[Federal Register Volume 78, Number 239 (Thursday, December 12, 2013)]
[Notices]
[Pages 75642-75643]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-29614]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71015; File No. SR-NYSEMKT-2013-98]
Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and
Immediate Effectiveness of Proposed Rule Change Amending the NYSE Amex
Options Fee Schedule To Include FLEX Option Transactions in the
Strategy Execution Fee Cap
December 6, 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 26, 2013, NYSE MKT LLC (the ``Exchange'' or
``NYSE MKT'') 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 Amex Options Fee Schedule
(``Fee Schedule'') to include FLEX Option transactions in the strategy
execution fee cap. The Exchange proposes to implement the fee change
effective December 1, 2013.\4\ 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.
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\4\ The Exchange notes that it has previously filed with the
Securities and Exchange Commission a proposed rule change to amend
the Fee Schedule relating to co-location fees (File No. SR-NYSEMKT-
2013-97). Exhibit 5 to SR-NYSEMKT-2013-97 specified an effective
date for the revised Fee Schedule of December 3, 2013 (changed from
November 8, 2013). Exhibit 5 to the instant proposed rule change
specifies an effective date of December 1, 2013 (changed from
November 8, 2013). On December 1, 2013, the Exchange will update the
Fee Schedule to reflect the fee change reflected in the instant
proposed rule change, with an effective date of December 1, 2013. On
December 3, 2013, the Exchange, subject to effectiveness of SR-
NYSEMKT-2013-97, will further update the Fee Schedule to reflect the
changes set forth in SR-NYSEMKT-2013-97, with an effective date of
December 3, 2013.
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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 include FLEX
Option transactions in the strategy execution fee cap. The Exchange
proposes to implement the fee change effective December 1, 2013.
A $750 cap currently applies to transaction fees for strategy
executions involving (a) reversals and conversions, (b) box spreads,
(c) short stock interest spreads, (d) merger spreads, and (e) jelly
rolls.\5\ Transaction fees for strategy executions are further capped
at $25,000 per month per initiating firm. The fee cap generally applies
to all strategy executions executed in standard option contracts (as
opposed to mini option contracts) on the same trading day in the same
option class. However, several types of transactions are excluded from
the fee cap, including transactions in FLEX Options.\6\
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\5\ A ``reversal'' is established by combining a short security
position with a short put and a long call position that shares the
same strike and expiration. A ``conversion'' is established by
combining a long position in the underlying security with a long put
and a short call position that shares the same strike and
expiration. A ``box spread'' is defined as transactions involving a
long call option and a short put option at one strike, combined with
a short call option and long put at a different strike, to create
synthetic long and synthetic short stock positions, respectively. A
``short stock interest spread'' is defined as transactions done to
achieve a short stock interest arbitrage involving the purchase,
sale and exercise of in-the-money options of the same class. A
``merger spread'' is defined as transactions done to achieve a
merger arbitrage involving the purchase, sale and exercise of
options of the same class and expiration date, each executed prior
to the date on which shareholders of record are required to elect
their respective form of consideration, i.e., cash or stock. A
``jelly roll'' is created by entering into two separate positions
simultaneously. One position involves buying a put and selling a
call with the same strike price and expiration. The second position
involves selling a put and buying a call, with the same strike
price, but with a different expiration from the first position.
\6\ A FLEX Option is a customized options contract. See, e.g.,
NYSE Amex Options Rule 900G.
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The Exchange proposes to eliminate the exclusion of FLEX Option
transactions from the strategy execution fee cap. As a result, a FLEX
Option transaction that is part of a strategy execution and that is not
otherwise excluded would be included in the fee cap. The proposed
change is designed to encourage ATP Holders to engage in both
additional FLEX Option transactions and strategy executions on the
Exchange. The proposed change is also designed to compete with other
markets that apply similar fee caps but that do not exclude FLEX Option
transactions from such fee caps.\7\
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\7\ For example, the Exchange understands that the Chicago Board
Options Exchange, Incorporated (``CBOE'') includes FLEX Option
transactions in certain of the fee caps that apply on that market.
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The proposed change is not otherwise intended to address any other
issues, and the Exchange is not aware of any problems that ATP 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,\8\ in general, and furthers the
objectives of Sections 6(b)(4) and (5) of the Act,\9\ in particular,
because it provides for the equitable allocation of reasonable dues,
fees, and
[[Page 75643]]
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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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange believes that the proposed change is reasonable
because including FLEX Option transactions in the strategy execution
fee cap may encourage ATP Holders to execute additional FLEX Options
and strategy executions on the Exchange. The proposed change would
therefore result in greater amounts of liquidity on the Exchange, which
should benefit the quality of the Exchange's market and investors,
generally. This proposed change is further reasonable because the
Exchange understands that other option markets similarly include FLEX
Option transactions in certain fee caps applicable to strategy
executions on such other markets.\10\ The Exchange believes that the
proposed change is equitable and not unfairly discriminatory because
FLEX Options are not differentiated from other transactions for
purposes of other pricing categories within the Fee Schedule. The
proposed change would therefore eliminate a potential disincentive for
ATP Holders to transact in FLEX Options on the Exchange while at the
same time encouraging ATP Holders to engage in additional strategy
executions.
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\10\ See supra note 7.
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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,\11\ 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 change could increase competition
on the Exchange by including FLEX Option transactions in the strategy
execution fee cap. This could result in ATP Holders engaging in both
additional FLEX Option transactions and strategy executions in order to
reach the fee cap levels. The proposed change could also increase
competition between the Exchange and other option markets by making the
Exchange a more desirable market with respect to pricing for FLEX
Option transactions and strategy executions.
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\11\ 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) \12\ of the Act and subparagraph (f)(2) of Rule
19b-4 \13\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 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) \14\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\14\ 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-NYSEMKT-2013-98 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-NYSEMKT-2013-98. 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 at 100 F Street NE.,
Washington, DC 20549-1090 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-
NYSEMKT-2013-98, and should be submitted on or before January 2, 2014.
For the Commission, by the Division of Trading and Markets, pursuant
to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-29614 Filed 12-11-13; 8:45 am]
BILLING CODE 8011-01-P