Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending the NYSE Arca Options Fee Schedule to Change the Monthly Fees for Option Trading Permits and Raise the Fee Cap that Applies to Certain Firm and Broker Dealer Open Outcry Executions, 34681-34683 [2013-13638]
Download as PDF
Federal Register / Vol. 78, No. 111 / Monday, June 10, 2013 / Notices
to determine whether the proposed rule
should be approved or disapproved.
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:
mstockstill on DSK4VPTVN1PROD with NOTICES
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-2013–57 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-2013–57. This
file number should be included on the
subject line if e-mail is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet website (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 Section, 100 F Street NE.,
Washington, DC 20549–1090, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing will also be available for
inspection and copying at the NYSE’s
principal office and on its Internet Web
site at www.nyse.com. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–
NYSEArca–2013–57 and should be
submitted on or before July 1, 2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Kevin M. ONeill,
Deputy Secretary.
[FR Doc. 2013–13652 Filed 6–7–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–69690; File No. SR–
NYSEArca–2013–55]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Amending the NYSE Arca
Options Fee Schedule to Change the
Monthly Fees for Option Trading
Permits and Raise the Fee Cap that
Applies to Certain Firm and Broker
Dealer Open Outcry Executions
June 4, 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 May 21,
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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amending
[sic] the NYSE Arca Options Fee
Schedule (‘‘Fee Schedule’’) to change
the monthly fees for Option Trading
Permits (‘‘OTPs’’) and raise the fee cap
that applies to certain Firm and Broker
Dealer open outcry executions. The
Exchange proposes to make the fee
changes operative on June 1, 2013 [sic]
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
1 15
U.S.C.78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
14 17
CFR 200.30–3(a)(12).
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34681
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend its
Fee Schedule to change the monthly
fees for OTPs and raise the fee cap that
applies to certain Firm and Broker
Dealer open outcry executions. The
Exchange proposes to make the fee
changes operative on June 1, 2013.
The Exchange requires that a Market
Maker have an OTP in order to operate
on the Exchange. For electronic Market
Making, a Market Maker must have four
OTPs in order to submit electronic
quotations in every class on the
Exchange. These four Market Maker
OTPs also permit the firm to have at
least one trader on the Floor of the
Exchange as a Floor-based open outcry
Market Maker. However, the manner in
which those OTPs are assigned to
individual traders may reduce the
permissible number of issues in which
electronic quotes are assigned. For
instance, two associated Market Makers
may assign OTP 1, 2, and 3 to trader A,
while the fourth is assigned to trader B.
Trader A may now only stream quotes
electronically in 750 issues, while trader
B may submit quotes electronically in
100 issues. To retain the appointment in
more than 750 issues, all four OTPs
must be in the same name, and to have
an additional individual Market Maker
on the Floor, a fifth OTP must be
acquired.
To tailor the recovery of costs more
closely to the basic costs for
administration of an OTP Holder or OTP
Firm, the Exchange is proposing to
introduce a new tiered pricing model for
Market Maker OTPs. The Exchange
currently charges $4,000 per OTP per
month for a Market Maker firm that has
between one and four Market Maker
OTPs and $1,000 per month for each
additional Market Maker OTP. The
Exchange proposes to charge $6,000 per
month for the first Market Maker OTP,
$5,000 per month for the second Market
Maker OTP, $4,000 per month for the
third Market Maker OTP, and $3,000 per
month for the fourth Market Maker OTP.
The Exchange would continue to charge
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34682
Federal Register / Vol. 78, No. 111 / Monday, June 10, 2013 / Notices
mstockstill on DSK4VPTVN1PROD with NOTICES
$1,000 per month for each additional
Market Maker OTP. Thus, under the
proposed change, a firm would pay
$2,000 more for the first OTP, $1,000
more for the second OTP, the same for
the third OTP, $1,000 less for the fourth
OTP, and the same for each additional
OTP thereafter. In order to have the
ability to make electronic markets in
every class on the Exchange, a Market
Maker firm would pay $18,000 per
month for four Market Maker OTPs and
$1,000 per month for each additional
trader on the Floor of the Exchange
operating as an open outcry Market
Maker. This would be an increase of
$2,000 over the current Fee Schedule.
The Exchange is proposing the tiered
pricing model because the level of
support the Exchange must provide
each Market Maker firm per Market
Maker OTP decreases as the number of
Market Maker OTPs increases (i.e., the
first Market Maker OTP requires the
most support from the Exchange), and
the tiered model is consistent with the
pricing practices of other exchanges, as
described below.
The Exchange also proposes to raise
the fee cap that applies to certain Firm
and Broker Dealer open outcry
executions. Currently, the Exchange
imposes a $75,000 cap per month on
Firm Proprietary fees and Broker Dealer
fees for transactions in standard option
contracts cleared in the customer range
for open outcry executions, exclusive of
strategy executions, royalty fees and
Firm trades executed via a joint back
office agreement. The Exchange has
made recent changes to its Fee Schedule
to encourage Customer order flow.4 As
a result, Firm and Broker Dealer open
outcry executions subject to this fee cap
have increased, and the Exchange
believes that the current fee cap is too
low. As such, the Exchange proposes to
raise the fee cap to $100,000, which the
Exchange believes is in line with
current market activity and would
continue to encourage Firms and Broker
Dealers to engage in a high level of open
outcry executions. The Exchange notes
that it has not raised the fee cap since
it was introduced in 2010.5 The
Exchange also proposes to make a
conforming change to endnote 9.
The proposed changes are not
otherwise intended to address any other
problem, and the Exchange is not aware
4 See e.g., Securities Exchange Act Release No.
68898 (Feb. 11, 2013), 78 FR 11261 (Feb. 15, 2013)
(SR–NYSEArca–2013–11).
5 See Securities Exchange Act Release Nos. 63471
(Dec. 8, 2010), 75 FR 77928 (Dec. 14, 2010) (SR–
NYSEArca–2010–108) (adopting $75,000 fee cap);
67419 (July 12, 2012), 77 FR 42343 (July 18, 2012)
(SR–NYSEArca–2012–71) (extending fee cap to
Broker Dealers).
VerDate Mar<15>2010
16:56 Jun 07, 2013
Jkt 229001
of any significant problem that the
affected market participants would have
in complying with the proposed
changes.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act,6 in general, and
furthers the objectives of Sections
6(b)(4) and 6(b)(5) 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 believes that the
proposed Market Maker OTP pricing
tiers are reasonable because the level of
support the Exchange must provide
each Market Maker firm per Market
Maker OTP decreases as the number of
Market Maker OTPs increases. The
Exchange’s administrative costs are
higher to set up and maintain a Market
Maker Firm, such as the paperwork
relating to having a Market Maker
operation. There is a marginal decrease
in administrative costs as the number of
Market Maker OTPs increases. The
Exchange also believes that a decreasing
price structure for successive OTPs may
encourage Market Maker firms to
purchase additional OTPs and quote
more issues, thereby enhancing
liquidity on the Exchange. At least two
other exchanges also offer similar tiered
pricing models for their trading permits
where the price decreases with each
successive permit. For example, the
Exchange’s affiliate, NYSE Amex
Options, has a sliding scale for market
maker Amex Trading Permits (‘‘ATPs’’).
NYSE Amex Options charges $8,000 per
month for the first ATP, $6,000 per
month for the second ATP, $5,000 per
month for the third ATP, $4,000 for the
fourth ATP, $3,000 per month for the
fifth ATP, and $2,000 per month for
each additional ATP.8 A market maker
must have five ATPs in order to trade
all issues on NYSE Amex Options,
which cost $26,000. Chicago Board
Options Exchange, Inc. (‘‘CBOE’’) also
has a sliding scale for Trading Permit
Holders (‘‘TPHs’’) who are acting as
market makers. The sliding scale is
$5,500 per month for permits one to 10,
$4,000 per month for permits 11 to 20,
and $2,500 per month for permits 21
6 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4) and (5).
8 See NYSE Amex Options Fee Schedule, dated
as of May 1, 2013, available at https://global
derivatives.nyx.com/sites/globalderivatives.nyx.
com/files/nyse_amex_options_fee_schedule_
050113.pdf.
7 15
PO 00000
Frm 00048
Fmt 4703
Sfmt 4703
and higher.9 The Exchange has
estimated that a CBOE market maker
would need 34 permits to trade all
issues on CBOE, which cost $130,000,
assuming the market maker qualifies for
the sliding scale permit rates. The
Exchange notes that its proposed fees of
$18,000 for four Market Maker OTPs to
cover all issues on the Exchange will
still be less than these other two
exchanges.
As stated above, it is equitable and
not unfairly discriminatory for the
Exchange to charge more for the first
two OTPs and the same or less for the
successive OTPs because the level of
support the Exchange must provide for
the initial OTPs decreases as the
number of Market Maker OTPs
increases. The Exchange believes that it
is equitable and not unfairly
discriminatory to offer favorable pricing
to Market Maker firms that quote more
issues on the Exchange because that
activity promotes liquidity on the
Exchange, which benefits all market
participants.
The Exchange believes that raising the
fee cap for Firm and Broker Dealer open
outcry executions is reasonable because
it will strike a more appropriate balance
between encouraging such executions
and generating adequate revenues in
light of the Exchange’s costs associated
with such trading activity. As noted
above, the Exchange has not increased
the fee cap since it was introduced in
2010. In addition, the proposed fee cap
is similar to the fee cap imposed on at
least one other exchange.10 The
Exchange further believes that the
proposed $100,000 fee cap is equitable
and not unfairly discriminatory because
even at such increased level, it would
continue to encourage Firms and Broker
Dealers to engage in a high level of open
outcry executions, which would
increase liquidity on the Exchange and
benefit all market participants. The
Exchange believes that it is equitable
and not unfairly discriminatory to
continue to offer the fee cap to Firms
and Broker Dealers, and not other
market participants, because its purpose
is to attract large block order flow to the
floor of the Exchange, where such
orders can be better handled in
9 The discounted permit rates of $4,000 and
$2,500 are only available to TPHs who commit to
a full year of that number of permits. See CBOE Fee
Schedule, dated as of May 8, 2013, available at
https://www.cboe.com/framed/PDFframed.aspx?
content=/publish/feeschedule/CBOEFeeSchedule.
pdf§ion=SEC_RESOURCES&title=CBOE%20%20CBOE.
10 Under the NYSE Amex Options Fee Schedule,
fees for Firm Proprietary manual trades are
aggregated and capped at $100,000 per month for
member firms, with certain exceptions. See n.6 of
the NYSE Amex Options Fee Schedule, supra n.8.
E:\FR\FM\10JNN1.SGM
10JNN1
Federal Register / Vol. 78, No. 111 / Monday, June 10, 2013 / Notices
comparison with electronic orders that
are not negotiable.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
In accordance with Section 6(b)(8) of
the Act,11 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.
The proposed Market Maker OTP fees
will allow the Exchange to remain
competitive with other exchanges by
offering a sliding scale of OTP fees
while keeping its fees less than certain
of its competitors. The Exchange
believes that raising the fee cap for Firm
and Broker Dealers will promote
competition because [sic] would
continue to encourage liquidity on the
Exchange via open outcry executions,
which would benefit all market
participants. 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.
mstockstill on DSK4VPTVN1PROD with NOTICES
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) 12 of the Act and
subparagraph (f)(2) of Rule 19b–4 13
thereunder, because it establishes a due,
fee, or other charge imposed by the
Exchange.
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
11 15
U.S.C. 78f(b)(8).
U.S.C. 78s(b)(3)(A).
13 17 CFR 240.19b–4(f)(2).
under Section 19(b)(2)(B) 14 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
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–2013–55 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–2013–55. 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
publicly available. All submissions
should refer to File Number SR–
12 15
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16:56 Jun 07, 2013
14 15
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PO 00000
NYSEArca–2013–55 and should be
submitted on or before July 1, 2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–13638 Filed 6–7–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–69684; File No. SR–BX–
2013–016]
Self-Regulatory Organizations;
NASDAQ OMX BX Inc.; Order
Instituting Proceedings To Determine
Whether To Approve or Disapprove the
Proposed Rule Change To Adopt a
Directed Order Process
June 3, 2013.
I. Introduction
On February 21, 2013, NASDAQ OMX
BX Inc. (‘‘Exchange’’ or ‘‘BX’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’),1 and
Rule 19b–4 thereunder,2 a proposed rule
change to establish a directed order
process. The proposed rule change was
published for comment in the Federal
Register on March 11, 2013.3 The
Commission received a comment letter
from one commenter on the proposal,4
a letter responding to the comment,5
and a follow up comment letter from the
same commenter.6 In addition, on April
17, 2013, the Exchange filed
Amendment No. 1 to the proposed rule
change.7 On April 22, 2013, the
15 17
CFR 200.30–3(a)(12).
U.S.C. 78a.
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 69040
(March 5, 2013), 78 FR 15385 (March 11, 2013)
(‘‘Notice’’).
4 See Letter, dated April 2, 2013, to the
Commission from Janet McGuiness, Executive Vice
President, Secretary and General Counsel, NYSE
Euronext (‘‘NYSE Letter’’).
5 See Letter, April 17, 2013, to the Commission
from Edith Hallahan, Principal Associate General
Counsel, BX (‘‘BX Response Letter’’).
6 See Letter, dated May 10, 2013, to the
Commission from Janet McGuiness, Executive Vice
President, Secretary and General Counsel, NYSE
Euronext (‘‘NYSE Response Letter’’).
7 Amendment No. 1, which the Commission
believes is technical in nature and not subject to
notice and comment, clarifies that, when a Directed
Order (as defined below) is submitted in an options
class that is subject to the price/time priority on the
Exchange, the Directed Market Maker’s Directed
Allocation (as defined below) would be capped at
40%, unless the Directed Market Maker’s size at the
first position in time priority at that price exceeds
1 15
U.S.C. 78s(b)(2)(B).
Frm 00049
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34683
Continued
Sfmt 4703
E:\FR\FM\10JNN1.SGM
10JNN1
Agencies
[Federal Register Volume 78, Number 111 (Monday, June 10, 2013)]
[Notices]
[Pages 34681-34683]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-13638]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69690; File No. SR-NYSEArca-2013-55]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Amending the NYSE
Arca Options Fee Schedule to Change the Monthly Fees for Option Trading
Permits and Raise the Fee Cap that Applies to Certain Firm and Broker
Dealer Open Outcry Executions
June 4, 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 May 21, 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 Substance
of the Proposed Rule Change
The Exchange proposes to amending [sic] the NYSE Arca Options Fee
Schedule (``Fee Schedule'') to change the monthly fees for Option
Trading Permits (``OTPs'') and raise the fee cap that applies to
certain Firm and Broker Dealer open outcry executions. The Exchange
proposes to make the fee changes operative on June 1, 2013 [sic] The
text of the proposed rule change is available on the Exchange's Web
site at www.nyse.com, at the principal office of the Exchange, and at
the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend its Fee Schedule to change the
monthly fees for OTPs and raise the fee cap that applies to certain
Firm and Broker Dealer open outcry executions. The Exchange proposes to
make the fee changes operative on June 1, 2013.
The Exchange requires that a Market Maker have an OTP in order to
operate on the Exchange. For electronic Market Making, a Market Maker
must have four OTPs in order to submit electronic quotations in every
class on the Exchange. These four Market Maker OTPs also permit the
firm to have at least one trader on the Floor of the Exchange as a
Floor-based open outcry Market Maker. However, the manner in which
those OTPs are assigned to individual traders may reduce the
permissible number of issues in which electronic quotes are assigned.
For instance, two associated Market Makers may assign OTP 1, 2, and 3
to trader A, while the fourth is assigned to trader B. Trader A may now
only stream quotes electronically in 750 issues, while trader B may
submit quotes electronically in 100 issues. To retain the appointment
in more than 750 issues, all four OTPs must be in the same name, and to
have an additional individual Market Maker on the Floor, a fifth OTP
must be acquired.
To tailor the recovery of costs more closely to the basic costs for
administration of an OTP Holder or OTP Firm, the Exchange is proposing
to introduce a new tiered pricing model for Market Maker OTPs. The
Exchange currently charges $4,000 per OTP per month for a Market Maker
firm that has between one and four Market Maker OTPs and $1,000 per
month for each additional Market Maker OTP. The Exchange proposes to
charge $6,000 per month for the first Market Maker OTP, $5,000 per
month for the second Market Maker OTP, $4,000 per month for the third
Market Maker OTP, and $3,000 per month for the fourth Market Maker OTP.
The Exchange would continue to charge
[[Page 34682]]
$1,000 per month for each additional Market Maker OTP. Thus, under the
proposed change, a firm would pay $2,000 more for the first OTP, $1,000
more for the second OTP, the same for the third OTP, $1,000 less for
the fourth OTP, and the same for each additional OTP thereafter. In
order to have the ability to make electronic markets in every class on
the Exchange, a Market Maker firm would pay $18,000 per month for four
Market Maker OTPs and $1,000 per month for each additional trader on
the Floor of the Exchange operating as an open outcry Market Maker.
This would be an increase of $2,000 over the current Fee Schedule. The
Exchange is proposing the tiered pricing model because the level of
support the Exchange must provide each Market Maker firm per Market
Maker OTP decreases as the number of Market Maker OTPs increases (i.e.,
the first Market Maker OTP requires the most support from the
Exchange), and the tiered model is consistent with the pricing
practices of other exchanges, as described below.
The Exchange also proposes to raise the fee cap that applies to
certain Firm and Broker Dealer open outcry executions. Currently, the
Exchange imposes a $75,000 cap per month on Firm Proprietary fees and
Broker Dealer fees for transactions in standard option contracts
cleared in the customer range for open outcry executions, exclusive of
strategy executions, royalty fees and Firm trades executed via a joint
back office agreement. The Exchange has made recent changes to its Fee
Schedule to encourage Customer order flow.\4\ As a result, Firm and
Broker Dealer open outcry executions subject to this fee cap have
increased, and the Exchange believes that the current fee cap is too
low. As such, the Exchange proposes to raise the fee cap to $100,000,
which the Exchange believes is in line with current market activity and
would continue to encourage Firms and Broker Dealers to engage in a
high level of open outcry executions. The Exchange notes that it has
not raised the fee cap since it was introduced in 2010.\5\ The Exchange
also proposes to make a conforming change to endnote 9.
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\4\ See e.g., Securities Exchange Act Release No. 68898 (Feb.
11, 2013), 78 FR 11261 (Feb. 15, 2013) (SR-NYSEArca-2013-11).
\5\ See Securities Exchange Act Release Nos. 63471 (Dec. 8,
2010), 75 FR 77928 (Dec. 14, 2010) (SR-NYSEArca-2010-108) (adopting
$75,000 fee cap); 67419 (July 12, 2012), 77 FR 42343 (July 18, 2012)
(SR-NYSEArca-2012-71) (extending fee cap to Broker Dealers).
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The proposed changes are not otherwise intended to address any
other problem, and the Exchange is not aware of any significant problem
that the affected market participants would have in complying with the
proposed changes.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\6\ in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5) 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.
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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange believes that the proposed Market Maker OTP pricing
tiers are reasonable because the level of support the Exchange must
provide each Market Maker firm per Market Maker OTP decreases as the
number of Market Maker OTPs increases. The Exchange's administrative
costs are higher to set up and maintain a Market Maker Firm, such as
the paperwork relating to having a Market Maker operation. There is a
marginal decrease in administrative costs as the number of Market Maker
OTPs increases. The Exchange also believes that a decreasing price
structure for successive OTPs may encourage Market Maker firms to
purchase additional OTPs and quote more issues, thereby enhancing
liquidity on the Exchange. At least two other exchanges also offer
similar tiered pricing models for their trading permits where the price
decreases with each successive permit. For example, the Exchange's
affiliate, NYSE Amex Options, has a sliding scale for market maker Amex
Trading Permits (``ATPs''). NYSE Amex Options charges $8,000 per month
for the first ATP, $6,000 per month for the second ATP, $5,000 per
month for the third ATP, $4,000 for the fourth ATP, $3,000 per month
for the fifth ATP, and $2,000 per month for each additional ATP.\8\ A
market maker must have five ATPs in order to trade all issues on NYSE
Amex Options, which cost $26,000. Chicago Board Options Exchange, Inc.
(``CBOE'') also has a sliding scale for Trading Permit Holders
(``TPHs'') who are acting as market makers. The sliding scale is $5,500
per month for permits one to 10, $4,000 per month for permits 11 to 20,
and $2,500 per month for permits 21 and higher.\9\ The Exchange has
estimated that a CBOE market maker would need 34 permits to trade all
issues on CBOE, which cost $130,000, assuming the market maker
qualifies for the sliding scale permit rates. The Exchange notes that
its proposed fees of $18,000 for four Market Maker OTPs to cover all
issues on the Exchange will still be less than these other two
exchanges.
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\8\ See NYSE Amex Options Fee Schedule, dated as of May 1, 2013,
available at https://globalderivatives.nyx.com/sites/globalderivatives.nyx.com/files/nyse_amex_options_fee_schedule_050113.pdf.
\9\ The discounted permit rates of $4,000 and $2,500 are only
available to TPHs who commit to a full year of that number of
permits. See CBOE Fee Schedule, dated as of May 8, 2013, available
at https://www.cboe.com/framed/PDFframed.aspx?content=/publish/feeschedule/CBOEFeeSchedule.pdf§ion=SEC_RESOURCES&title=CBOE%20-%20CBOE.
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As stated above, it is equitable and not unfairly discriminatory
for the Exchange to charge more for the first two OTPs and the same or
less for the successive OTPs because the level of support the Exchange
must provide for the initial OTPs decreases as the number of Market
Maker OTPs increases. The Exchange believes that it is equitable and
not unfairly discriminatory to offer favorable pricing to Market Maker
firms that quote more issues on the Exchange because that activity
promotes liquidity on the Exchange, which benefits all market
participants.
The Exchange believes that raising the fee cap for Firm and Broker
Dealer open outcry executions is reasonable because it will strike a
more appropriate balance between encouraging such executions and
generating adequate revenues in light of the Exchange's costs
associated with such trading activity. As noted above, the Exchange has
not increased the fee cap since it was introduced in 2010. In addition,
the proposed fee cap is similar to the fee cap imposed on at least one
other exchange.\10\ The Exchange further believes that the proposed
$100,000 fee cap is equitable and not unfairly discriminatory because
even at such increased level, it would continue to encourage Firms and
Broker Dealers to engage in a high level of open outcry executions,
which would increase liquidity on the Exchange and benefit all market
participants. The Exchange believes that it is equitable and not
unfairly discriminatory to continue to offer the fee cap to Firms and
Broker Dealers, and not other market participants, because its purpose
is to attract large block order flow to the floor of the Exchange,
where such orders can be better handled in
[[Page 34683]]
comparison with electronic orders that are not negotiable.
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\10\ Under the NYSE Amex Options Fee Schedule, fees for Firm
Proprietary manual trades are aggregated and capped at $100,000 per
month for member firms, with certain exceptions. See n.6 of the NYSE
Amex Options Fee Schedule, supra n.8.
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B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with Section 6(b)(8) of the Act,\11\ 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. The proposed Market Maker OTP fees will allow
the Exchange to remain competitive with other exchanges by offering a
sliding scale of OTP fees while keeping its fees less than certain of
its competitors. The Exchange believes that raising the fee cap for
Firm and Broker Dealers will promote competition because [sic] would
continue to encourage liquidity on the Exchange via open outcry
executions, which would benefit all market participants. 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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\11\ 15 U.S.C. 78f(b)(8).
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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) \12\ of the Act and subparagraph (f)(2) of Rule
19b-4 \13\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 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) \14\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\14\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-NYSEArca-2013-55 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-2013-55. 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 publicly available. All
submissions should refer to File Number SR-NYSEArca-2013-55 and should
be submitted on or before July 1, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-13638 Filed 6-7-13; 8:45 am]
BILLING CODE 8011-01-P