[Federal Register Volume 77, Number 216 (Wednesday, November 7, 2012)]
[Notices]
[Pages 66902-66904]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-27222]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68139; File No. SR-NYSEMKT-2012-56]


Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change To Amend the NYSE Amex 
Options LLC Fee Schedule To Amend the Fees for Specialists and 
eSpecialists Relating to Qualified Contingent Cross Orders

November 2, 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 19, 2012, NYSE MKT LLC (the ``Exchange'' or 
``NYSE MKT'') 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 Amex Options Fee Schedule 
(the ``Fee Schedule'') to amend the fees for Specialists and 
eSpecialists relating to Qualified Contingent Cross (``QCC'') orders. 
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 amend the fees 
for Specialists and eSpecialists relating to QCC orders.\4\ The 
Exchange proposes to implement these changes on November 1, 2012.
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    \4\ The QCC order permits an ATP Holder to effect a qualified 
contingent trade (``QCT'') in a Regulation NMS stock and cross the 
options leg of the trade on the Exchange immediately upon entry and 
without order exposure if the order is for at least 1,000 contracts, 
is part of a QCT, and is executed at a price at least equal to the 
national best bid and offer, as long as there are no Customer orders 
in the Exchange's Consolidated Book at the same price.
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Current Fees
    Currently, the Exchange does not charge an order fee for Customer 
orders that comprise all or part of a QCC order. The Exchange charges 
$0.20 per contract for non-Customer orders for all other 
participants.\5\ If a Specialist, eSpecialist, Market Maker, or Firm 
has reached its respective fee cap of $350,000 for the month and has 
executed volume in excess of $3,500,000 for the month, then the 
Exchange charges an incremental service fee of $0.05 per contract for a 
QCC order executed against a non-Customer and $0.10 per contract for a 
QCC order executed against a Customer.
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    \5\ This includes Specialists, eSpecialists, NYSE Amex Options 
Market Makers, Non-NYSE Amex Options Market Makers, Broker Dealers, 
Professional Customers, and Firms.
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Proposed Fees
    For a Specialist or eSpecialist executing a QCC order that has not 
reached its fee cap for the month under the Fee Schedule, the Exchange 
proposes to charge $0.13 per contract if the Specialist or eSpecialist 
executes an average daily volume (``ADV'') of fewer than 50,000 
contracts during the month, and $0.10 per contract if the Specialist or 
eSpecialist executes an ADV of 50,000 or more contracts during the 
month. In calculating the threshold of 50,000 contracts, the Exchange 
will exclude both Strategy Trades \6\ and QCC

[[Page 66903]]

trades. These are the same fees that the Exchange currently charges to 
Specialists and eSpecialists for non-QCC transactions.
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    \6\ Strategy Trades include reversals and conversions, dividend 
spreads, box spreads, short stock interest spreads, merger spreads, 
and jelly rolls.
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    The Exchange is proposing the fee reduction because Specialists and 
eSpecialists that are solicited to take part in a trade do not know, 
and have no control over, whether the trade is going to be executed as 
a QCC trade or through some other means.\7\ Therefore, if the trade is 
executed as a QCC trade, Specialists and eSpecialists may incur a 
transaction fee that is more per contract than they would pay if the 
trade were executed as a non-QCC trade. Currently, participants other 
than Specialists and eSpecialists may trade at a discount to their 
regular transaction fees when they execute a QCC trade. However, non-
capped Specialists and eSpecialists pay a premium for QCC trades under 
the current Fee Schedule, which the Exchange does not believe is 
warranted.\8\ The proposed change is not otherwise intended to address 
any other problem, and the Exchange is not aware of any significant 
problem that the affected Specialists and eSpecialists would have in 
complying with the proposed change.
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    \7\ The Exchange notes that, at the time it proposed the QCC 
fees prior to the implementation of the QCC order type, the Exchange 
believed that non-Customer participants would know in advance that 
they were being solicited to take part in a QCC order. See 
Securities Exchange Act Release No. 65472 (Oct. 3, 2011), 76 FR 
62887 (Oct. 11, 2011) (SR-NYSEAmex-2011-72), at 62888. However, with 
the implementation of the QCC order type, the Exchange has 
determined that a participant that is solicited to take part in a 
trade will not necessarily know whether the trade is going to be 
executed as a QCC trade or through some other means.
    \8\ For example, non-NYSE Amex Options Market Makers trading 
electronically are charged $0.43 per contract for non-QCC trades and 
$0.20 per contract for QCC trades.
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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 and issuers and other persons using its facilities and does not 
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 reducing the QCC non-Customer order fee 
for non-capped Specialists and eSpecialists is reasonable because 
Specialists and eSpecialists that are solicited to take part in a trade 
do not know in advance whether the trade is going to be executed as a 
QCC trade or through some other means and may incur a transaction fee 
that is more per contract than they would pay if the trade were 
executed as a non-QCC trade, which the Exchange does not believe is 
warranted. For these reasons, the Exchange believes that it is 
reasonable to charge Specialists and eSpecialists the same transaction 
fee for QCC or non-QCC transactions.
    In addition, the Exchange believes that lowering the fee for 
Specialists and eSpecialists is equitable and not unfairly 
discriminatory because under the current Fee Schedule, other 
participants, including non-NYSE Amex Options Market Makers, 
Professional Customers, Broker Dealers, and Firms, may trade at a 
discount to their regular transaction fees when they execute QCC 
trades. As such, the proposed rule change would put Specialists and 
eSpecialists on more equal footing with other participants.
    However, the Exchange notes that non-Directed NYSE Amex Options 
Market Maker orders are currently charged $0.20 per contract and $0.17 
per contract if the NYSE Amex Options Market Maker executes 50,000 or 
more contracts ADV each day in a month. Therefore, NYSE Amex Options 
Market Makers pay an amount equal to or greater than their regular 
transaction fee when they execute QCC trades.\11\ The Exchange believes 
that reducing the fee, as proposed, for Specialists and eSpecialists, 
but not reducing the fee for non-Directed NYSE Amex Options Market 
Makers, is equitable and not unfairly discriminatory because 
Specialists and eSpecialists are required to pay a monthly Rights Fee 
based on their prorated share of contract volume on the Exchange in 
each issue, unlike non-Directed NYSE Amex Options Market Makers, who do 
not pay any portion of the monthly Rights Fee.\12\ Any QCC volume 
executed by a Specialist or eSpecialist will proportionally increase 
the amount of the monthly Rights Fee that they pay, whereas any QCC 
volume executed by a non-Directed NYSE Amex Options Market Maker does 
not result in an additional charge in the form of the monthly Rights 
Fee. As such, the Exchange believes that it is equitable and not 
unfairly discriminatory to require non-Directed NYSE Amex Options 
Market Makers to pay an amount equal to or slightly more for a QCC 
trade than their regular transaction fee. In addition, NYSE Amex 
Options Market Makers continue to be eligible for the lower service fee 
for QCC trades if they exceed their monthly cap. The Exchange also 
notes that Specialists and eSpecialists have higher quoting obligations 
than NYSE Amex Options Market Makers, and in recognition of the 
additional liquidity and transparency they provide, the difference in 
treatment is warranted.
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    \11\ The Exchange notes that Directed NYSE Amex Options Market 
Maker orders do not apply to QCC trades.
    \12\ See endnote 1 of the Fee Schedule.
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    In addition, the Exchange believes that the proposed fee change is 
equitable and not unfairly discriminator [sic] because it would make 
Specialists and eSpecialists more likely to continue to respond to 
solicitations to trade, thereby attracting additional order flow to the 
Exchange, which can help price discovery, transparency, and liquidity, 
all of which are beneficial to Exchange participants.
    For these reasons, the Exchange believes that the entire proposal 
is reasonable, equitable and not unfairly discriminatory. 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 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) \13\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \14\ thereunder, because it establishes a due, fee, or other 
charge imposed by the NYSE MKT.
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(2).

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[[Page 66904]]

    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-NYSEMKT-2012-56 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-NYSEMKT-2012-56. 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 on official business 
days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such 
filing also will 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-NYSEMKT-2012-56, and should 
be submitted on or before November 28, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-27222 Filed 11-6-12; 8:45 am]
BILLING CODE 8011-01-P