Firms acting as LMMs are assessed a fee for LMM rights for each
appointed issue.\4\ The LMM rights fee is based on the average national
daily volume (``ADV'') of Customer contracts traded in that issue.\5\
The LMM rights fees are assessed at the end of each month on each issue
that an LMM holds in its LMM appointment. Currently, the LMM rights
fees are charged as follows:
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\4\ ``OTP Firm'' is defined in NYSE Arca Rule 1.1(r). ``Market
Maker'' is defined in NYSE Arca Rule 6.32. ``Lead Market Maker'' is
defined in NYSE Arca Rule 6.82.
\5\ The term ``Customer'' excludes a broker-dealer. See NYSE
Arca Rule 6.1A(a)(4).
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Monthly
Average national daily customer contracts issue fee
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0-1,000..................................................... $45
1,001 to 2,000.............................................. 75
2,001 to 5,000.............................................. 200
5,001 to 15,000............................................. 375
15,001 to 100,000........................................... 750
Over 100,000................................................ 1,500
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The Exchange's formal listing standards are provided under NYSE
Arca Rule 5.3 (Criteria for Underlying Securities) and prescribe the
minimum standards that must be satisfied before the Exchange lists a
particular issue. However, the Exchange is not required to list an
issue simply because it satisfies the minimum standards. To date, the
Exchange generally has not listed an issue if the Exchange anticipated
that it would trade an ADV of 100 or fewer Customer contracts because
the minimal revenue associated with such low-volume issues would not
offset the costs of listing and maintaining the listing of such issues.
However, other exchanges do list such issues, and the Exchange has
determined that it may be appropriate to list these low-volume issues
as a convenience for OTP Holders and OTP Firms whose customers wish to
transact in such issues and to satisfy requests of LMMs that have
requested appointments in such issues.
In order to better align the Exchange's revenue with the costs of
listing these low-volume issues, the Exchange proposes to add an
additional LMM rights fee tier for issues with an ADV of Customer
contracts of between 0 and 100. The LMM rights fee for this new tier
would be $125. The resulting LMM rights fees would be charged as
follows:
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Monthly
Average national daily customer contracts issue fee
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0-100....................................................... $125
101-1,000................................................... 45
1001 to 2,000............................................... 75
2,001 to 5,000.............................................. 200
5,001 to 15,000............................................. 375
15,001 to 100,000........................................... 750
Over 100,000................................................ 1,500
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The Exchange proposes that the new LMM rights fee tier apply only
to (i) an option listed on the Exchange for the first time on or after
October 1, 2013, and (ii) an option listed on the Exchange prior to
October 1, 2013 that is reallocated to a new LMM on or after October 1,
2013. Thus, the LMM for an issue with an ADV of Customer contracts
within the new lowest tier (i.e., 0-100 contracts) that listed on the
Exchange prior to October 1, 2013 would continue to be subject to the
$45 monthly issue fee. If, on or after October 1, 2013, the LMM
relinquished that appointment and a new LMM applied for and was granted
an appointment in that issue, then the new LMM would be subject to the
revised fees; following the reallocation, if the issue traded a monthly
ADV of 100 or fewer Customer contracts, then the new LMM would pay the
$125 monthly fee.
The proposed change is not otherwise intended to address any other
issues, and the Exchange is not aware of any problems that LMMs would
have in complying with the proposed change.\6\
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\6\ The Exchange notes that NYSE MKT LLC submitted a similar
proposal to implement a rights tier and fee for low-volume issues
listed on NYSE Amex Options LLC. See Securities Exchange Act Release
No. 67153 (June 7, 2012), 77 FR 35437 (June 13, 2012) (SR-NYSEMKT-
2012-05).
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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 (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
[[Page 60365]]
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 including an additional LMM rights fee
tier with a corresponding fee of $125 is reasonable because it would
better balance the Exchange's costs to list and maintain the listing of
these lowest volume issues against the minimal revenue that such issues
are anticipated to generate for the Exchange. The Exchange also
believes that it is reasonable to grandfather LMMs that hold an
appointment in an issue listed before October 1, 2013 at the lower $45
fee level in order to create an incentive for LMMs to maintain those
appointments.
The fee increase is also reasonable, equitable, and not unfairly
discriminatory because it will encourage more efficient use of the
Exchange's resources. Unfettered growth in option listings without an
offsetting growth in volume would ultimately result in increased costs
for all participants on the Exchange. As a result of the fee increase,
LMMs that wish to request new appointments in the lowest volume issues
would directly contribute toward some of the Exchange's costs to
support that trading instead of having those costs shared among all
Exchange participants. The Exchange also believes that the fee increase
is equitable and not unfairly discriminatory because LMMs choose to
apply for appointments, and thus only those LMMs that are willing to
pay the applicable fee will apply for the appointment. An LMM that does
not wish to pay the higher fee for a new appointment after October 1,
2013 will not request such an appointment, nor will it be required to
take one. The Exchange believes that it is equitable and not unfairly
discriminatory to grandfather those LMMs that maintain appointments in
previously listed issues that have a monthly ADV of 100 or fewer
Customer contracts after October 1, 2013 at the $45 monthly fee level;
otherwise, those LMMs would face a significant monthly fee increase.
The Exchange believes that grandfathering is fair and reasonable in
light of existing LMMs' expectations concerning fee levels at the time
their appointments were accepted.
Finally, the Exchange believes that it is subject to significant
competitive forces, as described below in the Exchange's statement
regarding the burden on competition.
For these reasons, 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,\9\ 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. The proposed rule change would enhance competition
among exchanges by permitting the Exchange to better balance its
revenues and costs when listing extremely low-volume issues that also
may be listed on other exchanges. The Exchange does not believe that
the proposed change would burden competition among LMMs because LMMs
apply for such appointments based on their own business decisions.
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\9\ 15 U.S.C. 78f(b)(8).
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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) \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-2013-95 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-2013-95. 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 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-2013-95, and should
be submitted on or before October 22, 2013.
[[Page 60366]]
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. 2013-23901 Filed 9-30-13; 8:45 am]
BILLING CODE 8011-01-P