[Federal Register Volume 79, Number 131 (Wednesday, July 9, 2014)]
[Notices]
[Pages 39029-39031]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-15963]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72525; File No. SR-NYSEArca-2014-74]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Amending NYSE Arca
Options Fee Schedule Relating to Manual Executions by Firms and Broker
Dealers
July 2, 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 July 1, 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 amend the NYSE Arca Options Fee Schedule
(``Fee Schedule'') relating to Manual Executions by Firms and Broker
Dealers. The Exchange proposes to implement the fee change effective
July 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 fees on Firm
and Broker Dealer Manual Executions to provide a lower rate in certain
select symbols.
Currently, a Firm or Broker Dealer order executed Manually on the
Floor of the Exchange that is not facilitating a Customer is charged
$0.25 per contract.\4\
---------------------------------------------------------------------------
\4\ Firm and Broker Dealer orders that facilitate a Customer are
charged $0.00.
---------------------------------------------------------------------------
The Exchange is proposing a rate of $0.12 per contract for Firm and
Broker Dealer orders for select symbols that are active issues with
narrow spreads and a competitive distribution of market share among the
exchanges.\5\ Initially, the Exchange proposes to include only options
transactions in VXX (iPath S&P 500 VIX Short Term Futures Exchange
Traded Note) in the select symbols, although the Exchange may add or
remove symbols from the eligible symbol list with subsequent filings
with the Securities and Exchange Commission (``Commission'').\6\
---------------------------------------------------------------------------
\5\ The Exchange notes that the practice of providing additional
incentives to increase order flow in high volume symbols is, and has
been, commonly practiced in the options markets. See, e.g.,
International Securities Exchange, LLC (``ISE''), Schedule of Fees,
available here, http://www.ise.com/assets/documents/OptionsExchange/legal/fee/ISE_fee_schedule.pdf, p. 6 (providing reduced fee rates
for order flow in Select Symbols); NASDAQ OMX PHLX, Pricing
Schedule, available here, http://www.nasdaqtrader.com/Micro.aspx?id=phlxpricing, Section I (providing a rebate for adding
liquidity in SPY); NYSE Arca, Inc. Fees Schedule, available here,
https://www.theice.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf (section titled ``Customer Monthly
Posting Credit Tiers and Qualifications for Executions in Penny
Pilot Issues'').
\6\ VXX is a Penny Pilot Issue in the top 10 by Customer volume
from January 2, 2014 through May 31, 2014, with market share spread
fairly evenly amongst five of the 12 exchanges, and with 15% of
transactions by contract volume involving a Firm. At least one other
option exchange (ISE) lists VXX among its select symbols. See supra
n. 5.
---------------------------------------------------------------------------
[[Page 39030]]
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.
---------------------------------------------------------------------------
\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
The Exchange believes that the proposed special rate for Firm and
Broker Dealer orders in select symbols is reasonable as it is within
the general range of transaction fees for manual transactions. The
proposed special rate for select symbols is reasonably designed to
increase the competitiveness of the Exchange with other options
exchanges that also offer increased incentives for higher volume
symbols.
It is also not unfairly discriminatory to provide for a reduced fee
for Firm and Broker Dealer orders in select symbols to attract business
in certain issues to the Floor. Firms and Broker Dealers are generally
represented on the Floor by Floor Brokers and providing a reduced fee
in certain symbols incents them to have their orders executed on the
Trading Floor where other participants are already present. Further,
the proposal is not unfairly discriminatory in its treatment of Firms
and Broker Dealers vis-[agrave]-vis Market Makers because Firms and
Broker Dealers have their orders brought to the Floor for execution
whereas Market Makers are providing liquidity for the orders. Market
Makers are present and obligated to respond to a call for markets, and
in return, Market Makers are charged a lower fee in all Manual
executions, with the exception being select symbols. In addition, the
Exchange believes that by providing a lower fee to Firm and Broker
Dealer orders brought to the Floor in a highly competitive issue,
Market Makers are provided a greater opportunity to interact with order
flow, which in turn benefits market participants.
The proposed fee change is also not unfairly discriminatory because
the reduced fee is available to any Firm or Broker Dealer.
Additionally, the proposed fee is an equitable allocation of fees
because the intent is to create an incentive for non-Market Maker order
flow to the Exchange, which will provide additional opportunities for
Market Makers and other participants alike.
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. The Exchange believes that the proposed fee change
reduces the burden on competition because it incents Firm and Broker
Dealers to have their orders brought to the Floor by offering a
competitive rate in active issues.
---------------------------------------------------------------------------
\9\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------
The Exchange also believes that the proposed fee change will
increase competition among exchanges where market share is very fairly
spread out amongst five of the twelve exchanges, but where, in this
active issue, one exchange has a disproportionate amount (30%) of
market share. The Exchange believes that the proposed fee change may
provide a competitive incentive to market participants. The Exchange
notes that it operates in a highly competitive market in which market
participants can readily favor competing venues, and providing a
reduced fee in certain select symbols for Firm and Broker Dealer orders
that participate in Manual Executions allows OTP firms to attract
additional business which benefits all participants. 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)\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-2014-74 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-2014-74. 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
[[Page 39031]]
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-2014-74, and should
be submitted on or before July 30, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
Jill M. Peterson,
Assistant Secretary.
---------------------------------------------------------------------------
\13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
[FR Doc. 2014-15963 Filed 7-8-14; 8:45 am]
BILLING CODE 8011-01-P