[Federal Register Volume 76, Number 117 (Friday, June 17, 2011)]
[Notices]
[Pages 35493-35495]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-15041]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64656; File No. SR-NYSEAmex-2011-36]


Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending the NYSE 
Amex Options Fee Schedule To Adopt a Monthly Fee Cap and Related 
Service Fee for All Member Firm Proprietary Transactions Executed in 
Open Outcry and To Increase Both the Existing Monthly Fee Cap and a 
Related Trading Volume Threshold Applicable to Market Makers

June 13, 2011.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that, on June 1, 2011, NYSE Amex LLC (the ``Exchange'' or ``NYSE 
Amex'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. 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\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its Options Fee Schedule (the 
``Schedule'') by adopting (i) A monthly fee cap of $100,000 per month 
for member firms on all proprietary trading in open outcry, with 
certain exclusions, and (ii) a related service fee of $.01 per contract 
for volumes in excess of the cap. The Exchange also proposes to amend 
the monthly fee cap that is currently applicable to market makers by 
increasing it from $250,000 to $350,000 for all trades with certain 
exclusions, while raising the threshold at which capped market makers 
begin to pay $.01 per contract from 2,500,000 contracts to 3,500,000 
contracts. The proposed changes will be operative on June 1, 2011. The 
text of the proposed rule change is available at the Exchange, the 
Commission's Public Reference Room, and http://www.nyse.com.

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 purpose of the proposal is to cap all member firm proprietary 
transactions executed in open outcry at $100,000 per month, with 
certain exclusions. Once the monthly fee cap has been reached, member 
firm proprietary transactions in open outcry will be subject to a $.01 
per contract service fee for all volumes in excess of the cap.\3\ For 
example, the

[[Page 35494]]

member firm rate per contract for open outcry executions is $.25 per 
contract. Therefore, a member firm will cap once they have executed 
400,000 contracts in proprietary transactions in open outcry, and at 
that point in time all subsequent proprietary transactions executed in 
open outcry by that member firm will be subject to a $.01 per contract 
service fee. The proposed service fee is being instituted to defray the 
Exchange's costs of providing services to members, which include trade 
matching and processing, post trade allocation, submission for clearing 
and customer service activities related to trading activity on the 
Exchange.
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    \3\ The Exchange trades several products subject to Royalty 
Fees, which are fees charged by the owner of the intellectual 
property rights associated with an index for the right to trade 
options on the index. Royalty Fees are not subject to the proposed 
monthly firm fee cap, and a capped firm will continue to pay Royalty 
Fees at the rate(s) stated in the Schedule. In addition, Firm 
Facilitation trades will continue to be executed at a rate of $0.00 
per contract regardless of whether a firm is capped or not.
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    The proposed fee cap is functionally similar to the ``Multiply-
Listed Option Fee Cap'' in place at the Chicago Board Options Exchange 
(``CBOE''),\4\ the ``Firm Related Equity Option Cap'' in place at 
NASDAQ OMX PHLX, Inc. (``PHLX''),\5\ and a monthly firm proprietary fee 
cap on the International Securities Exchange (``ISE'') that features a 
service fee.\6\ The Exchange believes the proposed new fee cap would 
create an incentive for members to continue to send order flow to the 
Exchange. The Exchange is limiting the proposed new fee cap to manual 
firm proprietary orders in order to attract large block order flow to 
the floor of the Exchange, where such orders can be better handled in 
comparison with electronic orders that are not negotiable. The Exchange 
notes that NYSE Arca, Inc. also recently established a fee cap of 
$75,000 per month that is applicable only to manual firm proprietary 
trades in options.\7\
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    \4\ The CBOE fees are capped at $75,000. See CBOE Fees Schedule, 
May 2, 2011, Section 1 (Equity Options Fees) on page 2 of 15 at 
http://www.cboe.com/publish/feeschedule/CBOEFeeSchedule.pdf.
    \5\ PHLX Firms are subject to a maximum fee of $75,000. See PHLX 
Fee Schedule, May 19, 2011, Section II (Equity Options Fees) on page 
8 of 42 at http://www.nasdaqtrader.com/content/marketregulation/membership/phlx/feesched.pdf.
    \6\ ISE firms are capped at $100,000 with certain exclusions and 
subject to a service fee on all volumes once the cap has been 
reached. See ISE Schedule of Fees, April 11, 2011, footnote 1 on 
page 15 of 17 at http://www.ise.com/assets/documents/OptionsExchange/legal/fee/fee_schedule.pdf.
    \7\ See Securities Exchange Act Release No. 63471 (December 8, 
2010), 75 FR 77928 (December 14, 2010) (File No. SR-NYSEArca-2010-
108).
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    The Exchange also proposes to amend the current fee cap applicable 
to market makers \8\ by increasing it from $250,000 per month to 
$350,000 per month and at the same time increasing the threshold from 
2,500,000 contracts per month to 3,500,000 contracts per month, at 
which point the capped market makers will pay $.01 per contract for all 
subsequent volumes executed that month, subject to certain 
exclusions.\9\ The Exchange is making this change as overall industry 
volumes and resultant volume on the Exchange have grown. In keeping up 
with this growth the Exchange is continually enhancing our systems to 
provide our market makers with the bandwidth necessary to quote 
competitively, and The Exchange believes that adjusting the fee cap 
upwards is appropriate given the ongoing costs of providing the 
throughput needed by high volume market makers.
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    \8\ This category includes Specialists, eSpecialists, and NYSE 
Amex Options Market Makers (both Directed and Non-Directed).
    \9\ The Exchange notes that the current market maker fee cap is 
exclusive of Royalty Fees charged for transactions in products 
subject to Royalty Fees. No change is occurring with respect to 
this, and capped market makers will continue to be subject to the 
Royalty Fees stated in the Schedule. Similarly, any fees or volume 
associated with a Strategy Trade will not be counted towards either 
the $350,000 cap or the volume threshold of 3,500,000 contracts. 
Additionally, the charge for all non-Public Customers who transact 
in the electronic Complex Order Book is $.05 per contract, and 
capped market makers trading in the Complex Order Book will continue 
to pay $.05 per contract.
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    The proposed changes will be operative on June 1, 2011.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Securities Exchange Act of 1934 
(the ``Act''),\10\ in general, and Section 6(b)(4) of the Act,\11\ in 
particular, in that it is designed to provide for the equitable 
allocation of reasonable dues, fees, and other charges among its 
members and other persons using its facilities.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that adopting the proposed new fee cap for 
manual firm proprietary trades is reasonable because it will 
potentially lower transaction fees for members providing liquidity on 
the Exchange. Members who reach the fee cap during a month will not 
have to pay regular transaction fees and thus will be able to lower 
their monthly fees.
    The Exchange believes that this proposed new fee cap is not 
unfairly discriminatory because all member firms are eligible to reach 
the cap. In addition, the Exchange believes that the proposed monthly 
fee cap, which applies only to manual firm proprietary trades, is not 
unfairly discriminatory to other market participants because its 
purpose is to attract large block order flow to the floor of the 
Exchange, where such orders can be better handled in comparison with 
electronic orders that are not negotiable. To the extent that this 
purpose is achieved, all of the Exchange's market participants should 
benefit from the improved market liquidity. The Exchange has previously 
adopted other incentive programs targeting other business areas: no 
fees for customer orders \12\ and fee caps for market makers.\13\
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    \12\ See NYSE Amex Options Fee Schedule as of May 11, 2011, 
Customer Electronic and Customer Manual charges on pages 2-3 of 10 
at http://www.nyse.com/pdfs/NYSEAmex_Options_Fee_Schedule_CLEAN_05_11_11_Effective_Date.pdf.
    \13\ See id. at footnote 5 on page 9 of 10.
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    The Exchange further believes the proposal to adopt the fee cap is 
equitable because it would uniformly apply to all member firms engaged 
in manual proprietary trading in option classes traded on the Exchange. 
As noted, market makers currently receive the benefit of a fee 
reduction once they reach a volume threshold.
    The Exchange believes that adopting the service fee is reasonable 
because it will also potentially lower transaction fees for member 
firms. Member firms who reach the fee cap during a month will pay the 
service fee instead of the regular transaction fees and thus will be 
able to lower their monthly fees. The Exchange believes that charging a 
service fee is also reasonable because it will allow the Exchange to 
recoup the costs incurred in providing certain services, which include 
trade matching and processing, post trade allocation, submission for 
clearing and customer service activities related to trading activity on 
the Exchange. The Exchange believes the proposed fee change will 
attract additional order flow to the Exchange and thereby will benefit 
all market participants.
    The Exchange believes the proposal to adopt the service fee is 
equitable and not unfairly discriminatory because it would uniformly 
apply to all member firms engaged in manual proprietary trading. The 
proposed fee is designed to give member firms that trade a lot on the 
Exchange a benefit by way of a lower transaction fee.
    The Exchange believes the proposed service fee change will benefit 
market participants by potentially lowering their fees while allowing 
the Exchange to remain competitive with other exchanges that offer 
similar fee cap programs. The Exchange notes that the proposed service 
fee is similar to fees other exchanges charge for providing certain 
services to their members. For example, ISE's monthly firm proprietary 
fee cap described above features a service fee that is applicable in

[[Page 35495]]

conjunction with the cap.\14\ The proposed service fee is also similar 
to the incremental charge of $.01 per contract that the Exchange 
currently charges on market maker volume executed in excess of 
2,500,000 contracts per month.\15\
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    \14\ See supra note 6 (describing the operation of the ISE 
service fee).
    \15\ See supra note 13 (describing the operation of the $.01 
incremental charge).
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    The Exchange believes the proposal to amend the monthly market 
maker fee cap is equitable and not unfairly discriminatory because it 
would uniformly apply to all market makers. Market maker fee caps 
generally are designed to give market makers who provide substantial 
liquidity on the Exchange a benefit by way of a lower transaction fee. 
The Exchange notes that other exchanges, notably the CBOE,\16\ 
PHLX,\17\ and ISE \18\ offer volume discounts and/or fee caps for 
market makers transacting business on their exchanges. The Exchange 
believes that the proposed increase in the amount of the fee cap is 
reasonable because of the additional costs being incurred by the 
Exchange in enhancing its systems to provide our market makers with the 
increased bandwidth needed to quote competitively, given the growth in 
overall industry volumes and resultant increased volume on the 
Exchange. The Exchange notes further that even at the newly proposed 
$350,000 level, the market maker fee cap would be substantially less 
than similar caps on PHLX (which offers a cap of $550,000 per month 
including only certain symbols) \19\ and CBOE (which requires a 
$8,446,400 annual prepayment, equivalent to over $700,000 per month, in 
order to attain a rate of $0.03 per contract).\20\
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    \16\ See CBOE Fees Schedule--Liquidity Provider Scale on page 2 
of 15 and related footnote 10 on page 4 of 15.
    \17\ See PHLX Fee Schedule--Section II (Equity Options Fees) on 
page 8 of 42.
    \18\ See ISE Schedule of Fees--ISE Market Maker sliding scale on 
page 4 of 17.
    \19\ See supra note 17.
    \20\ See supra note 16, footnote 10 on page 4 of 15.
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    For the reasons noted above, the Exchange believes that the 
proposed fees are fair, equitable and not unfairly discriminatory.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change is effective upon filing pursuant to 
Section 19(b)(3)(A) \21\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \22\ thereunder, because it establishes a due, fee, or other 
charge imposed by NYSE Amex.
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    \21\ 15 U.S.C. 78s(b)(3)(A).
    \22\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.

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 (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File Number SR-NYSEAmex-2011-36 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEAmex-2011-36. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://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 a.m. and 3 p.m. Copies of the 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-
NYSEAmex-2011-36 and should be submitted on or before July 8, 2011.

    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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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-15041 Filed 6-16-11; 8:45 am]
BILLING CODE 8011-01-P