[Federal Register Volume 78, Number 116 (Monday, June 17, 2013)]
[Notices]
[Pages 36281-36284]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-14255]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69734; File No. SR-NYSE-2013-35]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Amending Its Price List Related to Certain Pricing Applicable to 
Supplemental Liquidity Providers on the Exchange

June 11, 2013.
    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 May 30, 2013, New York Stock Exchange LLC (the ``Exchange'' or 
``NYSE'') 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 related to certain 
pricing applicable to Supplemental Liquidity Providers (``SLPs'') on 
the Exchange. The Exchange proposes to implement the fee change 
effective June 1, 2013. 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

[[Page 36282]]

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 related to certain 
pricing applicable to SLPs on the Exchange. The Exchange proposes to 
implement the fee change effective June 1, 2013.
    An SLP is a member organization that electronically enters orders 
or quotes from off the Floor of the Exchange into the systems and 
facilities of the Exchange and is obligated to maintain a bid or an 
offer at the National Best Bid (``NBB'') or the National Best Offer 
(``NBO'') in each assigned security in round lots averaging at least 
10% of the trading day (the ``percentage quoting requirement'').\3\ In 
addition, for all assigned SLP securities, an SLP is required to 
satisfy a ``monthly volume requirement'' by adding liquidity of an 
average daily volume (``ADV'') of more than a specified percentage 
(currently 0.22%) of consolidated ADV (``CADV'') in all NYSE-listed 
securities, as set forth in the Exchange's Price List.\4\
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    \3\ See Rule 107B(a). An SLP can either be a proprietary trading 
unit of a member organization or a registered market maker at the 
Exchange. If an SLP does not satisfy the percentage quoting 
requirement, it may be subject to certain non-regulatory penalties. 
Specifically, if the SLP failed to satisfy the percentage quoting 
requirement during a particular month, it would be ineligible to 
receive higher SLP credits. If the SLP failed to satisfy the 
percentage quoting requirement for three consecutive calendar months 
in any assigned security, the SLP would be at risk of having its 
assignment in the affected security(ies) revoked or being 
disqualified from its status as an SLP. See Rule 107B(k).
    \4\ An SLP's failure to satisfy the monthly volume requirement 
would not result in the non-regulatory penalties described in Rule 
107B(k). Rather, the monthly volume requirement only determines 
whether an SLP would be eligible for higher SLP credits.
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    SLPs are eligible for credits when adding liquidity to the 
Exchange.\5\ The amount of the credit is currently determined by the 
``tier'' that the SLP qualifies for, which is generally based on the 
SLP's level of quoting and the ADV of liquidity added by the SLP in 
assigned securities.\6\ The current rate for the base tier is $0.0015 
per share (or $0.0010 if a Non-Displayed Reserve Order), which is 
applicable if an SLP does not satisfy the percentage quoting 
requirement or the monthly volume requirement and therefore does not 
qualify for the higher SLP tiers (and corresponding credits) in the 
Price List. The Exchange proposes that, instead of the static $0.0015 
rate, the applicable rate for the base SLP tier would be the rate that 
applies to the non-SLP activity of the member organization (i.e., a 
$0.0015, $0.0017, or $0.0018 per share credit when adding liquidity to 
the Exchange). As a result, if an SLP did not qualify for one of the 
higher SLP tiers (e.g., a $0.0023 or $0.0025 per share credit), the 
SLP's transactions that add liquidity would be subject to the same rate 
that applies to the non-SLP transactions of the SLP's member 
organization. These rates are currently as follows: \7\
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    \5\ SLP credits are not applicable to executions of securities 
with a per share price of $1.00 or more at the close.
    \6\ For purposes of SLP liquidity credits, ADV calculations 
exclude early closing days.
    \7\ The Exchange notes that the $0.0010 rate for a Non-Displayed 
Reserve Order would not change as a result of this proposal.
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     A $0.0015 per share credit (or $0.0010 if a Non-Displayed 
Reserve Order) for adding liquidity to the Exchange, unless a higher 
credit applies;
     A $0.0017 per share credit when adding displayed liquidity 
to the Exchange if the member organization has ``Adding ADV'' \8\ that 
is at least 0.20% of NYSE CADV and executes market at-the-close 
(``MOC'') and limit at-the-close (``LOC'') orders of at least 0.10% of 
NYSE CADV; or
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    \8\ ``Adding ADV'' is when a member organization has ADV that 
adds liquidity to the Exchange during the billing month. Adding ADV 
excludes any liquidity added by a Designated Market Maker.
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     An $0.0018 per share credit when adding displayed 
liquidity to the Exchange if the member organization satisfies certain 
thresholds related to ``Adding ADV,'' MOC and LOC activity, SLP 
activity and ``Customer Electronic Adding ADV.'' \9\
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    \9\ An $0.0018 per share credit is provided per transaction when 
adding displayed liquidity to the Exchange if (i) the member 
organization has Adding ADV that is at least 1.5% of NYSE CADV, and 
executes MOC and LOC orders of at least 0.375% of NYSE CADV, (ii) 
the member organization has Adding ADV that is at least 0.8% of NYSE 
CADV, executes MOC and LOC orders of at least 0.12% of NYSE CADV, 
and adds liquidity to the NYSE as an SLP for all assigned SLP 
securities in the aggregate (including shares of both an SLP 
proprietary trading unit and an SLP market maker of the same member 
organization) of more than 0.15% of NYSE CADV, or (iii) the member 
organization has ADV that adds liquidity in customer electronic 
orders to the NYSE (``Customer Electronic Adding ADV,'' which shall 
exclude any liquidity added by a Floor broker, Designated Market 
Maker, or SLP) during the billing month that is at least 0.5% of 
NYSE CADV, executes MOC and LOC orders of at least 0.12% of NYSE 
CADV, and has Customer Electronic Adding ADV during the billing 
month that, taken as a percentage of NYSE CADV, is at least equal to 
the member organization's Customer Electronic Adding ADV during 
September 2012 as a percentage of CADV in NYSE-listed securities 
during September 2012 plus 15%.
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    In order to provide clarity regarding the applicable rates, the 
Exchange proposes to label these existing $0.0015, $0.0017, and $0.0018 
per share credits the ``non-Tier Adding Credit,'' the ``Tier 2 Adding 
Credit'' and the ``Tier 1 Adding Credit,'' respectively.\10\
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    \10\ This proposed change would have no impact on these existing 
rates or the Exchange's method of determining applicability.
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    The Exchange is proposing this change because the current pricing 
structure could result in an SLP's transactions that add liquidity 
receiving a price that is inferior to that of the non-SLP transactions 
of the same member organization. The potential for this inferior 
pricing is the result of a pricing change that became effective October 
1, 2012, through which the Exchange introduced the $0.0017 and $0.0018 
rates in the Price List for non-SLP activity of a member organization 
that adds liquidity.\11\ Prior to the introduction of these two rates, 
the non-SLP rate for adding liquidity was $0.0015 for all member 
organizations, which is the same as the base SLP credit rate.\12\ 
Accordingly, prior to October 2012 it was not possible for an SLP to 
receive a rate for adding liquidity that was inferior to the rate 
applicable to non-SLP activity of a member organization, even if the 
SLP failed to satisfy the percentage quoting requirement or the monthly 
volume requirement. The Exchange notes that SLP volume is counted when 
determining whether a member organization has achieved the non-SLP 
pricing thresholds that correspond to the rates introduced in October 
2012.
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    \11\ See Securities Exchange Act Release No. 68021 (October 9, 
2012), 77 FR 63406 (October 16, 2012) (SR-NYSE- 2012-50).
    \12\ The $0.0015 rate still applies for member organizations 
that do not qualify for the $0.0017 or $0.0018 rates.
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    The SLP program provides incentives for quoting and adds 
competition to the existing group of liquidity providers. Specifically, 
by requiring SLPs to quote at the NBB or NBO a percentage of the 
regular trading day in their assigned securities, and by paying a 
rebate to SLPs, the Exchange believes that it rewards aggressive 
liquidity providers and encourages the additional utilization of, and 
interaction with, the Exchange and provides customers with the premier 
venue for price discovery, liquidity, competitive quotes and price 
improvement.\13\
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    \13\ See Securities Exchange Act Release No. 58877 (October 29, 
2008), 73 FR 65904-05 (November 5, 2008) (SR-NYSE-2008-108).
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    The Exchange believes that it is inconsistent with the goal of the 
SLP program to continue to permit an SLP to receive a rate that is 
inferior to that

[[Page 36283]]

received by non-SLP activity of a member organization, because it could 
disincentivize member organizations from participating as SLPs and 
therefore lead to decreased levels of liquidity. Accordingly, the 
Exchange proposes to amend the Price List to specify that the rate 
applicable to the base SLP tier would be the applicable non-Tier Adding 
Credit, Tier 2 Adding Credit or Tier 1 Adding Credit (or $0.0010 if a 
Non-Displayed Reserve Order).
    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 member organizations, including SLPs, would have in 
complying with the proposed change.
    The Exchange believes that it is subject to significant competitive 
forces, as described below in the Exchange's statement regarding the 
burden on competition.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\14\ in general, and furthers the 
objectives of Sections 6(b)(4) and 6(b)(5) 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) and (5).
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    The Exchange believes that the proposed change is reasonable 
because the current pricing structure could result in an SLP's 
transactions that add liquidity receiving a price that is inferior to 
that of the non-SLP transactions of the same member organization. This 
is inconsistent with the goal of the SLP program, because it could 
disincentivize member organizations from participating as SLPs and 
therefore lead to decreased levels of liquidity.\16\
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    \16\ See supra note 13.
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    For example, an SLP must satisfy both the percentage quoting 
requirement and the monthly volume requirement in order to qualify for 
the higher SLP credits. However, only satisfaction of the percentage 
quoting requirement is required to avoid the non-regulatory penalties 
that are applicable to SLPs (i.e., the monthly volume requirement only 
determines whether the SLP is eligible for higher SLP credits). 
Accordingly, an SLP that satisfied the percentage quoting requirement 
would have satisfied its SLP ``obligations,'' but if it did not satisfy 
the monthly volume requirement it would not receive the higher SLP 
credits and therefore could receive a lower credit than the non-SLP 
activity of the same member organization.
    The Exchange believes that this proposed change is also equitable 
and not unfairly discriminatory because it would result in a rate being 
applied to an SLP that does not qualify for the higher SLP tiers (and 
corresponding credits) that is the same as the rate applied to the non-
SLP activity of the member organization. Therefore, an SLP's 
transactions that add liquidity would not be subject to a price that is 
inferior to that of the non-SLP transactions of the same member 
organization. The proposed change is also equitable and not unfairly 
discriminatory because it would eliminate the potential for this 
inferior SLP pricing that resulted from a pricing change that became 
effective October 1, 2012, through which the Exchange introduced the 
$0.0017 and $0.0018 rates in the Price List for non-SLP activity of a 
member organization that adds liquidity.\17\ Prior to the introduction 
of these two rates, the non-SLP rate for adding liquidity was $0.0015, 
which is the same as the base SLP credit rate. The proposed change is 
also equitable and not unfairly discriminatory because SLP volume is 
counted when determining whether a member organization has achieved the 
non-SLP pricing thresholds that correspond to the rates introduced in 
October 2012.
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    \17\ See supra note 11.
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    Finally, the Exchange believes that the proposed change would not 
result in any unnecessary burden on competition. Instead, the Exchange 
believes that the proposed change will eliminate a disincentive to 
participation as an SLP, and therefore prevent decreased levels of 
liquidity, by resulting in a rate being applied to an SLP that does not 
qualify for the higher SLP tiers (and corresponding credits) that is 
the same as the rate applied to the non-SLP activity of the member 
organization when adding liquidity.
    For these reasons, the Exchange believes that the proposal is 
consistent with the Act.

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

    In accordance with Section 6(b)(8) of the Act,\18\ 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. Rather, the Exchange believes that the 
proposed change will eliminate a disincentive to participation as an 
SLP, and therefore prevent decreased levels of liquidity, by resulting 
in a rate being applied to an SLP that does not qualify for the higher 
SLP tiers (and corresponding credits) that is the same as the rate 
applied to the non-SLP activity of the member organization when adding 
liquidity.
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    \18\ 15 U.S.C. 78f(b)(8).
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    The Exchange notes that the potential for this inferior pricing is 
the result of a pricing change that became effective October 1, 2012, 
through which the Exchange introduced the $0.0017 and $0.0018 rates in 
the Price List for non-SLP activity of a member organization that adds 
liquidity.\19\ Prior to October 2012 it was not possible for an SLP to 
receive a rate for adding liquidity that was inferior to the rate 
applicable to non-SLP member organizations, even if the SLP failed to 
satisfy the percentage quoting requirement or the monthly volume 
requirement.
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    \19\ See supra note 11.
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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 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) \20\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \21\ thereunder, because it establishes a due, fee, or other 
charge imposed by NYSE.
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    \20\ 15 U.S.C. 78s(b)(3)(A).
    \21\ 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

[[Page 36284]]

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) \22\ of the Act to determine 
whether the proposed rule change should be approved or disapproved.
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    \22\ 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-NYSE-2013-35 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-NYSE-2013-35. 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-NYSE-2013-35 and should be 
submitted on or before July 8, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-14255 Filed 6-14-13; 8:45 am]
BILLING CODE 8011-01-P