[Federal Register Volume 77, Number 210 (Tuesday, October 30, 2012)]
[Notices]
[Pages 65752-65753]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-26641]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68099; File No. SR-NYSEARCA-2012-115]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending the NYSE 
Arca Options Fee Schedule To Change the Monthly Cost for Option Trading 
Permits

October 24, 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 October 16, 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 change the monthly cost for Option Trading 
Permits (``OTPs''). 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 its Fee Schedule to change the 
monthly cost for OTPs. The Exchange proposes to make the change 
immediately operative.
    The Exchange requires that a Market Maker have an OTP in order to 
operate on the Exchange. For electronic Market Making, a Market Maker 
must have four OTPs in order to submit electronic quotations in every 
class on the Exchange. These four Market Maker OTPs also permit the 
firm to have at least one trader on the Floor of the Exchange as a 
Floor-based open outcry Market Maker. However, the manner in which 
those OTPs are assigned to individual traders may reduce the 
permissible number of issues in which electronic quotes are assigned. 
For instance, two associated Market Makers may assign OTP 1, 2, and 3 
to trader A, while the fourth is assigned to trader B. Trader A may now 
only stream quotes electronically in 750 issues, while trader B may 
submit quotes electronically in 100 issues. To retain the appointment 
in more than 750 issues, all four OTPs must be in the same name, and to 
have an additional individual Market Maker on the Floor, a fifth OTP 
must be acquired.
    To remain competitive in fixed fees among exchanges with trading 
floors, the Exchange is proposing to reduce the cost of additional 
Market Maker OTPs beyond the minimum of four that are required to 
submit electronic quotations in all issues listed on the Exchange. 
Accordingly, the Exchange proposes to specify that the existing fee of 
$4,000 per OTP per month would apply to a Market Maker firm that has 
between one and four Market Maker OTPs.\4\ The Exchange would also 
specify that a Market Maker firm would be charged $2,000 per OTP per 
month for each additional Market Maker OTP. As described above, each 
additional Market Maker OTP would permit the Market Maker firm, which 
already has the ability to make electronic markets in every class on 
the Exchange, to have an additional trader on the Floor of the Exchange 
as an open outcry Market Maker.
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    \4\ The Exchange notes that this proposed change would not have 
an impact on a firm that currently has between one and four Market 
Maker OTPs.
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    The Exchange also proposes to adopt a similar reduction for 
additional OTPs for Floor Brokers as well as for Office and Clearing 
Firms.\5\ In this regard, a firm is required to have one OTP per trader 
that operates as a Floor Broker on the Exchange. The OTP permits the 
Floor Broker to accept orders from all other firms and in all classes 
traded on the Exchange. However, for operational or administrative 
reasons, Floor Brokers often require an additional OTP in order to have 
sufficient clerical staff to satisfy their order entry obligations, 
including that orders be entered into the Exchange's systems via the 
Electronic Order Capture Device (``EOC'') prior to representation in 
the Trading Crowd.\6\ The additional OTP is assigned to the same Floor 
Broker, and only that same Floor Broker may represent orders and 
execute trades on the Floor of the Exchange. The Exchange requires an 
additional OTP for each EOC login. However, the additional OTP assigned 
to a Floor Broker would not permit the firm to have an additional Floor 
Broker on the Floor.\7\
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    \5\ While the proposed change would technically apply to Office 
and Clearing Firms, these firms only need one OTP because they do 
not have personnel on the Floor of the Exchange.
    \6\ See Rule 6.1(b)(30), which defines Trading Crowd to mean all 
Market Makers who hold an appointment in the option classes at the 
trading post where such trading crowd is located and all Market 
Makers who regularly effect transactions in person for their Market 
Maker accounts at that trading post, but generally will consist of 
the individuals present at the trading post.
    \7\ The Exchange proposes to specify in the Fee Schedule that 
the additional OTP would not enable a second Floor Broker to operate 
on the Floor. A firm would be charged $1,000 for an OTP for a second 
trader acting as a Floor Broker on the Exchange.
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    Accordingly, the Exchange proposes to specify that the existing fee 
of $1,000 per OTP per month would apply to a Floor Broker's first OTP 
and a charge of $250 per OTP per month would apply for each additional 
OTP.\8\
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    \8\ The Exchange notes that this proposed change would not have 
an impact on a firm that currently has one Floor Broker OTP.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Securities Exchange Act of 1934 (the 
``Act''),\9\ in general, and furthers the objectives of Section 6(b)(4) 
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

[[Page 65753]]

unfairly discriminate between customers, issuers, brokers or dealers.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that the proposed change is reasonable 
because it will lower the cost for firms to acquire additional Market 
Maker OTPs. The Exchange believes that the proposed OTP pricing may 
lead to, among other things, additional Market Makers quoting in open 
outcry, which would increase the quality of the Exchange's market by 
increasing the depth of liquidity on the Exchange, which will benefit 
investors.
    The Exchange also believes that the proposed change is reasonable 
because it will lower the cost for firms to acquire additional OTPs 
related to their Floor Broker activity, which will allow Floor Broker 
firms to price their services at a level that will enable them to 
attract higher levels of volume to the Floor of the Exchange while 
satisfying the Exchange's requirements related to entering, reporting 
and managing Floor volume. To the extent that Floor Brokers are able to 
attract higher volumes, they will bring more liquidity and price 
discovery to the Exchange. The Exchange also believes that the proposed 
change is equitable and not unfairly discriminatory because all firms 
may choose the particular type of OTP and function on the Exchange 
(e.g., Market Maker versus Floor Broker) that best suits their 
operational and business plans and needs.
    The proposed change is also equitable and not unfairly 
discriminatory because it would lower the fees for additional OTPs 
beyond the minimum necessary in a manner that the Exchange believes 
reflects the differences in the roles and activity on the Exchange 
between different market participants. Specifically, the Exchange 
believes that it is equitable and not unfairly discriminatory to charge 
$2,000 for each additional Market Maker OTP beyond four, as compared to 
$250 for an additional OTP for a Floor Broker firm. In this regard, the 
additional Market Maker OTP would permit the firm, which already has 
the ability to make markets in every class on the Exchange, to have an 
additional trader on the Floor of the Exchange as an open outcry Market 
Maker. However, an additional OTP for a Floor Broker firm would not 
permit the firm to have a second trader on the Floor in the capacity of 
a Floor Broker, but would instead be utilized for operational/
administrative purposes in order to satisfy applicable order entry and 
reporting requirements through EOC, for which one OTP per EOC login is 
required. Accordingly, this differential is equitable and not unfairly 
discriminatory because a Market Maker firm would derive an increased 
presence on the Floor via the additional OTP, but the Floor Broker firm 
would not. The Exchange believes that the additional OTP for the Market 
Maker firm, and in turn the increased presence on the Floor, could 
represent a proportionately increased economic value as compared to the 
additional OTP for the Floor Broker firm.
    Finally, 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.

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) \11\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \12\ thereunder, because it establishes a due, fee, or other 
charge imposed by the NYSE Arca.
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 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-2012-115 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-2012-115. 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. 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-2012-115 and should be submitted on or before 
November 20, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
Kevin M. O'Neill,
Deputy Secretary.
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    \13\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2012-26641 Filed 10-29-12; 8:45 am]
BILLING CODE 8011-01-P