Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending the NYSE Arca Options Fee Schedule To Revise Qualification Thresholds for Tiered Customer Posting Credits, 7828-7831 [2013-02300]
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7828
Federal Register / Vol. 78, No. 23 / Monday, February 4, 2013 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.13
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–02298 Filed 2–1–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–68758; File No. SR–
NYSEArca–2013–04]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Amending the NYSE Arca
Options Fee Schedule To Revise
Qualification Thresholds for Tiered
Customer Posting Credits
January 29, 2013.
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 January
15, 2013, NYSE Arca, Inc. (the
‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’) the
Tier
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 (‘‘Fee
Schedule’’) to revise the qualification
thresholds for tiered Customer posting
credits for electronic executions in
Penny Pilot issues. The Exchange
proposes to make the fee change
operative on February 1, 2013. 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 revise the qualification
thresholds for tiered Customer 4 posting
credits for electronic executions in
Penny Pilot issues.5 The Exchange
proposes to make the fee change
operative on February 1, 2013.
Currently, the Exchange provides
credits for posted electronic Customer
executions in Penny Pilot issues for
OTP Holders and OTP Firms that meet
the following execution thresholds:
Qualification basis (average electronic executions per day)
Base ...................
Tier 1 .................
Tier 2 .................
Tier 3 .................
Tier 4 .................
..............................................
15,000 Contracts from Customer Posted Orders in
Penny Pilot Issues.
25,000 Contracts from Customer Posted Orders in
Penny Pilot Issues, or
50,000 Contracts from Customer Posted Orders in
Penny Pilot Issues.
65,000 Contracts from Customer Posted Orders in
Penny Pilot Issues Plus
0.3% of U.S. Equity Market Share Posted and Executed on NYSE Arca Equity Market,* or
Credit applied to posted electronic customer executions in
Penny Pilot issues
..............................................
..............................................
..............................................
..............................................
($0.25)
($0.38)
75,000 Contracts from Posted Orders in Penny Pilot
Issues, all account types.*
..............................................
..............................................
($0.40)
..............................................
($0.43)
100,000 Contracts from
Posted Orders in Penny
Pilot Issues, all account
types,* or
100,000 Contracts from Customer Posted and Removing Orders in Penny Pilot
Issues.
($0.44)
* Includes transaction volume from the OTP Holder’s or OTP Firm’s affiliates.
The Exchange proposes to revise the
qualification thresholds for tiered
Customer posting credits for electronic
executions in Penny Pilot issues so that
the qualification thresholds for tiered
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13 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
4 Under NYSE Arca Options Rule 6.1(b)(29), the
term ‘‘Customer’’ has the same definition as Rule
15c3–1(c)(6) under the Act, which excludes certain
broker-dealers.
5 As provided under NYSE Arca Options Rule
6.72, options on certain issues have been approved
1 15
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Customer posting credits will be based
not on a fixed number of contracts but
instead on a percentage of average daily
volume (‘‘ADV’’) of Customer electronic
equity and ETF option contracts
executed by an OTP Holder or OTP
Firm on the Exchange relative to the
overall Total Industry Customer equity
and ETF option ADV.6 The Exchange
to trade with a minimum price variation of $0.01
as part of a pilot program that is currently
scheduled to expire on March 31, 2013. See
Securities Exchange Act Release No. 68426,
(December 13, 2012) 77 FR 75224 (December 19,
2012) (SR–NYSEArca–2012–135).
6 The OCC provides volume information in two
product categories: Equity and ETF volume and
index volume, and the information can be filtered
to show only Customer, firm, or market maker
account type. Equity and ETF Customer volume
numbers are available directly from the OCC each
morning, or may be transmitted, upon request, free
of charge from the Exchange. Equity and ETF
Customer volume is a widely followed benchmark
of industry volume and is indicative of industry
market share. Total Industry Customer equity and
ETF option ADV is comprised of those equity and
ETF option contracts that clear in the customer
account type at OCC, including Exchange-Traded
Fund Shares, Trust Issued Receipts, Partnership
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Federal Register / Vol. 78, No. 23 / Monday, February 4, 2013 / Notices
proposes the following qualification
thresholds for tiered Customer posting
Tier
credits for electronic executions in
Penny Pilot issues:
Qualification basis (average electronic executions per day)
Base ...................
Tier 1 .................
Tier 2 .................
Tier 3 .................
Tier 4 .................
..............................................
At least 0.15% of Total Industry Customer equity
and ETF option ADV from
Customer Posted Orders
in Penny Pilot Issues.
At least 0.25% of Total Industry Customer equity
and ETF option ADV from
Customer Posted Orders
in Penny Pilot Issues, or
At least 0.50% of Total Industry Customer equity
and ETF option ADV from
Customer Posted Orders
in Penny Pilot Issues.
At least 0.65% of Total Industry Customer equity
and ETF option ADV from
Customer Posted Orders
in Penny Pilot Issues Plus
0.3% of U.S. Equity Market Share Posted and Executed on NYSE Arca Equity Market,* or
7829
Credit applied to posted electronic customer executions in
Penny Pilot issues
..............................................
..............................................
..............................................
..............................................
($0.25)
($0.38)
At least 0.70% of Total Industry Customer equity
and ETF option ADV from
Posted Orders in Penny
Pilot Issues, all account
types.*
..............................................
..............................................
($0.40)
..............................................
($0.43)
At least 0.95% of Total Industry Customer equity
and ETF option ADV from
Posted Orders in Penny
Pilot Issues, all account
types,* or
At least 0.95% of Total Industry Customer equity
and ETF option ADV from
Customer Posted and Removing Orders in Penny
Pilot Issues.
($0.44)
* Includes transaction volume from the OTP Holder’s or OTP Firm’s affiliates.
these tiers or other requirements for the
tiers.
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.
mstockstill on DSK4VPTVN1PROD with NOTICES
The Exchange notes that the
calculations for the qualification
thresholds for tiered Customer posting
credits only include electronic
executions. Qualified Contingent Cross
(‘‘QCC’’) orders are neither posted nor
taken; thus QCC transactions are not
included in the calculation of posted or
taken execution volumes. Orders routed
to another market for execution are not
included in the calculation of taking
volume. In addition, Customer equity
and ETF option ADV will not include
executions from Electronic Complex
Order Executions.7
The Exchange notes that the proposed
percentages are generally equivalent to
the current fixed thresholds at current
volume levels, but will have the
advantage of fluctuating with industry
volume. The Exchange does not propose
to amend the credits associated with
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act,8 in general, and
furthers the objectives of Section 6(b)(4)
of the Act,9 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. The
Exchange also believes that the
proposed rule change is consistent with
Section 6(b)(5) of the Act,10 in
Units, and Index-Linked Securities such as
Exchange-Traded Notes (see NYSE Arca Options
Rule 5.3(g)–(j)), and does not include contracts that
clear in either the firm or market maker account
type at OCC or contracts overlying a security other
than an equity or ETF security. The Exchange notes
that there is one Penny Pilot issue, Mini NDX 100
Stock Index, that does not overlie an equity or ETF
security that is eligible for the Customer posing [sic]
credit. This Penny Pilot issue is not included in
equity and ETF option ADV; however, the Exchange
expects that the effect on the calculations for the
qualification thresholds for tiered Customer posting
credits to be negligible. Under the proposed rule
change, Total Industry Customer equity and ETF
option ADV will be that which is reported for the
month by OCC in the month in which the credits
may apply. For example, February 2013 Total
Industry Customer equity and ETF option ADV will
be used in determining what, if any, credit an OTP
Holder or OTP Firm may be eligible for based on
the Customer electronic equity and ETF option
ADV it transacts on the Exchange in February 2013.
7 The Exchange previously amended its Fee
Schedule to exclude Electronic Complex Order
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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 proposal to revise the
qualification thresholds for tiered
Customer posting credits for electronic
executions in Penny Pilot issues so that
they are based on the ADV of Total
Industry Customer electronic equity and
ETF option contracts on the Exchange is
volume from counting toward the qualification
thresholds for tiered Customer posting credits for
electronic executions in Penny Pilot issues. See
Securities Exchange Act Release No. 68405,
(December 11, 2012) 77 FR 74719 (December 17,
2012) (SR–NYSEArca–2012–137). The Exchange
proposes to amend endnote 8 to explicitly exclude
Electronic Complex Order Executions from the
qualification thresholds for tiered Customer posting
credits.
8 15 U.S.C. 78f(b).
9 15 U.S.C. 78f(b)(4).
10 15 U.S.C. 78f(b)(5).
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Federal Register / Vol. 78, No. 23 / Monday, February 4, 2013 / Notices
reasonable because it is designed to
attract additional Customer electronic
equity and ETF option volume to the
Exchange, which would benefit all
participants by offering greater price
discovery, increased transparency and
an increased opportunity to trade on the
Exchange. Additionally, the Exchange
believes that the proposed credits are
reasonable because they would
incentivize OTP Holders and OTP Firms
to submit Customer electronic equity
and ETF option orders to the Exchange
and would result in credits that are
reasonably related to the Exchange’s
market quality that is associated with
higher volumes.
The Exchange also believes that the
proposed qualification thresholds for
tiered Customer posting credits are
reasonable because the Exchange has
continued to provide more than one
method of qualifying for certain of the
tiers. For example, in addition to
posting Customer orders in Penny Pilot
issues, the Tier 2 credit can alternatively
be reached by posting a certain volume
of orders in all account types, and the
Tier 4 credit can be reached by posting
a certain volume of orders on the NYSE
Arca Equity Market, posting a certain
volume of orders in all account types, or
posting or removing a certain volume of
orders in Penny Pilot issues. The
Exchange believes that the aspect of the
proposed change related to the activity
of an affiliated ETP Holder on NYSE
Arca Equities is reasonable because it
would encourage increased trading
activity on both the NYSE Arca equity
and option markets.
The Exchange believes that using a
percentage based threshold rather than
a fixed threshold is reasonable because
it would allow the threshold to account
for fluctuating industry volume. The
Exchange also believes that the
proposed qualification thresholds for
tiered Customer posting credits are
reasonable because they will reward
OTP Holders and OTP Firms with a
greater credit for posted electronic
Customer executions in Penny Pilot
issues when they bring a larger number
of orders to the Exchange.
The Exchange believes that the
proposed credits are equitable and not
unfairly discriminatory because they
will be available to all OTP Holders and
OTP Firms that execute posted
electronic Customer orders on the
Exchange on an equal and nondiscriminatory basis, in particular
because they would be based on a
variable rather than a fixed threshold.
The Exchange believes that providing
methods for achieving the credits not
based solely on posted electronic
Customer Executions in Penny Pilot
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19:26 Feb 01, 2013
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issues is equitable and not unfairly
discriminatory because it would
continue to result in more OTP Holders
and OTP Firms qualifying for the credits
and therefore reducing their overall
transaction costs on the Exchange. The
Exchange also believes that the
proposed credits are not new or novel
because at least one other exchange has
a customer tier based on Total Industry
Customer equity and ETF option
volume.11 The Exchange believes that
the aspect of the proposed change
related to the activity of an affiliated
ETP Holder on NYSE Arca Equities is
equitable and not unfairly
discriminatory because it is designed to
continue to bring additional posted
order flow to NYSE Arca Equities, so as
to provide additional opportunities for
all ETP Holders to trade on NYSE Arca
Equities.12
The Exchange believes that the
proposed changes 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.
addition, providing an alternative
qualification basis for certain tiers by
including volume from affiliates allows
a firm with a diverse business structure,
but not a concentration on Customers
orders only, to earn a higher credit for
their Customers by posting order flow
that improves the overall market
quality, and encourages posting
competitive prices, which result in
better available markets for Customer
orders.13 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 promotes a 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 because it is
designed to attracted [sic] additional
volume, in particular posted electronic
Customer executions, to the Exchange,
which would promote price discovery
and transparency in the securities
markets thereby benefitting competition
in the industry. As stated above, the
Exchange believes that the proposed
change would impact all similarly
situated OTP Holders and OTP Firms
that post electronic Customer
executions on the Exchange equally,
and as such, the proposed change would
not impose a disparate burden on
competition either among or between
classes of market participants. In
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
11 See NYSE Amex Options Fee Schedule, dated
December 1, 2012, available at https://
globalderivatives.nyx.com/sites/
globalderivatives.nyx.com/files/nyse_amex_
options_fee_schedule_12_01_12__.pdf. See also
Securities Exchange Act Release No. 68036 (October
11, 2012), 77 FR 63900 (October 17, 2012) (SR–
NYSEMKT–2012–50).
12 The Exchange notes that this aspect of the
proposed change related to the activity of an
affiliated ETP Holder on NYSE Arca Equities has
been previously included in an immediately
effective filing. See Securities Exchange Act Release
No. 67020, (May 18, 2012) 77 FR 31050 (May 24,
2012) (SR–NYSEArca–2012–41).
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Frm 00093
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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.
The foregoing rule change is effective
upon filing pursuant to Section
19(b)(3)(A) 14 of the Act and
subparagraph (f)(2) of Rule 19b–4 15
thereunder, because it establishes a due,
fee, or other charge imposed by the
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. If the
Commission takes such action, the
Commission shall institute proceedings
under Section 19(b)(2)(B) 16 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
13 The Exchange notes that the Commission has
not previously determined that this aspect of the
proposed change related to the activity of an
affiliated ETP Holder on NYSE Arca Equities would
impose any burden on competition that is not
necessary or appropriate in furtherance of the
purposes of the Act. See id.
14 15 U.S.C. 78s(b)(3)(A).
15 17 CFR 240.19b–4(f)(2).
16 15 U.S.C. 78s(b)(2)(B).
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Federal Register / Vol. 78, No. 23 / Monday, February 4, 2013 / Notices
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–2013–04 on the
subject line.
Paper Comments
mstockstill on DSK4VPTVN1PROD with NOTICES
• 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–2013–04. 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–2013–04, and should be
submitted on or before February 25,
2013.
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19:26 Feb 01, 2013
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For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–02300 Filed 2–1–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–68762; File No. SR–
NASDAQ–2013–012]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend
NASDAQ Rule 4756 and Rule 4763
Regarding Modification of Previously
Entered Orders
January 29, 2013.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on January
18, 2013, The NASDAQ Stock Market
LLC (‘‘NASDAQ’’ or ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
NASDAQ proposes to amend
NASDAQ Rule 4756 (Entry and Display
of Quotes and Orders) and Rule 4763
(Short Sale Price Test Pursuant to Rule
201 of Regulation SHO) to stipulate how
Participants in the NASDAQ Market
Center System may modify previously
entered orders and to describe how
modified orders are processed.
NASDAQ proposes to implement the
proposed rule change 30 days after the
date of the filing or shortly thereafter.
The text of the proposed rule change
is below. Proposed new language is
italicized; deletions are bracketed.
4756. Entry and Display of Quotes and
Orders
(a) Entry of Orders—Participants can
enter orders into the System, subject to
the following requirements and
conditions:
(1)–(2) No change.
(3) Orders can be entered into the
System (or previously entered orders
17 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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7831
cancelled or modified) from 7:00 a.m.
until 8:00 p.m. Eastern Time.
Participants may modify a previously
entered order without cancelling it or
affecting the priority of the order on the
book solely for the purpose of modifying
the marking of a sell order as long,
short, or short exempt; provided,
however, that if an order is redesignated
as short, a Short Sale Period is in effect
under Rule 4763, and the order is not
priced at a Permitted Price or higher
under Rule 4763(e), the order will be
cancelled. In addition, a partial
cancellation of an order to reduce its
share size will not affect the priority of
the order on the book. Except as
provided in Rule 4761, all other
modifications of orders will result in the
replacement of the original order with a
new order with a new time stamp.
(b)–(c) No change.
*
*
*
*
*
4763. Short Sale Price Test Pursuant to
Rule 201 of Regulation SHO
(a)–(d) No change.
(e) Re-pricing of Orders during Short
Sale Period. Except as provided below,
[D]during the Short Sale Period, short
sale orders that are limited to the
national best bid or lower and short sale
market orders will be re-priced by the
System one minimum allowable price
increment above the current national
best bid (‘‘Permitted Price’’). To reflect
declines in the national best bid, the
Exchange will continue to re-price a
short sale order at the lowest Permitted
Price down to the order’s original limit
price, or if a market order, until the
order is filled. Non-displayed orders
between the NASDAQ bid and offer at
the time of receipt will also be re-priced
upward to a Permitted Price to
correspond with a rise in the national
best bid.
(1)–(2) No change.
(3) During the Short Sale Period, if an
order was entered as a long sale order
or a short sale exempt order but is
subsequently marked pursuant to
NASDAQ Rule 4756(a)(3) as a short sale
order, the System will cancel the order
unless it is priced at a Permitted Price
or higher.
(f)–(g) No change.
*
*
*
*
*
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
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
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]]>Agencies
[Federal Register Volume 78, Number 23 (Monday, February 4, 2013)]
[Notices]
[Pages 7828-7831]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-02300]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68758; File No. SR-NYSEArca-2013-04]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Amending the NYSE
Arca Options Fee Schedule To Revise Qualification Thresholds for Tiered
Customer Posting Credits
January 29, 2013.
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 January 15, 2013, 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
(``Fee Schedule'') to revise the qualification thresholds for tiered
Customer posting credits for electronic executions in Penny Pilot
issues. The Exchange proposes to make the fee change operative on
February 1, 2013. 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 revise the
qualification thresholds for tiered Customer \4\ posting credits for
electronic executions in Penny Pilot issues.\5\ The Exchange proposes
to make the fee change operative on February 1, 2013.
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\4\ Under NYSE Arca Options Rule 6.1(b)(29), the term
``Customer'' has the same definition as Rule 15c3-1(c)(6) under the
Act, which excludes certain broker-dealers.
\5\ As provided under NYSE Arca Options Rule 6.72, options on
certain issues have been approved to trade with a minimum price
variation of $0.01 as part of a pilot program that is currently
scheduled to expire on March 31, 2013. See Securities Exchange Act
Release No. 68426, (December 13, 2012) 77 FR 75224 (December 19,
2012) (SR-NYSEArca-2012-135).
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Currently, the Exchange provides credits for posted electronic
Customer executions in Penny Pilot issues for OTP Holders and OTP Firms
that meet the following execution thresholds:
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----------------------------------------------------------------------------------------------------------------
Tier Qualification basis (average electronic executions Credit applied to posted
per day) electronic customer
executions in Penny Pilot
issues
----------------------------------------------------------------------------------------------------------------
Base......................... ................ ................ ............... ($0.25)
Tier 1....................... 15,000 Contracts ................ ............... ($0.38)
from Customer
Posted Orders
in Penny Pilot
Issues.
Tier 2....................... 25,000 Contracts 75,000 Contracts ............... ($0.40)
from Customer from Posted
Posted Orders Orders in Penny
in Penny Pilot Pilot Issues,
Issues, or all account
types.*
Tier 3....................... 50,000 Contracts ................ ............... ($0.43)
from Customer
Posted Orders
in Penny Pilot
Issues.
Tier 4....................... 65,000 Contracts 100,000 100,000 ($0.44)
from Customer Contracts from Contracts from
Posted Orders Posted Orders Customer
in Penny Pilot in Penny Pilot Posted and
Issues Plus Issues, all Removing
0.3% of U.S. account types,* Orders in
Equity Market or Penny Pilot
Share Posted Issues.
and Executed on
NYSE Arca
Equity Market,*
or
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* Includes transaction volume from the OTP Holder's or OTP Firm's affiliates.
The Exchange proposes to revise the qualification thresholds for
tiered Customer posting credits for electronic executions in Penny
Pilot issues so that the qualification thresholds for tiered Customer
posting credits will be based not on a fixed number of contracts but
instead on a percentage of average daily volume (``ADV'') of Customer
electronic equity and ETF option contracts executed by an OTP Holder or
OTP Firm on the Exchange relative to the overall Total Industry
Customer equity and ETF option ADV.\6\ The Exchange
[[Page 7829]]
proposes the following qualification thresholds for tiered Customer
posting credits for electronic executions in Penny Pilot issues:
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\6\ The OCC provides volume information in two product
categories: Equity and ETF volume and index volume, and the
information can be filtered to show only Customer, firm, or market
maker account type. Equity and ETF Customer volume numbers are
available directly from the OCC each morning, or may be transmitted,
upon request, free of charge from the Exchange. Equity and ETF
Customer volume is a widely followed benchmark of industry volume
and is indicative of industry market share. Total Industry Customer
equity and ETF option ADV is comprised of those equity and ETF
option contracts that clear in the customer account type at OCC,
including Exchange-Traded Fund Shares, Trust Issued Receipts,
Partnership Units, and Index-Linked Securities such as Exchange-
Traded Notes (see NYSE Arca Options Rule 5.3(g)-(j)), and does not
include contracts that clear in either the firm or market maker
account type at OCC or contracts overlying a security other than an
equity or ETF security. The Exchange notes that there is one Penny
Pilot issue, Mini NDX 100 Stock Index, that does not overlie an
equity or ETF security that is eligible for the Customer posing
[sic] credit. This Penny Pilot issue is not included in equity and
ETF option ADV; however, the Exchange expects that the effect on the
calculations for the qualification thresholds for tiered Customer
posting credits to be negligible. Under the proposed rule change,
Total Industry Customer equity and ETF option ADV will be that which
is reported for the month by OCC in the month in which the credits
may apply. For example, February 2013 Total Industry Customer equity
and ETF option ADV will be used in determining what, if any, credit
an OTP Holder or OTP Firm may be eligible for based on the Customer
electronic equity and ETF option ADV it transacts on the Exchange in
February 2013.
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----------------------------------------------------------------------------------------------------------------
Tier Qualification basis (average electronic executions Credit applied to posted
per day) electronic customer
executions in Penny Pilot
issues
----------------------------------------------------------------------------------------------------------------
Base......................... ................ ................ ............... ($0.25)
Tier 1....................... At least 0.15% ................ ............... ($0.38)
of Total
Industry
Customer equity
and ETF option
ADV from
Customer Posted
Orders in Penny
Pilot Issues.
Tier 2....................... At least 0.25% At least 0.70% ............... ($0.40)
of Total of Total
Industry Industry
Customer equity Customer equity
and ETF option and ETF option
ADV from ADV from Posted
Customer Posted Orders in Penny
Orders in Penny Pilot Issues,
Pilot Issues, all account
or types.*
Tier 3....................... At least 0.50% ................ ............... ($0.43)
of Total
Industry
Customer equity
and ETF option
ADV from
Customer Posted
Orders in Penny
Pilot Issues.
Tier 4....................... At least 0.65% At least 0.95% At least 0.95% ($0.44)
of Total of Total of Total
Industry Industry Industry
Customer equity Customer equity Customer
and ETF option and ETF option equity and ETF
ADV from ADV from Posted option ADV
Customer Posted Orders in Penny from Customer
Orders in Penny Pilot Issues, Posted and
Pilot Issues all account Removing
Plus 0.3% of types,* or Orders in
U.S. Equity Penny Pilot
Market Share Issues.
Posted and
Executed on
NYSE Arca
Equity Market,*
or
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* Includes transaction volume from the OTP Holder's or OTP Firm's affiliates.
The Exchange notes that the calculations for the qualification
thresholds for tiered Customer posting credits only include electronic
executions. Qualified Contingent Cross (``QCC'') orders are neither
posted nor taken; thus QCC transactions are not included in the
calculation of posted or taken execution volumes. Orders routed to
another market for execution are not included in the calculation of
taking volume. In addition, Customer equity and ETF option ADV will not
include executions from Electronic Complex Order Executions.\7\
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\7\ The Exchange previously amended its Fee Schedule to exclude
Electronic Complex Order volume from counting toward the
qualification thresholds for tiered Customer posting credits for
electronic executions in Penny Pilot issues. See Securities Exchange
Act Release No. 68405, (December 11, 2012) 77 FR 74719 (December 17,
2012) (SR-NYSEArca-2012-137). The Exchange proposes to amend endnote
8 to explicitly exclude Electronic Complex Order Executions from the
qualification thresholds for tiered Customer posting credits.
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The Exchange notes that the proposed percentages are generally
equivalent to the current fixed thresholds at current volume levels,
but will have the advantage of fluctuating with industry volume. The
Exchange does not propose to amend the credits associated with these
tiers or other requirements for the tiers.
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 Act,\8\ in general, and furthers the
objectives of Section 6(b)(4) of the Act,\9\ 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. The Exchange also believes that the proposed rule change is
consistent with Section 6(b)(5) of the Act,\10\ 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.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(4).
\10\ 15 U.S.C. 78f(b)(5).
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The proposal to revise the qualification thresholds for tiered
Customer posting credits for electronic executions in Penny Pilot
issues so that they are based on the ADV of Total Industry Customer
electronic equity and ETF option contracts on the Exchange is
[[Page 7830]]
reasonable because it is designed to attract additional Customer
electronic equity and ETF option volume to the Exchange, which would
benefit all participants by offering greater price discovery, increased
transparency and an increased opportunity to trade on the Exchange.
Additionally, the Exchange believes that the proposed credits are
reasonable because they would incentivize OTP Holders and OTP Firms to
submit Customer electronic equity and ETF option orders to the Exchange
and would result in credits that are reasonably related to the
Exchange's market quality that is associated with higher volumes.
The Exchange also believes that the proposed qualification
thresholds for tiered Customer posting credits are reasonable because
the Exchange has continued to provide more than one method of
qualifying for certain of the tiers. For example, in addition to
posting Customer orders in Penny Pilot issues, the Tier 2 credit can
alternatively be reached by posting a certain volume of orders in all
account types, and the Tier 4 credit can be reached by posting a
certain volume of orders on the NYSE Arca Equity Market, posting a
certain volume of orders in all account types, or posting or removing a
certain volume of orders in Penny Pilot issues. The Exchange believes
that the aspect of the proposed change related to the activity of an
affiliated ETP Holder on NYSE Arca Equities is reasonable because it
would encourage increased trading activity on both the NYSE Arca equity
and option markets.
The Exchange believes that using a percentage based threshold
rather than a fixed threshold is reasonable because it would allow the
threshold to account for fluctuating industry volume. The Exchange also
believes that the proposed qualification thresholds for tiered Customer
posting credits are reasonable because they will reward OTP Holders and
OTP Firms with a greater credit for posted electronic Customer
executions in Penny Pilot issues when they bring a larger number of
orders to the Exchange.
The Exchange believes that the proposed credits are equitable and
not unfairly discriminatory because they will be available to all OTP
Holders and OTP Firms that execute posted electronic Customer orders on
the Exchange on an equal and non-discriminatory basis, in particular
because they would be based on a variable rather than a fixed
threshold. The Exchange believes that providing methods for achieving
the credits not based solely on posted electronic Customer Executions
in Penny Pilot issues is equitable and not unfairly discriminatory
because it would continue to result in more OTP Holders and OTP Firms
qualifying for the credits and therefore reducing their overall
transaction costs on the Exchange. The Exchange also believes that the
proposed credits are not new or novel because at least one other
exchange has a customer tier based on Total Industry Customer equity
and ETF option volume.\11\ The Exchange believes that the aspect of the
proposed change related to the activity of an affiliated ETP Holder on
NYSE Arca Equities is equitable and not unfairly discriminatory because
it is designed to continue to bring additional posted order flow to
NYSE Arca Equities, so as to provide additional opportunities for all
ETP Holders to trade on NYSE Arca Equities.\12\
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\11\ See NYSE Amex Options Fee Schedule, dated December 1, 2012,
available at https://globalderivatives.nyx.com/sites/globalderivatives.nyx.com/files/nyse_amex_options_fee_schedule_12_01_12__.pdf. See also Securities Exchange Act Release No.
68036 (October 11, 2012), 77 FR 63900 (October 17, 2012) (SR-
NYSEMKT-2012-50).
\12\ The Exchange notes that this aspect of the proposed change
related to the activity of an affiliated ETP Holder on NYSE Arca
Equities has been previously included in an immediately effective
filing. See Securities Exchange Act Release No. 67020, (May 18,
2012) 77 FR 31050 (May 24, 2012) (SR-NYSEArca-2012-41).
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The Exchange believes that the proposed changes 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.
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 because it is designed to
attracted [sic] additional volume, in particular posted electronic
Customer executions, to the Exchange, which would promote price
discovery and transparency in the securities markets thereby
benefitting competition in the industry. As stated above, the Exchange
believes that the proposed change would impact all similarly situated
OTP Holders and OTP Firms that post electronic Customer executions on
the Exchange equally, and as such, the proposed change would not impose
a disparate burden on competition either among or between classes of
market participants. In addition, providing an alternative
qualification basis for certain tiers by including volume from
affiliates allows a firm with a diverse business structure, but not a
concentration on Customers orders only, to earn a higher credit for
their Customers by posting order flow that improves the overall market
quality, and encourages posting competitive prices, which result in
better available markets for Customer orders.\13\ 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 promotes a competitive environment.
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\13\ The Exchange notes that the Commission has not previously
determined that this aspect of the proposed change related to the
activity of an affiliated ETP Holder on NYSE Arca Equities would
impose any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act. See id.
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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) \14\ of the Act and subparagraph (f)(2) of Rule
19b-4 \15\ thereunder, because it establishes a due, fee, or other
charge imposed by the NYSE Arca.
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\14\ 15 U.S.C. 78s(b)(3)(A).
\15\ 17 CFR 240.19b-4(f)(2).
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At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \16\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\16\ 15 U.S.C. 78s(b)(2)(B).
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[[Page 7831]]
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-2013-04 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-2013-04. 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-2013-04, and should
be submitted on or before February 25, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-02300 Filed 2-1-13; 8:45 am]
BILLING CODE 8011-01-P
