[Federal Register Volume 80, Number 11 (Friday, January 16, 2015)]
[Notices]
[Pages 2462-2465]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-00575]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-74031; File No. SR-NYSE-2014-78]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Amending Its Price List Relating to Fees for Bond Trading License Firms
January 12, 2015.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that on December 29, 2014, New York Stock Exchange LLC (``NYSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``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 Substance
of the Proposed Rule Change
The Exchange proposes to amend its Price List, effective January 1,
2015, to (i) waive new firm application fees for applicants seeking
only to obtain a bond trading license (``BTL'') for 2015 and 2016; (ii)
establish a separate Regulatory Fee for member organizations that
solely operate under a BTL; and (iii) waive the BTL fee for 2015 and
2016. 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
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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 its Price List, effective January 1,
2015, to (i) waive new firm application fees for applicants seeking
only to obtain a BTL for 2015 and 2016; (ii) establish a separate
Regulatory Fee for member organizations that solely operate under a
BTL; and (iii) waive the BTL fee for 2015 and 2016.
The Exchange proposes to waive the New Firm Fee for 2015 and 2016
for new member organization applicants that are seeking only to obtain
a BTL and not trade equities at the Exchange. The Exchange currently
charges a New Firm Fee ranging from $2,500 to $20,000, depending on the
type of firm, that is charged per application for any broker-dealer
that applies to be approved as an Exchange member organization. The
proposed waiver of the New Firm Fee would be available only to
applicants seeking approval as a new member organization, including
carrying firms, introducing firms, or non-public organizations, that
would be seeking to obtain a BTL at the Exchange and not trade
equities. As further proposed, if new firm that is approved as a member
organization and has had the New Firm Fee waived converts a BTL to a
full trading license within one year of approval, the New Firm Fee
would be charged retroactively. The Exchange believes that charging the
New Firm Fee retroactively within a year of approval is appropriate
because it would discourage applicants to claim that they are applying
for a BTL solely to avoid New Firm Fees.
The Exchange also proposes to establish a separate Regulatory Fee
for member organizations that operate solely under a BTL. Currently,
all member organizations are subject to a monthly gross FOCUS revenue
fee, which is calculated based on a firm's gross FOCUS revenues. This
fee is intended to cover the Exchange's costs to regulate its
members.\4\ Because member organizations with a BTL are only eligible
to trade on the Exchange's bond platform, the Exchange does not believe
that the regulatory costs associated with this membership are as high
as they are for member organizations that trade equities at the
Exchange. Moreover, the Exchange notes that Exchange member
organizations that do business with the public, including trading
bonds, must be members of the Financial Industry Regulatory Authority,
Inc. (``FINRA'') and therefore are separately subject to regulation by
FINRA. To more closely align the regulatory fee for BTLs with the
Exchange's associated regulatory cost, the Exchange proposes to set an
annual regulatory fee for member organizations that solely operate
under a BTL of $500.00.
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\4\ The current Regulatory Fee is $0.12 per $1,000 in Gross
FOCUS revenue, subject to annual minimums for certain classes of
member organizations. The Exchange proposes a non-substantive change
to the Fee Schedule to delete the Regulatory Fee that was in effect
before April 1, 2013.
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The Exchange currently charges a BTL fee of $1,000 per year. The
Exchange proposes to amend the Price List to waive the BTL fee for 2015
and 2016. The Exchange also proposes a non-substantive change to the
Price List to specify that the BTL fee is an annual fee.
The Exchange believes that the proposed fee changes would provide
increased incentives for bond trading firms that are not currently
Exchange member organizations to apply for Exchange membership and a
BTL. The Exchange believes that having more member organizations
trading on the Exchange's bond platform would benefit investors through
the additional display of liquidity and increased execution
opportunities in Exchange-traded bonds at the Exchange.
The proposed change is not otherwise intended to address any other
issues, and the Exchange is not aware of any problems that members and
member organizations 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,\5\ in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\6\ 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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\5\ 15 U.S.C. 78f(b).
\6\ 15 U.S.C. 78f(b)(4), (5).
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The Exchange believes that it is reasonable to waive the New Firm
Fee and the annual BTL fee for 2015 and 2016 to provide an incentive
for bond trading firms to apply for Exchange membership and a BTL. The
Exchange believes that providing an incentive for bond trading firms
that are not currently Exchange member organizations to apply for
membership and a BTL would encourage market participants to become
members of the Exchange and bring additional liquidity to the only
transparent bond market. The proposed waiver of the New Firm Fee and
BTL fee is equitable and not unfairly discriminatory because it would
be offered to all market participants that wish to trade at the
Exchange the narrower class of debt securities only. To the extent the
existing New Firm Fees or the BTL fee serves as a disincentive for bond
trading firms to become Exchange member organizations, the Exchange
believes that the proposed fee change could provide an incentive for
additional bonds trading firms to apply for Exchange membership, and
therefore is not unfairly discriminatory. The Exchange believes
creating incentives for bond trading firms to trade bonds on the
Exchange protects investors and the public interest by increasing the
competition and liquidity on the only transparent market for bond
trading.
The Exchange believes that the proposed Regulatory Fee for member
organizations that operate solely under a BTL is reasonable because the
proposed change would more closely align the regulatory costs
associated with member organizations that only trade bonds on the
Exchange with the fee charged to such member organizations. In
addition, the Exchange believes that the proposed Regulatory Fee for
BTLs is reasonable because it is expected to generate revenues that
will be less than or equal to the Exchange's regulatory costs with
respect to regulating member organizations that solely trade bonds at
the Exchange. The Exchange believes that this is consistent with the
Commission's previously stated view that regulatory fees be used for
regulatory purposes and not to support the Exchange's business side.
The Exchange further believes that the proposed Regulatory Fee for
member organizations that operate solely under a BTL is equitable and
not unfairly discriminatory because it would be applied equally to all
market participants that wish to trade at the Exchange the narrower
class of debt securities only. In particular, the Exchange does not
believe that it is unfairly discriminatory to charge member
organizations that only trade bonds a different Regulatory Fee than
[[Page 2464]]
what is charged to member organizations that trade equities at the
Exchange because of the relatively low volume of trading on the bonds
platform as compared to the volume of trading on the Exchange's
equities platform. The Exchange believes that the current Regulatory
Fee for member organizations serves as a disincentive for broker-
dealers that trade bonds, but do not trade equities at the Exchange, to
become Exchange member organizations for purposes of trading bonds. The
Exchange further notes that if a member organization that only has a
BTL at the Exchange is conducting business with the public, that member
organization must be a member of FINRA and therefore is separately
subject to regulation by FINRA.
Finally, recognizing the statements of Commissioners who have
expressed concern about the state of the U.S. corporate and municipal
bond markets as well as recommendations outlined in the Commission's
release of its Report on the Municipal Securities Market (Report), the
Exchange believes that expanding the number of member organizations
eligible to trade bonds at the Exchange would be an important element
in the democratization of the fixed income market.\7\ As highlighted in
SEC Chair White's statement during the SEC's 2013 Roundtable on Fixed
Income Markets, the Report makes recommendations that include (1)
improving pre- and post-trade transparency; (2) promoting the use of
transparent and open trading venues, and (3) requiring dealers to seek
``best execution'' for customers and to provide customers with relevant
pricing information in connection with their transactions.\8\ Achieving
these recommendations and applying them to both the municipal and
corporate bond markets would, in the Exchange's view, assist in
lowering the systemic risk that is anticipated to increase as interest
rates rise and the closed network of bond trading comes under pressure
as retirement and pension managers seek to adjust their positions.
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\7\ See SEC Report on the Municipal Securities Market, July
2012. http://www.sec.gov/news/studies/2012/munireport073112.pdf;
``SEC's Gallagher Says Retail Bond Investors Fighting `Headwinds'
'', Jesse Hamilton, Bloomberg News. Sep. 20, 2012. See http://www.bloomberg.com/news/2012-09-19/sec-s-gallagher-says-retail-bond-investors-fighting-headwinds-.html.
\8\ See Opening remarks of Chairman Mary Jo White at SEC
Roundtable on Fixed Income Markets. http://www.sec.gov/News/Speech/Detail/Speech/1365171515300.
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B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with Section 6(b)(8) of the Act,\9\ the Exchange
believes that the proposed rule change would not impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act. Debt securities typically trade in a decentralized
over-the-counter (``OTC'') dealer market that is less liquid and
transparent than the equities markets. The Exchange believes that the
proposed change would increase competition with these OTC venues by
reducing the cost of being approved as and operating as an Exchange
member organization that solely trades bonds at the Exchange, which the
Exchange believes will enhance market quality through the additional
display of liquidity and increased execution opportunities in Exchange-
traded bonds at the Exchange.
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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 that
are not transparent. In such an environment, the Exchange must
continually review, and consider adjusting its fees and rebates to
remain competitive with other exchanges as well as with alternative
trading systems and other venues that are not required to comply with
the statutory standards applicable to exchanges. Because competitors
are free to modify their own fees and credits in response, and because
market participants may readily adjust their order routing practices,
the Exchange believes that the degree to which fee changes in this
market may impose any burden on competition is extremely limited. As a
result of all of these considerations, the Exchange does not believe
that the proposed change will impair the ability of member
organizations or competing order execution venues to maintain their
competitive standing in the financial markets.
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 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-NYSE-2014-78 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-NYSE-2014-78. 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 2465]]
printing in the Commission's Public Reference Section, 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 the filing will also be available
for Web site viewing and printing at the NYSE's principal office and on
its Internet Web site at www.nyse.com. 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-NYSE-2014-78 and should be submitted on
or before February 6, 2015.
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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Brent J. Fields,
Secretary.
[FR Doc. 2015-00575 Filed 1-15-15; 8:45 am]
BILLING CODE 8011-01-P