[Federal Register Volume 79, Number 111 (Tuesday, June 10, 2014)]
[Notices]
[Pages 33252-33253]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-13454]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72309; File No. SR-NYSEArca-2014-62]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Amending the NYSE
Arca Options Fee Schedule Relating to Fees on Strategy Executions
June 4, 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 May 23, 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.
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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'') relating to fees on Strategy Executions. The
Exchange proposes to implement the fee change effective June 1, 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.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of this filing is to modify the Exchange's Limit of
Fees on Options Strategy Executions (``Strategy Cap'') to include
Flexible Exchange Option (``FLEX'') \4\ transactions executed as part
of a qualifying Strategy Execution.
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\4\ See NYSE Arca Rule 5.30(4) [sic] (defining Flexible Exchange
Option as a ``customized options contract'').
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Currently, certain Strategy Executions are eligible to be capped at
$750 per day in transaction fees, and further capped at $25,000 per
month per initiating firm. Strategies eligible for the Strategy Cap
involve reversals and conversions; box spreads; short stock interest
spreads; merger spreads; and jelly rolls.\5\ The Exchange, however,
currently deems FLEX transactions ineligible for the Strategy Cap. OTP
Holders and OTP Firms occasionally receive orders for eligible Strategy
Executions where one or more legs is comprised of a FLEX trade. Because
FLEX trade fees are not eligible to be capped as part of a Strategy
Execution, the OTP Holders and OTP Firms lose business to other markets
that include FLEX transactions in their own competing Strategy Cap.\6\
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\5\ See NYSE Arca Options Fees and Charges, available at,
https://globalderivatives.nyx.com/sites/globalderivatives.nyx.com/files/nyse_arca_options_fee_schedule_for_4-1-14.pdf, n. 10,
defining the eligible Strategy Executions as follows:
(a) Reversals and Conversions. 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.
(b) Box spread. 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.
(c) Short stock interest spread. 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.
(d) Merger spread. 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.
(e) Jelly rolls. 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\ See, e.g., NYSE Amex Options Fee Schedule, available at,
https://globalderivatives.nyx.com/sites/globalderivatives.nyx.com/files/nyse_amex_options_fee_schedule_for_2-3-14_0.pdf.
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NYSE Arca proposes to allow fees from FLEX transactions that are
part of an otherwise eligible Strategy Execution to be included in the
Strategy Cap.
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 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 inclusion of Strategy
Executions that are comprised in whole or in part by FLEX transactions
in the Strategy Cap to be reasonable as it will reduce the total
transaction costs for these types of trades. In addition, the proposed
fee change is reasonable because it is similar to the strategy caps
available on other Exchanges.\9\ The use of these Strategy Executions
benefit all market participants by increasing liquidity in general and
allowing significantly large business to be brought together to enhance
price discovery. By encouraging this type of business on the Exchange,
the increased liquidity benefits all market participants.
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\9\ See supra n. 6.
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The Exchange also believes that the proposed inclusion of Strategy
Executions that are comprised in whole or in part by FLEX transactions
in the Strategy Cap is also not unfairly discriminatory, as Strategy
Executions
[[Page 33253]]
can be conducted by any OTP Holder or OTP Firm.
Finally, the Exchange believes that it is subject to significant
competitive forces, including from options exchanges that do not
exclude FLEX transactions from their strategy caps, 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. The Exchange believes that the proposed fee
change reduces the burden on competition because it will allow OTP
Holders and OTP Firms to compete for business by broadening the scope
of eligible transactions to be included in the Strategy Cap, which
change would bring the Strategy Cap in line with the strategy caps
available on other options exchanges.\11\
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\10\ 15 U.S.C. 78f(b)(8).
\11\ See supra n. 6.
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The Exchange notes that it operates in a highly competitive market
in which market participants can readily favor competing venues, and
providing a cap on Strategy Executions comprised in whole or in part by
FLEX transactions in a manner consistent with other trading venues will
encourage competition. 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-NYSEArca-2014-62 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEArca-2014-62. 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-2014-62, and should
be submitted on or before July 1, 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. 2014-13454 Filed 6-9-14; 8:45 am]
BILLING CODE 8011-01-P