[Federal Register Volume 77, Number 216 (Wednesday, November 7, 2012)]
[Notices]
[Pages 66902-66904]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-27222]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68139; File No. SR-NYSEMKT-2012-56]
Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and
Immediate Effectiveness of Proposed Rule Change To Amend the NYSE Amex
Options LLC Fee Schedule To Amend the Fees for Specialists and
eSpecialists Relating to Qualified Contingent Cross Orders
November 2, 2012.
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 October 19, 2012, NYSE MKT LLC (the ``Exchange'' or
``NYSE MKT'') 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 Substance
of the Proposed Rule Change
The Exchange proposes to amend the NYSE Amex Options Fee Schedule
(the ``Fee Schedule'') to amend the fees for Specialists and
eSpecialists relating to Qualified Contingent Cross (``QCC'') orders.
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 amend the fees
for Specialists and eSpecialists relating to QCC orders.\4\ The
Exchange proposes to implement these changes on November 1, 2012.
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\4\ The QCC order permits an ATP Holder to effect a qualified
contingent trade (``QCT'') in a Regulation NMS stock and cross the
options leg of the trade on the Exchange immediately upon entry and
without order exposure if the order is for at least 1,000 contracts,
is part of a QCT, and is executed at a price at least equal to the
national best bid and offer, as long as there are no Customer orders
in the Exchange's Consolidated Book at the same price.
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Current Fees
Currently, the Exchange does not charge an order fee for Customer
orders that comprise all or part of a QCC order. The Exchange charges
$0.20 per contract for non-Customer orders for all other
participants.\5\ If a Specialist, eSpecialist, Market Maker, or Firm
has reached its respective fee cap of $350,000 for the month and has
executed volume in excess of $3,500,000 for the month, then the
Exchange charges an incremental service fee of $0.05 per contract for a
QCC order executed against a non-Customer and $0.10 per contract for a
QCC order executed against a Customer.
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\5\ This includes Specialists, eSpecialists, NYSE Amex Options
Market Makers, Non-NYSE Amex Options Market Makers, Broker Dealers,
Professional Customers, and Firms.
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Proposed Fees
For a Specialist or eSpecialist executing a QCC order that has not
reached its fee cap for the month under the Fee Schedule, the Exchange
proposes to charge $0.13 per contract if the Specialist or eSpecialist
executes an average daily volume (``ADV'') of fewer than 50,000
contracts during the month, and $0.10 per contract if the Specialist or
eSpecialist executes an ADV of 50,000 or more contracts during the
month. In calculating the threshold of 50,000 contracts, the Exchange
will exclude both Strategy Trades \6\ and QCC
[[Page 66903]]
trades. These are the same fees that the Exchange currently charges to
Specialists and eSpecialists for non-QCC transactions.
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\6\ Strategy Trades include reversals and conversions, dividend
spreads, box spreads, short stock interest spreads, merger spreads,
and jelly rolls.
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The Exchange is proposing the fee reduction because Specialists and
eSpecialists that are solicited to take part in a trade do not know,
and have no control over, whether the trade is going to be executed as
a QCC trade or through some other means.\7\ Therefore, if the trade is
executed as a QCC trade, Specialists and eSpecialists may incur a
transaction fee that is more per contract than they would pay if the
trade were executed as a non-QCC trade. Currently, participants other
than Specialists and eSpecialists may trade at a discount to their
regular transaction fees when they execute a QCC trade. However, non-
capped Specialists and eSpecialists pay a premium for QCC trades under
the current Fee Schedule, which the Exchange does not believe is
warranted.\8\ The proposed change is not otherwise intended to address
any other problem, and the Exchange is not aware of any significant
problem that the affected Specialists and eSpecialists would have in
complying with the proposed change.
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\7\ The Exchange notes that, at the time it proposed the QCC
fees prior to the implementation of the QCC order type, the Exchange
believed that non-Customer participants would know in advance that
they were being solicited to take part in a QCC order. See
Securities Exchange Act Release No. 65472 (Oct. 3, 2011), 76 FR
62887 (Oct. 11, 2011) (SR-NYSEAmex-2011-72), at 62888. However, with
the implementation of the QCC order type, the Exchange has
determined that a participant that is solicited to take part in a
trade will not necessarily know whether the trade is going to be
executed as a QCC trade or through some other means.
\8\ For example, non-NYSE Amex Options Market Makers trading
electronically are charged $0.43 per contract for non-QCC trades and
$0.20 per contract for QCC trades.
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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''),\9\ in general, and furthers the objectives of Section 6(b)(4)
of the Act,\10\ 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.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that reducing the QCC non-Customer order fee
for non-capped Specialists and eSpecialists is reasonable because
Specialists and eSpecialists that are solicited to take part in a trade
do not know in advance whether the trade is going to be executed as a
QCC trade or through some other means and may incur a transaction fee
that is more per contract than they would pay if the trade were
executed as a non-QCC trade, which the Exchange does not believe is
warranted. For these reasons, the Exchange believes that it is
reasonable to charge Specialists and eSpecialists the same transaction
fee for QCC or non-QCC transactions.
In addition, the Exchange believes that lowering the fee for
Specialists and eSpecialists is equitable and not unfairly
discriminatory because under the current Fee Schedule, other
participants, including non-NYSE Amex Options Market Makers,
Professional Customers, Broker Dealers, and Firms, may trade at a
discount to their regular transaction fees when they execute QCC
trades. As such, the proposed rule change would put Specialists and
eSpecialists on more equal footing with other participants.
However, the Exchange notes that non-Directed NYSE Amex Options
Market Maker orders are currently charged $0.20 per contract and $0.17
per contract if the NYSE Amex Options Market Maker executes 50,000 or
more contracts ADV each day in a month. Therefore, NYSE Amex Options
Market Makers pay an amount equal to or greater than their regular
transaction fee when they execute QCC trades.\11\ The Exchange believes
that reducing the fee, as proposed, for Specialists and eSpecialists,
but not reducing the fee for non-Directed NYSE Amex Options Market
Makers, is equitable and not unfairly discriminatory because
Specialists and eSpecialists are required to pay a monthly Rights Fee
based on their prorated share of contract volume on the Exchange in
each issue, unlike non-Directed NYSE Amex Options Market Makers, who do
not pay any portion of the monthly Rights Fee.\12\ Any QCC volume
executed by a Specialist or eSpecialist will proportionally increase
the amount of the monthly Rights Fee that they pay, whereas any QCC
volume executed by a non-Directed NYSE Amex Options Market Maker does
not result in an additional charge in the form of the monthly Rights
Fee. As such, the Exchange believes that it is equitable and not
unfairly discriminatory to require non-Directed NYSE Amex Options
Market Makers to pay an amount equal to or slightly more for a QCC
trade than their regular transaction fee. In addition, NYSE Amex
Options Market Makers continue to be eligible for the lower service fee
for QCC trades if they exceed their monthly cap. The Exchange also
notes that Specialists and eSpecialists have higher quoting obligations
than NYSE Amex Options Market Makers, and in recognition of the
additional liquidity and transparency they provide, the difference in
treatment is warranted.
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\11\ The Exchange notes that Directed NYSE Amex Options Market
Maker orders do not apply to QCC trades.
\12\ See endnote 1 of the Fee Schedule.
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In addition, the Exchange believes that the proposed fee change is
equitable and not unfairly discriminator [sic] because it would make
Specialists and eSpecialists more likely to continue to respond to
solicitations to trade, thereby attracting additional order flow to the
Exchange, which can help price discovery, transparency, and liquidity,
all of which are beneficial to Exchange participants.
For these reasons, the Exchange believes that the entire proposal
is reasonable, equitable and not unfairly discriminatory. Finally, the
Exchange notes that it operates in a highly competitive market in which
market participants can readily favor competing venues if they deem fee
levels at a particular venue to be excessive. 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.
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 of the purposes of the Act.
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) \13\ of the Act and subparagraph (f)(2) of Rule
19b-4 \14\ thereunder, because it establishes a due, fee, or other
charge imposed by the NYSE MKT.
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\13\ 15 U.S.C. 78s(b)(3)(A).
\14\ 17 CFR 240.19b-4(f)(2).
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[[Page 66904]]
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.
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-NYSEMKT-2012-56 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-NYSEMKT-2012-56. 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 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 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-NYSEMKT-2012-56, and should
be submitted on or before November 28, 2012.
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. 2012-27222 Filed 11-6-12; 8:45 am]
BILLING CODE 8011-01-P