[Federal Register Volume 78, Number 150 (Monday, August 5, 2013)]
[Notices]
[Pages 47465-47467]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-18757]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70071; File No. SR-NYSEMKT-2013-65]


Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change To Amend the NYSE Amex 
Options Fee Schedule To Increase the Royalty Fees Applicable to Non-
Customer Transactions in Options on the Russell 2000 Index

July 30, 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 July 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 the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend the NYSE Amex Options Fee Schedule 
to increase the Royalty Fees applicable to non-Customer transactions in 
options on the Russell 2000 Index (``RUT''). 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.

[[Page 47466]]

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 the NYSE Amex Options Fee Schedule 
to increase the Royalty Fees applicable to non-Customer transactions in 
options on RUT from $0.15 to $0.40 per contract. Royalty Fees charged 
by the Exchange reflect the pass-through charges associated with the 
licensing of certain products, including RUT. The proposed increase in 
the Royalty Fee for RUT from $0.15 to $0.40 per contract is a 
reflection of the increased cost the Exchange has incurred in securing 
a license agreement from the index provider. Absent the license 
agreement, the Exchange and its participants would be unable to trade 
RUT options and would lose the ability to hedge small cap securities 
with a large notional value, European-style cash-settled index option.
    The proposed change will be operative on August 1, 2013.
    The proposed change is not otherwise intended to address any other 
issues relating to Royalty Fees and the Exchange is not aware of any 
problems that market participants 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,\4\ in general, and furthers the 
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\5\ 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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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed increase in the Royalty Fee 
from $0.15 to $0.40 for options on RUT is reasonable because Royalty 
Fees charged by the Exchange reflect the pass-through charges 
associated with the licensing of certain products, including RUT. The 
proposed increase is therefore a direct result of an increase in the 
licensing fee charged to the Exchange by the index provider and the 
owner of the intellectual property associated with the index.
    The Exchange believes that the proposed increase in the Royalty Fee 
from $0.15 to $0.40 for options on RUT is equitable and not unfairly 
discriminatory because Royalty Fees are assessed only on those non-
Customer participants who choose to transact in a product that requires 
the Exchange to obtain a licensing agreement based on the intellectual 
property rights associated with the product, as is the case with RUT. 
The Exchange further believes that this is equitable and not unfairly 
discriminatory because RUT has some products that can give participants 
a similar economic exposure without an associated Royalty Fee. In 
particular, there are exchange-traded fund (``ETF'') options that are 
based on RUT, such as the iShares Russell 2000 ETF traded under the 
symbol IWM. This means that participants that would be liable for the 
Royalty Fees can avoid them by transacting in alternative products, if 
they so choose.
    The Exchange assesses the Royalty Fees on non-Customer participants 
such as NYSE Amex Market Makers, non-NYSE Amex Market Makers, ATP 
Firms, Professional Customers, and Broker Dealers.\6\ The Exchange 
believes that it is equitable and not unfairly discriminatory to 
continue to not charge Royalty Fees to Customers, which has been the 
case since the Exchange implemented Royalty Fees, because the Exchange 
is attempting to continue to attract Customer order flow in RUT 
options, which in turn can interact with other participants' order flow 
on the Exchange to their benefit.\7\
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    \6\ See endnote 11 of the Fee Schedule.
    \7\ See Securities Exchange Act Release No. 53968 (June 9, 
2006), 71 FR 34971 (June 16, 2006) (SR-Amex-2006-56).
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    For the reasons given above, the Exchange believes that the 
proposed increase from $0.15 to $0.40 for the Royalty Fee charged to 
non-Customer transactions in RUT options is reasonable, equitable, and 
not unfairly discriminatory. Finally, the Exchange believes that it is 
subject to significant competitive forces, as described below in the 
Exchange's statement regarding the burden on competition.

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

    In accordance with Section 6(b)(8) of the Act,\8\ 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. By providing all participants on the Exchange with 
the ability to hedge via RUT options, the Exchange is not placing any 
burden on competition among its various participants. The Exchange 
further notes that the licensing agreement it has secured is not an 
exclusive agreement as at least two other option exchanges continue to 
trade RUT options and charge a fee related to such license.\9\ As such, 
there is no burden on competition among exchanges for the trading of 
RUT options.
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    \8\ 15 U.S.C. 78f(b)(8).
    \9\ See Chicago Board Options Exchange (``CBOE'') Fee Schedule, 
available at http://www.cboe.com/TradingResources/FeeSchedule.aspx. 
The Exchange's affiliate NYSE Arca, Inc. also has proposed to 
increase its Royalty Fee for RUT options from $0.15 to $0.40 per 
contract. See SR-NYSEArca-2013-76.
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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) \10\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \11\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 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) \12\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \12\ 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

[[Page 47467]]

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-2013-65 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-2013-65. 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 at 100 F Street NE., 
Washington, DC 20549-1090 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 
available publicly. All submissions should refer to File Number SR-
NYSEMKT-2013-65, and should be submitted on or before August 26, 2013.
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    \13\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-18757 Filed 8-2-13; 8:45 am]
BILLING CODE 8011-01-P