[Federal Register Volume 77, Number 227 (Monday, November 26, 2012)]
[Notices]
[Pages 70522-70525]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-28593]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68261; File No. SR-NYSEMKT-2012-64]


Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change To Change the Monthly 
Fees for the Use of Ports

November 19, 2012.
    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 November 6, 2012, NYSE MKT LLC (the ``Exchange'' or ``NYSE 
MKT'') filed with the Securities and Exchange Commission 
(``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 Price List to change the monthly 
fees for the use of ports. 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its Price List to change the monthly 
fees for the use of ports that provide connectivity to the Exchange's 
trading systems (i.e., ports for entry of orders and/or quotes 
(``order/quote entry ports'')) and to implement a fee for ports that 
allow for the receipt of ``drop copies'' of order or transaction 
information (``drop copy ports'' and, together with order/quote entry 
ports, ``ports'').\3\
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    \3\ Firms receive confirmations of their orders and receive 
execution reports via the order/quote entry port that is used to 
enter the order or quote. A ``drop copy'' contains redundant 
information that a firm chooses to have ``dropped'' to another 
destination (e.g., to allow the firm's back office and/or compliance 
department, or another firm--typically the firm's clearing broker--
to have immediate access to the information). Such drop copies can 
only be sent via a drop copy port. Drop copy ports cannot be used to 
enter orders and/or quotes.
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Order/Quote Entry Ports
    The Exchange currently makes order/quote entry ports available for 
connectivity to its trading systems and charges $300 per port pair per 
month for up to five pairs of ports, then $1,500 per month for each 
additional five pairs of ports.\4\
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    \4\ See Securities Exchange Act Release No. 63072 (October 7, 
2010), 75 FR 64368 (October 19, 2010) (SR-NYSEAmex-2010-97) (the 
port fee ``Adopting Release''). See also Securities Exchange Act 
Release No. 66104 (January 5, 2012), 77 FR 1771 (January 11, 2012) 
(SR-NYSEAmex-2011-107) (the port fee ``Amending Release''). For 
example, the current fee for six pairs of ports would be $3,000 
total per month (i.e., $1,500 total for the first five pairs and 
$1,500 for the sixth pair). The fee would remain $3,000 for pairs 
seven through 10. The fee would increase by $1,500, to $4,500 total, 
for pairs 11 through 15.
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    The Exchange proposes to change the current methodology for order/
quote entry port billing, such that order/quote entry ports would be 
charged on a per port basis, without billing in groups of five and 
without requiring that ports be in pairs.\5\ More specifically, the 
Exchange proposes to charge $200 per port per month for order/quote 
entry ports, which are currently charged $300 per pair per month for 
activity on NYSE MKT; \6\ provided, however, that (i) users of the 
Exchange's Risk Management Gateway service (``RMG'') would not be 
charged for order/quote entry ports if such ports are designated as 
being used for RMG purposes, and (ii) Designated Market Makers 
(``DMMs'') would not be charged for order/quote entry ports that 
connect to the Exchange via the DMM Gateway.\7\
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    \5\ The Exchange stated in the Adopting Release that the port 
fee is charged per participant. The Exchange later clarified that 
``per participant'' means per member organization for purposes of 
the port fees. See Amending Release, at 1772. The proposed fee 
change would change the current methodology such that ports would 
not be charged on a per member organization basis. Accordingly, 
reference to per member organization would be removed from the Price 
List related to port fees.
    \6\ The Exchange has a Common Customer Gateway (``CCG'') that 
accesses the equity trading systems that it shares with its 
affiliates, New York Stock Exchange LLC (``NYSE'') and NYSE Arca, 
Inc. (``NYSE Arca''), and all ports connect to the CCG. See, e.g., 
Securities Exchange Act Release No. 64543 (May 25, 2011), 76 FR 
31667 (June 1, 2011) (SR-NYSEAmex-2011-20). All NYSE MKT member 
organizations are also NYSE member organizations and, accordingly, a 
member organization utilizes its ports for activity on both NYSE 
and/or NYSE MKT and is charged port fees based on the total number 
of ports connected to the CCG, whether the ports are used to quote 
and trade on NYSE, NYSE MKT, and/or both, because those trading 
systems are integrated. The NYSE Arca trading platform is not 
integrated in the same manner. Therefore, it does not share its 
ports with NYSE or NYSE MKT.
    \7\ Since the Adopting Release, the Exchange has not charged 
DMMs for order/quote entry ports that have connected to the Exchange 
via the DMM Gateway. Since 2011, when DMMs first became able to 
enter orders through CCG, DMM order/quote entry ports connected to 
the Exchange via the CCG have been, and currently are, charged port 
fees in accordance with the Price List. DMMs can elect to use the 
DMM Gateway, the CCG, or both for their connectivity to the 
Exchange. However, the DMM Gateway must be used for certain DMM-
specific functions that relate to the DMM's role on the Exchange and 
the obligations attendant therewith.
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    Two methods are available to DMMs to connect to the Exchange: DMM 
Gateway and CCG. The two methods are quite distinct, however. Only DMMs 
may utilize the DMM Gateway, and they may only use DMM Gateway when

[[Page 70523]]

acting in their capacity as a DMM. DMMs are required to use the DMM 
Gateway for certain DMM-specific functions that relate to the DMM's 
role on the Exchange and the obligations attendant therewith, which are 
not applicable to other market participants on the Exchange. By 
contrast, non-DMMs as well as DMMs may use the CCG, use of the CCG by a 
DMM is optional, and a DMM that connects to the Exchange via CCG can 
use the relevant order/quote entry port for orders and quotes both in 
its capacity as a DMM and for orders and quotes in other securities. 
Accordingly, because DMMs are required to utilize DMM Gateway, but not 
CCG, to be able to fulfill their functions as DMMs, the Exchange 
proposes that DMMs not be charged for order/quote entry ports that 
connect to the Exchange via the DMM Gateway, but that DMMs, like other 
market participants, be charged for order/entry ports that connect to 
the Exchange via the CCG.
    The Exchange proposes that users of RMG would not be charged for 
order/quote entry ports if such ports are designated as being used for 
RMG purposes. RMG enables Sponsoring member organizations to verify 
whether a Sponsored Participant's orders comply with order criteria 
established by the Sponsoring member organization for the Sponsored 
Participant, including, among other things, criteria related to order 
size (per order or daily quantity limits), credit limits (per order or 
daily value), specific symbols or end users.\8\ Currently, users of RMG 
are required to pay the existing order/quote entry port fees for 
connectivity to the Exchange's trading systems, in addition to the RMG 
connection fees related to such ports.\9\ The Exchange proposes that 
users of RMG would no longer be required to pay port fees for order/
quote entry ports designated as being used for RMG because, in the 
Exchange's opinion, order/quote entry ports are an integral part of RMG 
and such users are already charged a fee for RMG, including additional 
connections related thereto, which the Exchange believes is sufficient 
to cover its costs related to making the order/quote entry ports 
available for RMG purposes. Accordingly, the Exchange proposes to 
specify that port fees are not applicable to order/quote entry ports 
designated as being used for RMG.
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    \8\ See Securities Exchange Act Release No. 59353 (February 3, 
2009), 74 FR 6935 (February 11, 2009) (SR-NYSEALTR-2008-12) (order 
approving RMG). See also Securities Exchange Act Release No. 59429 
(February 20, 2009), 74 FR 9016 (February 27, 2009) (SR-NYSEALTR-
2009-12) (establishing RMG fees).
    \9\ Currently, a $3,000 charge per month applies for an initial 
RMG connection and a $1,000 charge for every additional connection 
thereafter.
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Drop Copy Ports

    The Exchange proposes to implement a fee for drop copy ports,\10\ 
for which the Exchange does not currently charge a fee, provided, 
however, that DMMs would not be charged for drop copy ports that 
utilize the DMM Gateway and users of RMG would not be charged for drop 
copy ports if such ports are designated as being used for RMG purposes. 
The Exchange proposes to charge $500 per port per month for drop copy 
ports.\11\ Additionally, the Exchange proposes to specify that only one 
fee per drop copy port would apply, even if the port receives drop 
copies from multiple order/quote entry ports and/or drop copies for 
activity on both NYSE and NYSE MKT.\12\
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    \10\ See supra note 3.
    \11\ The Exchange proposes to add language to the Price List to 
differentiate between drop copy ports and order/quote entry ports.
    \12\ See supra note 6.
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    DMMs that connect to the Exchange using the DMM Gateway are 
required to use drop copy ports that utilize the DMM Gateway for their 
drop copies. Accordingly, the Exchange proposes that DMMs not be 
charged for drop copy ports that utilize the DMM Gateway, but that 
DMMs, like other market participants, be charged for drop copy ports 
that connect to the Exchange via the CCG, as DMMs are not required to 
use CCG.
    In addition, the Exchange proposes that users of RMG would not be 
charged for drop copy ports if such ports are designated as being used 
for RMG purposes. The Exchange proposes that users of RMG not be 
required to pay port fees for drop copy ports designated as being used 
for RMG because, in the Exchange's opinion, ports are an integral part 
of RMG and such users are already charged a fee for RMG, including 
additional connections related thereto, which the Exchange believes is 
sufficient to cover its costs related to making the ports available for 
RMG purposes. Accordingly, the Exchange proposes to specify that port 
fees are not applicable to drop copy ports designated as being used for 
RMG.
    Overall, the Exchange believes that the changes proposed herein 
will result in the method of billing for ports more closely aligning 
with the needs of firms with ports. The proposed changes will also 
permit the Exchange to remain competitive with other exchanges with 
respect to fees charged for ports.\13\ The Exchange notes that the 
proposed changes are not otherwise intended to address any other issues 
surrounding ports or port fees and that the Exchange is not aware of 
any problems that port users would have in complying with the proposed 
change.
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    \13\ For example, the charge for connectivity to the NASDAQ 
Stock Market LLC (``NASDAQ'') NY-Metro and Mid-Atlantic Datacenters 
is $500 and a separate charge for Pre-Trade Risk Management ports is 
applicable, which ranges from $400 to $600 and is capped at $25,000 
per firm per month. Also, the BATS Exchange, Inc. (``BZX'') charges 
$400 per month per pair (primary and secondary data center) for 
logical ports. Additionally, EDGA Exchange, Inc. (``EDGA'') and EDGX 
Exchange, Inc. (``EDGX'') each charge $500 per port. EDGA and EDGX 
also provide the first five ports for free.
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    The Exchange proposes to implement these changes immediately. In 
this regard, the Exchange notes that billing for ports would be based, 
as is currently on the case, on the number of ports on the third 
business day prior to the end of the month. In addition, the level of 
activity with respect to a particular port would still not affect the 
assessment of monthly fees, such that, except for ports that are not 
charged, even if a particular port is not used, a port fee would still 
apply.
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''),\14\ in general, and furthers the objectives of Section 
6(b)(4) of the Act,\15\ 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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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(4).
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    Overall, the Exchange believes that the proposed changes, including 
the rates proposed, are reasonable because the fees charged for order/
quote entry ports and drop copy ports are expected to permit the 
exchange to offset, in part, its connectivity costs associated with 
making such ports available, including costs based on gateway software 
and hardware enhancements and resources dedicated to gateway 
development, quality assurance, and support. In this regard, the 
Exchange believes that its fees are competitive with those charged by 
other venues, and that in some cases its port fees are less expensive 
than many of its primary competitors.\16\ The Exchange believes that 
the changes proposed herein will result in the method of billing for 
ports more closely aligning with the needs of firms with ports.
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    \16\ See supra note 13.

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[[Page 70524]]

    The Exchange believes that the proposed change to the methodology 
for billing for order/quote entry ports is reasonable because it will 
simplify the fees for ports by eliminating the pair requirement and 
allowing a firm that requires more than five pairs of ports to request, 
and pay for, the specific number of ports that it requires, rather than 
requesting ports in pairs and in groups of five. This aspect of the 
proposed change is also equitable and not unfairly discriminatory 
because it will result in charges for order/entry ports being based on 
the number of ports utilized. This aspect of the proposed change is 
also equitable and not unfairly discriminatory because it will apply on 
an equal basis for all ports on the Exchange, except for order/quote 
entry ports related to RMG and ports utilized by DMMs to connect to the 
Exchange via the DMM Gateway.\17\
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    \17\ The Exchange describes below how the proposed changes 
regarding RMG and DMMs are consistent with the Act.
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    The Exchange believes that it is reasonable to charge $200 per port 
per month for order/quote entry ports because, when combined with the 
change to the methodology for billing for ports, it could result in a 
decrease in the overall cost to users of ports. The proposed rate is 
also reasonable because it is comparable to the rates of other 
exchanges.\18\ The Exchange also believes that these changes to the 
fees are equitable and not unfairly discriminatory because they would 
apply to all users of order/quote entry ports on the Exchange, subject 
to the exceptions noted above.
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    \18\ See supra note 13.
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    The Exchange also believes that it is equitable and not unfairly 
discriminatory to not charge DMMs for order/quote entry ports that 
connect to the Exchange via the DMM Gateway but to charge DMMs for 
order/quote entry ports that connect to the Exchange via CCG, because 
DMMs are required to use the DMM Gateway for certain DMM-specific 
functions that relate to the DMM's role on the Exchange and the 
obligations attendant therewith, which are not applicable to other 
market participants on the Exchange. By contrast, non-DMMs as well as 
DMMs may use the CCG, use of the CCG by a DMM is optional, and a DMM 
that connects to the Exchange via CCG can use the relevant order/quote 
entry port for orders and quotes both in its capacity as a DMM and for 
orders and quotes in other securities. Accordingly, the Exchange 
believes that it is equitable and not unfairly discriminatory to charge 
DMMs for order/quote entry ports that connect to the Exchange via CCG, 
as use of the CCG is not necessary for DMMs to fulfill their role as 
DMMs. In addition, a single order/quote entry port that connects to the 
Exchange via CCG could be used by a DMM both in its capacity as a DMM 
and for other securities, for which other market participants would be 
charged port fees. Consequently, the Exchange believes that it is 
equitable and not unfairly discriminatory that a DMM that connects to 
the Exchange via CCG would continue to be charged applicable port fees, 
as is currently the case.
    In addition, the Exchange notes that DMM Gateway, unlike CCG, was 
designed with functionality to help DMMs fulfill their obligations as 
DMMs efficiently, and so the Exchange believes that to the extent that 
exempting DMM Gateway from port fees for order/quote entry ports 
encourages DMMs to use the DMM Gateway to fulfill their obligations 
helps ensure that that they are in the best position to operate 
efficiently.
    The Exchange believes that the proposed new fee for drop copy ports 
is reasonable because it will result in a fee being charged for the use 
of technology and infrastructure provided by the Exchange. In this 
regard, the Exchange believes that the rate is reasonable because it is 
comparable to the rate charged by other exchanges for drop copy 
ports.\19\ Furthermore, the Exchange believes that the proposed rate 
for a drop copy port is reasonable because, when compared to the 
proposed rate for order/quote entry ports, it reflects the level of 
resources required of the Exchange to establish and maintain the port, 
including the various sources from which data comes (i.e., establishing 
connections to order/quote entry ports as well as, in certain 
circumstances, to order/quote entry ports on both NYSE and NYSE MKT). 
The proposed rate is also reasonable in light of the functional/
operational differences between a drop copy port and an order/quote 
entry port (e.g., that configuration and monitoring of the drop copy 
port is more substantial and because drop copy ports capture cumulative 
activity).
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    \19\ See supra note 13.
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    The Exchange also believes that it is reasonable that only one fee 
per drop copy port would apply, even if the port receives drop copies 
from multiple order/quote entry ports and/or from both NYSE and NYSE 
MKT, because the purpose of drop copies is such that a trading unit's 
or a firm's entire order and execution activity is captured. This is 
also reflected in the rate of $500 that is proposed for drop copy 
ports, which is higher than the rate proposed for order/quote entry 
ports. The Exchange believes that the proposed new fee for drop copy 
ports is equitable and not unfairly discriminatory because it will 
apply on an equal basis to all users of drop copy ports and to all drop 
copy ports on the Exchange, except for those order/entry ports related 
to RMG and ports utilized by DMMs to connect to the Exchange via the 
DMM Gateway.\20\ In this regard, all firms are able to request drop 
copy ports, as is the case with order/quote entry ports.
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    \20\ See supra note 17.
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    The Exchange believes that it is equitable and not unfairly 
discriminatory to not charge DMMs for drop copy ports that connect to 
the Exchange via the DMM Gateway for the reasons above regarding order/
quote entry ports.
    The Exchange believes that not charging for ports that are 
designated to be used for RMG is reasonable because ports are an 
integral part of RMG and such users are already charged a fee for RMG, 
including additional connections related thereto, which the Exchange 
believes is sufficient to cover its costs related to making the ports 
available for RMG purposes.\21\ In this regard, ports not designated as 
being used for RMG purposes would remain subject to port fees. The 
Exchange also believes that this is equitable and not unfairly 
discriminatory because it would apply equally to all member 
organizations that utilize RMG, which is fully-voluntary and is 
available to any member organization.
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    \21\ See supra note 8.
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    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.

[[Page 70525]]

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) \22\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \23\ thereunder, because it establishes a due, fee, or other 
charge imposed by the NYSE MKT.
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    \22\ 15 U.S.C. 78s(b)(3)(A).
    \23\ 17 CFR 240.19b-(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-NYSEMKT-2012-64 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-2012-64. 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, 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-NYSEMKT-2012-64 and should 
be submitted on or before December 17, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-28593 Filed 11-23-12; 8:45 am]
BILLING CODE 8011-01-P