[Federal Register Volume 79, Number 223 (Wednesday, November 19, 2014)]
[Notices]
[Pages 68927-68929]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-27308]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-73585; File No. SR-NYSEArca-2014-116]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Amending the NYSE
Arca Options Fee Schedule To Add a Service Fee for Certain Post-Trade
Adjustments Performed by the Exchange To Be Effective December 1, 2014
November 13, 2014.
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 4, 2014, NYSE Arca, Inc. (the ``Exchange'' or ``NYSE
Arca'') filed with the Securities and Exchange Commission (the
``Commission'') a proposed rule change as described in Items I, II and
III below, which Items have been prepared by the Exchange. 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\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend the NYSE Arca Options Fee Schedule
to add a service fee for certain post-trade adjustments performed by
the Exchange. The Exchange proposes to implement the fee change
effective December 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend the Fee Schedule to add a service
fee for certain post-trade adjustments performed by the Exchange (the
``Service Fee''). The Exchange proposes to implement the Service Fee
effective December 1, 2014. As described below, the proposed Service
Fee would apply to certain post-trade adjustments performed by Exchange
staff. The purpose of the proposed Service Fee is to ensure a fair and
reasonable use of Exchange resources by allowing the Exchange to recoup
for valuable employee time and resources expended on these post-trade
adjustments that may also be self-executed by OTP Holders or OTP Firms
(collectively, ``OTPs''). In addition, the Exchange believes that the
proposed Service Fee would incentivize OTPs to process their own post-
trade adjustments going forward.
In an effort to conserve Exchange resources, the Exchange has
provided OTPs with the functionality to perform certain of their own
post-trade adjustments. Specifically, OTPs may perform post-trade
adjustments on their side of the trade that do not affect the
contractual terms of a transaction. For example, OTPs may currently
make the following non-contractual post-trade adjustments without
Exchange interaction: changing the position indicator (e.g., from Open
to Close or Close to Open); adding or removing Clearing Member Trade
Agreement (``CMTA'') information; allocating trades (e.g., adding
multiple executing domains or ``give-ups''); changing the clearing
account type (e.g., Customer, Firm, Market Maker) and modifying the
optional data field, which may be used by OTPs for their own internal
back-office processing (collectively, the ``Post-Trade Adjustments'').
Notwithstanding the availability of functionality for OTPs to
perform this function themselves, OTPs still send the Exchange a
significant number of requests, on a daily basis, to perform these
straightforward Post-Trade Adjustments on the OTPs' behalf. The
Exchange uses its best efforts to respond to these requests by OTPs in
a timely manner. While the Exchange is committed to delivering a
certain level of customer service to its OTPs, it believes that
performing the Post-Trade Adjustments free of charge results in the
diversion of valuable Exchange time and resources in a manner that is
not a [sic]
[[Page 68928]]
fair and equitable to either the Exchange or, ultimately the OTPs.
Thus, to help offset the costs of having Exchange staff process
Post Trade Adjustments on behalf of OTPs, the Exchange is proposing a
$5.00 Service Fee, per trade adjusted. The Post-Trade Adjustments that
would be subject to the proposed Service Fee would be only those Post-
Trade Adjustments that do not affect the contractual terms of a
transaction and that are performed by the Exchange on behalf of OTPs
when the OTPs could otherwise enter the Post-Trade Adjustments on their
own behalf.\3\ [sic] The Exchange notes that if an outage or
malfunction of an Exchange system makes it infeasible for OTPs to enter
Post-Trade Adjustments on their own behalf, the Exchange would not
assess any Service Fees to process Post-Trade Adjustments on behalf of
OTPs.
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\3\ Should the Exchange propose to charge OTPs for any
additional post-trade adjustments made on behalf of OTPs, other than
non-contractual changes that OTPs may do on their own behalf, the
Exchange would only do so pursuant to a separate fee filing.
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The $5.00 Service Fee would apply to each trade adjusted, not to
each non-contractual change that the Exchange is requested to make to a
given trade.\4\ For example, if, for a given trade, an OTP requested
that the Exchange change both the position indicator from open to close
and at the same time change the CMTA information, the Service Fee would
still be $5.00, because the changes were for the same trade. The
Exchange believes that the $5.00 Service Fee would reasonably
compensate the Exchange for the resources diverted to the Post-Trade
Adjustments (i.e., cover employee and overhead expenses). The Exchange
also believes that the $5.00 Service Fee may operate as an effective
disincentive for OTPs that have relied on the Exchange to perform these
services free of charge and believes these OTPs may take these tasks
in-house given the newly introduced costs.
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\4\ The Exchange proposes to add this Service Fee to the end of
the Fee Schedule (immediately following ``Report Fees'') under a new
section entitled ``NYSE Arca OPTIONS: SERVICE FEES.''
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The Exchange is proposing to discount the $5.00 fee to $1.00 per
trade adjusted for the first three months that the Service Fee is
operative (i.e., December 1, 2014--February 28, 2015). The Exchange
believes this temporary discount is reasonable as it would provide OTPs
time to adjust to the Exchange's new policy. To further provide OTPs
notice of this proposed change, the Exchange previously announced by
Trader Update the specific type of Post-Trade Adjustments that would be
subject to the Service Fee.\5\
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\5\ See NYSE Arca Options Trader Update, available here, http://www1.nyse.com/pdfs/NYSE_Arca_Options_Service_Fee_Post_Trade_Adjustments_10_13_14.pdf.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\6\ in general, and furthers the
objectives of Sections 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, issuers and other persons
using its facilities and does not unfairly discriminate between
customers, issuers, brokers or dealers.
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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange believes that the Service Fee is reasonable, equitable
and not unfairly discriminatory because it is designed to ensure a fair
and reasonable use of Exchange resources by allowing the Exchange to
recoup for valuable employee time and resources expended on the Post-
Trade Adjustments. The Exchange believes that imposing this $5.00 fee
per trade adjusted would reasonably compensate the Exchange for the
resources diverted to the Post-Trade Adjustments (i.e., cover employee
and overhead expenses).\8\
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\8\ As noted above, the Exchange would offer an introductory
rate of $1.00 per trade adjusted for the first three months that the
Service Fee is operational.
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Moreover, the Exchange believes that the Service Fee would promote
a fair and orderly market and protect investors and the public interest
because the Service Fee may result in a more efficient use of Exchange
resources, which would benefit all market participants.
The Exchange believes that the Service Fee is reasonable, equitable
and not unfairly discriminatory because OTPs would have the option, as
they do today, to perform the Post-Trade Adjustments themselves and the
Service Fee would only apply if OTPs elected to rely on the Exchange to
perform these adjustments for them. Moreover, the Service Fee would
apply equally to all market participants who opt to rely on the
Exchange to perform the Post-Trade Adjustments. In fact, the Exchange
believes that the proposed Service Fee would incentivize OTPs to
process their own Post-Trade Adjustments going forward.
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.
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 would impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act. The proposed rule [sic] Service Fee is not
intended to address any competitive issues among exchanges or OTPs but
rather to more efficiently use the Exchange's employee time and
resources, which may ultimately benefit OTPs.
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\9\ 15 U.S.C. 78f(b)(8).
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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
imposing the Service Fee may enable the Exchange to improve efficiency
and ensure the fair and reasonable use of Exchange resources. 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 Service Fee 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.
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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 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) \12\ of the Act to determine whether the proposed
rule
[[Page 68929]]
change should be approved or disapproved.
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\12\ 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-2014-116 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-2014-116. 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 offices 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-
116, and should be submitted on or before December 10, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Kevin M. O' Neill,
Deputy Secretary.
[FR Doc. 2014-27308 Filed 11-18-14; 8:45 am]
BILLING CODE 8011-01-P