[Federal Register Volume 79, Number 21 (Friday, January 31, 2014)]
[Notices]
[Pages 5499-5501]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-01968]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71409; File No. SR-NYSEArca-2014-06]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change to Increase Its
Options Regulatory Fee
January 27, 2014.
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 January 22, 2014, 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C.78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
The Exchange proposes to increase its Options Regulatory Fee. The
Exchange proposes to implement this change on February 3, 2014. 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 5500]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to increase its Options Regulatory Fee
(``ORF''), effective February 3, 2014.
Background
The ORF, which is currently $0.005 per contract, is assessed by the
Exchange on each OTP Holder or OTP Firm for all options transactions
executed or cleared by the OTP Holder or OTP Firm that are cleared by
The Options Clearing Corporations (``OCC'') in the customer range,
i.e., transactions that clear in the customer account of the OTP
Holder's or OTP Firm's clearing firm at OCC, regardless of the
marketplace of execution.\4\ In other words, the Exchange imposes the
ORF on all customer-range transactions executed by an OTP Holder or OTP
Firm even if the transactions do not take place on the Exchange. In the
case where an OTP Holder or OTP Firm executes a transaction and a
different OTP Holder or OTP Firm clears the transaction, the ORF would
be assessed to the OTP Holder or OTP Firm that executes the
transaction. In the case where a non-OTP Holder or non-OTP Firm
executes a transaction and an OTP Holder or OTP Firm clears the
transaction, the ORF would be assessed to the OTP Holder or OTP Firm
that clears the transaction.
---------------------------------------------------------------------------
\4\ See Securities Exchange Act Release No. 34-68174 (November
7, 2012), 77 FR 67845 (November 14, 2012) (SR-NYSEArca-2012-118).
---------------------------------------------------------------------------
The dues and fees paid by OTP Holders or OTP Firms go into the
general funds of the Exchange, a portion of which is used to help pay
the costs of regulation. In particular, the ORF is designed to recover
a material portion of the costs to the Exchange of the supervision and
regulation of OTP Holders or OTP Firms, including performing routine
surveillances and investigations, as well as policy, rulemaking,
interpretive, and enforcement activities. The Exchange monitors the
amount of revenue collected from the ORF to ensure that this revenue,
in combination with other regulatory fees and fines, does not exceed
regulatory costs. The ORF is collected indirectly from OTP Holders or
OTP Firms through their clearing firms by OCC on behalf of the
Exchange.
Proposed Change
The Exchange proposes to increase the ORF from $0.005 per contract
to $0.0055 per contract in order to recoup increased regulatory
expenses while also ensuring that the ORF will not exceed such
expenses. Transaction volumes across the industry have increased
moderately since the ORF was last changed in December 2012, but the
Exchange's regulatory expenses have increased at a faster rate. The
Exchange believes that revenue generated from the proposed ORF, when
combined with all of the Exchange's other regulatory fees, will cover a
material portion but not all of the Exchange's regulatory costs. The
Exchange will continue to monitor the amount of revenue collected from
the ORF to ensure that it, in combination with its other regulatory
fees and fines, does not exceed regulatory costs. If the Exchange
determines that regulatory revenues exceed regulatory costs, the
Exchange will adjust the ORF by submitting a fee filing change to the
Commission.\5\ The Exchange proposes to implement this fee change on
February 3, 2014.
---------------------------------------------------------------------------
\5\ The Exchange notes that its regulatory responsibilities with
respect to member compliance with options sales practice rules have
been allocated to FINRA under an SEC Rule 17d-2 agreement; the ORF
is not designed to cover the cost of options sales practice
regulation. See Securities Exchange Act Release No. 64399 (May 4,
2011), 76 FR 27114 (May 10, 2011) (SR-NYSEArca-2011-20).
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Securities Exchange Act of 1934 (the
``Act''),\6\ in general, and furthers the objectives of Section 6(b)(4)
and (5) of the Act,\7\ in particular, because it provides for the
equitable allocation of reasonable dues, fees, and other charges among
its members and issuers and other persons using its facilities and does
not unfairly discriminate between customers, issuers, brokers, or
dealers.
---------------------------------------------------------------------------
\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
The Exchange believes that the proposed fee change is reasonable
because the Exchange's revenue from the collection of the ORF has not
kept pace with Exchange's regulatory expenses. As described above, the
ORF seeks to recover the costs of supervising and regulating members,
including performing routine surveillances and investigations, as well
as policy, rulemaking, interpretive and enforcement activities. The
proposed ORF increase will help to offset these regulatory expenses,
but would not result in total regulatory revenue exceeding total
regulatory costs. The Exchange further notes that another options
exchange has raised its options regulatory fee to $0.0095 per contract
and thus the Exchange's ORF of $0.0055 per contract will still be below
that level.\8\
---------------------------------------------------------------------------
\8\ See Securities Exchange Act Release No. 34-71007 (December
6, 2013), 78 FR 75653 (December 12, 2013) (SR-CBOE-2013-117).
---------------------------------------------------------------------------
The Exchange believes that the proposed ORF increase is equitable
and not unfairly discriminatory because it is objectively allocated to
all OTP Holders or OTP Firms on all of their transactions that clear in
the customer range at OCC. Moreover, the Exchange believes the ORF
ensures fairness by assessing higher fees to those member firms that
require more Exchange regulatory services based on the amount of
customer options business they conduct. Regulating customer trading
activity is more labor intensive and requires greater expenditure of
human and technical resources than regulating non-customer trading
activity. Surveillance and regulation of non-customer trading activity
generally tends to be more automated and less labor intensive. As a
result, the costs associated with administering the customer component
of the Exchange's overall regulatory program are anticipated to be
higher than the costs associated with administering the non-customer
component of its regulatory program. As such, the Exchange proposes
assessing higher fees to those firms that will require more Exchange
regulatory services based on the amount of customer options business
they conduct.\9\
---------------------------------------------------------------------------
\9\ The ORF is not charged for orders that clear in categories
other than the customer range (e.g., market maker orders) because
members incur the costs of owning memberships and through their
memberships are charged transaction fees, dues and other fees that
go into the general funds of the Exchange, a portion of which is
used to help pay the costs of regulation. See supra note 4.
---------------------------------------------------------------------------
The Exchange believes that the ORF will continue to be equitable
and not unfairly discriminatory because the fee increase is objectively
allocated to all OTP Holders or OTP Firms. As noted above, the Exchange
will continue to monitor the amount of revenue collected from the ORF
to ensure that it, in combination with its other regulatory fees and
fines, does not exceed regulatory costs. If the Exchange determines
that regulatory revenues exceed regulatory costs, the Exchange will
adjust the ORF by submitting a fee filing change to the Commission.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance
[[Page 5501]]
of the purposes of the Act. The proposed fee change is not designed to
address any competitive issues. Rather, the proposed change is designed
to help the Exchange adequately fund its regulatory activities while
seeking to ensure that total regulatory revenues do not exceed total
regulatory costs.
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.
---------------------------------------------------------------------------
\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 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) \12\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
---------------------------------------------------------------------------
\12\ 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-2014-06 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-2014-06. 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-2014-06, and should
be submitted on or before February 21, 2014.
---------------------------------------------------------------------------
\13\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-01968 Filed 1-30-14; 8:45 am]
BILLING CODE 8011-01-P