[Federal Register Volume 77, Number 179 (Friday, September 14, 2012)]
[Notices]
[Pages 56886-56890]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-22641]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67816; File No. SR-NSX-2012-14]


Self-Regulatory Organizations; National Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Clarify the Purpose of, and Statutory Basis for, the September 4, 2012 
Changes to the NSX Fee and Rebate Schedule

September 10, 2012.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on September 4, 2012, National Stock Exchange, Inc. filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change, as described in Items I and II below, which Items have been 
prepared by the Exchange. The Commission is publishing this notice to 
solicit comment 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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[[Page 56887]]

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    National Stock Exchange, Inc. (``NSX[supreg]'' or ``Exchange'') is 
proposing to amend its Fee and Rebate Schedule (the ``Fee Schedule'') 
issued pursuant to Exchange Rule 16.1(a) to introduce different Fee 
Schedules including liquidity adding rebates and liquidity removal 
fees. The Exchange proposes to adopt a Fee Schedule which allows Equity 
Trading Permit (``ETP'') Holders to choose one of two pricing options 
which can be applied to shares executed on the Exchange in Automatic 
Execution Mode \3\ for securities quoted at prices equal to or greater 
than one dollar. ETP Holders can choose between a Variable Fee 
Schedule, which offers a liquidity adding rebate, a fixed liquidity 
removal fee along with market data rebates, and a Fixed Fee Schedule 
which sets forth a fixed liquidity adding rebate and a fixed liquidity 
removal fee.
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    \3\ See NSX Rule 11.13(b)(1).
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    The proposed rule filing also offers ETP Holders that execute 
orders using the Order Delivery Mode \4\ an alternate fee schedule 
(``Alternate Fee Schedule'') for securities quoted at prices equal to 
or greater than one dollar. The Alternate Fee Schedule may provide 
these ETP Holders with an incentive to execute additional orders on the 
Exchange using the Automatic Execution Mode. ETP Holders that are order 
delivery participants automatically receive the Alternate Fee Schedule 
upon meeting the minimum ADV threshold of 1,500,000 in Order Delivery 
Mode and 10,000,000 shares in Automatic Execution Mode. Under the 
Alternate Fee Schedule, ETP Holders will receive up to an additional 
$0.0003 liquidity adding rebate over the tiered rebates contained in 
the Primary Fee Schedule when the tier requirements are met. The 
Exchange is also proposing to reduce the liquidity adding rebates and 
increase the number of ADV tiers on the current Primary Fee Schedule 
(as defined in further detail below).
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    \4\ See NSX Rule 11.13(b)(2).
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    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.nsx.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

Purpose

    The Exchange is proposing to modify the Fee Schedule for securities 
quoted in prices equal to or greater than one dollar. The Exchange will 
not change the Fee Schedule for securities priced less than one dollar. 
First, the Exchange is proposing to introduce a Fixed Fee Schedule 
which will be the default Fee Schedule for shares executed in Automatic 
Execution Mode. Second, the Exchange proposes to require ETP Holders to 
pay a $0.0030 liquidity removal fee under both the Fixed Fee Schedule 
and the Variable Fee Schedule unless the ETP Holder provides and 
executes 50,000 shares of liquidity per month on the Exchange in 
Automatic Execution Mode. ETP Holders that exceed the 50,000 liquidity 
providing threshold will be charged the liquidity removal rate from the 
appropriate ADV tier on the default Fixed Fee Schedule or the elected 
Variable Fee Schedule. Third, the Exchange proposes to reduce the per 
share liquidity adding rebate and increase the number of ADV tiers for 
securities quoted at prices equal to or more than one dollar for ETP 
Holders that use the Order Delivery Mode. Fourth, an Alternate Fee 
Schedule will be proposed by the Exchange for ETP Holders executing 
orders using the Order Delivery Mode. Under the Alternate Fee Schedule, 
shares executed under the Automatic Execution Mode by an ETP Holder 
that is an order delivery participant will be attributed to the per 
share average daily volume (``ADV'') calculation \5\ used by the 
Exchange to determine the tiered rebate applicable to Order Delivery 
Mode. Fifth, the Exchange is proposing to amend the definition of the 
ADV used to determine whether the Alternate or Primary Fee Schedule 
applies to an ETP Holder using Order Delivery Mode. Finally, the 
Exchange is proposing to clarify the Fee Schedule's endnotes, and 
present the fee structure in a table format.
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    \5\ See Endnote 4. The Exchange proposes to define the ADV as 
the average number of shares the ETP Holder has executed on the 
Exchange in all NMS stocks quoted at prices equal to or greater than 
a dollar when the Exchange is open for trading (excluding partial 
trading days) in Auto-Ex Mode or in Order Delivery Mode during the 
calendar month (or partial month, as applicable \3\) [sic]. Shares 
executed by an ETP Holder in Auto-Ex Mode will only be used by the 
Exchange to calculate the minimum ADV contained in Section I of the 
Fee Schedule. Likewise, shares executed by an ETP Holder in Order 
Delivery Mode as an order delivery participant will only be used by 
the Exchange to calculate the minimum ADV contained in Section II of 
the Fee Schedule.
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1. Introduction of Fixed Fee Schedule for Automatic Execution Mode
    The Exchange's current tiered pricing schedule for ETP Holders 
executing transactions using the Automatic Execution Mode includes a 
liquidity adding rebate, a liquidity removal fee and a market data 
revenue rebate which causes variable pricing (``Variable Fee 
Schedule''). The Exchange will not change the rates currently contained 
in the Variable Fee Schedule. The Exchange changed the presentation of 
the Variable Fee Schedule by representing the liquidity adding rebates, 
liquidity removal fees and market data revenue rebates in a table 
format.
    The proposed rule change introduces a Fixed Fee Schedule applicable 
to transactions executed by ETP Holders using the Automatic Execution 
Mode. The Fixed Fee Schedule will be the Exchange's default pricing for 
shares executed in Automatic Execution Mode. However, an ETP Holder may 
elect to apply the Variable Fee Schedule instead of the Fixed Fee 
Schedule by indicating its preference in an email to the Exchange prior 
to the first of the month.\6\ ETP Holders may elect the Variable Fee 
Schedule following the effectiveness of this rule filing by emailing 
the Exchange by September 10, 2012.\7\
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    \6\ See Endnote 3.
    \7\ See Endnote 3. ETP Holders may elect to adopt the ``Variable 
Fee Schedule'' by sending an email indicating this preference to 
[email protected].
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    The Fixed Fee Schedule provides fixed tier pricing and no market 
data revenue rebate. ETP Holders will receive a fixed rebate when 
executing displayed orders that add liquidity, and be charged a fixed 
fee when executing orders that remove liquidity from the Exchange. 
Under the Fixed Fee Schedule, a per share liquidity adding rebate will 
be paid for displayed orders in securities quoted with a price equal to 
or greater than a dollar at a rate of $0.0024, $0.0030, $0.0031, 
$0.0032, or $0.0033 per share depending on an ETP Holder's ADV. An ETP 
Holder will receive a $0.0024 per share rebate when the ETP Holder's 
ADV is less than 500,000 shares; a $0.0030 per share rebate when the 
ETP Holder's ADV is at least 500,000 shares but less than 1,500,000 
shares; a $0.0031 per share rebate when the ETP Holder's ADV is at 
least 1,500,000 shares but less than 5,000,000 shares; a $0.0032 per 
share rebate when the ETP Holder's ADV is at least 5,000,000 shares but 
less than 10,000,000 shares; and a $0.0033 per share rebate when the 
ETP Holder's ADV is at least 10,000,000 shares.
    In addition, the Fixed Fee Schedule will charge ETP Holders a 
tiered liquidity removal fee at a rate of $0.0030, $0.0029, $0.0028, or 
$0.0027 per share depending on an ETP Holder's

[[Page 56888]]

ADV. A $0.0030 per share fee applies when the ETP Holder's ADV is less 
than 500,000 shares; a $0.0029 per share fee applies when the ETP 
Holder's ADV is at least 500,000 shares but less than 5,000,000 shares; 
a $0.0028 per share fee applies when the ETP Holder's ADV is at least 
5,000,000 shares but less than 10,000,000 shares; and a $0.0027 per 
share fee applies when the ETP Holder's ADV is at least 10,000,000 
shares.
2. Tiered Pricing Contingency
    The proposed rule change will also make the availability of the 
lower tiered pricing for liquidity removal contained in the Fixed Fee 
Schedule and the Variable Fee Schedule contingent upon an ETP Holder's 
use of the Automatic Execution Mode to execute 50,000 shares per month 
of displayed orders which add liquidity to the Exchange.
3. Reduction of Per Share Liquidity Rebate for Order Delivery Mode
    As currently reflected in Section II of the Fee Schedule, ETP 
Holders that execute orders using the Order Delivery Mode receive a 
liquidity adding rebate for displayed orders of securities quoted at 
prices equal to or better than one dollar, and a market data revenue 
rebate attributable to these orders is available at certain ADV levels. 
The Exchange currently offers a per share rebate of $0.0008, $0.0024 or 
$0.0027 per share depending on an ETP Holder's ADV (``Primary Fee 
Schedule''). A current $0.0008 per share rebate (with no market data 
revenue sharing) applies when the ETP Holder's ADV is less than 
15,000,000 shares; a current $0.0024 per share rebate (with no market 
data revenue sharing) applies when the ETP Holder's ADV is at least 
15,000,000 shares but less than 25,000,000 shares; a current $0.0027 
per share rebate (plus 25% market data revenue sharing) applies when 
the ETP Holder's ADV is at least 25,000,000 shares but less than 
30,000,000 shares; and a current $0.0027 per share rebate (plus 50% 
market data revenue sharing) applies when the ETP Holder's ADV is at 
least 30,000,000 shares.
    The Exchange is proposing to reduce the liquidity adding rebates 
and increase the number of tier sizes offered under the Primary Fee 
Schedule. The proposed changes include an $0.0008 per share rebate 
(with no market data revenue sharing) when the ETP Holder's ADV is less 
than 10,000,000 shares; a $0.0011 per share rebate (with no market data 
revenue sharing) when the ETP Holder's ADV is at least 10,000,000 
shares but less than 12,000,000 shares; a $0.0015 per share rebate 
(with no market data revenue sharing) when the ETP Holder's ADV is at 
least 12,000,000 shares but less than 15,000,000 shares; a $0.0021 per 
share rebate (with no market data revenue sharing) when the ETP 
Holder's ADV is at least 15,000,000 shares but less than 20,000,000; a 
$0.0021 per share rebate (plus 25% market data revenue sharing) when 
the ETP Holder's ADV is at least 20,000,000 shares but less than 
25,000,000; and a $0.0024 per share rebate (plus 25% market data 
revenue sharing) when the ETP Holder's ADV is equal to or greater than 
25,000,000 shares.
    An ETP Holder may be eligible for an additional $0.0001 rebate on 
the Primary Fee Schedule if the ETP Holder executes an ADV of 3,000,000 
to 4,999,999 shares using the Automatic Execution Mode in addition to a 
minimum ADV of 1,500,000 shares in Order Delivery Mode. An ETP Holder 
may also be eligible for an addition $0.0002 rebate on the Primary Fee 
Schedule by executing an ADV of 5,000,000 to 9,999,999 shares using the 
Automatic Execution Mode in addition to a minimum of 1,500,000 shares 
in Order Delivery Mode.
4. Alternate Fee Schedule
    The Exchange is also proposing to adopt an ``Alternate Fee 
Schedule'' which will automatically apply when an ETP Holder that uses 
the Order Delivery Mode as an order delivery participant meets the 
minimum ADV threshold by executing 1,500,000 shares using the Order 
Delivery Mode and 10,000,000 using the Automatic Execution Mode.\8\ The 
Alternate Fee Schedule will be in lieu of the Primary Fee Schedule. ETP 
Holders that are not order delivery participants will not be subject to 
this fee schedule.
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    \8\ See Endnote 9.
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    As stated above, an ETP Holder that is an Order Delivery 
participant will automatically receive the Alternate Fee Schedule by 
meeting a minimum ADV of 1,500,000 shares in Order Delivery Mode and 
10,000,000 shares in Automatic Execution Mode. The Alternate Fee 
Schedule increases an ETP Holder's liquidity adding rebates from the 
tiered liquidity adding rates in the Primary Fee Schedule by $0.0003 
per tier. Thus, a $0.0011 per share liquidity adding rebate (with no 
market data revenue sharing) applies when the ETP Holder's ADV is less 
than 10,000,000 shares; a $0.0014 per share liquidity adding rebate 
(with no market data revenue sharing) applies when the ETP Holder's ADV 
is at least 10,000,000 shares but less than 12,000,000 shares; a 
$0.0018 per share liquidity adding rebate (with no market data revenue 
sharing) applies when the ETP Holder's ADV is at least 12,000,000 
shares but less than 15,000,000 shares; a $0.0024 per share liquidity 
adding rebate (with no market data revenue sharing) applies when the 
ETP Holder's ADV is at least 15,000,000 shares but less than 
20,000,000; a $0.0024 per share liquidity adding rebate (plus 25% 
market data revenue sharing, as further described below) applies when 
the ETP Holder's ADV is at least 20,000,000 shares but less than 
25,000,000; and a $0.0027 per share liquidity adding rebate (plus 25% 
market data revenue sharing) applies when the ETP Holder's ADV is 
greater than 25,000,000 shares. The Alternate Fee Schedule attributes 
the number of shares executed by the ETP Holder using the Automatic 
Execution Mode in the per share ADV calculation used by the Exchange to 
determine the applicable tiered rebates available in Order Delivery 
Mode.
5. Amended ADV Definition for Order Delivery Mode
    The Exchange proposes a clarification in endnote 8 providing that 
marketable orders entered by an ETP Holder that is an order delivery 
participant with a handling instruction other than Post Only through 
the order delivery session is [sic] subject to the Automatic Execution 
Mode Fee Schedule. Furthermore, these orders will be counted towards 
the minimum ADV for Automatic Execution Mode for determining whether 
the Alternate Fee Schedule will automatically apply.
6. Amended Endnotes and Table Presentation
    The Exchange also proposes to make certain amendments to the Fee 
Schedule in order to clarify language used in the endnotes. The 
Exchange proposes to clarify the definition of (i) Displayed Orders 
contained in endnote 2, (ii) ADV contained in endnote 4, and (iii) 
Market Data Revenue (``MDR'') Rebates contained in endnote 5. These 
proposed amendments do not represent a substantive change to the 
current definitions. Also, the Exchange moved endnotes 7 through 10 in 
the proposed Fee Schedule. Subject to the changes discussed in this 
filing, there are no additional substantive changes made to endnotes 7 
through 10. Finally, the Exchange is proposing to change the 
presentation of its multiple fee schedules by using tables to set forth 
the different rebates and fees.
6. [sic] Rationale
    The Exchange believes these changes are necessary to create 
incentives for ETP Holders to submit increased

[[Page 56889]]

volumes of orders to the Exchange and, ultimately, to increase the 
revenues of the Exchange for the purpose of continuing to adequately 
fund its regulatory and general business functions. The Exchange 
believes that these changes will not impair its ability to carry out 
its regulatory responsibilities. The proposed modifications are 
reasonable and equitably allocated to those ETP Holders that opt to 
submit orders in the Automatic Execution Mode (as liquidity provider or 
taker) and the Order Delivery Mode, and are not unfairly discriminatory 
because ETP Holders are free to elect whether or not to send such 
orders to the Exchange. In addition, the proposed modifications, by 
providing a market data rebate for displayed orders only (and not Zero 
Display Reserve Orders), may provide incentives for ETP Holders to 
submit displayed orders over Zero Display Reserve Orders. Based upon 
the information above, the Exchange believes that the proposed rule 
change is consistent with the protection of investors and the public 
interest.

Operative Date and Notice

    The Exchange currently intends to make the proposed modifications, 
which are effective on filing of this proposed rule, operative as of 
commencement of trading on September 4, 2012. Pursuant to Exchange Rule 
16.1(c), the Exchange will ``provide ETP Holders with notice of all 
relevant dues, fees, assessments and charges of the Exchange'' through 
the issuance of a Regulatory Circular of the changes to the Fee 
Schedule and will post a copy of the rule filing on the Exchange's Web 
site (www.nsx.com).

Statutory Basis

    The Exchange believes that the proposed rule changes are consistent 
with the provisions of Section 6(b) of the Securities Exchange Act of 
1934 \9\ (the ``Act''), in general, and Section 6(b)(4) of the Act,\10\ 
in particular in that each change is designed to provide for the 
equitable allocation of reasonable dues, fees and other charges among 
its members and other persons using the facilities of the Exchange.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4).
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    The proposed changes that introduce the two different pricing 
options are equitably allocated and not unfairly discriminatory because 
all qualified ETP Holders are eligible to choose which Fee Schedule 
they would like to apply. The adjustments are reasonable methods to 
incentivize the submission of orders on the Exchange. These proposed 
changes are equitable because they are open to all members on an equal 
basis.
    The proposed changes that to [sic] the Automatic Execution Mode 
Section of the Fee Schedule are equitably allocated and not unfairly 
discriminatory because all qualified ETP Holders are eligible to submit 
(or not submit) displayed liquidity providing orders of securities 
priced at least one dollar in Automatic Execution Mode on the Exchange. 
The volume adjustments are reasonable methods to incentivize the 
submission of such orders. All similarly situated members are subject 
to the same fee structure, and access to the Exchange is offered on 
terms that are not unfairly-discriminatory. Volume-based rebates and 
discounts have been widely adopted in the equities markets, and are 
equitable because they are open to all members on an equal basis and 
provide rebates that are reasonably related to the value of an 
exchange's market quality associated with the requirements for the 
favorable pricing tier.
    The proposed changes to the rebates payable for executions in 
securities priced at least one dollar in Order Delivery Mode are 
reasonable because they are in the same range of rebates offered by 
other comparable exchanges. The proposed changes are equitably 
allocated and not unfairly discriminatory because all qualified ETP 
Holders are eligible to submit (or not submit) displayed liquidity 
providing orders of securities priced at least one dollar in Order 
Delivery Mode on the Exchange. The volume adjustments are reasonable 
methods to incentivize the submission of such orders. All similarly 
situated members are subject to the same fee structure, and access to 
the Exchange is offered on terms that are not unfairly-discriminatory 
[sic]. Volume-based rebates and discounts have been widely adopted in 
the equities markets, and are equitable because they are open to all 
members on an equal basis and provide rebates that are reasonably 
related to the value of an exchange's market quality associated with 
the requirements for the favorable pricing tier.
    The proposed visual changes to the Fee Schedule is [sic] reasonable 
because it allows [sic] Exchange ETP Holders to better understand the 
different Fee Schedules.

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

    The Exchange does not believe that the proposed rule change will 
impose any inappropriate burden on competition.

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

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act.\11\ 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 to determine whether the 
proposed rule should be approved or disapproved.
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    \11\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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 email to [email protected]. Please include 
File Number SR-NSX-2012-14 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-NSX-2012-14. 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

[[Page 56890]]

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 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-NSX-2012-14 and should be submitted on or before October 
5, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-22641 Filed 9-13-12; 8:45 am]
BILLING CODE 8011-01-P