Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Its Fee Schedule With Respect to Electronic Complex Order Executions, 30412-30415 [2011-12963]

Download as PDF 30412 Federal Register / Vol. 76, No. 101 / Wednesday, May 25, 2011 / Notices proposed rule change is proper, and indeed necessary, in light of the need to have rules that permit the listing of identical expiration months across exchanges for products that are multiply listed and fungible with one another. The Exchange believes that the proposed rule change should encourage competition and be beneficial to traders and market participants by providing them with a means to trade on the Exchange securities that are listed and traded on other exchanges. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Securities Exchange Act of 1934 7 (the ‘‘Act’’) in general, and furthers the objectives of Section 6(b)(5) of the Act 8 in particular, in that it is designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general to protect investors and the public interest. In particular, the proposed rule change will permit the Exchange to accommodate requests made by its permit holders and other market participants to list the additional expiration months and thus encourage competition without harming investors or the public interest. 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. WReier-Aviles on DSKGBLS3C1PROD with NOTICES III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not significantly affect the protection of investors or the public interest, does not impose any significant burden on competition, and, by its terms, does not become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 7 15 U.S.C. 78f(b). 8 15 U.S.C. 78f(b)(5). VerDate Mar<15>2010 15:12 May 24, 2011 Jkt 223001 19(b)(3)(A) of the Act 9 and Rule 19b– 4(f)(6) thereunder.10 The Exchange has requested that the Commission waive the 30-day operative delay. The Commission believes that waiver of the operative delay is consistent with the protection of investors and the public interest because the proposal should promote competition by allowing the Exchange to list and trade option series that are trading on other options exchanges without undue delay. Therefore, the Commission designates the proposal operative upon filing.11 At any time within 60 days of the filing of the 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 e-mail to rulecomments@sec.gov. Please include File Number SR–NYSEAmex–2011–33 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–NYSEAmex–2011–33. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use 9 15 U.S.C. 78s(b)(3)(A). 10 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6)(iii) requires the Exchange to give the Commission written notice of the Exchange’s intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Commission has waived the five-day prefiling requirement in this case. 11 For purposes only of waiving the 30-day operative delay, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). PO 00000 Frm 00110 Fmt 4703 Sfmt 4703 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 website 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 a.m. and 3 p.m. Copies of the 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– NYSEAmex–2011–33 and should be submitted on or before June 15, 2011. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.12 Cathy H. Ahn, Deputy Secretary. [FR Doc. 2011–12874 Filed 5–24–11; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–64524; File No. SR– NYSEAmex–2011–30] Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Its Fee Schedule With Respect to Electronic Complex Order Executions May 19, 2011. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that, on May 11, 2011, NYSE Amex LLC (the ‘‘Exchange’’ or ‘‘NYSE Amex’’) 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 12 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 E:\FR\FM\25MYN1.SGM 25MYN1 Federal Register / Vol. 76, No. 101 / Wednesday, May 25, 2011 / Notices prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend its Options Fee Schedule (the ‘‘Schedule’’) to (1) reinstitute the standard marketing charges for electronic complex order executions that had been temporarily waived, (2) eliminate the fee charged to Customers (other than Professional Customers) for electronic complex order executions and (3) provide that the per contract fee for electronic complex order executions will no longer be capped for Specialists, e-Specialists and Market Makers even though such executions and the related fees will count toward existing thresholds in the Schedule applicable to such participants that will otherwise still cap their per contract fees on other types of executions. The proposed changes will be operative on May 11, 2011. The text of the proposed rule change is available at the Exchange, the Commission’s Public Reference Room, and http://www.nyse.com. 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. WReier-Aviles on DSKGBLS3C1PROD with NOTICES A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange is proposing to reinstitute the standard marketing charges 3 for electronic complex order executions that had been temporarily waived in July 2010 pending the enabling of directed order functionality for executions in the complex matching 3 The standard marketing charges are $0.25 per contract for any electronic Customer order in a Penny Pilot option that trades with a market maker and $0.65 per contract for any electronic Customer order in a non-Penny Pilot option that trades with a market maker. VerDate Mar<15>2010 15:12 May 24, 2011 Jkt 223001 engine. The pool of monies from the collection of marketing charges on electronic public Customer orders from market makers who trade with such orders is available for distribution as payment for order flow under the Exchange’s rules. The Exchange is still intending to develop directed order functionality; however, the implementation is taking longer than anticipated. In the interim, the Exchange has heard from several order flow providers and liquidity providers that the absence of marketing charges for Customer executions in the complex order book is hindering their ability to route and/or attract complex order flow to the Exchange, particularly since competing exchanges do allow for the collection of marketing charges on complex orders.4 Consequently, the Exchange therefore proposes to resume its prior practice of treating electronic complex orders in the same manner as any other orders for the purpose of assessing payment for order flow charges in order to remain competitive. The Exchange further proposes to eliminate the fees charged to Customers (other than Professional Customers) for electronic complex order executions. Currently, Customers trade without a charge for non-complex order executions as provided in the Schedule, and the Exchange is proposing to extend that treatment to complex order executions. With this change, the execution of Customer electronic complex orders will be priced identically with the execution of any other Customer order, complex or otherwise, in the Exchange’s system. The Exchange notes that other competing exchanges also have a $0.00 per contract rate charge for nonprofessional customers for the execution of complex orders.5 Finally, the Exchange proposes that the per contract fee for electronic complex order executions will no longer be capped for Specialists, e-Specialists and Market Makers even though such executions and the related fees will still 4 Chicago Board Options Exchange (‘‘CBOE’’), NASDAQ OMX PHLX (‘‘PHLX’’), and International Securities Exchange (‘‘ISE’’) all assess marketing charges against market makers who trade with customer complex orders. PHLX and ISE except their ‘‘make/take’’ symbols from the collection of marketing charges, but all other options are included. 5 See ISE Schedule of Fees, ‘‘Rebates and Fees for Adding and Removing Liquidity’’ on page 16 of 17 at http://www.ise.com/assets/documents/ OptionsExchange/legal/fee/feeschedule.pdf; see also CBOE Fees Schedule, ‘‘Options Transaction Fees: Equity Options’’ on page 1 of 15 at http:// www.cboe.com/publish/feeschedule/ CBOEFeeSchedule.pdf,which includes complex orders even though there is no separate pricing for such orders on the CBOE. PO 00000 Frm 00111 Fmt 4703 Sfmt 4703 30413 count toward existing dollar and volume thresholds in the Schedule applicable to such participants that will otherwise still cap their per contract fees on other types of executions. For example, the Schedule currently provides that the fees of a Market Maker will be aggregated and capped at $250,000 per month for all types of executions, so a Market Maker that has reached this level would not be charged a fee for additional order executions, including electronic complex order executions, until a volume level of 2,500,000 contracts is reached for that month. In the latter instance, the Market Marker would only be charged a fee of $0.01 per contract for executions in excess of the 2,500,000 contact level, including electronic complex order executions. With the elimination of the current $0.05 per contract fee that is charged to Customers for electronic complex order executions, the Exchange could be in the position of receiving either no revenue at all or only $0.01 per contract for electronic complex order executions in which a Market Maker trades with a Customer. Consequently, it is proposed that the current fee caps will no longer be applicable to electronic complex order executions, which would continue to incur a fee of $0.05 per contract on the Market Maker’s side of a trade regardless of whether either or both of the foregoing monthly thresholds have been met. Such executions would, however, still count toward meeting those threshold levels and could therefore impact the fees paid on other types of executions by such a Market Maker. The proposed changes will be operative on May 11, 2011. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the provisions of Section 6 of the Securities Exchange Act of 1934 (the ‘‘Act’’),6 in general, and Section 6(b)(4) of the Act,7 in particular, in that it is designed to provide for the equitable allocation of reasonable dues, fees, and other charges among its members and other persons using its facilities. The marketing charges that will be reinstituted to fund payment for order flow for electronic complex order executions are charges that were previously in effect on the Exchange. The Exchange believes that these charges are reasonable and equitable because they are identical to the marketing charges assessed by 6 15 7 15 U.S.C. 78f(b). U.S.C. 78f(b)(4). E:\FR\FM\25MYN1.SGM 25MYN1 WReier-Aviles on DSKGBLS3C1PROD with NOTICES 30414 Federal Register / Vol. 76, No. 101 / Wednesday, May 25, 2011 / Notices competing exchanges CBOE and ISE, as referenced herein, and slightly less than the marketing charge of $0.70 per contract assessed by competing exchange PHLX for an electronic customer order in a non-Penny Pilot option that trades with a market maker. The Exchange further believes that the re-imposition of marketing charges on market makers who trade with electronic Customer orders in the complex order book is reasonable and equitable because it is based on the need to attract additional Customer complex order flow to the Exchange, which will benefit all market participants. The Exchange notes that reinstituting marketing charges as proposed will simplify the fee schedule, thereby making it easier for market makers in particular to factor these charges into the models that [sic] use to make trading decisions. Finally, the Exchange believes that reinstituting marketing charges as proposed is not unfairly discriminatory because it means that electronic complex orders will be treated in the same manner as any other orders for the purpose of assessing payment for order flow charges. The preferential rate of $0.00 proposed to be charged to Customers (other than Professional Customers) is reasonable and equitable because it will extend to electronic complex order executions the same fee treatment that the Exchange currently provides to Customers for non-complex order executions. The Exchange also notes that, as discussed above, competing exchanges have extended the same preferential treatment to customer fees for the execution of complex orders and the Exchange believes it is reasonable and equitable to adjust its fees accordingly to remain competitive with the fees charged by other venues. The Exchange notes that historically Customers have been afforded preferential treatment such as priority at a price over non-Customers 8 and preferential fees. This is in exchange for forsaking the ability to place orders on both sides of the market in the same series 9 and for being subject to generally higher margin requirements as compared to non-Customers.10 On this basis, the Exchange feels that this change is not unfairly discriminatory. The reduction of such fees is expected to attract additional Customer complex order flow to the Exchange, which will benefit all market participants. 8 See NYSE Amex Rule 964NY Display, Priority, and Order Allocation—Trading Systems. 9 See NYSE Amex Rule 995NY Prohibited Conduct. 10 See NYSE Amex Rule 462 Minimum Margins. VerDate Mar<15>2010 15:12 May 24, 2011 Jkt 223001 Additionally, by making this change, the fee schedule is being simplified, making it easier for market participants to make trading decisions. Finally, the removal of the cap applicable to Specialists, e-Specialists and Market Makers as it applies to the execution of electronic complex orders effectively removes a ‘‘tier’’ for such market participants in the fees applicable to such orders, thereby instituting a $0.05 per contract side fee that is equally applicable to all types of market participants, other than Customers, for the same trade. This change will further simplify the Schedule as it applies to the execution of electronic complex orders. The Exchange believes that the removal of the cap currently applicable to the aforementioned market participants is reasonable, equitable and not unfairly discriminatory as it relates to those market participants because, even though they will be paying $0.05 per contract for executions that previously would have cost them $0.01 or $0.00 per contract under the cap, they will have the opportunity to interact with the additional complex order flow attracted to the Exchange by the elimination of the Customer rate charge. In addition, the new rate of $0.05 per contract for those executions is fair and equitable in that it is not a large increase and it will continue to be less than those same market participants are charged for electronic executions outside of the complex order book, which can be as much as $0.17 per contract. The Exchange operates in a highly competitive market comprised of nine U.S. options exchanges in which sophisticated and knowledgeable market participants can readily send order flow to competing exchanges if they deem fee levels at a particular exchange to be excessive or discriminatory. The Exchange believes that the complex order fees and rebates it assesses must be competitive with fees and rebates assessed on other exchanges. The Exchange believes that this competitive marketplace impacts the fees and rebates present on the Exchange today and influences the proposals set forth above. 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. PO 00000 Frm 00112 Fmt 4703 Sfmt 4703 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) 11 of the Act and subparagraph (f)(2) of Rule 19b–4 12 thereunder, because it establishes a due, fee, or other charge imposed by NYSE Amex. 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 e-mail to rulecomments@sec.gov. Please include File Number SR–NYSEAmex-2011–30 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–NYSEAmex-2011–30. This file number should be included on the subject line if e-mail 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 11 15 12 17 E:\FR\FM\25MYN1.SGM U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(2). 25MYN1 Federal Register / Vol. 76, No. 101 / Wednesday, May 25, 2011 / Notices 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 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the NYSE’s principal office, and on its Web site at http:// www.nyse.com. The text of the proposed rule change is available on the Commission’s Web site at http:// www.sec.gov. 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– NYSEAmex-2011–30 and should be submitted on or before June 15, 2011. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.13 Cathy H. Ahn, Deputy Secretary. [FR Doc. 2011–12963 Filed 5–24–11; 8:45 am] BILLING CODE 8011–01–P [Release No. 34–64521; File No. SR– NYSEAmex–2011–34] Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing of Proposed Rule Change Amending NYSE Amex Equities Rule 70.40(3) To Permit Member Organizations to Engage in Proprietary Trading From Their Approved Booth Premises in Certain OTC Bulletin Board and OTC Markets Securities WReier-Aviles on DSKGBLS3C1PROD with NOTICES May 19, 2011. 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 11, 2011, NYSE Amex LLC (the ‘‘Exchange’’ or ‘‘NYSE Amex’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared CFR 200.30–3(a)(12). U.S.C.78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 1 15 VerDate Mar<15>2010 15:12 May 24, 2011 Jkt 223001 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend NYSE Amex Equities Rule 70.40(3) to permit member organizations to engage in proprietary trading from their approved booth premises in certain OTC Bulletin Board (‘‘OTCBB’’) and OTC Markets 4 securities. The text of the proposed rule change is available at the Exchange, at http://www.nyse.com, at the Commission’s Public Reference Room, and on the Commission’s Web site at http://www.sec.gov. 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 SECURITIES AND EXCHANGE COMMISSION 13 17 by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1. Purpose The Exchange proposes to amend NYSE Amex Equities Rule 70.40(3) to permit member organizations to engage in proprietary trading from their approved booth premises in certain OTCBB and OTC Markets securities.5 In June 2007, the New York Stock Exchange LLC (‘‘NYSE’’) adopted NYSE Rule 70.40, which permits a member organization to operate its booth premises on the NYSE Floor in a manner similar to its ‘‘upstairs’’ office, thereby allowing member organizations to access other markets and trade a wider array of products from their booth premises and thus operate more 4 The OTCBB and OTC Markets Group Inc. each operate electronic quotation systems for brokerdealers to trade unlisted securities. The marketplaces operated by OTC Markets Group Inc. include OTCQX, OTCQB and OTC Pink. 5 The Exchange’s affiliate, New York Stock Exchange LLC (‘‘NYSE’’), has proposed to adopt the same rule. See SR–NYSE–2010–22. PO 00000 Frm 00113 Fmt 4703 Sfmt 4703 30415 efficiently and competitively.6 At the time that NYSE Rule 70.40 was adopted, it included certain conditions and limitations on such trading, including that only trading on behalf of customers would be permitted. In October 2008, the Exchange adopted NYSE Amex Equities Rule 70.40, which is identical to NYSE Rule 70.40.7 As such, NYSE Rule Amex Equities 70.40(3) prohibits member organizations approved to operate booth premises pursuant to such Rule from effecting any transaction from their approved booth premises for their own account, the account of an associated person, or an account with respect to which they or an associated person thereof exercise investment discretion on the Exchange. After more than two years of experience with NYSE Amex Equities Rule 70.40, member organizations have requested that certain types of proprietary trading be permitted under the Rule, and the Exchange has determined that it is appropriate to do so. Therefore, the Exchange proposes to revise NYSE Amex Equities Rule 70.40(3) to permit member organizations to effect transactions in the common, preferred, and debt securities of an operating company that is quoted on the OTC Bulletin Board or OTC Markets (an ‘‘OTC Security’’) from their approved booth premises for their own account, the account of an associated person, or an account with respect to which they or an associated person thereof exercise investment discretion, except that such member organizations could not effect such transactions in an OTC Security that is related to a security listed or traded on the Exchange or NYSE.8 Because trading would be limited to the common, preferred, and debt securities of an operating company, a member organization could not trade in an index-based or derivative security (e.g., 6 See Securities Exchange Act Release 55908 (June 14, 2007), 72 FR 34056 (June 20, 2007) (SR– NYSE–2007–51) (notice of filing and immediate effectiveness of proposed rule change permitting member organizations to operate booth as upstairs office). Under NYSE Rule 70.40, only Floor brokers may conduct activity from booth premises. 7 See Securities Exchange Act Release No. 58705 (October 1, 2008), 73 FR 58995 (October 8, 2008) (SR–Amex-2008–63) (Order Granting Approval of Proposed Rule Change to Establish New Membership, Member Firm Conduct, and Equity Trading Rules Following the Exchange’s Acquisition by NYSE Euronext). Under NYSE Amex Equities Rule 70.40, only Floor brokers may conduct activity from booth premises. 8 Since the merger of NYSE and NYSE Amex in 2008, the exchanges have conducted equity trading from the same Trading Floor, and NYSE Amex has conducted options trading in rooms adjacent the Trading Floor. See Securities Exchange Act Release No. 58673 (September 29, 2008) (SR–Amex-2008– 62 and SR–NYSE–2008–60), 73 FR 57707 (October 3, 2008), and NYSE Rule 6A. E:\FR\FM\25MYN1.SGM 25MYN1

Agencies

[Federal Register Volume 76, Number 101 (Wednesday, May 25, 2011)]
[Notices]
[Pages 30412-30415]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-12963]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64524; File No. SR-NYSEAmex-2011-30]


Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending Its Fee 
Schedule With Respect to Electronic Complex Order Executions

May 19, 2011.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that, on May 11, 2011, NYSE Amex LLC (the ``Exchange'' or ``NYSE 
Amex'') 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

[[Page 30413]]

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\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its Options Fee Schedule (the 
``Schedule'') to (1) reinstitute the standard marketing charges for 
electronic complex order executions that had been temporarily waived, 
(2) eliminate the fee charged to Customers (other than Professional 
Customers) for electronic complex order executions and (3) provide that 
the per contract fee for electronic complex order executions will no 
longer be capped for Specialists, e-Specialists and Market Makers even 
though such executions and the related fees will count toward existing 
thresholds in the Schedule applicable to such participants that will 
otherwise still cap their per contract fees on other types of 
executions. The proposed changes will be operative on May 11, 2011.
    The text of the proposed rule change is available at the Exchange, 
the Commission's Public Reference Room, and http://www.nyse.com.

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 Exchange is proposing to reinstitute the standard marketing 
charges \3\ for electronic complex order executions that had been 
temporarily waived in July 2010 pending the enabling of directed order 
functionality for executions in the complex matching engine. The pool 
of monies from the collection of marketing charges on electronic public 
Customer orders from market makers who trade with such orders is 
available for distribution as payment for order flow under the 
Exchange's rules. The Exchange is still intending to develop directed 
order functionality; however, the implementation is taking longer than 
anticipated. In the interim, the Exchange has heard from several order 
flow providers and liquidity providers that the absence of marketing 
charges for Customer executions in the complex order book is hindering 
their ability to route and/or attract complex order flow to the 
Exchange, particularly since competing exchanges do allow for the 
collection of marketing charges on complex orders.\4\ Consequently, the 
Exchange therefore proposes to resume its prior practice of treating 
electronic complex orders in the same manner as any other orders for 
the purpose of assessing payment for order flow charges in order to 
remain competitive.
---------------------------------------------------------------------------

    \3\ The standard marketing charges are $0.25 per contract for 
any electronic Customer order in a Penny Pilot option that trades 
with a market maker and $0.65 per contract for any electronic 
Customer order in a non-Penny Pilot option that trades with a market 
maker.
    \4\ Chicago Board Options Exchange (``CBOE''), NASDAQ OMX PHLX 
(``PHLX''), and International Securities Exchange (``ISE'') all 
assess marketing charges against market makers who trade with 
customer complex orders. PHLX and ISE except their ``make/take'' 
symbols from the collection of marketing charges, but all other 
options are included.
---------------------------------------------------------------------------

    The Exchange further proposes to eliminate the fees charged to 
Customers (other than Professional Customers) for electronic complex 
order executions. Currently, Customers trade without a charge for non-
complex order executions as provided in the Schedule, and the Exchange 
is proposing to extend that treatment to complex order executions. With 
this change, the execution of Customer electronic complex orders will 
be priced identically with the execution of any other Customer order, 
complex or otherwise, in the Exchange's system. The Exchange notes that 
other competing exchanges also have a $0.00 per contract rate charge 
for non-professional customers for the execution of complex orders.\5\
---------------------------------------------------------------------------

    \5\ See ISE Schedule of Fees, ``Rebates and Fees for Adding and 
Removing Liquidity'' on page 16 of 17 at http://www.ise.com/assets/documents/OptionsExchange/legal/fee/feeschedule.pdf; see also CBOE 
Fees Schedule, ``Options Transaction Fees: Equity Options'' on page 
1 of 15 at http://www.cboe.com/publish/feeschedule/CBOEFeeSchedule.pdf,which includes complex orders even though there 
is no separate pricing for such orders on the CBOE.
---------------------------------------------------------------------------

    Finally, the Exchange proposes that the per contract fee for 
electronic complex order executions will no longer be capped for 
Specialists, e-Specialists and Market Makers even though such 
executions and the related fees will still count toward existing dollar 
and volume thresholds in the Schedule applicable to such participants 
that will otherwise still cap their per contract fees on other types of 
executions. For example, the Schedule currently provides that the fees 
of a Market Maker will be aggregated and capped at $250,000 per month 
for all types of executions, so a Market Maker that has reached this 
level would not be charged a fee for additional order executions, 
including electronic complex order executions, until a volume level of 
2,500,000 contracts is reached for that month. In the latter instance, 
the Market Marker would only be charged a fee of $0.01 per contract for 
executions in excess of the 2,500,000 contact level, including 
electronic complex order executions. With the elimination of the 
current $0.05 per contract fee that is charged to Customers for 
electronic complex order executions, the Exchange could be in the 
position of receiving either no revenue at all or only $0.01 per 
contract for electronic complex order executions in which a Market 
Maker trades with a Customer. Consequently, it is proposed that the 
current fee caps will no longer be applicable to electronic complex 
order executions, which would continue to incur a fee of $0.05 per 
contract on the Market Maker's side of a trade regardless of whether 
either or both of the foregoing monthly thresholds have been met. Such 
executions would, however, still count toward meeting those threshold 
levels and could therefore impact the fees paid on other types of 
executions by such a Market Maker.
    The proposed changes will be operative on May 11, 2011.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Securities Exchange Act of 1934 
(the ``Act''),\6\ in general, and Section 6(b)(4) of the Act,\7\ in 
particular, in that it is designed to provide for the equitable 
allocation of reasonable dues, fees, and other charges among its 
members and other persons using its facilities. The marketing charges 
that will be reinstituted to fund payment for order flow for electronic 
complex order executions are charges that were previously in effect on 
the Exchange. The Exchange believes that these charges are reasonable 
and equitable because they are identical to the marketing charges 
assessed by

[[Page 30414]]

competing exchanges CBOE and ISE, as referenced herein, and slightly 
less than the marketing charge of $0.70 per contract assessed by 
competing exchange PHLX for an electronic customer order in a non-Penny 
Pilot option that trades with a market maker.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(4).
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    The Exchange further believes that the re-imposition of marketing 
charges on market makers who trade with electronic Customer orders in 
the complex order book is reasonable and equitable because it is based 
on the need to attract additional Customer complex order flow to the 
Exchange, which will benefit all market participants. The Exchange 
notes that reinstituting marketing charges as proposed will simplify 
the fee schedule, thereby making it easier for market makers in 
particular to factor these charges into the models that [sic] use to 
make trading decisions. Finally, the Exchange believes that 
reinstituting marketing charges as proposed is not unfairly 
discriminatory because it means that electronic complex orders will be 
treated in the same manner as any other orders for the purpose of 
assessing payment for order flow charges.
    The preferential rate of $0.00 proposed to be charged to Customers 
(other than Professional Customers) is reasonable and equitable because 
it will extend to electronic complex order executions the same fee 
treatment that the Exchange currently provides to Customers for non-
complex order executions. The Exchange also notes that, as discussed 
above, competing exchanges have extended the same preferential 
treatment to customer fees for the execution of complex orders and the 
Exchange believes it is reasonable and equitable to adjust its fees 
accordingly to remain competitive with the fees charged by other 
venues. The Exchange notes that historically Customers have been 
afforded preferential treatment such as priority at a price over non-
Customers \8\ and preferential fees. This is in exchange for forsaking 
the ability to place orders on both sides of the market in the same 
series \9\ and for being subject to generally higher margin 
requirements as compared to non-Customers.\10\ On this basis, the 
Exchange feels that this change is not unfairly discriminatory. The 
reduction of such fees is expected to attract additional Customer 
complex order flow to the Exchange, which will benefit all market 
participants. Additionally, by making this change, the fee schedule is 
being simplified, making it easier for market participants to make 
trading decisions.
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    \8\ See NYSE Amex Rule 964NY Display, Priority, and Order 
Allocation--Trading Systems.
    \9\ See NYSE Amex Rule 995NY Prohibited Conduct.
    \10\ See NYSE Amex Rule 462 Minimum Margins.
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    Finally, the removal of the cap applicable to Specialists, e-
Specialists and Market Makers as it applies to the execution of 
electronic complex orders effectively removes a ``tier'' for such 
market participants in the fees applicable to such orders, thereby 
instituting a $0.05 per contract side fee that is equally applicable to 
all types of market participants, other than Customers, for the same 
trade. This change will further simplify the Schedule as it applies to 
the execution of electronic complex orders. The Exchange believes that 
the removal of the cap currently applicable to the aforementioned 
market participants is reasonable, equitable and not unfairly 
discriminatory as it relates to those market participants because, even 
though they will be paying $0.05 per contract for executions that 
previously would have cost them $0.01 or $0.00 per contract under the 
cap, they will have the opportunity to interact with the additional 
complex order flow attracted to the Exchange by the elimination of the 
Customer rate charge. In addition, the new rate of $0.05 per contract 
for those executions is fair and equitable in that it is not a large 
increase and it will continue to be less than those same market 
participants are charged for electronic executions outside of the 
complex order book, which can be as much as $0.17 per contract.
    The Exchange operates in a highly competitive market comprised of 
nine U.S. options exchanges in which sophisticated and knowledgeable 
market participants can readily send order flow to competing exchanges 
if they deem fee levels at a particular exchange to be excessive or 
discriminatory. The Exchange believes that the complex order fees and 
rebates it assesses must be competitive with fees and rebates assessed 
on other exchanges. The Exchange believes that this competitive 
marketplace impacts the fees and rebates present on the Exchange today 
and influences the proposals set forth above.

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) \11\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \12\ thereunder, because it establishes a due, fee, or other 
charge imposed by NYSE Amex.
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 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.

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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-NYSEAmex-2011-30 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-NYSEAmex-2011-30. This 
file number should be included on the subject line if e-mail 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

[[Page 30415]]

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 a.m. and 3 
p.m. Copies of the filing also will be available for inspection and 
copying at the NYSE's principal office, and on its Web site at http://www.nyse.com. The text of the proposed rule change is available on the 
Commission's Web site at http://www.sec.gov. 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-NYSEAmex-2011-30 and should be submitted 
on or before June 15, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
Cathy H. Ahn,
Deputy Secretary.
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    \13\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2011-12963 Filed 5-24-11; 8:45 am]
BILLING CODE 8011-01-P