[Federal Register Volume 78, Number 32 (Friday, February 15, 2013)]
[Notices]
[Pages 11261-11263]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-03572]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68898; File No. SR-NYSEArca-2013-11]


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 Introduce a New Electronic Customer Rate 
for Certain Executions That Take Liquidity

February 11, 2013.
    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 January 29, 2013, 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-

[[Page 11262]]

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 
(the ``Fee Schedule'') to introduce a new electronic Customer rate for 
certain executions that take liquidity. 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 purpose of this filing is to amend the Exchange's Fee Schedule 
to introduce a new electronic Customer rate of $0.67 per contract for 
executions that take liquidity in a non-Penny Pilot class from the 
trading interest of a Lead Market Maker (``LMM''), if the OTP Holder or 
OTP Firm entering the Customer's order satisfies certain volume 
thresholds. The Exchange proposes to implement the fee changes on 
February 1, 2013.
    An electronic Customer execution in a non-Penny Pilot class is 
currently subject to a take fee of $0.79 per contract. Unlike an 
execution in a Penny Pilot class, the rate for an electronic execution 
in a non-Penny Pilot class is not currently dependent on the account 
type of the counterparty. The Exchange proposes to introduce a new 
electronic Customer take rate of $0.67 per contract for executions that 
take liquidity in a non-Penny Pilot class from the trading interest of 
an LMM (including orders and quotes) if the OTP Holder or OTP Firm 
entering the Customer's order, during the month, (i) transacts an 
average daily volume (``ADV'') on the Exchange of at least 15,000 
contracts from electronic Customer orders that take liquidity in non-
Penny Pilot classes or (ii) transacts a combined ADV on the Exchange of 
at least 30,000 contracts in non-Penny Pilot classes from electronic 
Customer orders that take liquidity and affiliated electronic Market 
Maker orders and quotes that post liquidity in non-Penny Pilot 
classes.\4\
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    \4\ For purposes of calculating ADV for the qualification, the 
Take Liquidity threshold does not include orders that are routed to 
other exchanges for execution at the National Best Bid and Offer 
(``NBBO''); Post or Take Liquidity calculations do not include 
volume from Electronic Complex Orders.
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    The Exchange believes that the proposed rate, which would only 
apply to the Customer side of an execution that takes liquidity against 
trading interest of an LMM, will incent additional posted liquidity at 
the NBBO by LMMs as well as additional Customer orders being sent to 
the Exchange for execution.
    The Exchange notes that the proposed change is not otherwise 
intended to address any other issues, and the Exchange is not aware of 
any problems that Customers, LMMs, OTP Holders or OTP Firms would have 
in complying with the proposed change.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\5\ in general, and furthers the 
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\6\ 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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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed change is reasonable 
because the proposed rate, which would only apply to the Customer side 
of an execution that takes liquidity against trading interest of an 
LMM, will incent additional posted liquidity at the NBBO by LMMs as 
well as additional Customer orders being sent to the Exchange for 
execution. First, the proposed lower Customer rate would incent an OTP 
Holder or OTP Firm to send additional Customer orders to the Exchange 
because its customers' transaction costs could be decreased. Second, an 
OTP Holder or OTP Firm that is affiliated with an LMM on the Exchange 
would be incented to send additional Customer order flow to the 
Exchange for execution in order to increase the likelihood that its LMM 
will interact with those orders. Third, and building on the two points 
above, an LMM would be incented to post additional liquidity at the 
NBBO, thereby rendering a Customer order that executes against the 
LMM's trading interest a taker of liquidity and eligible for the lower 
Customer take rate.
    The Exchange believes that the proposed new rate and related 
thresholds are reasonable because they are set at levels that will 
encourage OTP Holders and OTP Firms to send additional Customer orders 
to the Exchange. Further, the Exchange believes that the proposed 
thresholds are reasonable because, despite being set at levels that OTP 
Holders and OTP Firms do not currently satisfy, the Exchange believes 
they are achievable for OTP Holders and OTP Firms that send Customer 
orders to the Exchange, whether they are OTP Holders and OTP Firms that 
predominantly send Customer orders to the Exchange or OTP Holders and 
OTP Firms that are affiliated with a Market Maker on the Exchange.
    The Exchange believes that the proposed new rate is equitable and 
not unfairly discriminatory because it will be available to all OTP 
Holders and OTP Firms that transact electronic Customer orders on the 
Exchange, on an equal and non-discriminatory basis.
    The Exchange further believes that it is equitable and not unfairly 
discriminatory to generally charge a lower fee to Customers, as 
compared to non-Customers, because Customers are less sophisticated 
than non-Customers and the proposed change is intended to attract a 
higher level of Customer order flow to the Exchange, which benefits 
both Customers and non-Customers. In this regard, the Exchange believes 
that the proposed change is equitable and not unfairly discriminatory 
because the lower Customer take rate would incent OTP Holders and OTP 
Firms to send additional Customer order flow to the Exchange for 
execution, which would benefit the quality of the Exchange's market 
and, in turn, be beneficial to all market participants. Accordingly, 
the proposed new Customer take rate would be reasonably related to the 
value to the Exchange's market quality associated with higher volumes 
in Customer order flow.

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

    The Exchange does not believe that the proposed rule change will 
impose

[[Page 11263]]

any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. Specifically, 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. In this regard, and for the reasons described above, the 
Exchange believes that the proposed rule change reflects this 
competitive environment and would permit the Exchange's pricing for 
electronic Customer executions in non-Penny Pilot classes that take 
liquidity while executing against LMMs to remain competitive with 
pricing applicable on other option exchanges.

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) \7\ of the Act and subparagraph (f)(2) of Rule 19b-
4 \8\ thereunder, because it establishes a due, fee, or other charge 
imposed by NYSE Arca.
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 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. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \9\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \9\ 15 U.S.C. 78s(b)(2)(B).
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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-NYSEARCA-2013-11 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-2013-11. 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 such filing also will be available 
for inspection and copying at 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-2013-11, and should be submitted on or before 
March 8, 2013.
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    \10\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-03572 Filed 2-14-13; 8:45 am]
BILLING CODE 8011-01-P