[Federal Register Volume 76, Number 157 (Monday, August 15, 2011)]
[Notices]
[Pages 50529-50532]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-20640]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65062; File No. SR-NYSE-2011-39]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to Credits to Supplemental Liquidity Providers

August 9, 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 August 1, 2011, New York Stock Exchange LLC (the ``Exchange'' 
or ``NYSE'') 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 2011 Price List (``Price List'') 
for equity transactions to amend the tiered structure of credits to 
Supplemental Liquidity Providers (``SLPs'') for adding liquidity to the 
Exchange in NYSE-listed securities with a per share stock price of 
$1.00 or more, to include criteria based on an SLP's Average Daily 
Volume (``ADV'') in added liquidity in the applicable month. The 
amended pricing will take effect on August 1, 2011. The text of the 
proposed rule change is available at the Exchange, at http://www.nyse.com, at the Commission's Public Reference Room, and at the 
Commission's Web site at http://www.sec.gov.

[[Page 50530]]

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its tiered structure of credits to 
SLPs for adding liquidity to the Exchange in NYSE-listed securities. 
The Exchange proposes to change the tiered volume requirements in the 
Price List from numerical thresholds (e.g., 50 million shares) to a 
combination of numerical thresholds and percentage thresholds of US ADV 
(e.g., 1.25% of US ADV).\3\ The percentage threshold volume 
requirements to reach the tiered pricing levels will be fixed and not 
variable and will result in share volume that will adjust each month 
based on US average daily consolidated share volume in Tape A 
securities (``US Tape A ADV'') for that given month. US Tape A ADV is 
equal to the volume reported by all exchanges and trade reporting 
facilities to the Consolidated Tape Association (``CTA'') Plan for Tape 
A securities. The Exchange currently makes this data publicly available 
on a T + 1 basis from a link at http://www.nyxdata.com/US-andEuropean-Volumes. The percentage approach is in line with those adopted by NYSE 
Arca, Inc. (``NYSE Arca''), NASDAQ Stock Market LLC and EDGX Exchange, 
Inc. for liquidity providers.\4\
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    \3\ For purposes of transaction fees and Supplemental Liquidity 
Provider liquidity credits, ADV calculations exclude early closing 
days.
    \4\ See Securities Exchange Act Release Nos. 64627 (June 8, 
2011), 76 FR 34788 (June 14, 2011) (SR-NYSEArca-2011-35); 64453 (May 
10, 2011), 76 FR 28252 (May 16, 2011) (SR-NASDAQ-2011-062); 64632 
(June 8, 2011), 76 FR 34792 (June 14, 2011) (SR-EDGX-2011-17). In 
addition, other exchanges have included both percentage thresholds 
and minimum numeric thresholds as tier requirements. See, e.g., 
Securities Exchange Act Release No. 64820 (July 6, 2011, 76 FR 40974 
(July 12, 2011) (SE-NYSEArca-2011-41).
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    Under the current tiered structure of credits, SLPs that meet the 
10% average or more quoting requirement in an assigned security 
pursuant to NYSE Rule 107B receive a credit per share per transaction 
for adding liquidity, based on total ADV of added liquidity in the 
applicable month for all assigned SLP securities, as follows: \5\
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    \5\ See Securities Exchange Act Release No. 63642 (January 4, 
2011), 76 FR 1653 (January 11, 2011) (SR-NYSE-2010-87).
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     $0.0022 credit per share per transaction if total ADV of 
added liquidity is more than 50 million shares;
     $0.0021 credit per share per transaction if total ADV of 
added liquidity is more than 20 million shares but not more than 50 
million shares;
     $0.0020 credit per share per transaction if total ADV of 
added liquidity is more than 10 million shares but not more than 20 
million shares.\6\
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    \6\ For all other SLP transactions that add liquidity to the 
Exchange but do not qualify for any of the foregoing credits, the 
credit is $0.0015 per share per transaction. In addition, in its 
first calendar month as an SLP, an SLP qualifies for the tiered 
credits regardless of whether it meets the requirement to provide 
liquidity with an ADV of more than 10 million shares.
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    The Exchange proposes to amend such credits with respect to SLP 
transactions as described below. SLPs that meet the 10% average or more 
quoting requirement in an assigned security pursuant to NYSE Rule 107B 
will receive a credit per share per transaction for adding liquidity, 
based on total ADV of added liquidity in the applicable month for all 
assigned SLP securities, as follows:
     0.0022 credit per share per transaction if added liquidity 
is the greater of (a) an ADV of more than 35 million shares or (b) more 
than 1.25% of US Tape A ADV (``SLP Tier 1'');
     $0.0021 credit per share per transaction if added 
liquidity is the greater of (a) an ADV of more than 15 million shares 
but not more than 35 million shares or (b) more than 0.50% but not more 
than 1.25% of US Tape A (``SLP Tier 2''); and
     $0.0020 credit per share per transaction if added 
liquidity is an ADV of more than 10 million shares but not more than 
the greater of 15 million shares or 0.50% of US Tape A ADV (``SLP Tier 
3'').
    The following table sets forth the differences between the current 
thresholds for the SLP credits as well as the proposed structure:

----------------------------------------------------------------------------------------------------------------
                                SLP Credit  per
                                  share  per       Current daily provide ADV     Proposed new daily provide ADV
           SLP Tier                qualified              requirement                     requirement
                                 provide share
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1............................           $0.0022  More than 50,000,000 shares.  More than 1.25% of US Tape A ADV
                                                                                or 35,000,000 shares, whichever
                                                                                is greater.
2............................            0.0021  More than 20,000,000 shares   More than 0.50% of US Tape A ADV
                                                  but not more than             or 15,000,000 shares, whichever
                                                  50,000,000 shares.            is greater, but not more than
                                                                                1.25% of US Tape A ADV or
                                                                                35,000,000 shares, whichever is
                                                                                greater.
3............................            0.0020  More than 10,000,000 shares   More than 10,000,000 shares but
                                                  but not more than             not more than 0.50% of US Tape A
                                                  20,000,000 shares.            ADV or 15,000,000 shares,
                                                                                whichever is greater.
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    The proposed ADV thresholds for SLP Tiers 1 and 2 will fluctuate 
according to monthly market volumes, but will be subject to fixed 
minimum numerical thresholds as shown in the following example.

    Example: In a month in which the US Tape A ADV is 3.5 billion 
shares, the requirement for SLP Tier 1 would be 1.25% or 43.75 
million shares ADV, and the requirement for SLP Tier 2 would be 0.5% 
or 17.5 million shares ADV. In a month in which US Tape ADV falls to 
2 billion shares, the requirement for Tier 1 would be the greater of 
35 million shares and 1.25% of US Tape A ADV, or 25 million shares, 
so the minimum would be 35 million shares. In that same month, the 
requirement for SLP Tier 2 would be the greater of 15 million shares 
ADV and 0.5% of US Tape A, or 10 million shares, so the minimum ADV 
would be 15 million shares.

    The minimum numerical thresholds for SLP Tier 2 of 15 million and 
for SLP Tier 1 of 35 million are set lower than the current numerical 
thresholds of 20 million for SLP Tier 2 and 50 million for SLP Tier 1 
because current equity market volume has declined from recent 
historical levels.
    The Exchange is proposing to add numerical minimum ADV thresholds 
to

[[Page 50531]]

the percentage ADV thresholds in SLP Tier 1 and SLP Tier 2 in order to 
facilitate the determination of the applicable credits per share and 
prevent crossing between tiers in low volume months. For example, in a 
month with less than 2 billion US Tape A ADV, SLP Tier 2's 0.50% 
percentage ADV threshold would fall below the SLP Tier 3 requirement 
(e.g., 0.50% of 1.5 billion US Tape A ADV is equal to 7.5 million ADV, 
which is less than the 10 million SLP Tier 3 requirement.)
    The Exchange believes that the SLP Tier 3 minimum requirement of 10 
million ADV, which remains unchanged and not tied to any percentage ADV 
threshold, continues to be an appropriate minimum requirement for the 
SLP program, given that it is a reasonable requirement to get a 
significantly larger increase of $.0005 over the client rebate of 
$.0015, and that the larger volume requirements needed for SLP Tier 2 
and SLP Tier 1 are likely to be more sensitive to fluctuations in 
market volumes. In addition, the SLP Tier 3 maximum requirement is 
being lowered from 20 million ADV to 15 million ADV in order to 
correspond to, and avoid overlap with, the minimum 15 million ADV 
requirement in SLP Tier 2.
    For two of its SLP Tiers, NYSE is moving to an approach that will 
compare the liquidity added by an SLP to the greater of a numerical 
threshold or a percentage threshold based upon the average daily traded 
volume of the relevant security, for several reasons. The percentage 
threshold will adjust each calendar month based on the U.S. average 
daily consolidated share volume in Tape A Securities for that month, 
while the numerical threshold remains unchanged from month to month, 
thereby providing a consistent floor against which to measure the SLPs' 
performance. The Exchange also believes that the proposed approach will 
provide a more straightforward way to communicate floating volume 
tiers, while maintaining a minimum threshold, which, as noted above, is 
an approach similar to that adopted by other exchanges.\7\ The Exchange 
notes that the combined approach will allow tiers to move in sync with 
consolidated volume while maintaining a numerical threshold. While the 
percentage thresholds will result in lower minimum share volume 
requirements for SLP Tier 1 and SLP Tier 2 when consolidated volumes 
are lower, they will also result in higher minimum share volume 
requirements when consolidated volumes are higher. Such higher and 
lower consolidated volumes will have a similar impact on the maximum 
share requirements for SLP Tier 2 and SLP Tier 3; however, the minimum 
share requirement for SLP Tier 3 will remain unchanged at 10 million 
shares.
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    \7\ See note 2, supra.
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    These changes are intended to be effective immediately for all 
transactions beginning August 1, 2011 and are only applicable to those 
NYSE-listed securities with a per share stock price of $1.00 or more.
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''), in general, and Section 6(b)(4) of the Act,\8\ 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. The Exchange believes 
that the proposal does not constitute an inequitable allocation of 
fees, as all similarly situated member organizations and other market 
participants will be subject to the same fee structure, and access to 
the Exchange's market is offered on fair and non-discriminatory terms.
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    \8\ 15 U.S.C. 78f(b)(4).
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    With respect to the addition of percentage ADV thresholds to the 
existing share thresholds for certain of NYSE's existing pricing tiers, 
NYSE believes that the change is reasonable, because the levels of 
liquidity provision required to receive the applicable credits will 
move month to month with respect to the levels of market volumes. NYSE 
believes the levels of activity required to achieve higher tiers will 
be generally consistent with existing requirements for these tiers. 
Moreover, like existing pricing tiers tied to volume levels, as in 
effect at NYSE and other markets, the proposed pricing tiers are 
equitable and non-discriminatory because they are open to all SLPs on 
an equal basis and provide discounts that are reasonably related to the 
value to an exchange's market quality associated with higher volumes.
    Finally, the Exchange notes that it operates in a highly 
competitive market in which market participants can readily favor 
competing venues if they deem fee levels at a particular venue to be 
excessive. In such an environment, the Exchange must continually adjust 
its fees to remain competitive with other exchanges and with 
alternative trading systems that have been exempted from compliance 
with the statutory standards applicable to exchanges. The Exchange 
believes that the proposed rule change reflects this competitive 
environment because it will broaden the conditions under which 
customers may qualify for higher liquidity provider credits.

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) \9\ of the Act and subparagraph (f)(2) of Rule 19b-
4 \10\ thereunder, because it establishes or changes a due, fee, or 
other charge imposed on its members by the Exchange. At any time within 
60 days of the filing of such proposed rule change, the Commission 
summarily may temporarily suspend such rule change if it appears to the 
Commission that such action is necessary or appropriate in the public 
interest, for the protection of investors, or otherwise in furtherance 
of the purposes of the Act.
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File Number SR-NYSE-2011-39 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.


[[Page 50532]]


All submissions should refer to File Number SR-NYSE-2011-39. 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-NYSE-2011-39 and should be 
submitted on or before September 6, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-20640 Filed 8-12-11; 8:45 am]
BILLING CODE 8011-01-P