Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Its Price List To Eliminate Transaction Fees for Midpoint Passive Liquidity Orders That Remove Liquidity From the Exchange and That are Designated With a “Retail” Modifier as Defined in Rule 13-Equities, 1541-1544 [2015-00210]

Download as PDF Federal Register / Vol. 80, No. 7 / Monday, January 12, 2015 / Notices confusion on the part of members that expect both types of corporate events to receive consistent treatment. B. Self-Regulatory Organization’s Statement on Burden on Competition BX does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. Specifically, by offering market participants additional options with regard to management of open orders, the change has the potential to enhance BX’s competitiveness with respect to other trading venues, thereby promoting greater competition. Moreover, the change does not burden competition in that it does not restrict the ability of members to enter and update trading interest in BX. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action tkelley on DSK3SPTVN1PROD with NOTICES Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act 12 and subparagraph (f)(6) of Rule 19b–4 thereunder.13 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. 12 15 U.S.C. 78s(b)(3)(a)(ii). CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. 13 17 VerDate Sep<11>2014 17:35 Jan 09, 2015 Jkt 235001 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– BX–2014–061 on the subject line. Paper Comments • Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–BX–2014–061. 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–BX– 2014–061, and should be submitted on or before February 2, 2015. PO 00000 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.14 Brent J. Fields, Secretary. [FR Doc. 2015–00219 Filed 1–9–15; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–73991; File No. SR– NYSEMKT–2014–108] Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Its Price List To Eliminate Transaction Fees for Midpoint Passive Liquidity Orders That Remove Liquidity From the Exchange and That are Designated With a ‘‘Retail’’ Modifier as Defined in Rule 13—Equities January 6, 2015. 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 22, 2014, NYSE MKT LLC (the ‘‘Exchange’’ or ‘‘NYSE MKT’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the 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 Substance of the Proposed Rule Change The Exchange proposes to amend its Price List to eliminate transaction fees for Midpoint Passive Liquidity (‘‘MPL’’) Orders that remove liquidity from the Exchange and that are designated with a ‘‘retail’’ modifier as defined in Rule 13—Equities. The Exchange proposes to implement the fee change effective January 2, 2015. 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. 14 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. 1 15 Frm 00049 Fmt 4703 Sfmt 4703 1541 E:\FR\FM\12JAN1.SGM 12JAN1 1542 Federal Register / Vol. 80, No. 7 / Monday, January 12, 2015 / Notices 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. tkelley on DSK3SPTVN1PROD with NOTICES 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 Price List to eliminate transaction fees for MPL Orders that remove liquidity from the Exchange and that are designated with a ‘‘retail’’ modifier as defined in Rule 13—Equities (‘‘Rule 13’’). The Exchange proposes to implement the fee change effective January 2, 2015. For securities priced $1.00 or greater, the Exchange currently charges a fee of $0.0028 per share for all MPL Orders 4 that remove liquidity from the NYSE MKT. For non-ETP securities traded pursuant to unlisted trading privileges (‘‘UTP’’) priced at $1.00 or greater, the Exchange currently charges a fee of $0.0030 for all MPL Orders that remove liquidity from the Exchange. For ETPs traded pursuant to UTP, the Exchange currently charges a fee of $0.0029 for all MPL Orders that remove liquidity from the Exchange. The Exchange proposes to eliminate the fee for MPL Orders that remove liquidity from the Exchange that are designated with a ‘‘retail’’ modifier as defined in Rule 13. To be eligible for the proposed pricing for MPL Orders, an MPL Order would need to meet the requirements to be designated as ‘‘retail’’ pursuant to Rule 13. An order designated as ‘‘retail’’ under Rule 13 is an agency or riskless principal order that meets the criteria of Financial Industry Regulatory Authority, Inc. Rule 5320.03 and that (1) originates from a natural person and (2) is submitted to the Exchange by a member organization, provided that no change is made to the terms of the order with respect to price or side of market and the order does not originate from a 4 MPL Order is defined in Rule 13 as an undisplayed limit order that automatically executes at the mid-point of the protected best bid or offer (‘‘PBBO’’). VerDate Sep<11>2014 17:35 Jan 09, 2015 Jkt 235001 trading algorithm or any other computerized methodology.5 To submit an order with a ‘‘retail’’ modifier, a member or member organization must submit an attestation, in a form prescribed by the Exchange, that substantially all orders submitted as ‘‘retail’’ will qualify as such. Further, Rule 13 requires a member organization to have written policies and procedures reasonably designed to assure that it will only designate orders as ‘‘retail’’ if all requirements are met.6 In addition, a member organization would be required to designate such MPL Order as ‘‘retail’’ pursuant to Rule 13.7 The Exchange proposes to retain the fee for MPL Orders that remove liquidity from the Exchange but that are not designated with a ‘‘retail’’ modifier at the current rates. The proposed amended Price List would distinguish MPL Orders that remove liquidity and that are designated as ‘‘retail’’ under Rule 13, which would not be charged a fee, from MPL Orders that remove liquidity and that are not designated as ‘‘retail’’ under Rule 13, and which would continue to be charged the existing fee for MPL Orders that take liquidity. The Exchange proposes to make comparable amendments to the Price List relating to pricing applicable to Floor broker executions of MPL Orders. The proposed change is not otherwise intended to address any other issues, and the Exchange is not aware of any problems that members and member organizations would have in complying with the proposed change. 5 An order designated as ‘‘retail’’ under Rule 13 is separate and distinct from a ‘‘Retail Order’’ within the Retail Liquidity Program under Rule 107C. The proposed rule change solely concerns orders designated as ‘‘retail’’ pursuant to Rule 13. 6 Such written policies and procedures require the member organization to (1) exercise due diligence before entering a ‘‘retail’’ order to assure that entry as a ‘‘retail’’ order is in compliance with the applicable requirements, and (2) monitor whether orders entered as ‘‘retail’’ orders meet the applicable requirements. If a member organization represents ‘‘retail’’ orders from another brokerdealer customer, the member organization’s supervisory procedures must be reasonably designed to assure that the orders it receives from such broker-dealer customer that it designates as ‘‘retail’’ orders meet the definition of a ‘‘retail’’ order. The member organization must (i) obtain an annual written representation, in a form acceptable to the Exchange, from each broker-dealer customer that sends it orders to be designated as ‘‘retail’’ orders that entry of such orders as ‘‘retail’’ orders will be in compliance with the applicable requirements; and (ii) monitor whether its brokerdealer customer’s ‘‘retail’’ order flow meets the applicable requirements. 7 Currently, a member organization may designate an order as ‘‘retail’’ either by means of a specific tag in the order entry message, as with other order modifiers, or by designating a particular member or member organization mnemonic used at the Exchange as a ‘‘retail mnemonic.’’ PO 00000 Frm 00050 Fmt 4703 Sfmt 4703 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 Sections 6(b)(4) and 6(b)(5) 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 and does not unfairly discriminate between customers, issuers, brokers or dealers. The Exchange believes that removing a fee for MPL Orders that remove liquidity from the Exchange and that are designated as ‘‘retail’’ is reasonable because it will encourage the submission of orders that meet the requirements to be designated as ‘‘retail’’ to the Exchange, thus enhancing order execution opportunities for all participants, but specifically retail investors. The ‘‘retail’’ modifier under Rule 13 along with its pricing is designed to incentivize the submission of additional retail order flow to a public market like the Exchange.10 Moreover, the Exchange believes that markets and price discovery optimally function through the interactions of diverse flow types, and also believes that growth in internalization has required differentiation of retail order flow from other order flow types. As the Exchange has previously noted, a significant percentage of the orders of individual investors are executed overthe-counter.11 The Exchange accordingly further believes that the proposed change is reasonable because it would contribute to maintaining or increasing the proportion of retail flow in Exchange-listed securities that are executed on a registered national securities exchange, rather than executing in off-exchange venues. Finally, the Exchange notes that while the proposed price change would treat retail order flow differently from order flow submitted by other market participants, such segmentation would not be inconsistent with Section 6(b)(5) 8 15 U.S.C. 78f(b). U.S.C. 78f(b)(4) and (5). 10 Securities Exchange Act Release Nos. 72252 (May 27, 2014), 79 FR 31368 (June 2, 2014) (SR– NYSEMKT–2014–46) (introduction of ‘‘retail’’ modifier under Rule 13). 11 Securities Exchange Act Release Nos. 71878 (April 4, 2014), 79 FR 19936 (April 10, 2014) (SR– NYSEMKT–2014–25); see also Securities Exchange Act Release No. 34–73702 (Nov. 28, 2014), 79 FR 72049, 72051 (Dec. 4, 2014) (order approving NASDAQ OMX BX Retail Price Improvement Program and noting that most marketable retail order flow is executed in the over-the-counter markets, pursuant to bilateral agreements, without ever reaching a public exchange) (‘‘BX Retail Approval Order’’). 9 15 E:\FR\FM\12JAN1.SGM 12JAN1 Federal Register / Vol. 80, No. 7 / Monday, January 12, 2015 / Notices of the Act,12 which requires that the rules of an exchange are not designed to permit unfair discrimination. The Commission has previously recognized that the markets generally distinguish between retail investors, whose orders are considered desirable by liquidity providers because such retail investors are presumed on average to be less informed about short-term price movements, and professional traders, whose orders are presumed on average to be more informed.13 The Commission has further recognized that, because of this distinction, liquidity providers are generally inclined to offer price improvement to less informed retail orders than to more informed professional orders.14 The Exchange believes that the differentiation proposed herein is not designed to permit unfair discrimination, but instead is reasonably designed to attract retail flow to the Exchange, while helping to ensure that retail investors benefit from the better price that liquidity providers are willing to give their orders. The Exchange believes that the proposed increase of retail order flow to the Exchange might also create a desirable opportunity for institutional investors to interact with retail order flow that they are not able to reach currently. The Exchange therefore believes that the proposed change would further promote a competitive process around retail executions such that retail investors would receive better prices than they currently do through bilateral internalization arrangements. The Exchange believes that the transparency and competitiveness of the proposed rule change on an exchange market would result in better prices for retail investors.15 The proposed change is also equitable and not unfairly discriminatory because it would contribute to investors’ confidence in the fairness of their transactions and because it would benefit all investors by tkelley on DSK3SPTVN1PROD with NOTICES 12 15 U.S.C. 78f(b)(5). 13 See BX Retail Approval Order at 72051. 14 Id. 15 See, e.g., Securities Exchange Act Release No. 67347 (July 3, 2012), 77 FR 40673, 40680 (July 10, 2012) (SR–NYSEAmex–2011–84) (order approving adoption of Retail Liquidity Program on a pilot basis). The Exchange notes that other markets offer separate non-tier and tiered pricing for retail orders, see NASDAQ Price List, available at https:// nasdaqtrader.com/ Trader.aspx?id=PriceListTrading2, and EDGX Exchange Fee Schedule, available at https:// www.directedge.com/trading/ EDGXFeeSchedule.aspx, as well as retail price improvement pricing for ‘‘Retail Orders’’ that remove displayed liquidity or mid-point peg liquidity. See BATS BYX Exchange Fee Schedule, available at https://cdn.batstrading.com/resources/ regulation/rule_book/BATS-Exchanges_Fee_ Schedules.pdf [sic]. VerDate Sep<11>2014 17:35 Jan 09, 2015 Jkt 235001 increasing the liquidity pool and potential for price-improving executions at the Exchange. The proposed change is also equitable and not unfairly discriminatory because the ability to designate MPL Orders as ‘‘retail’’ is available equally to all similarly situated members and member organizations that submit qualifying orders and satisfy the other related, existing requirements. The Exchange believes that it is subject to significant competitive forces, as described below in the Exchange’s statement regarding the burden on competition. For the foregoing reasons, the Exchange believes that the proposal is consistent with the Act. B. Self-Regulatory Organization’s Statement on Burden on Competition In accordance with Section 6(b)(8) of the Act,16 the Exchange believes that the proposed rule change would not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. Instead, the Exchange believes that the proposed change would increase competition among execution venues and encourage additional execution opportunities on the Exchange. For the same reasons, the proposed change also would not impose any burden on competition among market participants. The Exchange believes that while it is the first to offer orders with a ‘‘retail’’ modifier the ability to take at the mid-point for free through MPL Orders, providing significant price improvement, the proposed change also permits the Exchange to compete with other markets, including NASDAQ, which does not charge but provides a credit for designated Retail Orders that take liquidity in Retail Liquidity Provider programs,17 as well as over-the-counter trading that offers mid-point executions at low fees. Finally, the Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive or rebate opportunities available at other venues to be more favorable. In such an environment, the Exchange must continually adjust its fees and rebates to remain competitive with other exchanges and with alternative trading systems that have been exempted from compliance with the statutory standards applicable to U.S.C. 78f(b)(8). Securities Exchange Act Release Nos. 70860 (November 13, 2013), 78 FR 69512 (November 19, 2013) (SR–NASDAQ–2013–138). exchanges. Because competitors are free to modify their own fees and credits in response, and because market participants may readily adjust their order routing practices, the Exchange believes that the degree to which fee changes in this market may impose any burden on competition is extremely limited. As a result of all of these considerations, the Exchange does not believe that the proposed changes will impair the ability of member organizations or competing order execution venues to maintain their competitive standing in the financial markets. 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) 18 of the Act and subparagraph (f)(2) of Rule 19b–4 19 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 under Section 19(b)(2)(B) 20 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 rule-comments@ sec.gov. Please include File Number SR– 16 15 17 See PO 00000 Frm 00051 Fmt 4703 Sfmt 4703 1543 18 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(2). 20 15 U.S.C. 78s(b)(2)(B). 19 17 E:\FR\FM\12JAN1.SGM 12JAN1 1544 Federal Register / Vol. 80, No. 7 / Monday, January 12, 2015 / Notices NYSEMKT–2014–108 on the subject line. SECURITIES AND EXCHANGE COMMISSION Paper Comments • Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–NYSEMKT–2014–108. 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 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– NYSEMKT–2014–108 and should be submitted on or before February 2, 2015. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.21 Brent J. Fields, Secretary. [FR Doc. 2015–00210 Filed 1–9–15; 8:45 am] tkelley on DSK3SPTVN1PROD with NOTICES BILLING CODE 8011–01–P [Release No. 34–74003; File No. SR–Phlx– 2014–79] Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify the Rule Governing Modification of Orders on Its NASDAQ OMX PSX Facility (‘‘PSX’’) in the Event of an Issuer Corporate Action Related to a Dividend, Payment or Distribution January 6, 2015. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on December 23, 2014, NASDAQ OMX PHLX LLC (‘‘Phlx’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II, and III 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 the Substance of the Proposed Rule Change The text of the proposed rule change is available on the Exchange’s Web site at https:// nasdaqomxphlx.cchwallstreet.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 Exchange 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 these 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 aspects of such statements. 1 15 21 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 17:35 Jan 09, 2015 2 17 Jkt 235001 PO 00000 U.S.C. 78s(b)(1). CFR 240.19b–4. Frm 00052 Fmt 4703 Sfmt 4703 A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose PSX Rule 4761 [sic] 3 addresses the treatment of quotes/orders in securities that are the subject of issuer corporate actions related to a dividend, payment or distribution. The rule applies to any trading interest that is carried on the PSX book overnight. As a general matter, PSX cancels open quotes/orders in the event of any corporate action related to a dividend, payment or distribution, on the ex-date of the action. The cancellation occurs immediately prior to the opening of trading at 8 a.m. on the ex-date of the corporate action, and the member receives a cancellation notice, so that it can, if it desires, reenter the order at the commencement of trading on the exdate. Prior to 2013, PSX had not had a clear rule providing for the adjustments of quotes and orders carried on the PSX book overnight. In April 2013, Phlx adopted Rule 3311 to provide that PSX would cancel all open quotes/orders in the event of any corporate action.4 Subsequently, in response to member demand for assistance with order management with respect to certain common types of corporate action, Phlx amended the rule to offer limited, optional functionality to allow open orders to be adjusted, rather than cancelled.5 As written, the rule provides for the possibility of order adjustment in the case of cash dividends, forward stock splits, and combined cash dividends/forward stock splits. The proposal will expand the rule also to provide for adjustment in the case of stock dividends and combined cash dividends/stock dividends. The proposal reflects the conclusion, based on member feedback, that actions resulting in the distribution of additional stock should be treated similarly, regardless of whether they are denominated as forward stock splits or stock dividends. Phlx will make members aware of the effective date of the proposed change by the issuance of a widely disseminated Equity Trader Alert. Under the current rule, a member may designate that all orders with a time-in3 The Commission notes that the correct rule number for this reference is PSX Rule 3311. 4 Securities Exchange Act Release No. 69632 (May 23, 2013), 78 FR 32501 (May 30, 2013) (SR–Phlx– 2013–56). 5 Securities Exchange Act Release No. 70110 (August 5, 2013), 78 FR 48736 (August 9, 2013) (SR–Phlx–2013–77). E:\FR\FM\12JAN1.SGM 12JAN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 80, Number 7 (Monday, January 12, 2015)]
[Notices]
[Pages 1541-1544]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-00210]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73991; File No. SR-NYSEMKT-2014-108]

Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and
Immediate Effectiveness of Proposed Rule Change Amending Its Price List
To Eliminate Transaction Fees for Midpoint Passive Liquidity Orders
That Remove Liquidity From the Exchange and That are Designated With a
``Retail'' Modifier as Defined in Rule 13--Equities

January 6, 2015.
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 22, 2014, NYSE MKT LLC (the ``Exchange'' or
``NYSE MKT'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

\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 amend its Price List to eliminate
transaction fees for Midpoint Passive Liquidity (``MPL'') Orders that
remove liquidity from the Exchange and that are designated with a
``retail'' modifier as defined in Rule 13--Equities. The Exchange
proposes to implement the fee change effective January 2, 2015. 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.

[[Page 1542]]

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 Price List to eliminate
transaction fees for MPL Orders that remove liquidity from the Exchange
and that are designated with a ``retail'' modifier as defined in Rule
13--Equities (``Rule 13''). The Exchange proposes to implement the fee
change effective January 2, 2015.
For securities priced $1.00 or greater, the Exchange currently
charges a fee of $0.0028 per share for all MPL Orders \4\ that remove
liquidity from the NYSE MKT. For non-ETP securities traded pursuant to
unlisted trading privileges (``UTP'') priced at $1.00 or greater, the
Exchange currently charges a fee of $0.0030 for all MPL Orders that
remove liquidity from the Exchange. For ETPs traded pursuant to UTP,
the Exchange currently charges a fee of $0.0029 for all MPL Orders that
remove liquidity from the Exchange. The Exchange proposes to eliminate
the fee for MPL Orders that remove liquidity from the Exchange that are
designated with a ``retail'' modifier as defined in Rule 13.
---------------------------------------------------------------------------

\4\ MPL Order is defined in Rule 13 as an undisplayed limit
order that automatically executes at the mid-point of the protected
best bid or offer (``PBBO'').
---------------------------------------------------------------------------

To be eligible for the proposed pricing for MPL Orders, an MPL
Order would need to meet the requirements to be designated as
``retail'' pursuant to Rule 13. An order designated as ``retail'' under
Rule 13 is an agency or riskless principal order that meets the
criteria of Financial Industry Regulatory Authority, Inc. Rule 5320.03
and that (1) originates from a natural person and (2) is submitted to
the Exchange by a member organization, provided that no change is made
to the terms of the order with respect to price or side of market and
the order does not originate from a trading algorithm or any other
computerized methodology.\5\
---------------------------------------------------------------------------

\5\ An order designated as ``retail'' under Rule 13 is separate
and distinct from a ``Retail Order'' within the Retail Liquidity
Program under Rule 107C. The proposed rule change solely concerns
orders designated as ``retail'' pursuant to Rule 13.
---------------------------------------------------------------------------

To submit an order with a ``retail'' modifier, a member or member
organization must submit an attestation, in a form prescribed by the
Exchange, that substantially all orders submitted as ``retail'' will
qualify as such. Further, Rule 13 requires a member organization to
have written policies and procedures reasonably designed to assure that
it will only designate orders as ``retail'' if all requirements are
met.\6\ In addition, a member organization would be required to
designate such MPL Order as ``retail'' pursuant to Rule 13.\7\
---------------------------------------------------------------------------

\6\ Such written policies and procedures require the member
organization to (1) exercise due diligence before entering a
``retail'' order to assure that entry as a ``retail'' order is in
compliance with the applicable requirements, and (2) monitor whether
orders entered as ``retail'' orders meet the applicable
requirements. If a member organization represents ``retail'' orders
from another broker-dealer customer, the member organization's
supervisory procedures must be reasonably designed to assure that
the orders it receives from such broker-dealer customer that it
designates as ``retail'' orders meet the definition of a ``retail''
order. The member organization must (i) obtain an annual written
representation, in a form acceptable to the Exchange, from each
broker-dealer customer that sends it orders to be designated as
``retail'' orders that entry of such orders as ``retail'' orders
will be in compliance with the applicable requirements; and (ii)
monitor whether its broker-dealer customer's ``retail'' order flow
meets the applicable requirements.
\7\ Currently, a member organization may designate an order as
``retail'' either by means of a specific tag in the order entry
message, as with other order modifiers, or by designating a
particular member or member organization mnemonic used at the
Exchange as a ``retail mnemonic.''
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The Exchange proposes to retain the fee for MPL Orders that remove
liquidity from the Exchange but that are not designated with a
``retail'' modifier at the current rates. The proposed amended Price
List would distinguish MPL Orders that remove liquidity and that are
designated as ``retail'' under Rule 13, which would not be charged a
fee, from MPL Orders that remove liquidity and that are not designated
as ``retail'' under Rule 13, and which would continue to be charged the
existing fee for MPL Orders that take liquidity. The Exchange proposes
to make comparable amendments to the Price List relating to pricing
applicable to Floor broker executions of MPL Orders.
The proposed change is not otherwise intended to address any other
issues, and the Exchange is not aware of any problems that members and
member organizations 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 Sections 6(b)(4) and 6(b)(5) 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 and does not unfairly discriminate
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) and (5).
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The Exchange believes that removing a fee for MPL Orders that
remove liquidity from the Exchange and that are designated as
``retail'' is reasonable because it will encourage the submission of
orders that meet the requirements to be designated as ``retail'' to the
Exchange, thus enhancing order execution opportunities for all
participants, but specifically retail investors. The ``retail''
modifier under Rule 13 along with its pricing is designed to
incentivize the submission of additional retail order flow to a public
market like the Exchange.\10\ Moreover, the Exchange believes that
markets and price discovery optimally function through the interactions
of diverse flow types, and also believes that growth in internalization
has required differentiation of retail order flow from other order flow
types. As the Exchange has previously noted, a significant percentage
of the orders of individual investors are executed over-the-
counter.\11\ The Exchange accordingly further believes that the
proposed change is reasonable because it would contribute to
maintaining or increasing the proportion of retail flow in Exchange-
listed securities that are executed on a registered national securities
exchange, rather than executing in off-exchange venues.
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\10\ Securities Exchange Act Release Nos. 72252 (May 27, 2014),
79 FR 31368 (June 2, 2014) (SR-NYSEMKT-2014-46) (introduction of
``retail'' modifier under Rule 13).
\11\ Securities Exchange Act Release Nos. 71878 (April 4, 2014),
79 FR 19936 (April 10, 2014) (SR-NYSEMKT-2014-25); see also
Securities Exchange Act Release No. 34-73702 (Nov. 28, 2014), 79 FR
72049, 72051 (Dec. 4, 2014) (order approving NASDAQ OMX BX Retail
Price Improvement Program and noting that most marketable retail
order flow is executed in the over-the-counter markets, pursuant to
bilateral agreements, without ever reaching a public exchange) (``BX
Retail Approval Order'').
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Finally, the Exchange notes that while the proposed price change
would treat retail order flow differently from order flow submitted by
other market participants, such segmentation would not be inconsistent
with Section 6(b)(5)

[[Page 1543]]

of the Act,\12\ which requires that the rules of an exchange are not
designed to permit unfair discrimination. The Commission has previously
recognized that the markets generally distinguish between retail
investors, whose orders are considered desirable by liquidity providers
because such retail investors are presumed on average to be less
informed about short-term price movements, and professional traders,
whose orders are presumed on average to be more informed.\13\ The
Commission has further recognized that, because of this distinction,
liquidity providers are generally inclined to offer price improvement
to less informed retail orders than to more informed professional
orders.\14\ The Exchange believes that the differentiation proposed
herein is not designed to permit unfair discrimination, but instead is
reasonably designed to attract retail flow to the Exchange, while
helping to ensure that retail investors benefit from the better price
that liquidity providers are willing to give their orders. The Exchange
believes that the proposed increase of retail order flow to the
Exchange might also create a desirable opportunity for institutional
investors to interact with retail order flow that they are not able to
reach currently. The Exchange therefore believes that the proposed
change would further promote a competitive process around retail
executions such that retail investors would receive better prices than
they currently do through bilateral internalization arrangements. The
Exchange believes that the transparency and competitiveness of the
proposed rule change on an exchange market would result in better
prices for retail investors.\15\ The proposed change is also equitable
and not unfairly discriminatory because it would contribute to
investors' confidence in the fairness of their transactions and because
it would benefit all investors by increasing the liquidity pool and
potential for price-improving executions at the Exchange.
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\12\ 15 U.S.C. 78f(b)(5).
\13\ See BX Retail Approval Order at 72051.
\14\ Id.
\15\ See, e.g., Securities Exchange Act Release No. 67347 (July
3, 2012), 77 FR 40673, 40680 (July 10, 2012) (SR-NYSEAmex-2011-84)
(order approving adoption of Retail Liquidity Program on a pilot
basis). The Exchange notes that other markets offer separate non-
tier and tiered pricing for retail orders, see NASDAQ Price List,
available at https://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2, and EDGX Exchange Fee Schedule,
available at https://www.directedge.com/trading/EDGXFeeSchedule.aspx,
as well as retail price improvement pricing for ``Retail Orders''
that remove displayed liquidity or mid-point peg liquidity. See BATS
BYX Exchange Fee Schedule, available at https://cdn.batstrading.com/resources/regulation/rule_book/BATS-Exchanges_Fee_Schedules.pdf
[sic].
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The proposed change is also equitable and not unfairly
discriminatory because the ability to designate MPL Orders as
``retail'' is available equally to all similarly situated members and
member organizations that submit qualifying orders and satisfy the
other related, existing requirements.
The Exchange believes that it is subject to significant competitive
forces, as described below in the Exchange's statement regarding the
burden on competition.
For the foregoing reasons, the Exchange believes that the proposal
is consistent with the Act.

B. Self-Regulatory Organization's Statement on Burden on Competition

In accordance with Section 6(b)(8) of the Act,\16\ the Exchange
believes that the proposed rule change would not impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act. Instead, the Exchange believes that the proposed
change would increase competition among execution venues and encourage
additional execution opportunities on the Exchange. For the same
reasons, the proposed change also would not impose any burden on
competition among market participants. The Exchange believes that while
it is the first to offer orders with a ``retail'' modifier the ability
to take at the mid-point for free through MPL Orders, providing
significant price improvement, the proposed change also permits the
Exchange to compete with other markets, including NASDAQ, which does
not charge but provides a credit for designated Retail Orders that take
liquidity in Retail Liquidity Provider programs,\17\ as well as over-
the-counter trading that offers mid-point executions at low fees.
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\16\ 15 U.S.C. 78f(b)(8).
\17\ See Securities Exchange Act Release Nos. 70860 (November
13, 2013), 78 FR 69512 (November 19, 2013) (SR-NASDAQ-2013-138).
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Finally, the Exchange notes that it operates in a highly
competitive market in which market participants can readily favor
competing venues if they deem fee levels at a particular venue to be
excessive or rebate opportunities available at other venues to be more
favorable. In such an environment, the Exchange must continually adjust
its fees and rebates to remain competitive with other exchanges and
with alternative trading systems that have been exempted from
compliance with the statutory standards applicable to exchanges.
Because competitors are free to modify their own fees and credits in
response, and because market participants may readily adjust their
order routing practices, the Exchange believes that the degree to which
fee changes in this market may impose any burden on competition is
extremely limited. As a result of all of these considerations, the
Exchange does not believe that the proposed changes will impair the
ability of member organizations or competing order execution venues to
maintain their competitive standing in the financial markets.

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) \18\ of the Act and subparagraph (f)(2) of Rule
19b-4 \19\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\18\ 15 U.S.C. 78s(b)(3)(A).
\19\ 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. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \20\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\20\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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-

[[Page 1544]]

NYSEMKT-2014-108 on the subject line.

Paper Comments

Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEMKT-2014-108. 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 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-NYSEMKT-2014-108 and should be submitted
on or before February 2, 2015.

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-00210 Filed 1-9-15; 8:45 am]
BILLING CODE 8011-01-P

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