[Federal Register Volume 77, Number 157 (Tuesday, August 14, 2012)]
[Notices]
[Pages 48568-48570]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-19842]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-67618; File No. SR-NYSEARCA-2012-81]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend the NYSE
Arca Options Fee Schedule To Add an Additional Tier to the Lead Market
Maker Rights Fee and an Alternative Qualification Basis for Market
Makers That Post Liquidity in Penny Pilot Issues and Options on the
SPDR S&P 500 ETF
August 8, 2012.
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 July 27, 2012, 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, II,
and III below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 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 the NYSE Arca Options Fee Schedule
(``Fee Schedule'') to add an additional tier to the Lead Market Maker
(``LMM'') rights fee and an alternative qualification basis for Market
Makers that post liquidity in Penny Pilot issues and options on the
SPDR S&P 500 ETF (``SPY''). 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend the Fee Schedule to add an
additional tier to the LMM rights fee and an alternative qualification
basis for Market Makers that post liquidity in Penny Pilot issues and
options on SPY.
LMM Rights
OTP Firms \4\ acting as LMMs are assessed a fee for LMM rights for
each appointed issue.\5\ The LMM rights fee is based on the average
daily volume (``ADV'') of Customer contracts traded in that issue.\6\
Currently, the LMM rights fees are charged as follows:
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\4\ See NYSE Arca Rule 1.1(r).
\5\ ``Market Maker'' is defined in NYSE Arca Rule 6.32. ``Lead
Market Maker'' is defined in NYSE Arca Rule 6.82.
\6\ The term ``Customer'' excludes a broker-dealer. See NYSE
Arca Rule 6.1A(a)(4).
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Monthly
Average national daily customer contracts issue fee
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0 to 2,000.................................................. $75
2,001 to 5,000.............................................. 200
5,001 to 15,000............................................. 375
15,001 to 100,000........................................... 750
Over 100,000................................................ 1,500
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The Exchange proposes to add an additional tier for issues with an
ADV of between 0-1000 contracts that will be charged an LMM rights fee
of $45. The LMM rights fee for issues with an ADV of between 1001-2000
contracts would continue to be $75. The fees are assessed at the end of
each month on each issue that an LMM holds in their LMM appointment.
The proposed LMM rights fees would be charged as follows:
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Monthly
Average national daily customer contracts issue fee
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0-1000...................................................... $45
1001 to 2,000............................................... 75
2,001 to 5,000.............................................. 200
5,001 to 15,000............................................. 375
15,001 to 100,000........................................... 750
Over 100,000................................................ 1,500
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Penny Pilot Issues
Currently, Market Makers receive a per contract credit for posted
electronic executions based on certain volume thresholds in Penny Pilot
issues, with an additional credit for posted electronic executions in
SPY, as follows:
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Credit applied to
posted electronic Credit applied to
Qualification basis (average market maker posted electronic
Tier electronic executions per day) executions in market maker
penny pilot issues executions in SPY
(except SPY)
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Base................................ .................................. ($0.32) ($0.34)
Tier 1.............................. 30,000 Contracts from Market Maker ($0.34) ($0.36)
Posted Orders in Penny Pilot
Issues.
Tier 2.............................. 80,000 Contracts from Market Maker ($0.38) ($0.40)
Posted Orders in Penny Pilot
Issues.
Tier 3.............................. 150,000 Contracts from Market ($0.40) ($0.42)
Maker Posted Orders in Penny
Pilot Issues.
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For example, if a Market Maker has average electronic executions
per day of 40,000 contracts from posted orders in Penny Pilot issues,
the Market Maker receives a credit of $0.34 per contract for posted
electronic executions in non-SPY Penny Pilot issues, and a credit of
$0.36 per contract for posted electronic executions in SPY.
The Exchange proposes to add an alternative qualification basis for
Market Makers that post liquidity in Penny Pilot issues and SPY. Market
Makers will have an alternative method to
[[Page 48569]]
qualify for the Tier 2 credit applied to posted electronic executions
in Penny Pilot issues and SPY. A Market Maker may qualify for the Tier
2 credit by:
Having an ADV of 80,000 executed electronic Market Maker
posted contracts in Penny Pilot issues, including SPY, or
Having a combined ADV of 150,000 executed electronic
Market Maker and Customer posted contracts in Penny Pilot issues,
including SPY, from all affiliated OTP Holders \7\ and OTP Firms.
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\7\ See NYSE Arca Rule 1.1(q).
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For purposes of this calculation, days when the market closes early
are not included in the ADV. The Exchange does not propose to change
the base rate, Tier 1, or Tier 3 credits for Market Makers that post
electronic executions in Penny Pilot issues or SPY. The proposed Market
Maker monthly posting credit tiers and qualifications for executions in
Penny Pilot issues and SPY would be as follows:
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Tier Qualification basis Credit applied to posted electronic market Credit applied to
(average electronic maker executions in penny pilot issues posted electronic
executions per day). (except SPY) market maker
executions in SPY
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Base.................... ...................... ...................... ($0.32) ($0.34)
Tier 1.................. 30,000 Contracts from ...................... ($0.34) ($0.36)
Market Maker Posted
Orders in Penny Pilot
Issues.
Tier 2.................. 80,000 Contracts from 150,000 Contracts ($0.38) ($0.40)
Market Maker Posted Combined from Market
Orders in Penny Pilot Maker Posted Orders
Issues. and Customer
Electronic Posted
Orders in Penny Pilot
Issues*.
Tier 3.................. 150,000 Contracts from ...................... ($0.40) ($0.42)
Market Maker Posted
Orders in Penny Pilot
Issues.
* Includes transaction volume from the Market Maker's affiliates.
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For example, if a Market Maker has average electronic executions
per day of 160,000 contracts combined from Market Maker posted orders
and Customer electronic posted orders in Penny Pilot issues, the Market
Maker receives a credit of $0.38 per contract for Market Maker posted
electronic executions in non-SPY Penny Pilot issues, and a credit of
$0.40 per contract for Market Maker posted electronic executions in
SPY.
The Exchange proposes to make all of the changes described above
operative on August 1, 2012.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\8\ in general, and furthers the
objectives of Section 6(b)(4) of the Act,\9\ in particular, because it
provides for the equitable allocation of reasonable dues, fees, and
other charges among its members, issuers and other persons using its
facilities and does not unfairly discriminate between customers,
issuers, brokers or dealers.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that including an additional tier for LMM
rights fees is reasonable, equitable, and not unfairly discriminatory
because certain issues have declined to an ADV below 1,000 Customer
contracts, which in turn produces a profit for LMMs that is lower than
the amount of the LMM rights fee. Issues that are particularly
unprofitable run the risk of being delisted, even though the decline in
ADV may be temporary. Therefore, it is reasonable to lower the LMM
rights fee to an amount that is more closely aligned to the revenues
generated by these issues. In addition, the fee is equitable and not
unfairly discriminatory because it would apply uniformly to all
similarly situated LMMs.
The Exchange further believes that the proposed alternative
qualification basis for Market Makers is reasonable, equitable and not
unfairly discriminatory because it is set at a level that would be more
achievable for Market Makers and encourages Market Makers to send
additional Customer orders to the Exchange. In this regard, the
Exchange has proposed more than one method of qualifying for the Tier 2
credit. Overall, the Exchange believes that this will result in more
Market Makers qualifying for the tier, receiving the increased credits,
and therefore reducing their overall transaction costs on the Exchange.
In addition, the Exchange believes that the proposed alternative
qualification basis would continue to incent Market Makers to increase
the level of Customer order flow sent to, and liquidity added on, the
Exchange, thereby potentially improving the quality and efficiency of
order interaction and executions on the Exchange. The Exchange believes
that the aspect of the proposed change related to the activity of an
affiliated OTP Holder or OTP Firm is reasonable, equitable and not
unfairly discriminatory because it would encourage increased trading
activity on the Exchange. In this regard, the proposal is designed to
bring additional posted order flow to the Exchange, so as to provide
additional opportunities for all OTP Holders and OTP Firms to trade on
the Exchange. The Exchange further believes that the proposed change is
reasonable, equitable and not unfairly discriminatory because the
tiers, and the corresponding credits, will apply uniformly to all
Market Makers.
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.
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) \10\ of the Act and subparagraph (f)(2) of Rule
19b-4 \11\
[[Page 48570]]
thereunder, because it establishes a due, fee, or other charge imposed
by NYSE Arca.
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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 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 email to [email protected]. Please include
File Number SR-NYSEArca-2012-81 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-NYSEArca-2012-81. 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 (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 20549-1090 on official business days between the hours
of 10:00 a.m. and 3:00 p.m. Copies of the filing will also be available
for inspection and copying at the Exchange'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-2012-81 and should be submitted
on or before September 4, 2012.
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\12\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-19842 Filed 8-13-12; 8:45 am]
BILLING CODE 8011-01-P