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, 25758-25761 [2015-10411]
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25758
Federal Register / Vol. 80, No. 86 / Tuesday, May 5, 2015 / Notices
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
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Federal Register / Vol. 80, No. 86 / Tuesday, May 5, 2015 / Notices
greater).4 While order/quote entry ports
may be used by OTPs 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
Exchange has treated such dedicated
quote takedown ports the same as order/
quote entry port [sic] 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 OTPs
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
4 See Fee Schedule, available at, https://
www.nyse.com/publicdocs/nyse/markets/arcaoptions/NYSE_Arca_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/
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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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 × $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 the table regarding Port
Fees under the section ‘‘NYSE Arca
OPTIONS: FLOOR and EQUIPMENT
and CO-LOCATION FEES,’’ a new
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Frm 00100
Fmt 4703
Sfmt 4703
25759
category for ‘‘Quote Takedown Ports,’’
together with the following language:
‘‘For each order/quote entry port
utilized, NYSE Arca 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 Arca
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.’’ In addition,
to add clarity regarding Port Fees, the
Exchange proposes to move the existing
text regarding how the Exchange will
aggregate the order/quote entry ports of
a Marker Maker’s affiliate to appear
immediately below the Quote
Takedown Ports and to specify that the
Exchange will similarly aggregate the
Quote Takedown Ports of affiliates.6
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 OTPs 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
6 See proposed Fee Schedule, Port Fees (‘‘For
purpose of calculating the number of order/quote
entry ports and quote takedown ports, the Exchange
shall aggregate the ports of affiliates.’’).
7 15 U.S.C. 78f(b).
8 15 U.S.C. 78f(b)(5).
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asabaliauskas on DSK5VPTVN1PROD with NOTICES
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Federal Register / Vol. 80, No. 86 / Tuesday, May 5, 2015 / Notices
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.
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 OTPs would be subject
to the same schedule of Port Fees and
OTPs would continue to be able to
request, and pay for only those ports
that they require, with no impact to
other OTPs. 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.
9 15
U.S.C. 78f(b).
10 15 U.S.C. 78f(b)(4) and (5).
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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 2,710 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
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 (10 Gbps)).
15 See NOM Price List, Section 3, NASDAQ
Options Market, Access Services, available at,
https://nasdaq.cchwallstreet.com/NASDAQTools/
bookmark.asp?id=nasdaq-ruleoptions_XVS3&manual=/nasdaq/main/nasdaqoptionsrules/.
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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 OTPs, particularly Market Makers, in
that the Exchange allows OTPs 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)
16 15
U.S.C. 78f(b)(8).
U.S.C. 78s(b)(3)(A)(iii).
18 17 CFR 240.19b–4(f)(6).
17 15
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Federal Register / Vol. 80, No. 86 / Tuesday, May 5, 2015 / Notices
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
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:
Electronic Comments
Paper Comments
asabaliauskas on DSK5VPTVN1PROD with NOTICES
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSEARCA–2015–32. 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–
NYSEARCA–2015–32, and should be
submitted on or before May 26, 2015.
and Rule 19b–4 2 thereunder, notice is
hereby given that on April 17, 2015, The
Depository Trust Company (‘‘DTC’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I, II and III below, which Items
have been prepared by DTC. DTC filed
the proposed rule change pursuant to
section 19(b)(3)(A) 3 of the Act and Rule
19b–4(f)(2) 4 thereunder. The proposed
rule change was effective upon filing
with the Commission. The Commission
is publishing this notice to 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.
1. Purpose
The proposed rule change would
revise the Fee Schedule with respect to
a fee charged to Participants that use the
Custody Service, as described below.
The Custody Service provides safe
keeping and physical transaction
processing for securities certificates and
other items (collectively, ‘‘certificates’’),
including certificates for securities and
other assets not eligible for deposit in
DTC’s core depository services.6 In
utilizing the Custody Service,
Participants are able to leverage DTC’s
vault facility to outsource the safe
[FR Doc. 2015–10411 Filed 5–4–15; 8:45 am]
BILLING CODE 8011–01–P
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
Number SR–NYSEARCA–2015–32 on
the subject line.
• Send paper comments in triplicate
to Secretary, Securities and Exchange
CFR 240.19b–4(f)(6).
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).
22 15 U.S.C. 78s(b)(2)(B).
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–74831; File No. SR–DTC–
2015–004]
Self-Regulatory Organizations; The
Depository Trust Company; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Relating to a
DTC Custody Service Fee Change
19 17
April 29, 2015.
20 17
Pursuant to section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (‘‘Act’’)
VerDate Sep<11>2014
17:18 May 04, 2015
Jkt 235001
25761
23 17
1 15
PO 00000
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
Frm 00102
Fmt 4703
Sfmt 4703
I. Clearing Agency’s Statement of the
Terms of Substance of the Proposed
Rule Change
The proposed rule change consists of
a change to DTC’s Fee Schedule (‘‘Fee
Schedule’’) with respect to the DTC
Custody Service.5
II. Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
In its filing with the Commission,
DTC 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. DTC has prepared
summaries, set forth in sections A, B,
and C below, of the most significant
aspects of such statements.
(A) Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
2 17
CFR 240.19b–4.
U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–4(f)(2).
5 Each term not otherwise defined herein has its
respective meaning as set forth in the DTC Rules
(the ‘‘Rules’’), available at https://www.dtcc.com/
legal/rules-and-procedures.aspx.
6 Please see the DTC Custody Service Guide at p.
5, available at https://www.dtcc.com/∼/media/Files/
Downloads/legal/service-guides/Custody.pdf for an
overview on Custody Service eligibility.
3 15
E:\FR\FM\05MYN1.SGM
05MYN1
Agencies
[Federal Register Volume 80, Number 86 (Tuesday, May 5, 2015)]
[Notices]
[Pages 25758-25761]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-10411]
-----------------------------------------------------------------------
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 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 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
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 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
[[Page 25759]]
greater).\4\ While order/quote entry ports may be used by OTPs
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
Exchange has treated such dedicated quote takedown ports the same as
order/quote entry port [sic] for Port Fee purposes.
---------------------------------------------------------------------------
\4\ See Fee Schedule, available at, https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_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/amex-options/US_Options_Risk_Controls_Client_Document.pdf
(announcing availability of ports dedicated to quote takedown to
minimize latency for quote takedowns).
---------------------------------------------------------------------------
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 OTPs 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 the table regarding Port Fees under the section ``NYSE
Arca OPTIONS: FLOOR and EQUIPMENT and CO-LOCATION FEES,'' a new
category for ``Quote Takedown Ports,'' together with the following
language: ``For each order/quote entry port utilized, NYSE Arca 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 Arca 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.'' In addition, to add clarity regarding Port
Fees, the Exchange proposes to move the existing text regarding how the
Exchange will aggregate the order/quote entry ports of a Marker Maker's
affiliate to appear immediately below the Quote Takedown Ports and to
specify that the Exchange will similarly aggregate the Quote Takedown
Ports of affiliates.\6\
---------------------------------------------------------------------------
\6\ See proposed Fee Schedule, Port Fees (``For purpose of
calculating the number of order/quote entry ports and quote takedown
ports, the Exchange shall 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 OTPs
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
[[Page 25760]]
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.
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.
---------------------------------------------------------------------------
\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
The Exchange believes the proposed change is reasonable, equitable
and not unfairly discriminatory for the following reasons. First, all
OTPs would be subject to the same schedule of Port Fees and OTPs would
continue to be able to request, and pay for only those ports that they
require, with no impact to other OTPs. 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 2,710 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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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 (10
Gbps)).
\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/.
---------------------------------------------------------------------------
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 OTPs, particularly Market
Makers, in that the Exchange allows OTPs 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)
[[Page 25761]]
of the Act and Rule 19b-4(f)(6)(iii) thereunder.
---------------------------------------------------------------------------
\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 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\
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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-NYSEARCA-2015-32 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-NYSEARCA-2015-32. 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-NYSEARCA-2015-32, 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\
---------------------------------------------------------------------------
\23\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Brent J. Fields,
Secretary.
[FR Doc. 2015-10411 Filed 5-4-15; 8:45 am]
BILLING CODE 8011-01-P