Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Modifying Its Rules To Provide for the Use of Ports That Provide Connectivity to the Exchange's Trading Systems Solely for the Cancellation or “Takedown” of Quotes and Changes to the NYSE Amex Options Fee Schedule Related to This Quote Takedown Service, 25755-25758 [2015-10410]
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Federal Register / Vol. 80, No. 86 / Tuesday, May 5, 2015 / Notices
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 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:
asabaliauskas on DSK5VPTVN1PROD with NOTICES
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–
Phlx–2015–36 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–Phlx–2015–36. 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–Phlx–
2015–36, and should be submitted on or
before May 26, 2015.
VerDate Sep<11>2014
17:18 May 04, 2015
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For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.43
Brent J. Fields,
Secretary.
[FR Doc. 2015–10403 Filed 5–4–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–74840; File No. SR–
NYSEMKT–2015–31]
Self-Regulatory Organizations; NYSE
MKT LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Modifying Its Rules To
Provide for the Use of Ports That
Provide Connectivity to the
Exchange’s Trading Systems Solely
for the Cancellation or ‘‘Takedown’’ of
Quotes and Changes to the NYSE
Amex Options Fee Schedule Related to
This Quote Takedown Service
April 29, 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 April 17,
2015, 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 and II
below, which 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 modify its
rules to provide for the use of ports that
provide connectivity to the Exchange’s
trading systems solely for the
cancellation or ‘‘takedown’’ of quotes. In
addition, the proposed rule change
reflects changes to the NYSE Amex
Options Fee Schedule (‘‘Fee Schedule’’)
related to this quote takedown service.
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.
43 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
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25755
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 modify its
rules to provide for the use of ports that
provide connectivity to the Exchange’s
trading systems solely for the
cancellation or ‘‘takedown’’ of quotes. In
addition, the proposed rule change
reflects changes to the Fee Schedule
related to this quote takedown service.
Order/Quote Entry Ports
The Exchange currently makes
available to ATP Holders order/quote
entry ports for connectivity to Exchange
trading systems (each an ‘‘order/quote
entry port’’). ATP Holders may be
authorized to utilize order/quote entry
ports for option activity on NYSE Amex
Options and incur monthly Port Fees.
Currently, the Exchange charges $450
per month, per order/quote entry port
for the first 40 ports and $150 per
month, per order/quote entry port for
any additional ports in excess of 40 (i.e.,
ports 41 and greater).4
While order/quote entry ports may be
used by ATP Holders registered as
Market Makers to both enter and cancel
or remove quotes, Market Makers may
dedicate certain ports solely to the
removal of quotes, i.e., a ‘‘quote
takedown port,’’ 5 and, until now, the
4 See Fee Schedule, available at, https://
www.nyse.com/publicdocs/nyse/markets/amexoptions/NYSE_Amex_Options_Fee_Schedule.pdf.
Unutilized order/quote entry ports that connect to
the Exchange via its backup datacenter are
considered established for backup purposes and are
not subject to Port Fees. In addition, for purpose of
calculating the number of order/quote entry ports,
the Exchange shall aggregate the ports of Affiliates.
See id.
5 See Trader Update regarding Options Pre-Trade
and Post-Trade Risk Controls, available at, https://
www.nyse.com/publicdocs/nyse/markets/amexoptions/US_Options_Risk_Controls_Client_
Document.pdf (announcing availability of ports
dedicated to quote takedown to minimize latency
for quote takedowns).
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Federal Register / Vol. 80, No. 86 / Tuesday, May 5, 2015 / Notices
Exchange has treated such dedicated
quote takedown ports the same as order/
quote entry port for Port Fee purposes.
asabaliauskas on DSK5VPTVN1PROD with NOTICES
Quote Takedown Ports
The Exchange is proposing to modify
its rules to provide ports specifically
dedicated to quote cancellation or
‘‘quote takedown’’ (each a ‘‘Quote
Takedown Port’’) as a service distinct
from order/quote entry ports, which
may be used both for entering quotes or
orders and removing or cancelling
quotes. The proposed Quote Takedown
Ports would be designed to assist ATP
Holders registered as Marker Makers in
the management of, and risk control
over, their quotes, particularly if they
have a large number of options issues in
their appointment. For example, if a
Market Maker detects market
indications that may influence the
direction or bias of its quotes, the
Market Maker may attempt to cancel all
of its quotes in a number of classes,
thereby avoiding unintended
executions, while it evaluates the
direction of the market. Thus, to reduce
uncertainty, the Marker Maker may
submit to the Exchange a ‘‘quote
takedown’’ message through a dedicated
Quote Takedown Port for the prompt
removal of quotes. By entering a quote
takedown message through a dedicated
Quote Takedown Port, a Market Maker
may reduce its exposure to risk because
of heavy quote traffic-induced latency.
The Exchange proposes to modify the
Fee Schedule to provide that certain
Quote Takedown Ports would not be
subject to Port Fees. Specifically, for
each order/quote entry port utilized, the
Exchange proposes to allow Market
Makers to utilize, free of charge, one
Quote Takedown Port. Because Quote
Takedown Ports would not be available
for quote or order submission, the
Exchange is proposing to allow one
Quote Takedown Port free of charge for
every order/quote entry port that a
Market Maker utilizes. In other words,
provided a Market Maker does not
exceed a 1-to-1 ratio of order/quote
entry port-to-Quote Takedown Port, the
Quote Takedown Port(s) would be free
(the ‘‘1-to-1 ratio’’). However, a Market
Maker that exceeds the 1-to-1 ratio
would be charged for additional Quote
Takedown Ports. For example, a Market
Maker with thirty-five (35) order/quote
entry ports and forty-two (42) Quote
Takedown Ports would have forty-two
(42) ports subject to charge because the
Exchange would charge for the 35 order/
quote entry ports and the seven Quote
Takedown Ports that exceed the 1–1
ratio (42–35=7). The Exchange would
not charge for the first 35 Quote
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Takedown Ports because those ports
would meet the 1-to-1 ratio.
Similarly, the Exchange would not
include those Quote Takedown Ports
that meet the 1-to-1 ratio to determine
a Market Maker’s total number of ports
for purposes of calculating Port Fees. As
noted above, the Exchange charges $450
per month, per port for the first forty
ports, and $150 per month for each
additional port in excess of forty. Thus,
using the example above, the Exchange
would not count the thirty-five (35)
Quote Takedown Ports (which align
with the 35 order/quote entry ports)
against the Market Maker’s total number
of ports utilized, but would count seven
(7) additional Quote Takedown Ports.
Thus, because the Market Maker would
have forty-two (42) chargeable ports, the
Market Maker’s total monthly port fee
would be $18,300 (i.e., 40 ports × $450
per port = $18,000; and 2 ports × $150
per port $300).
The Exchange notes that options
Market Makers typically require more
than forty (40) order/quote entry ports,
in part to satisfy their obligation to
maintain continuous two-sided markets
in their appointed classes. Thus, the
Exchange believes that the proposed
change would enhance the ability of
Market Maker firms to manage quotes,
quote traffic, and their quoting
obligations by eliminating fees for
certain Quote Takedown Ports, which
function as risk management tools
rather than trade opportunity tools. The
Exchange believes this proposed change
would permit the Exchange to remain
competitive with other exchanges with
respect to fees charged for ports.
To reflect the proposed change, the
Exchange proposes to add to the Fee
Schedule, in Section V. (Technology &
System Access Fees), subsection A.
(Port Fees), a new category for ‘‘Quote
Takedown Ports,’’ together with the
following language: ‘‘For each order/
quote entry port utilized, NYSE Amex
Options Market Makers may utilize, free
of charge, one port dedicated to quote
cancellation or ‘quote takedown,’ which
port(s) will not be included in the count
of order/quote entry ports utilized. Any
quote takedown port utilized by a NYSE
Amex Options Market Maker that is in
excess of the number of order/quote
entry ports utilized will be counted and
charged as an order/quote entry port.’’
The Exchange also proposes to make
clear that the Quote Takedown Ports of
Affiliates, like order/quote entry ports,
are aggregated.6 Finally, to add clarity
6 See proposed Fee Schedule, Section V.A. (‘‘For
purpose of calculating the number of order/quote
entry ports and quote takedown ports, the Exchange
will aggregate the ports of Affiliates.’’).
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Frm 00097
Fmt 4703
Sfmt 4703
regarding Port Fees, the Exchange
proposes a non-substantive change to
the layout of the table setting forth Port
Fees, which the Exchange believes will
simplify and add transparency to the
Fee Schedule.
The Exchange believes the proposal to
offer Quote Takedown Ports would
ensure a fair and reasonable use of
resources by eliminating charges to
Market Makers for certain Quote
Takedown Ports (described above),
which are used to control and manage
risk exposure to the benefit of all marker
participants.
2. Statutory Basis
The proposed rule change is
consistent with Section 6(b) 7 of the
Securities Exchange Act of 1934 (the
‘‘Act’’), in general, and furthers the
objectives of Section 6(b)(5),8 in
particular, in that 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 facilitating
transactions in securities, and to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system.
The Exchange believes that the
proposed rule change would promote
just and equitable principles of trade
and remove impediments to and perfect
the mechanism of a free and open
market because offering ATP Holders
registered as Market Makers designated
Quote Takedown Ports would enhance
Market Makers’ ability to manage
quotes, quote traffic, and their quoting
obligations, which would, in turn,
improve their risk controls to the benefit
of all participants. The Exchange
believes that the Quote Takedown Ports
would foster cooperation and
coordination with persons engaged in
facilitating transactions in securities
because Quote Takedown Ports
minimize latency for quote takedown,
which would enable the fair and
reasonable use of Market Makers’
resources. Because Quote Takedown
Ports, as the name suggests, are only
available for quote takedowns and not
order or quote entry (or order
cancellation), the Quote Takedown
Ports are not designed to permit unfair
discrimination but rather are designed
to enable Market Makers, that are
subject to heightened obligations that
other market participants are not, to
meet their quoting obligations, which,
in turn, benefits all market participants.
7 15
8 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
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05MYN1
asabaliauskas on DSK5VPTVN1PROD with NOTICES
Federal Register / Vol. 80, No. 86 / Tuesday, May 5, 2015 / Notices
The Exchange also believes that the
proposed rule change is consistent with
Section 6(b) of the Act,9 in general, and
furthers the objectives of Sections
6(b)(4) and (5) of the Act,10 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 the proposed
change is reasonable, equitable and not
unfairly discriminatory for the following
reasons. First, all ATP Holders would be
subject to the same schedule of Port
Fees and ATP Holders would continue
to be able to request, and pay for only
those ports that they require, with no
impact to other ATP Holders. As noted
above, because Quote Takedown Ports
are uniquely designed to address quotes
and only Market Makers are obliged to
quote, the proposed fee structure for
Quote Takedown Ports would not
disadvantage non-Market Makers
trading on the Exchange. Second, the
proposal to enable Market Makers to
utilize certain Quote Takedown Ports
free of charge would result in the fair
and reasonable use of resources by
Market Makers, and would encourage
trading on the Exchange, thus
improving liquidity and price discovery,
to the benefit of all market participants.
In addition, providing Market Makers a
free Quote Takedown Port for each
order/quote entry port may increase use
of Quote Takedown Ports as a cost
effective means of improving risk
controls. The increased use of Quote
Takedown Ports by Market Makers
would improve Market Makers’ ability
to manage quotes, quote traffic, and
their quoting obligations, which would,
in turn, improve their risk controls to
the benefit of all participants.
The Exchange likewise believes that
not including those Quote Takedown
Ports that meet the 1-to-1 ratio (order/
quote entry ports-to-Quote Takedown
Ports) in the count against a Market
Maker’s total number of ports utilized
for purposes of calculating the monthly
Port Fees is reasonable, equitable and
not unfairly discriminatory. The
Exchange notes that options Market
Makers, require more than 40 ports in
order to satisfy their responsibilities and
obligations to investors, which stem
from the significant number of series
that exist for any particular option
9 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4) and (5).
10 15
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17:18 May 04, 2015
Jkt 235001
class 11 and the corresponding
obligations that Market Makers have to
maintain continuous quotations in all
series in their appointed classes.
Furthermore, Market Makers that quote
across a significant number, if not all, of
the 2,520 classes traded on the
Exchange could have responsibility for
upwards of 620,000 individual option
series.12 Accordingly, the level of
activity that is required to satisfy the
quoting obligations, which directly
relates to the number of ports needed,
is such that the Exchange believes it is
equitable and not unfairly
discriminatory to only include the
number of order/quote entry and Quote
Takedown Ports in excess of the 1-to-1
ratio in determining the per port charge
for Market Makers.
Finally, the Exchange believes that
the proposed change is reasonable,
because the Quote Takedown Ports are
used for purposes distinct from order/
quote entry ports, for which the
Exchange charges.13 In this regard, the
Exchange believes that its Port Fees are
competitive with those charged by other
venues, and that in some cases its Port
Fees are less expensive than many of its
primary competitors. For example, the
Chicago Board Options Exchange
(‘‘CBOE’’) charges $750 per port per
month for a Network Access Port.14 The
NASDAQ Options Market (‘‘NOM’’)
charges $650 per port per month.15
For these 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 does not believe
that the proposed rule change would
impose any burden on competition that
is not necessary or appropriate in
furtherance of the purposes of the Act.
Because the proposed change results in
the fair and reasonable use of resources
by ATP Holders, particularly Market
11 For example, as of February 24, 2015, there
were more than 1,952 individual option series
overlying Chipotle Mexican Grill, Inc.
12 As of February 24, 2015.
13 The Exchange also charges for use of drop copy
ports, which are not discussed in this filing. See
supra n. 4.
14 See CBOE fee schedule, Command
Connectivity Charges, at p 11, available at, https://
www.cboe.com/publish/feeschedule/
CBOEFeeSchedule.pdf (charging $750 per month
for each Network Access Port (1 Gbps) and $3,500
per month for each Network Access Port (10Gbps)).
15 See NOM Price List, Section 3, NASDAQ
Options Market, Access Services, available at,
https://nasdaq.cchwallstreet.com/NASDAQTools/
bookmark.asp?id=nasdaq-rule-options_
XVS3&manual=/nasdaq/main/nasdaqoptionsrules/.
16 15 U.S.C. 78f(b)(8).
PO 00000
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25757
Makers, in that the Exchange allows
ATP Holders to utilize one Quote
Takedown Port per one order/quote
entry port free of charge, the Exchange
believes this change would benefit all
market participants. In addition,
because Quote Takedown Ports enhance
Market Makers’ risk controls for
transactions executed on the Exchange,
the Exchange believes the proposal is
pro-competitive.
The Exchange notes that it operates in
a highly competitive market in which
market participants can readily favor
competing venues. In such an
environment, the Exchange must
continually review, and consider
adjusting, its fees and credits to remain
competitive with other exchanges. For
the reasons described above, the
Exchange believes that the proposed
rule change reflects this competitive
environment.
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 Exchange has filed the proposed
rule change pursuant to Section
19(b)(3)(A)(iii) of the Act 17 and Rule
19b–4(f)(6) thereunder.18 Because the
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
prior to 30 days from the date on which
it was filed, or such shorter time as the
Commission may designate, if
consistent with the protection of
investors and the public interest, the
proposed rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act and Rule 19b-4(f)(6)(iii)
thereunder.
A proposed rule change filed under
Rule 19b–4(f)(6) 19 normally does not
become operative prior to 30 days after
the date of the filing. However, pursuant
to Rule 19b4(f)(6)(iii),20 the Commission
may designate a shorter time if such
action is consistent with the protection
of investors and the public interest. The
Exchange has requested that the
Commission waive the 30-day operative
delay so that the proposal may become
17 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
19 17 CFR 240.19b–4(f)(6).
20 17 CFR 240.19b–4(f)(6)(iii).
18 17
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operative immediately upon filing and
thereby enable Market Makers to
enhance their risk controls and risk
management processes without delay.
The Commission believes that waiving
the 30-day operative delay is consistent
with the protection of investors and the
public interest. Therefore, the
Commission hereby waives the 30-day
operative delay and designates the
proposal effective upon filing.21
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) 22 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:
asabaliauskas on DSK5VPTVN1PROD with NOTICES
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–
NYSEMKT–2015–31 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSEMKT–2015–31. 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
21 For purposes of waiving the 30-day operative
delay, the Commission has considered the proposed
rule’s impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
22 15 U.S.C. 78s(b)(2)(B).
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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 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–2015–31, and should be
submitted on or before May 26, 2015.
solicit comments on the proposed rule
change from interested persons.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.23
Brent J. Fields,
Secretary.
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.
[FR Doc. 2015–10410 Filed 5–4–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–74841; File No. SR–
NYSEARCA–2015–32]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Modifying Its Rules To
Provide for the Use of Ports That
Provide Connectivity to the
Exchange’s Trading Systems Solely
for the Cancellation or ‘‘Takedown’’ of
Quotes and Changes to the NYSE Arca
Options Fee Schedule Related to
Quote Takedown Service
April 29, 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 April 17
2015, 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 and II
below, which Items have been prepared
by the self-regulatory organization. The
Commission is publishing this notice to
23 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
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I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to modify its
rules to provide for the use of ports that
provide connectivity to the Exchange’s
trading systems solely for the
cancellation or ‘‘takedown’’ of quotes. In
addition, the proposed rule change
reflects changes to the NYSE Arca
Options Fee Schedule (‘‘Fee Schedule’’)
related to this quote takedown service.
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
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to modify its
rules to provide for the use of ports that
provide connectivity to the Exchange’s
trading systems solely for the
cancellation or ‘‘takedown’’ of quotes. In
addition, the proposed rule change
reflects changes to the Fee Schedule
related to this quote takedown service.
Order/Quote Entry Ports
The Exchange currently makes
available to OTP Holders and OTP
Firms (‘‘OTPs’’) order/quote entry ports
for connectivity to Exchange trading
systems (each an ‘‘order/quote entry
port’’). OTPs may be authorized to
utilize order/quote entry ports for
option activity on NYSE Arca Options
and incur monthly Port Fees. Currently,
the Exchange charges $450 per month,
per order/quote entry port for the first
40 ports and $150 per month, per order/
quote entry port for any additional ports
in excess of 40 (i.e., ports 41 and
E:\FR\FM\05MYN1.SGM
05MYN1
Agencies
[Federal Register Volume 80, Number 86 (Tuesday, May 5, 2015)]
[Notices]
[Pages 25755-25758]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-10410]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-74840; File No. SR-NYSEMKT-2015-31]
Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and
Immediate Effectiveness of Proposed Rule Change Modifying Its Rules To
Provide for the Use of Ports That Provide Connectivity to the
Exchange's Trading Systems Solely for the Cancellation or ``Takedown''
of Quotes and Changes to the NYSE Amex Options Fee Schedule Related to
This Quote Takedown Service
April 29, 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 April 17, 2015, 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 and II
below, which 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.
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\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 modify its rules to provide for the use of
ports that provide connectivity to the Exchange's trading systems
solely for the cancellation or ``takedown'' of quotes. In addition, the
proposed rule change reflects changes to the NYSE Amex Options Fee
Schedule (``Fee Schedule'') related to this quote takedown service. 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 modify its rules to provide for the use of
ports that provide connectivity to the Exchange's trading systems
solely for the cancellation or ``takedown'' of quotes. In addition, the
proposed rule change reflects changes to the Fee Schedule related to
this quote takedown service.
Order/Quote Entry Ports
The Exchange currently makes available to ATP Holders order/quote
entry ports for connectivity to Exchange trading systems (each an
``order/quote entry port''). ATP Holders may be authorized to utilize
order/quote entry ports for option activity on NYSE Amex Options and
incur monthly Port Fees. Currently, the Exchange charges $450 per
month, per order/quote entry port for the first 40 ports and $150 per
month, per order/quote entry port for any additional ports in excess of
40 (i.e., ports 41 and greater).\4\
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\4\ See Fee Schedule, available at, https://www.nyse.com/publicdocs/nyse/markets/amex-options/NYSE_Amex_Options_Fee_Schedule.pdf. Unutilized order/quote entry
ports that connect to the Exchange via its backup datacenter are
considered established for backup purposes and are not subject to
Port Fees. In addition, for purpose of calculating the number of
order/quote entry ports, the Exchange shall aggregate the ports of
Affiliates. See id.
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While order/quote entry ports may be used by ATP Holders registered
as Market Makers to both enter and cancel or remove quotes, Market
Makers may dedicate certain ports solely to the removal of quotes,
i.e., a ``quote takedown port,'' \5\ and, until now, the
[[Page 25756]]
Exchange has treated such dedicated quote takedown ports the same as
order/quote entry port for Port Fee purposes.
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\5\ See Trader Update regarding Options Pre-Trade and Post-Trade
Risk Controls, available at, https://www.nyse.com/publicdocs/nyse/markets/amex-options/US_Options_Risk_Controls_Client_Document.pdf
(announcing availability of ports dedicated to quote takedown to
minimize latency for quote takedowns).
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Quote Takedown Ports
The Exchange is proposing to modify its rules to provide ports
specifically dedicated to quote cancellation or ``quote takedown''
(each a ``Quote Takedown Port'') as a service distinct from order/quote
entry ports, which may be used both for entering quotes or orders and
removing or cancelling quotes. The proposed Quote Takedown Ports would
be designed to assist ATP Holders registered as Marker Makers in the
management of, and risk control over, their quotes, particularly if
they have a large number of options issues in their appointment. For
example, if a Market Maker detects market indications that may
influence the direction or bias of its quotes, the Market Maker may
attempt to cancel all of its quotes in a number of classes, thereby
avoiding unintended executions, while it evaluates the direction of the
market. Thus, to reduce uncertainty, the Marker Maker may submit to the
Exchange a ``quote takedown'' message through a dedicated Quote
Takedown Port for the prompt removal of quotes. By entering a quote
takedown message through a dedicated Quote Takedown Port, a Market
Maker may reduce its exposure to risk because of heavy quote traffic-
induced latency.
The Exchange proposes to modify the Fee Schedule to provide that
certain Quote Takedown Ports would not be subject to Port Fees.
Specifically, for each order/quote entry port utilized, the Exchange
proposes to allow Market Makers to utilize, free of charge, one Quote
Takedown Port. Because Quote Takedown Ports would not be available for
quote or order submission, the Exchange is proposing to allow one Quote
Takedown Port free of charge for every order/quote entry port that a
Market Maker utilizes. In other words, provided a Market Maker does not
exceed a 1-to-1 ratio of order/quote entry port-to-Quote Takedown Port,
the Quote Takedown Port(s) would be free (the ``1-to-1 ratio'').
However, a Market Maker that exceeds the 1-to-1 ratio would be charged
for additional Quote Takedown Ports. For example, a Market Maker with
thirty-five (35) order/quote entry ports and forty-two (42) Quote
Takedown Ports would have forty-two (42) ports subject to charge
because the Exchange would charge for the 35 order/quote entry ports
and the seven Quote Takedown Ports that exceed the 1-1 ratio (42-35=7).
The Exchange would not charge for the first 35 Quote Takedown Ports
because those ports would meet the 1-to-1 ratio.
Similarly, the Exchange would not include those Quote Takedown
Ports that meet the 1-to-1 ratio to determine a Market Maker's total
number of ports for purposes of calculating Port Fees. As noted above,
the Exchange charges $450 per month, per port for the first forty
ports, and $150 per month for each additional port in excess of forty.
Thus, using the example above, the Exchange would not count the thirty-
five (35) Quote Takedown Ports (which align with the 35 order/quote
entry ports) against the Market Maker's total number of ports utilized,
but would count seven (7) additional Quote Takedown Ports. Thus,
because the Market Maker would have forty-two (42) chargeable ports,
the Market Maker's total monthly port fee would be $18,300 (i.e., 40
ports x $450 per port = $18,000; and 2 ports x $150 per port $300).
The Exchange notes that options Market Makers typically require
more than forty (40) order/quote entry ports, in part to satisfy their
obligation to maintain continuous two-sided markets in their appointed
classes. Thus, the Exchange believes that the proposed change would
enhance the ability of Market Maker firms to manage quotes, quote
traffic, and their quoting obligations by eliminating fees for certain
Quote Takedown Ports, which function as risk management tools rather
than trade opportunity tools. The Exchange believes this proposed
change would permit the Exchange to remain competitive with other
exchanges with respect to fees charged for ports.
To reflect the proposed change, the Exchange proposes to add to the
Fee Schedule, in Section V. (Technology & System Access Fees),
subsection A. (Port Fees), a new category for ``Quote Takedown Ports,''
together with the following language: ``For each order/quote entry port
utilized, NYSE Amex Options Market Makers may utilize, free of charge,
one port dedicated to quote cancellation or `quote takedown,' which
port(s) will not be included in the count of order/quote entry ports
utilized. Any quote takedown port utilized by a NYSE Amex Options
Market Maker that is in excess of the number of order/quote entry ports
utilized will be counted and charged as an order/quote entry port.''
The Exchange also proposes to make clear that the Quote Takedown Ports
of Affiliates, like order/quote entry ports, are aggregated.\6\
Finally, to add clarity regarding Port Fees, the Exchange proposes a
non-substantive change to the layout of the table setting forth Port
Fees, which the Exchange believes will simplify and add transparency to
the Fee Schedule.
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\6\ See proposed Fee Schedule, Section V.A. (``For purpose of
calculating the number of order/quote entry ports and quote takedown
ports, the Exchange will aggregate the ports of Affiliates.'').
---------------------------------------------------------------------------
The Exchange believes the proposal to offer Quote Takedown Ports
would ensure a fair and reasonable use of resources by eliminating
charges to Market Makers for certain Quote Takedown Ports (described
above), which are used to control and manage risk exposure to the
benefit of all marker participants.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) \7\ of the
Securities Exchange Act of 1934 (the ``Act''), in general, and furthers
the objectives of Section 6(b)(5),\8\ in particular, in that 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 facilitating transactions in
securities, and to remove impediments to and perfect the mechanism of a
free and open market and a national market system.
---------------------------------------------------------------------------
\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange believes that the proposed rule change would promote
just and equitable principles of trade and remove impediments to and
perfect the mechanism of a free and open market because offering ATP
Holders registered as Market Makers designated Quote Takedown Ports
would enhance Market Makers' ability to manage quotes, quote traffic,
and their quoting obligations, which would, in turn, improve their risk
controls to the benefit of all participants. The Exchange believes that
the Quote Takedown Ports would foster cooperation and coordination with
persons engaged in facilitating transactions in securities because
Quote Takedown Ports minimize latency for quote takedown, which would
enable the fair and reasonable use of Market Makers' resources. Because
Quote Takedown Ports, as the name suggests, are only available for
quote takedowns and not order or quote entry (or order cancellation),
the Quote Takedown Ports are not designed to permit unfair
discrimination but rather are designed to enable Market Makers, that
are subject to heightened obligations that other market participants
are not, to meet their quoting obligations, which, in turn, benefits
all market participants.
[[Page 25757]]
The Exchange also believes that the proposed rule change is
consistent with Section 6(b) of the Act,\9\ in general, and furthers
the objectives of Sections 6(b)(4) and (5) of the Act,\10\ 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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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange believes the proposed change is reasonable, equitable
and not unfairly discriminatory for the following reasons. First, all
ATP Holders would be subject to the same schedule of Port Fees and ATP
Holders would continue to be able to request, and pay for only those
ports that they require, with no impact to other ATP Holders. As noted
above, because Quote Takedown Ports are uniquely designed to address
quotes and only Market Makers are obliged to quote, the proposed fee
structure for Quote Takedown Ports would not disadvantage non-Market
Makers trading on the Exchange. Second, the proposal to enable Market
Makers to utilize certain Quote Takedown Ports free of charge would
result in the fair and reasonable use of resources by Market Makers,
and would encourage trading on the Exchange, thus improving liquidity
and price discovery, to the benefit of all market participants. In
addition, providing Market Makers a free Quote Takedown Port for each
order/quote entry port may increase use of Quote Takedown Ports as a
cost effective means of improving risk controls. The increased use of
Quote Takedown Ports by Market Makers would improve Market Makers'
ability to manage quotes, quote traffic, and their quoting obligations,
which would, in turn, improve their risk controls to the benefit of all
participants.
The Exchange likewise believes that not including those Quote
Takedown Ports that meet the 1-to-1 ratio (order/quote entry ports-to-
Quote Takedown Ports) in the count against a Market Maker's total
number of ports utilized for purposes of calculating the monthly Port
Fees is reasonable, equitable and not unfairly discriminatory. The
Exchange notes that options Market Makers, require more than 40 ports
in order to satisfy their responsibilities and obligations to
investors, which stem from the significant number of series that exist
for any particular option class \11\ and the corresponding obligations
that Market Makers have to maintain continuous quotations in all series
in their appointed classes. Furthermore, Market Makers that quote
across a significant number, if not all, of the 2,520 classes traded on
the Exchange could have responsibility for upwards of 620,000
individual option series.\12\ Accordingly, the level of activity that
is required to satisfy the quoting obligations, which directly relates
to the number of ports needed, is such that the Exchange believes it is
equitable and not unfairly discriminatory to only include the number of
order/quote entry and Quote Takedown Ports in excess of the 1-to-1
ratio in determining the per port charge for Market Makers.
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\11\ For example, as of February 24, 2015, there were more than
1,952 individual option series overlying Chipotle Mexican Grill,
Inc.
\12\ As of February 24, 2015.
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Finally, the Exchange believes that the proposed change is
reasonable, because the Quote Takedown Ports are used for purposes
distinct from order/quote entry ports, for which the Exchange
charges.\13\ In this regard, the Exchange believes that its Port Fees
are competitive with those charged by other venues, and that in some
cases its Port Fees are less expensive than many of its primary
competitors. For example, the Chicago Board Options Exchange (``CBOE'')
charges $750 per port per month for a Network Access Port.\14\ The
NASDAQ Options Market (``NOM'') charges $650 per port per month.\15\
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\13\ The Exchange also charges for use of drop copy ports, which
are not discussed in this filing. See supra n. 4.
\14\ See CBOE fee schedule, Command Connectivity Charges, at p
11, available at, https://www.cboe.com/publish/feeschedule/CBOEFeeSchedule.pdf (charging $750 per month for each Network Access
Port (1 Gbps) and $3,500 per month for each Network Access Port
(10Gbps)).
\15\ See NOM Price List, Section 3, NASDAQ Options Market,
Access Services, available at, https://nasdaq.cchwallstreet.com/NASDAQTools/bookmark.asp?id=nasdaq-rule-options_XVS3&manual=/nasdaq/main/nasdaq-optionsrules/.
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For these 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
does not believe that the proposed rule change would impose any burden
on competition that is not necessary or appropriate in furtherance of
the purposes of the Act. Because the proposed change results in the
fair and reasonable use of resources by ATP Holders, particularly
Market Makers, in that the Exchange allows ATP Holders to utilize one
Quote Takedown Port per one order/quote entry port free of charge, the
Exchange believes this change would benefit all market participants. In
addition, because Quote Takedown Ports enhance Market Makers' risk
controls for transactions executed on the Exchange, the Exchange
believes the proposal is pro-competitive.
---------------------------------------------------------------------------
\16\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------
The Exchange notes that it operates in a highly competitive market
in which market participants can readily favor competing venues. In
such an environment, the Exchange must continually review, and consider
adjusting, its fees and credits to remain competitive with other
exchanges. For the reasons described above, the Exchange believes that
the proposed rule change reflects this competitive environment.
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 Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \17\ and Rule 19b-4(f)(6) thereunder.\18\
Because the 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 prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
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\17\ 15 U.S.C. 78s(b)(3)(A)(iii).
\18\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
A proposed rule change filed under Rule 19b-4(f)(6) \19\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b4(f)(6)(iii),\20\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has
requested that the Commission waive the 30-day operative delay so that
the proposal may become
[[Page 25758]]
operative immediately upon filing and thereby enable Market Makers to
enhance their risk controls and risk management processes without
delay. The Commission believes that waiving the 30-day operative delay
is consistent with the protection of investors and the public interest.
Therefore, the Commission hereby waives the 30-day operative delay and
designates the proposal effective upon filing.\21\
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\19\ 17 CFR 240.19b-4(f)(6).
\20\ 17 CFR 240.19b-4(f)(6)(iii).
\21\ For purposes of waiving the 30-day operative delay, the
Commission has considered the proposed rule's impact on efficiency,
competition, and capital formation. See 15 U.S.C. 78c(f).
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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) \22\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\22\ 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-NYSEMKT-2015-31 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEMKT-2015-31. 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 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-2015-31, and should be submitted
on or before May 26, 2015.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
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\23\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-10410 Filed 5-4-15; 8:45 am]
BILLING CODE 8011-01-P