[Federal Register Volume 78, Number 238 (Wednesday, December 11, 2013)]
[Notices]
[Pages 75396-75398]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-29496]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70998; File No. SR-NYSEARCA-2013-133]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Proposes To Amend
the NYSE Arca Equities Schedule of Fees and Charges for Exchange
Services To Specify the Exclusion of Odd Lot Transactions From
Consolidated Average Daily Volume Calculations for a Limited Period of
Time for Purposes of Certain Transaction Pricing on the Exchange
Through January 31, 2014
December 5, 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 November 22, 2013, NYSE Arca, Inc. (``Exchange'' or ``NYSE
Arca'') 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 self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
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 exclusion of odd lot transactions from consolidated average
daily volume (``CADV'') calculations for a limited period of time for
purposes of certain transaction pricing on the Exchange. 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend the Fee Schedule to specify the
exclusion of odd lot transactions from CADV calculations for a limited
period of time for purposes of certain transaction pricing on the
Exchange. The Exchange proposes to implement the Fee Schedule on
December 9, 2013.
The Exchange provides an ETP Holder with the opportunity to qualify
for one or more pricing Tiers based on its level of activity during a
particular month. Each Tier has 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. Many of
these Tiers use a specific percentage of CADV as a threshold that an
ETP Holder's activity must meet or exceed in order to qualify for the
particular Tier. For example, an ETP Holder must, among other things,
provide liquidity an average daily volume (``ADV'') of 0.70% or more of
CADV during the month to qualify for Tier 1 pricing.\3\ As an
additional example, transaction pricing for an ETP Holder that is a
Lead Market Maker (``LMM'') can depend on the CADV for the security in
the previous month.
---------------------------------------------------------------------------
\3\ 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.
---------------------------------------------------------------------------
CADV is a measure of transactions in Tape A, Tape B and Tape C
securities reported to the consolidated tape.
[[Page 75397]]
Transactions that are not reported to the consolidated tape are not
included in CADV for purposes of the Fee Schedule. An odd lot
transaction, which is generally an execution of less than 100 shares,
is not currently reported to the consolidated tape and is therefore not
currently included in CADV.\4\ Beginning December 9, 2013, odd lot
transactions will be reported to the consolidated tape.\5\ The Exchange
proposes to amend Footnote 3 in the Fee Schedule to specify that odd
lot transactions reported to the consolidated tape will be excluded
from CADV through January 31, 2014 for purposes of billing on the
Exchange. This proposed change is intended to maintain consistency in
the Exchange's current method of determining Tier qualifications for a
limited period of time in order to provide ETP Holders with an
opportunity to adjust to the potential impact of the inclusion of odd
lot transactions in CADV.
---------------------------------------------------------------------------
\4\ See NYSE Arca Equities Rule 7.5. A round lot is generally an
execution of 100 shares or a multiple thereof.
\5\ See Securities Exchange Act Release No. 70794 (October 31,
2013), 78 FR 66789 (November 6, 2013) (SR-CTA-2013-05) (Order
Approving the Eighteenth Substantive Amendment to the Second
Restatement of the CTA Plan). See also Securities Exchange Act
Release No. 70793 (October 31, 2013), 78 FR 66788 (November 6, 2013)
(File No. S7-24-89) (Order Approving Amendment No. 30 to the Joint
Self-Regulatory Organization Plan Governing the Collection,
Consolidation and Dissemination of Quotation and Transaction
Information for Nasdaq-Listed Securities Traded on Exchanges on an
Unlisted Trading Privileges Basis). See also Securities Exchange Act
Release No. 70898 (November 19, 2013), 78 FR 70386 (November 25,
2013) (SR-NYSE-2013-75). See also announcements regarding December
9, 2013 implementation date, available at https://cta.nyxdata.com/cta/popup/news/2385 and http://www.nasdaqtrader.com/TraderNews.aspx?id=uva2013-11. If the inclusion of odd lot
transactions in the consolidated tape is delayed to a date after
December 9, 2013, the manner of inclusion or exclusion of odd lot
transactions described in this proposal for purposes of billing on
the Exchange would similarly take effect on such later date.
---------------------------------------------------------------------------
As described above, CADV is also used in the Fee Schedule to
differentiate between securities with different CADV levels for
purposes of LMM pricing. Odd lot transactions are currently excluded
when determining the particular LMM Tier that applies because odd lot
transactions are not currently reported to the consolidated tape. In
contrast to the proposed change described above, the Exchange will not
make any adjustment beginning on December 9, 2013 to consolidated tape
figures for purposes of determining the applicable LMM Tier.\6\
Therefore, beginning December 9, 2013, odd lot transactions reported to
the consolidated tape would be included in LMM Tier determinations.
These determinations are based on CADV from the previous month and LMMs
would therefore be able to adjust their activity immediately on
December 9, 2013 based on November 2013 CADV.
---------------------------------------------------------------------------
\6\ The Exchange will reflect this in Footnote 3 in the Fee
Schedule.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
The Exchange believes that the proposed change is reasonable
because it will maintain consistency in the current manner of measuring
ETP Holder activity with respect to transaction pricing on the Exchange
for a limited period of time. Absent this change, the denominator of a
Tier threshold calculation (i.e., CADV) would increase immediately when
odd lot transactions begin to be reported to the consolidated tape and
an ETP Holder would therefore need to immediately increase its own
activity (i.e., the numerator) to qualify for the Tier compared to when
odd lot transactions were not included in the consolidated tape.
However, such an increase in ETP Holder activity would not result in
any corresponding benefit to the ETP Holder, because the Exchange is
not proposing a change to the Tier rates. The Exchange anticipates that
the eventual impact on determining Tier qualifications will be minimal
when odd lot transactions begin to be included in CADV. Notwithstanding
the anticipated minimal impact, however, the Exchange believes that it
is reasonable to provide ETP Holders with a limited transition period
to adapt to such impact.
The Exchange believes that it is reasonable to include odd lot
transactions in LMM Tier determinations immediately on December 9, 2013
because such determinations are based on CADV from the previous month.
LMMs would therefore be able to adjust their activity immediately on
December 9, 2013 based on November 2013 CADV. This is different than
with excluding odd lot transactions from other CADV calculations for a
limited period of time because such other CADV calculations are
determined based on the actual billing month, not a prior month.
Furthermore, the Exchange does not anticipate that including odd lot
transactions in these determinations beginning on December 9, 2013
would have a significant impact on the number of securities for which
each particular LMM Tier would otherwise apply absent the inclusion of
odd lot transactions.\9\
---------------------------------------------------------------------------
\9\ Based on October 2013 data, the applicable LMM Tier would
change for only one security by including odd lot transactions.
---------------------------------------------------------------------------
The proposed change is equitable and not unfairly discriminatory
because it would apply to all ETP Holders equally. More specifically,
odd lot transactions would be excluded from CADV for billing purposes
for all ETP Holders for a limited period of time. The proposed change
is also equitable and not unfairly discriminatory because the inclusion
of odd lots in the CADV calculation beginning on February 1, 2014 would
occur at the same time for all ETP Holders, after the same nearly two
month transition period. The proposed change is also equitable and not
unfairly discriminatory because odd lot transactions would be
immediately included in LMM Tier determinations for all ETP Holders
that operate as LMMs. Immediately including odd lot transactions
reported to the consolidated tape in LMM Tier determinations is
equitable and not unfairly discriminatory because LMMs would be able to
adjust their activity immediately on December 9, 2013 based on November
2013 CADV. 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,\10\ 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 would maintain
consistency in the Exchange's current method of determining Tier
[[Page 75398]]
qualifications for a limited period of time in order to give ETP
Holders an opportunity to adjust to the inclusion of odd lot
transactions in CADV. This proposed change is also designed to maintain
competition on the Exchange by eliminating the potential for ETP
Holders to immediately fail to qualify for a Tier due to the inclusion
of odd lot transactions in the consolidated tape beginning on December
9, 2013. The Exchange believes that competition would not be burdened
by including odd lot transactions in LMM Tier determinations because
the Exchange anticipates that this would not have a significant impact
on the number of securities for which each particular LMM Tier would
otherwise apply absent the inclusion of odd lot transactions--i.e.,
only one security to which an LMM is assigned based on October 2013
data.
---------------------------------------------------------------------------
\10\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------
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.
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) \11\ of the Act and subparagraph (f)(2) of Rule
19b-4 \12\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
---------------------------------------------------------------------------
\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------
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) \13\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
---------------------------------------------------------------------------
\13\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
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-2013-133 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-2013-133. 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-2013-133 and should
be submitted on or before January 2, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
---------------------------------------------------------------------------
\14\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-29496 Filed 12-10-13; 8:45 am]
BILLING CODE 8011-01-P