[Federal Register Volume 78, Number 88 (Tuesday, May 7, 2013)]
[Notices]
[Pages 26675-26677]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-10741]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69488; File No. SR-NYSEMKT-2013-38]


Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Amending NYSE Amex 
Options Fee Schedule for Firms To Increase the Transaction Fee for 
Certain Proprietary Electronic Executions and To Introduce Volume-Based 
Tiers for Certain Proprietary Electronic Executions

May 1, 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 April 19, 2013, 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 
(``Fee Schedule''). 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 for Firms to (1) 
increase the transaction fee for certain proprietary electronic 
executions of standard option contracts and (2) introduce volume-based 
tiers for certain proprietary electronic executions of standard option 
contracts that will be charged a lower per contract rate. The proposed 
change will be operative on May 1, 2013.
    Specifically, the Exchange proposes to increase the per contract 
transaction fee for proprietary electronically executed orders for 
Firms from $.20 to $.25 per contract. The Exchange notes that the 
proposed fee is within the range of Firm fees presently assessed in the 
industry, which range from $.17 per contract for high volume (over 
500,000 contracts per month) Firms in Multiply Listed, non-Select 
Symbols on NASDAQ OMX

[[Page 26676]]

PHLX (``PHLX'') \4\ to $.89 per contract to take liquidity on The 
NASDAQ Options Market (``NOM'') for non-Penny Pilot securities.\5\
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    \4\ See PHLX Fee Schedule, available at http://www.nasdaqtrader.com/Micro.aspx?id=PHLXPricing.
    \5\ See NOM Fee Schedule, available at http://www.nasdaqtrader.com/Micro.aspx?id=OptionsPricing.
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    At the same time, the Exchange proposes to establish volume-based 
tiers for Firms that trade electronically on the Exchange. Upon 
achieving a higher volume tier, a Firm will automatically become 
eligible for a lower per contract rate on all of its electronic 
executions in that month. The proposed volume-based tiers will be based 
on a percentage of the Total Industry Customer equity and exchange-
traded fund (``ETF'') option average daily volume (``ADV'').\6\ By 
doing so, the tiers will float with the level of overall activity in 
the marketplace. The tiers will be as follows:
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    \6\ Total Industry Customer equity and ETF option ADV will be 
that which is reported for the month by The Options Clearing 
Corporation (``OCC'') in the month in which the discounted rate may 
apply. For example, May 2013 Total Industry Customer equity and ETF 
option ADV will be used in determining what, if any, discount a Firm 
may be eligible for on its electronic Firm transactions based on the 
amount of electronic Firm volume it executes in May 2013 relative to 
Total Industry Customer equity and ETF option ADV. Total Industry 
Customer equity and ETF option ADV comprises those equity and ETF 
contracts that clear in the customer account type at OCC and does 
not include contracts that clear in either the firm or market maker 
account type at OCC or contracts overlying a security other than an 
equity or ETF security.

------------------------------------------------------------------------
                                                             Rate per
                                                             contract
                                                           (retroactive
   Tiers for firm proprietary electronic transactions      to the first
                                                             contract
                                                           traded during
                                                            the month)
------------------------------------------------------------------------
Less than .21% of Total Industry Customer equity and ETF            $.25
 option ADV.............................................
.21% to .32% of Total Industry Customer equity and ETF               .20
 option ADV.............................................
Greater than .32% of Total Industry Customer equity and              .17
 ETF option ADV.........................................
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    Based on the past few months of activity, .32% of Total Industry 
Customer equity and ETF option ADV would be approximately 38,750 
contracts per day (or 813,750 contracts per month) and .21% would be 
approximately 25,500 contracts per day (or 536,550 contracts per 
month), in each case assuming 21 trading days per month.
    By way of comparison, the Exchange notes that the discounted fee 
for Firm electronic volume on PHLX is available if a Firm executes more 
than 500,000 contracts per month (which would be an average of 23,810 
contracts per day if measured daily, assuming 21 trading days per 
month). The PHLX fee is $.45 if the Firm executes 500,000 or fewer 
contracts or $.17 if the Firm executes more than 500,000 contracts. 
While the highest volume tier that the Exchange is proposing is higher 
than the one on PHLX, the Exchange notes that the base rate on PHLX is 
substantially higher at $.45 per contract \7\ as compared to the 
Exchange's base rate of $.25 per contract.
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    \7\ See supra, notes 4-5.
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    In calculating the amount of Firm electronic volume that is counted 
in the volume tier necessary to achieve the lower per contract rate, 
the Exchange will exclude qualified contingent cross (``QCC'') volume 
because QCC volumes are already eligible for a separate rebate.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6(b) \8\ of the Act, in general, and 
Section 6(b)(4) and (5) \9\ of the Act, in particular, in that it is 
designed to provide for the equitable allocation of reasonable dues, 
fees, and other charges among its members and other persons using its 
facilities and does not unfairly discriminate between customers, 
issuers, brokers, or dealers.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed fees are reasonable because 
they are within the range of similar fees on other exchanges.\10\ They 
also are reasonable because they are designed to attract higher volumes 
of Firm proprietary electronic equity and ETF volume to the Exchange, 
which will benefit all participants by offering greater price 
discovery, increased transparency, and an increased opportunity to 
trade on the Exchange. Encouraging Firms to send higher volumes of 
orders to the Exchange will contribute to the Exchange's depth of book 
as well as to the top of book liquidity. The Exchange also believes 
that proposed thresholds for the tiers for the lower rates are 
reasonable because they are comparable to at least one other exchange 
(PHLX) and will reward Firms with lower fees when they bring a larger 
number of equity and ETF orders to the Exchange. The proposed fee 
increase for lower volume Firms is reasonable and equitable because it 
will reasonably ensure that the Exchange will derive sufficient revenue 
to continue to fund the fee reductions at the higher volumes for the 
benefit of all participants. Moreover, the Exchange believes that the 
proposed fees are equitable and not unfairly discriminatory because 
they will apply to all Firms that execute proprietary electronic equity 
and ETF orders on the Exchange on an equal and non-discriminatory 
basis.
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    \10\ See supra, notes 4-5.
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    The Exchange believes that excluding the volumes attributable to 
QCC executions is reasonable, equitable, and not unfairly 
discriminatory. QCC volumes are already counted toward a separate 
rebate that the Exchange pays to Floor Brokers who transact QCC 
trades.\11\ If the Exchange were to count QCC volumes toward Firm 
electronic volumes for discounted rates, the Exchange would have to 
raise fees for all other participants. The Exchange does not believe 
such a result would be reasonable or equitable. Because all Firms will 
be treated equally with respect to QCC volume, the proposal to exclude 
this volume from the tiers is not inequitable or unfairly 
discriminatory.
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    \11\ See Securities Exchange Act Release No. 65472 (Oct. 3, 
2011), 76 FR 62887 (Oct. 11, 2011) (SR-NYSEAmex-2011-72).
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    The Exchange further notes that non-Firm market participants pay 
substantially more for the ability to trade on the Exchange, and as 
such, the proposed amount of the increase for Firms that contribute 
relatively lower levels of volume is reasonable. For example, Market 
Makers have much higher fixed monthly costs as compared to Firms. A 
Market Maker seeking to stream quotes in the entire universe of names 
traded on the Exchange must pay $26,000 per month in Amex Trading 
Permit (``ATP'') fees. In addition, a Market Maker acting as a 
Specialist, e-Specialist, or Directed Order Market Maker incurs monthly 
Rights Fees that range from $75 per option to $1,500 per option along 
with Premium Product Fees that can be as high as $7,000 per month. 
Firms pay only $1,000 per month in ATP fees and for that low monthly 
cost are able to send orders in all issues traded on the Exchange. 
Other participants have a much higher per contract cost to trade on the 
Exchange, such as Non-NYSE Amex Options Market Makers, who pay $.43 per 
contract to transact on the Exchange electronically.
    Firms also are free to change the manner in which they access the 
Exchange. Firms may apply to become Market Makers to transact on a 
proprietary basis as Market Makers. In light of the ability to access 
the Exchange in a variety of ways, each of which is priced differently, 
Firms and

[[Page 26677]]

other participants may access the Exchange in a manner that makes the 
most economic sense for them.

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. The Exchange believes that 
the proposed change will encourage Firms to send higher volumes of 
order flow to the Exchange to qualify for the lower transaction fees. 
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.

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) \12\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \13\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 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) \14\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \14\ 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-NYSEMKT-2013-38 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-2013-38. 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 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 publicly available. All 
submissions should refer to File Number SR-NYSEMKT-2013-38 and should 
be submitted on or before May 28, 2013.

    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. 2013-10741 Filed 5-6-13; 8:45 am]
BILLING CODE 8011-01-P