[Federal Register Volume 78, Number 229 (Wednesday, November 27, 2013)]
[Notices]
[Pages 71016-71018]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-28417]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70912; File No. SR-NYSEARCA-2013-128]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend the NYSE
Arca Equities Schedule of Fees and Charges for Exchange Services To
Specify the Method of Billing When More Than One Pricing Tier Could Be
Applicable
November 21, 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 November 15, 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 Substance
of the Proposed Rule Change
The Exchange proposes to amend the NYSE Arca Equities Schedule of
Fees and Charges for Exchange Services (the ``Fee Schedule'') to
specify the method of billing when more than one pricing tier could be
applicable. The Exchange proposes to implement the Fee Schedule change
immediately. 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.
[[Page 71017]]
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to specify the method of billing when more
than one pricing tier could be applicable. The Exchange proposes to
implement the Fee Schedule change immediately.
An ETP Holder may qualify for several different pricing ``Tiers''
based on its level of activity during a particular month. These Tiers
each have a corresponding fee or credit that applies to the ETP
Holder's transactions during the month. Generally, a qualifying ETP
Holder would be subject to a lower transaction fee or a higher
transaction credit, depending on the particular Tier. For example, an
ETP Holder that qualifies for Tape C Step Up Tier 2 receives an
incremental $0.0002 per share credit for executions that provide
liquidity to the Book in Tape C securities, which is in addition to the
ETP Holder's Tiered or Basic Rate credit(s) (e.g., $0.0002 in addition
to the $0.0030 credit under Tier 1).\4\
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\4\ To qualify for the Tape C Step Up Tier 2 an ETP Holder must
directly execute providing average daily volume (``ADV'') in Tape C
securities (``Tape C Adding ADV'') during the billing month that is
at least 2 million shares greater than the ETP Holder's Tape C
Adding ADV during the second quarter of 2012 (``Q2 2012''), subject
to the ETP Holder's combined providing ADV in Tape A, Tape B, and
Tape C Securities during the billing month as a percentage of
consolidated ADV (``CADV'') being no less than during Q2 2012.
To qualify for Tier 1, an ETP Holder must (1) provide liquidity
an ADV per month of 0.70% or more of CADV or (2) (a) provide
liquidity an ADV per month of 0.15% or more of CADV and (b) be
affiliated with an Options Trading Permit (``OTP'') Holder or OTP
Firm that provides an ADV of electronic posted executions (including
all account types) in Penny Pilot issues on NYSE Arca Options
(excluding mini options) of at least 100,000 contracts, of which at
least 25,000 contracts must be for the account of a market maker.
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Due to the lower fee or higher credit that applies, certain of the
pricing Tiers specify that a qualifying ETP Holder is not able to
qualify to receive certain other specific Tier pricing. Continuing with
the example above, Tape C Step Up Tier 2 provides that Investor Tier 1
and Cross-Asset Tier ETP Holders, among others, cannot qualify for Tape
C Step Up Tier 2.\5\ Without these exclusions, an ETP Holder could
receive a higher credit than intended (e.g., $0.0034 under Investor
Tier 1 plus $0.0002 under Tape C Step Up Tier 2 would be a total credit
of $0.0036) or lower fees compared to the other fees and credits in the
Fee Schedule.\6\
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\5\ To qualify for Investor Tier 1, an ETP Holder must (1)
provide liquidity of 0.60% or more of CADV per month, (2) maintain a
ratio of cancelled orders to total orders of less than 30%,
excluding Immediate-or-Cancel orders, and (3) maintain a ratio of
executed liquidity adding volume-to-total volume of greater than
80%.
To qualify for the Cross Asset Tier, an ETP Holder must (1)
provide liquidity of 0.40% or more of the CADV per month, and (2) be
affiliated with an OTP Holder or OTP Firm that provides an ADV of
electronic posted Customer executions in Penny Pilot issues on NYSE
Arca Options (excluding mini options) of at least 0.95% of total
Customer equity and exchange-traded fund option ADV, as reported by
The Options Clearing Corporation.
\6\ See Securities Exchange Act Release No. 67461 (July 18,
2012), 77 FR 43408, 43409 (July 24, 2012) (SR-NYSEArca-2012-69) in
which the Exchange noted its belief that prohibiting certain ETP
Holders from qualifying for the Tape C Step Up Tier 2 was
reasonable, equitable and not unfairly discriminatory because the
ETP Holders that qualify for certain other Tiers would already
receive a higher credit for such executions.
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The Exchange determines qualifications for the Tiers after the
billing month ends. If an ETP Holder or Market Maker qualifies for more
than one Tier in the Fee Schedule, the Exchange applies the most
favorable rate available under such Tiers. For example, if an ETP
Holder or Market Maker qualifies for both the Cross-Asset Tier and the
Tape C Step Up Tier 2, the Exchange will apply the single most
favorable tier to the ETP Holder or Market Maker. The Exchange has
consistently applied pricing in this manner and now proposes to codify
this practice by adding text to the Tiers in the Fee Schedule that
could be effected.
The proposed change is not otherwise intended to address any other
issues and the Exchange is not aware of any problems that ETP Holders
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,\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 is reasonable
because it specifies the Exchange's current method of billing when more
than one pricing Tier could be applicable to an ETP Holder. This method
of billing is reasonable because it results in the application of the
most beneficial fees and credits for which an ETP Holder qualifies when
an ETP Holder qualifies for more than one pricing Tier. The proposed
change is equitable and not unfairly discriminatory because it applies
to all ETP Holders equally. The proposed change is also equitable and
not unfairly discriminatory because it eliminates the potential for an
ETP Holder that qualifies for more than one pricing Tier to receive
less favorable pricing than other ETP Holders that qualify for one of
the same Tiers.
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. Instead, the proposed change describes the
Exchange's existing method of applying fees and credits for ETP Holders
that qualify for the various Tiers within the Fee Schedule. This
billing method is designed to result in the application of the most
beneficial fees and credits for which an ETP Holder qualifies if such
ETP Holder qualifies for more than one pricing Tier. This billing
method is also designed to increase competition on the Exchange by
eliminating a potential disincentive for ETP Holders to submit orders
on the Exchange--i.e., if less beneficial fees and credits could apply
as a result of qualifying for multiple Tiers. 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 or
credit levels at a particular venue to be unattractive. In such an
environment, the Exchange must continually review, and consider
adjusting, its fees and credits to remain competitive with other
exchanges. The billing method described herein is based on objective
standards that are applicable to all ETP Holders and reflects the need
for the Exchange to offer significant financial incentives to attract
order flow. For these reasons, the Exchange believes that the proposed
rule change reflects this competitive environment and is therefore
consistent with the Act.
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\9\ 15 U.S.C. 78f(b)(8).
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[[Page 71018]]
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-2013-128 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-2013-128. 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-NYSEARCA-2013-128 and should
be submitted on or before December 18, 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. 2013-28417 Filed 11-26-13; 8:45 am]
BILLING CODE 8011-01-P