Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending the NYSE Arca Options Fee Schedule, 74719-74722 [2012-30321]
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Federal Register / Vol. 77, No. 242 / Monday, December 17, 2012 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–68405; File No. SR–
NYSEArca–2012–137]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Amending the NYSE Arca
Options Fee Schedule
December 11, 2012.
19(b)(1) 1
Pursuant to Section
of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on December
3, 2012, NYSE Arca, Inc. (the
‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the selfregulatory 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 the Substance
of the Proposed Rule Change
The Exchange proposes to amend the
NYSE Arca Options Fee Schedule and
to Make the Fee Change Operative on
December 1, 2012. 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
Tier
Base .......................................
Tier 1 ......................................
srobinson on DSK4SPTVN1PROD with
1. Purpose
The Exchange proposes to amend the
Fee Schedule to (i) reorganize
transaction fees, (ii) raise the take rate
for certain electronic executions in
Penny Pilot issues, (iii) revise the
Customer monthly posting credit tiers,
(iv) replace the Market Maker monthly
posting credit tiers with one Super Tier,
(v) lower the base credit applied to
posted electronic Market Maker
executions in SPY, (vi) revise the fees
for Electronic Complex Order
executions, and (vii) include days when
the Exchange closes early in the
calculations for qualifications for
monthly posting credits. The Exchange
proposes to make the fee change
operative on December 1, 2012.
Transaction Fees
Currently, the Exchange groups
transaction fees for manual executions
and electronic executions in Penny Pilot
issues together on the Fee Schedule and
transaction fees for electronic
executions in non-Penny Pilot issues
together on the Fee Schedule. The
Exchange proposes to reorganize the
presentation of transaction fees on the
Fee Schedule so that manual execution
................................................
30,000 Contracts from Market
Maker Posted Orders in
Penny Pilot Issues.
U.S.C.78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
4 The Exchange proposes to amend endnote 5
accordingly to reflect the proposed reorganization
of transaction fees and to replace the term
‘‘Standard Executions’’ with descriptions of
2 15
16:21 Dec 14, 2012
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
fees are grouped together and electronic
executions in Penny Pilot issues and
non-Penny Pilot issues are grouped
together. The Exchange believes that
this is a clearer way to present these
transaction fees. In addition, the
Exchange proposes to separate the take
liquidity rate for electronic executions
in Penny Pilots issues into two
subcategories: Against a Customer and
against a non-Customer.
For NYSE Arca Market Maker and
Firm and Broker Dealer orders, the
Exchange proposes to increase the take
liquidity rate for executions in Penny
Pilot issues against a Customer from
$0.45 per contract to $0.47 per contract.
The Exchange does not propose to
change any of the other current
transaction fees in these categories.4
Customer Monthly Posing Credit Tiers
Currently, the Exchange provides a
credit for OTP Holders and OTP Firms
that meet certain customer monthly
posting tiers for executions in Penny
Pilot issues. These credits are generally
based on meeting certain combined
thresholds in contracts from Customer
posted orders in Penny Pilot issues and
Electronic Complex Orders.5 The
Exchange proposes not to count
Electronic Complex Orders toward the
Customer monthly posting credit tiers.
The Exchange does not propose to
amend any other credits or other
requirements for these Customer
monthly posting credit tiers.
Market Maker Monthly Posting Credit
Tiers
The Exchange currently offers three
Market Maker monthly posting credit
tiers based on contracts from posted
orders in Penny Pilot issues:
Qualification basis (Average electronic executions per day)
1 15
VerDate Mar<15>2010
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.
Jkt 229001
.........................................................................
.........................................................................
‘‘manual’’ and ‘‘electronic’’ executions. The
Exchange notes that it has filed a separate proposed
rule change that modifies endnote 5. The text of
endnote 5 in the Exhibit 5 assumes that the
previously filed proposed rule change is operative.
See File No. SR–NYSEArca–2012–134.
5 Customer Monthly Posting Tier 4 also can be
met if the OTP Holder or OTP Firm has average
PO 00000
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Credit applied
to posted electronic market
maker executions in penny
pilot issues
(except SPY)
Fmt 4703
Sfmt 4703
Credit applied
to posted electronic market
maker executions in SPY
($0.32)
($0.34)
($0.34)
($0.36)
electronic executions per day of 65,000 contracts
combined from Customer posted orders in Penny
Pilot issues and Electronic Complex Orders,
including all account types and issues, plus 0.3%
of U.S. Equity Market Share posted and executed
on NYSE Arca Equity Market, including transaction
volume from the OTP Holder’s or OTP Firm’s
affiliates.
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Federal Register / Vol. 77, No. 242 / Monday, December 17, 2012 / Notices
Tier
Tier 2 ......................................
80,000 Contracts from Market
Maker Posted Orders in
Penny Pilot Issues.
Tier 3 ......................................
150,000 Contracts from Market Maker Posted Orders in
Penny Pilot Issues.
The Exchange proposes to replace
these three tiers with one Super Tier
that would require average electronic
executions per day of 80,000 contracts
from Market Maker posted orders in all
issues or 200,000 liquidity adding and
liquidity removing contracts combined
from all orders in Penny Pilot issues, all
account types, with at least 100,000
contracts from posted orders in Penny
Pilot issues, including transaction
volume from the Market Maker’s
affiliates. If a Market Maker meets either
of the new Super Tier thresholds, the
Market Maker would receive a credit of
$0.37 applied to posted electronic
Market Maker executions in Penny Pilot
issues (except SPY) and a credit of $0.39
applied to posted electronic Market
Maker executions in SPY. In addition,
the base credit applied to posted
electronic Market Maker executions in
SPY would be reduced from $0.34 to
$0.32.
srobinson on DSK4SPTVN1PROD with
Electronic Complex Order Executions
Currently, the Exchange charges $0.06
per contract side for Electronic Complex
Order executions. Complex orders in
non-Penny Pilot issues executed against
individual orders in the Consolidated
Book are subject to the standard
execution rate (‘‘Standard Execution
Rate’’) per contract. Complex orders in
Penny Pilot issues executed against
individual orders in the Consolidated
Book are subject to the take liquidity
rate (‘‘Take Liquidity Rate’’) per contract
for that issue.
The Exchange proposes to modify the
transaction fees for Electronic Complex
Order executions based on order type:
whether it is a Customer or nonCustomer Electronic Complex Order and
whether such order is in a Penny Pilot
Issue or a non-Penny Pilot Issue. For a
Customer Electronic Complex Order
against a non-Customer Electronic
Complex Order in Penny Pilot issues,
the Customer would receive a $0.39
credit per contract and the nonCustomer would pay a $0.50 fee per
VerDate Mar<15>2010
16:21 Dec 14, 2012
Jkt 229001
150,000 Contracts Combined from Market
Maker Posted Orders and Customer Electronic Posted Orders in Penny Pilot Issues
(Includes transaction volume from the Market Maker’s affiliates).
.........................................................................
contract. In non-Penny Pilot issues, the
Customer would receive a $0.75 credit
per contract and the non-Customer
would pay a $0.85 fee per contract. For
a Customer Electronic Complex Order
against a Customer Electronic Complex
Order in all issues, there would be no
transaction fee. For a non-Customer
Electronic Complex Order against a nonCustomer Electronic Complex Order, the
non-Customer would pay a $0.50 fee per
contract in Penny Pilot issues and a
$0.85 fee per contract in non-Penny
Pilot issues.
Early Closing Days
Currently, the Exchange does not
include days when the Exchange closes
early in the calculations for
qualifications for the Customer monthly
posting credit tiers and the Market
Maker monthly posting credit tiers, as
set forth in endnote 8. The Exchange
closes early on a small number of
trading days each year, generally one to
three days each year—July 3, the Friday
following Thanksgiving, and December
24—depending on the day of the week
on which those days fall. For example,
if in a given year July 3 and December
24 both fell on weekends, there would
be only one scheduled early closing day
for that year. In addition, when any
holiday observed by the Exchange falls
on a Saturday, the Exchange is not open
on the preceding Friday and when any
holiday observed by the Exchange falls
on a Sunday, the Exchange is not open
on the succeeding Monday.
Accordingly, if in a given year July 4 fell
on a Saturday, the Exchange would be
closed on Friday, July 3, rather than
have an early closing day. When an
early closing day occurs, the Exchange
is required to manually back out such
day when calculating the credits
described above in the affected months.
The Exchange proposes to amend
endnote 8 to include days when the
Exchange closes early in the
calculations for qualifications for
monthly posting credits, which would
PO 00000
Frm 00088
Fmt 4703
Sfmt 4703
($0.38)
($0.40)
($0.40)
($0.42)
affect the Customer monthly posting
credit tiers and the proposed Market
Maker monthly posting credit Super
Tier.
The Exchange notes that the proposed
changes are not otherwise intended to
address any other issues, and the
Exchange is not aware of any problems
that OTP Holders and OTP Firms 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 Securities Exchange
Act of 1934 (the ‘‘Act’’),6 in general, and
furthers the objectives of Section 6(b)(4)
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.
The Exchange also believes that the
proposed rule change is consistent with
Section 6(b)(5) of the Act,8 in particular,
because it is designed to prevent
fraudulent and manipulative acts and
practices, to promote just and equitable
principles of trade, to foster cooperation
and coordination with persons engaged
in regulating, clearing, settling,
processing information with respect to,
and facilitating transactions in
securities, to remove impediments to,
and perfect the mechanisms of, a free
and open market and a national market
system and, in general, to protect
investors and the public interest and
because it is not designed to permit
unfair discrimination between
customers, issuers, brokers, or dealers.
The Exchange believes that
reorganizing its transaction fees is
reasonable because the Exchange
believes that grouping the transaction
fees by order type is a clearer way to
6 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4).
8 15 U.S.C. 78f(b)(5).
7 15
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srobinson on DSK4SPTVN1PROD with
Federal Register / Vol. 77, No. 242 / Monday, December 17, 2012 / Notices
present these transaction fees in the Fee
Schedule. The Exchange believes that
the proposed change is equitable and
not unfairly discriminatory because it is
designed to better organize the Fee
Schedule, which will benefit all market
participants equally.
The Exchange believes that raising the
take liquidity rate for NYSE Market
Maker, Firm and Broker Dealer
electronic executions in Penny Pilot
issues that take liquidity against a
Customer is reasonable because resting
Customer orders are considered less
sophisticated order flow than resting
non-Customer orders, which in turn
attract non-Customers to take liquidity
in such Customer orders rather than
non-Customer orders. The Exchange
believes that the proposed change is
reasonable because it will encourage
NYSE Arca Market Makers, Firms, and
Broker Dealers to take resting nonCustomer orders. The Exchange believes
that it is reasonable to charge less for
Lead Market Maker (‘‘LMM’’) electronic
executions in Penny Pilot issues that
take liquidity against a Customer
because LMMs have higher quoting
obligations and often have order flow
arrangements with Customers that they
must maintain, therefore it is reasonable
to charge a lower fee to LMMs in order
to encourage LMMs to take posted
Customer liquidity. In addition, the
Exchange believes that it is equitable
and not unfairly discriminatory to
charge less for LMM electronic
executions in Penny Pilot issues that
take liquidity against a Customer
because only LMMs are required to pay
a monthly Rights fee per issue, which
increases based on the average national
daily customer contracts, and the Rights
fee for Penny Pilot issues are usually
higher because such issues are the most
active. The Exchange believes that it is
reasonable to charge less for Customer
electronic executions in Penny Pilot
issues that take liquidity against a
Customer because it would continue to
encourage Customer order flow, which
is beneficial to all market participants.
The Exchange believes that the
proposed change is equitable and not
unfairly discriminatory because NYSE
Market Makers, Firms, and Broker
Dealers can use Arca Book to see if there
is a Customer resting order at the top of
the Consolidated Book, and avoid taking
liquidity against such order. In addition,
the Exchange believes it is equitable and
not unfairly discriminatory to charge a
lower fee to LMMs because they make
significant contributions to market
quality by providing higher volumes of
liquidity. The Exchange believes that it
is equitable and not unfairly
VerDate Mar<15>2010
16:21 Dec 14, 2012
Jkt 229001
discriminatory to charge a lower fee to
Customers, because they are less
sophisticated than non-Customers and
the proposed change will continue to
attract a high level of Customer order
flow, which benefits both Customers
and non-Customers.
The Exchange believes that not
counting Electronic Complex Orders
toward Customer monthly posting credit
tiers is reasonable because it is designed
to attract higher levels of Customer
posted orders in Penny Pilot issues. In
addition, the Exchange believes that the
proposed change is reasonable because
it is not changing any of the credits
offered. The Exchange believes that the
proposed change is equitable and not
unfairly discriminatory because the
credit tiers are open to all OTP Holders
and OTP Firms on an equal basis and
would continue to provide credits that
are reasonably related to the value to the
Exchange’s market quality associated
with higher volumes in Customer
posted orders in Penny Pilot issues.
The Exchange believes that replacing
the Market Maker monthly posting
credit tiers with one Super Tier is
reasonable because it simplifies the
monthly posting credit tiers and
encourages Market Makers to post
greater volumes in all issues, including
non-Penny Pilot issues. In addition, the
proposed change is reasonable because
it would incent OTP Holders and OTP
Firms that have a Market Making
presence in addition to a proprietary or
agency order flow presence to provide
greater order flow in Penny Pilot issues.
The Exchange believes that the
proposed change is equitable and not
unfairly discriminatory because it
would provide more than one way for
Market Makers to achieve the proposed
credits—either by providing high levels
of Market Maker posted orders in all
issues or high levels of orders in Penny
Pilot issues by the Market Maker and its
affiliates. In addition, the proposed
credits are reasonably related to the
value to the Exchange’s market quality
associated with higher volumes in
Market Maker posted orders and orders
in Penny Pilot issues.
The Exchange believes that lowering
the base credit applied to posted
electronic Market Maker executions in
SPY is reasonable because the current
higher credit did not attracted [sic] the
anticipated additional volume in SPY,
and it is the same credit previously
offered by the Exchange. The Exchange
also believes that lowering the base
credit applied to posted electronic
market maker executions in SPY is
equitable and not unfairly
discriminatory because it would impact
all Market Makers equally and is offset
PO 00000
Frm 00089
Fmt 4703
Sfmt 4703
74721
by providing an additional credit for
posted electronic Market Maker
executions in SPY that meet the Super
Tier threshold.
The Exchange believes that revising
the fees for Electronic Complex Order
executions is reasonable because the
Exchange believes that it would
encourage increased Customer flow in
Electronic Complex Orders whereas the
Exchange believes that the current flat
rate does not incent additional trading.
In addition, the proposed fees and
credits are competitive with fees and
credits on at least one other exchange.9
The Exchange also believes that the
non-Customer fees for Electronic
Complex Orders are reasonable because
they are consistent with the take
liquidity rates for non-Customers that
execute against individual orders in
Penny Pilot and non-Penny Pilot issues.
The Exchange believes that the
proposed change is equitable and not
unfairly discriminatory because it is
designed to attract Customer Electronic
Complex Order flow, which ultimately
benefits all market participants. In
addition, the Exchange believes that the
non-Customer fees for Electronic
Complex Order executions are equitable
and not unfairly discriminatory because
all non-Customers will be assessed the
same fee.
The Exchange believes that including
days when the Exchange closes early in
the calculations for qualifications for
monthly posting credits is reasonable
because it is not expected to have a
material impact on OTP Holders, OTP
Firms, or Market Makers. The Exchange
generally closes early on only one to
three days a year, which generally
affects a maximum of three billing
months (July, November, and December)
and may only impact one or two billing
months if July 3 or December 24 occur
on weekends or observed holidays when
the Exchange is otherwise closed. The
change would have no impact on the
credit calculations for the other months.
In addition, the proposed change is
reasonable because it would streamline
credit calculations because the
Exchange and OTP Holders, OTP Firms,
and Market Makers that track their
performance during the month would
no longer be required to back out
transactions from early closing days.
The Exchange believes the proposed
change is equitable and not unfairly
discriminatory because all similarly
situated OTP Holders, OTP Firms, and
Market Makers would be subject to the
9 See International Securities Exchange Schedule
of Fees as of November 6, 2012, available at https://
www.ise.com/assets/documents/OptionsExchange/
legal/fee/fee_schedule.pdf.
E:\FR\FM\17DEN1.SGM
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Federal Register / Vol. 77, No. 242 / Monday, December 17, 2012 / Notices
same fee structure. In addition, trading
activity is generally lower on early
closing days, so the Tier 4 Customer
monthly posting credit, which is based
on a threshold percentage of trading
activity, would adjust automatically.
Credit tiers based on a fixed threshold,
including the Tier 1, 2, and 3 Customer
monthly posting credit and the Super
Tier Market Maker monthly posting
credit, would be minimally impacted
and OTP Holders, OTP Firms, and
Market Makers would still benefit from
the streamlined process for calculating
trading activity during the month.
The Exchange believes that the
proposed changes bring better
organization to the Fee Schedule and
are designed to incent all market
participants, thereby removing
impediments to and perfecting the
mechanism of a free and open market
system. In addition, for the reasons
stated above, the proposed changes are
not designed to permit unfair
discrimination between customers,
issuers, brokers, or dealers.
Finally, the Exchange notes that it
operates in a highly competitive market
in which market participants can
readily favor competing venues. 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.
srobinson on DSK4SPTVN1PROD with
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,
10 15
11 17
U.S.C. 78s(b)(3)(A).
CFR 240.19b-4(f)(2).
VerDate Mar<15>2010
16:21 Dec 14, 2012
Jkt 229001
fee, or other charge imposed by NYSE
Arca.
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 (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
Number SR–NYSEArca–2012–137 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–NYSEArca-2012–137. 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 (https://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
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
PO 00000
Frm 00090
Fmt 4703
Sfmt 4703
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–
NYSEArca–2012–137, and should be
submitted on or before January 7, 2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.12
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–30321 Filed 12–14–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–68401; File No. SR–CME–
2012–42]
Self-Regulatory Organizations;
Chicago Mercantile Exchange Inc.;
Order Approving Proposed Rule
Change Regarding the Valuation of
Securities on Deposit
December 11, 2012.
I. Introduction
On October 10, 2012, Chicago
Mercantile Exchange Inc. (‘‘CME’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change SR–CME–2012–42
pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder.2
The proposed rule change was
published for comment in the Federal
Register on October 30, 2012.3 The
Commission received no comment
letters regarding this proposal. For the
reasons discussed below, the
Commission is granting approval of the
proposed rule change.
II. Description
CME is proposing to issue an
Advisory Notice that announces certain
changes to the way CME will value
securities on deposit. Under the
proposed changes, CME will begin using
the current market value, plus accrued
interest, to value securities on deposit.
CME currently excludes accrued interest
from the value of securities on deposit.
Therefore, with this adjustment, accrued
interest will now be included in the
market value of the security. The
purpose of the adjustment is to
harmonize valuations with existing
industry conventions. CME initially
12 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 34–
68093 (October 24, 2012), 77 FR 65730 (October 30,
2012).
1 15
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]]>Agencies
[Federal Register Volume 77, Number 242 (Monday, December 17, 2012)]
[Notices]
[Pages 74719-74722]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-30321]
[[Page 74719]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68405; File No. SR-NYSEArca-2012-137]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Amending the NYSE
Arca Options Fee Schedule
December 11, 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 December 3, 2012, NYSE Arca, Inc. (the ``Exchange'' or
``NYSE Arca'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C.78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
The Exchange proposes to amend the NYSE Arca Options Fee Schedule
and to Make the Fee Change Operative on December 1, 2012. The text of
the proposed rule change is available on the Exchange's Web site at
www.nyse.com, at the principal office of the Exchange, and at the
Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend the Fee Schedule to (i) reorganize
transaction fees, (ii) raise the take rate for certain electronic
executions in Penny Pilot issues, (iii) revise the Customer monthly
posting credit tiers, (iv) replace the Market Maker monthly posting
credit tiers with one Super Tier, (v) lower the base credit applied to
posted electronic Market Maker executions in SPY, (vi) revise the fees
for Electronic Complex Order executions, and (vii) include days when
the Exchange closes early in the calculations for qualifications for
monthly posting credits. The Exchange proposes to make the fee change
operative on December 1, 2012.
Transaction Fees
Currently, the Exchange groups transaction fees for manual
executions and electronic executions in Penny Pilot issues together on
the Fee Schedule and transaction fees for electronic executions in non-
Penny Pilot issues together on the Fee Schedule. The Exchange proposes
to reorganize the presentation of transaction fees on the Fee Schedule
so that manual execution fees are grouped together and electronic
executions in Penny Pilot issues and non-Penny Pilot issues are grouped
together. The Exchange believes that this is a clearer way to present
these transaction fees. In addition, the Exchange proposes to separate
the take liquidity rate for electronic executions in Penny Pilots
issues into two subcategories: Against a Customer and against a non-
Customer.
For NYSE Arca Market Maker and Firm and Broker Dealer orders, the
Exchange proposes to increase the take liquidity rate for executions in
Penny Pilot issues against a Customer from $0.45 per contract to $0.47
per contract. The Exchange does not propose to change any of the other
current transaction fees in these categories.\4\
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\4\ The Exchange proposes to amend endnote 5 accordingly to
reflect the proposed reorganization of transaction fees and to
replace the term ``Standard Executions'' with descriptions of
``manual'' and ``electronic'' executions. The Exchange notes that it
has filed a separate proposed rule change that modifies endnote 5.
The text of endnote 5 in the Exhibit 5 assumes that the previously
filed proposed rule change is operative. See File No. SR-NYSEArca-
2012-134.
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Customer Monthly Posing Credit Tiers
Currently, the Exchange provides a credit for OTP Holders and OTP
Firms that meet certain customer monthly posting tiers for executions
in Penny Pilot issues. These credits are generally based on meeting
certain combined thresholds in contracts from Customer posted orders in
Penny Pilot issues and Electronic Complex Orders.\5\ The Exchange
proposes not to count Electronic Complex Orders toward the Customer
monthly posting credit tiers. The Exchange does not propose to amend
any other credits or other requirements for these Customer monthly
posting credit tiers.
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\5\ Customer Monthly Posting Tier 4 also can be met if the OTP
Holder or OTP Firm has average electronic executions per day of
65,000 contracts combined from Customer posted orders in Penny Pilot
issues and Electronic Complex Orders, including all account types
and issues, plus 0.3% of U.S. Equity Market Share posted and
executed on NYSE Arca Equity Market, including transaction volume
from the OTP Holder's or OTP Firm's affiliates.
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Market Maker Monthly Posting Credit Tiers
The Exchange currently offers three Market Maker monthly posting
credit tiers based on contracts from posted orders in Penny Pilot
issues:
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Tier Qualification basis (Average electronic Credit applied Credit applied
executions per day) to posted to posted
electronic electronic
market maker market maker
executions in executions in
penny pilot SPY
issues (except
SPY)
----------------------------------------------------------------------------------------------------------------
Base.............................. ..................... ..................... ($0.32) ($0.34)
Tier 1............................ 30,000 Contracts from ..................... ($0.34) ($0.36)
Market Maker Posted
Orders in Penny
Pilot Issues.
[[Page 74720]]
Tier 2............................ 80,000 Contracts from 150,000 Contracts ($0.38) ($0.40)
Market Maker Posted Combined from Market
Orders in Penny Maker Posted Orders
Pilot Issues. and Customer
Electronic Posted
Orders in Penny
Pilot Issues
(Includes
transaction volume
from the Market
Maker's affiliates).
Tier 3............................ 150,000 Contracts ..................... ($0.40) ($0.42)
from Market Maker
Posted Orders in
Penny Pilot Issues.
----------------------------------------------------------------------------------------------------------------
The Exchange proposes to replace these three tiers with one Super
Tier that would require average electronic executions per day of 80,000
contracts from Market Maker posted orders in all issues or 200,000
liquidity adding and liquidity removing contracts combined from all
orders in Penny Pilot issues, all account types, with at least 100,000
contracts from posted orders in Penny Pilot issues, including
transaction volume from the Market Maker's affiliates. If a Market
Maker meets either of the new Super Tier thresholds, the Market Maker
would receive a credit of $0.37 applied to posted electronic Market
Maker executions in Penny Pilot issues (except SPY) and a credit of
$0.39 applied to posted electronic Market Maker executions in SPY. In
addition, the base credit applied to posted electronic Market Maker
executions in SPY would be reduced from $0.34 to $0.32.
Electronic Complex Order Executions
Currently, the Exchange charges $0.06 per contract side for
Electronic Complex Order executions. Complex orders in non-Penny Pilot
issues executed against individual orders in the Consolidated Book are
subject to the standard execution rate (``Standard Execution Rate'')
per contract. Complex orders in Penny Pilot issues executed against
individual orders in the Consolidated Book are subject to the take
liquidity rate (``Take Liquidity Rate'') per contract for that issue.
The Exchange proposes to modify the transaction fees for Electronic
Complex Order executions based on order type: whether it is a Customer
or non-Customer Electronic Complex Order and whether such order is in a
Penny Pilot Issue or a non-Penny Pilot Issue. For a Customer Electronic
Complex Order against a non-Customer Electronic Complex Order in Penny
Pilot issues, the Customer would receive a $0.39 credit per contract
and the non-Customer would pay a $0.50 fee per contract. In non-Penny
Pilot issues, the Customer would receive a $0.75 credit per contract
and the non-Customer would pay a $0.85 fee per contract. For a Customer
Electronic Complex Order against a Customer Electronic Complex Order in
all issues, there would be no transaction fee. For a non-Customer
Electronic Complex Order against a non-Customer Electronic Complex
Order, the non-Customer would pay a $0.50 fee per contract in Penny
Pilot issues and a $0.85 fee per contract in non-Penny Pilot issues.
Early Closing Days
Currently, the Exchange does not include days when the Exchange
closes early in the calculations for qualifications for the Customer
monthly posting credit tiers and the Market Maker monthly posting
credit tiers, as set forth in endnote 8. The Exchange closes early on a
small number of trading days each year, generally one to three days
each year--July 3, the Friday following Thanksgiving, and December 24--
depending on the day of the week on which those days fall. For example,
if in a given year July 3 and December 24 both fell on weekends, there
would be only one scheduled early closing day for that year. In
addition, when any holiday observed by the Exchange falls on a
Saturday, the Exchange is not open on the preceding Friday and when any
holiday observed by the Exchange falls on a Sunday, the Exchange is not
open on the succeeding Monday. Accordingly, if in a given year July 4
fell on a Saturday, the Exchange would be closed on Friday, July 3,
rather than have an early closing day. When an early closing day
occurs, the Exchange is required to manually back out such day when
calculating the credits described above in the affected months. The
Exchange proposes to amend endnote 8 to include days when the Exchange
closes early in the calculations for qualifications for monthly posting
credits, which would affect the Customer monthly posting credit tiers
and the proposed Market Maker monthly posting credit Super Tier.
The Exchange notes that the proposed changes are not otherwise
intended to address any other issues, and the Exchange is not aware of
any problems that OTP Holders and OTP Firms 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 Securities Exchange Act of 1934 (the
``Act''),\6\ in general, and furthers the objectives of Section 6(b)(4)
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.
The Exchange also believes that the proposed rule change is consistent
with Section 6(b)(5) of the Act,\8\ in particular, because it is
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in securities, to remove impediments to, and perfect the
mechanisms of, a free and open market and a national market system and,
in general, to protect investors and the public interest and because it
is not designed to permit unfair discrimination between customers,
issuers, brokers, or dealers.
---------------------------------------------------------------------------
\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(4).
\8\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange believes that reorganizing its transaction fees is
reasonable because the Exchange believes that grouping the transaction
fees by order type is a clearer way to
[[Page 74721]]
present these transaction fees in the Fee Schedule. The Exchange
believes that the proposed change is equitable and not unfairly
discriminatory because it is designed to better organize the Fee
Schedule, which will benefit all market participants equally.
The Exchange believes that raising the take liquidity rate for NYSE
Market Maker, Firm and Broker Dealer electronic executions in Penny
Pilot issues that take liquidity against a Customer is reasonable
because resting Customer orders are considered less sophisticated order
flow than resting non-Customer orders, which in turn attract non-
Customers to take liquidity in such Customer orders rather than non-
Customer orders. The Exchange believes that the proposed change is
reasonable because it will encourage NYSE Arca Market Makers, Firms,
and Broker Dealers to take resting non-Customer orders. The Exchange
believes that it is reasonable to charge less for Lead Market Maker
(``LMM'') electronic executions in Penny Pilot issues that take
liquidity against a Customer because LMMs have higher quoting
obligations and often have order flow arrangements with Customers that
they must maintain, therefore it is reasonable to charge a lower fee to
LMMs in order to encourage LMMs to take posted Customer liquidity. In
addition, the Exchange believes that it is equitable and not unfairly
discriminatory to charge less for LMM electronic executions in Penny
Pilot issues that take liquidity against a Customer because only LMMs
are required to pay a monthly Rights fee per issue, which increases
based on the average national daily customer contracts, and the Rights
fee for Penny Pilot issues are usually higher because such issues are
the most active. The Exchange believes that it is reasonable to charge
less for Customer electronic executions in Penny Pilot issues that take
liquidity against a Customer because it would continue to encourage
Customer order flow, which is beneficial to all market participants.
The Exchange believes that the proposed change is equitable and not
unfairly discriminatory because NYSE Market Makers, Firms, and Broker
Dealers can use Arca Book to see if there is a Customer resting order
at the top of the Consolidated Book, and avoid taking liquidity against
such order. In addition, the Exchange believes it is equitable and not
unfairly discriminatory to charge a lower fee to LMMs because they make
significant contributions to market quality by providing higher volumes
of liquidity. The Exchange believes that it is equitable and not
unfairly discriminatory to charge a lower fee to Customers, because
they are less sophisticated than non-Customers and the proposed change
will continue to attract a high level of Customer order flow, which
benefits both Customers and non-Customers.
The Exchange believes that not counting Electronic Complex Orders
toward Customer monthly posting credit tiers is reasonable because it
is designed to attract higher levels of Customer posted orders in Penny
Pilot issues. In addition, the Exchange believes that the proposed
change is reasonable because it is not changing any of the credits
offered. The Exchange believes that the proposed change is equitable
and not unfairly discriminatory because the credit tiers are open to
all OTP Holders and OTP Firms on an equal basis and would continue to
provide credits that are reasonably related to the value to the
Exchange's market quality associated with higher volumes in Customer
posted orders in Penny Pilot issues.
The Exchange believes that replacing the Market Maker monthly
posting credit tiers with one Super Tier is reasonable because it
simplifies the monthly posting credit tiers and encourages Market
Makers to post greater volumes in all issues, including non-Penny Pilot
issues. In addition, the proposed change is reasonable because it would
incent OTP Holders and OTP Firms that have a Market Making presence in
addition to a proprietary or agency order flow presence to provide
greater order flow in Penny Pilot issues. The Exchange believes that
the proposed change is equitable and not unfairly discriminatory
because it would provide more than one way for Market Makers to achieve
the proposed credits--either by providing high levels of Market Maker
posted orders in all issues or high levels of orders in Penny Pilot
issues by the Market Maker and its affiliates. In addition, the
proposed credits are reasonably related to the value to the Exchange's
market quality associated with higher volumes in Market Maker posted
orders and orders in Penny Pilot issues.
The Exchange believes that lowering the base credit applied to
posted electronic Market Maker executions in SPY is reasonable because
the current higher credit did not attracted [sic] the anticipated
additional volume in SPY, and it is the same credit previously offered
by the Exchange. The Exchange also believes that lowering the base
credit applied to posted electronic market maker executions in SPY is
equitable and not unfairly discriminatory because it would impact all
Market Makers equally and is offset by providing an additional credit
for posted electronic Market Maker executions in SPY that meet the
Super Tier threshold.
The Exchange believes that revising the fees for Electronic Complex
Order executions is reasonable because the Exchange believes that it
would encourage increased Customer flow in Electronic Complex Orders
whereas the Exchange believes that the current flat rate does not
incent additional trading. In addition, the proposed fees and credits
are competitive with fees and credits on at least one other
exchange.\9\ The Exchange also believes that the non-Customer fees for
Electronic Complex Orders are reasonable because they are consistent
with the take liquidity rates for non-Customers that execute against
individual orders in Penny Pilot and non-Penny Pilot issues. The
Exchange believes that the proposed change is equitable and not
unfairly discriminatory because it is designed to attract Customer
Electronic Complex Order flow, which ultimately benefits all market
participants. In addition, the Exchange believes that the non-Customer
fees for Electronic Complex Order executions are equitable and not
unfairly discriminatory because all non-Customers will be assessed the
same fee.
---------------------------------------------------------------------------
\9\ See International Securities Exchange Schedule of Fees as of
November 6, 2012, available at https://www.ise.com/assets/documents/OptionsExchange/legal/fee/fee_schedule.pdf.
---------------------------------------------------------------------------
The Exchange believes that including days when the Exchange closes
early in the calculations for qualifications for monthly posting
credits is reasonable because it is not expected to have a material
impact on OTP Holders, OTP Firms, or Market Makers. The Exchange
generally closes early on only one to three days a year, which
generally affects a maximum of three billing months (July, November,
and December) and may only impact one or two billing months if July 3
or December 24 occur on weekends or observed holidays when the Exchange
is otherwise closed. The change would have no impact on the credit
calculations for the other months. In addition, the proposed change is
reasonable because it would streamline credit calculations because the
Exchange and OTP Holders, OTP Firms, and Market Makers that track their
performance during the month would no longer be required to back out
transactions from early closing days. The Exchange believes the
proposed change is equitable and not unfairly discriminatory because
all similarly situated OTP Holders, OTP Firms, and Market Makers would
be subject to the
[[Page 74722]]
same fee structure. In addition, trading activity is generally lower on
early closing days, so the Tier 4 Customer monthly posting credit,
which is based on a threshold percentage of trading activity, would
adjust automatically. Credit tiers based on a fixed threshold,
including the Tier 1, 2, and 3 Customer monthly posting credit and the
Super Tier Market Maker monthly posting credit, would be minimally
impacted and OTP Holders, OTP Firms, and Market Makers would still
benefit from the streamlined process for calculating trading activity
during the month.
The Exchange believes that the proposed changes bring better
organization to the Fee Schedule and are designed to incent all market
participants, thereby removing impediments to and perfecting the
mechanism of a free and open market system. In addition, for the
reasons stated above, the proposed changes are not designed to permit
unfair discrimination between customers, issuers, brokers, or dealers.
Finally, the Exchange notes that it operates in a highly
competitive market in which market participants can readily favor
competing venues. 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) \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 NYSE Arca.
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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------
At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
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 (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-NYSEArca-2012-137 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-NYSEArca-2012-137. 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 (https://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 office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSEArca-2012-137, and
should be submitted on or before January 7, 2013.
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\12\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-30321 Filed 12-14-12; 8:45 am]
BILLING CODE 8011-01-P
