[Federal Register Volume 78, Number 219 (Wednesday, November 13, 2013)]
[Notices]
[Pages 68108-68110]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-27042]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70818; File No. SR-NYSEArca-2013-114]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending the NYSE 
Arca Options Fee Schedule Regarding the Applicable Lead Market Maker 
Rights Fee for Low-Volume Issues

November 6, 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 October 31, 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-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 Arca Options Fee Schedule 
(``Fee Schedule'') regarding the applicable Lead Market Maker (``LMM'') 
rights fee for low-volume issues within the first six months of being 
listed on the Exchange. 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 68109]]

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 Fee Schedule regarding the 
applicable LMM rights fee for low-volume issues within the first six 
months of being listed on the Exchange. The Exchange proposes to 
implement the fee change effective November 1, 2013.
    OTP Firms acting as LMMs are assessed a fee for LMM rights for each 
appointed issue.\4\ The LMM rights fee is based on the average national 
daily volume (``ADV'') of Customer contracts traded in that issue.\5\ 
The LMM rights fees are assessed at the end of each month on each issue 
that an LMM holds in its LMM appointment. Currently, the LMM rights 
fees are charged as follows:
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    \4\ ``OTP Firm'' is defined in NYSE Arca Rule 1.1(r). ``Market 
Maker'' is defined in NYSE Arca Rule 6.32. ``Lead Market Maker'' is 
defined in NYSE Arca Rule 6.82.
    \5\ The term ``Customer'' excludes a broker-dealer. See NYSE 
Arca Rule 6.1A(a)(4).

------------------------------------------------------------------------
                                                               Monthly
                 ADV of customer contracts                    issue fee
------------------------------------------------------------------------
0-100......................................................         $125
101-1,000..................................................           45
1,001 to 2,000.............................................           75
2,001 to 5,000.............................................          200
5,001 to 15,000............................................          375
15,001 to 100,000..........................................          750
Over 100,000...............................................        1,500
------------------------------------------------------------------------

    The Exchange introduced the current lowest-volume LMM rights fee 
tier on October 1, 2013 and set the corresponding $125 fee at a level 
that is designed to balance the Exchange's revenue with the cost of 
listing low-volume issues.\6\ This lowest-volume LMM rights fee tier 
currently applies to (i) issues listed on the Exchange on or after 
October 1, 2013 or (ii) issues listed before October 1, 2013 that are 
reallocated to a new LMM on or after October 1, 2013. All other issues 
are grandfathered, such that the LMM rights fee for the next highest 
tier applies instead, which is currently $45.
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    \6\ See Securities Exchange Act Release No. 70503 (September 25, 
2013), 78 FR 60364 (October 1, 2013) (SR-NYSEArca-2013-95).
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    The Exchange proposes that, for issues listed on the Exchange on or 
after October 1, 2013 for which the lowest-volume LMM rights fee tier 
would apply (i.e., issues with an ADV of Customer contracts of 0-100 
contracts), the fee for the next highest tier would apply instead for a 
period of six months from the date of listing on the Exchange if, at 
the time of initial listing, the issue is not listed on any other 
market. After six months from the date of listing on the Exchange, the 
standard fee for the lowest-volume LMM rights fee tier would apply.\7\ 
The Exchange proposes that this six-month period also apply to a new 
issue listed on the Exchange between October 1, 2013 and the 
implementation date of this proposal (i.e., November 1, 2013) if the 
issue was not listed on another market at the time of initial listing 
on the Exchange, except that the proposed six-month period would be 
decreased by the amount of time that the issue has already been listed 
on the Exchange.\8\
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    \7\ As is currently the case, if the ADV of Customer contracts 
for the issue corresponded to a different LMM rights fee tier, the 
corresponding fee for that different tier would apply, including 
during the six-month period proposed herein.
    \8\ For example, if a new issue was listed on the Exchange on 
October 1, 2013 and qualifies for the lowest-volume LMM rights fee 
tier, beginning November 1, 2013 the fee for the next highest tier 
would apply instead for the next five months. The standard fee for 
the lowest-volume LMM rights fee tier would apply to such issue 
during October 2013. The Exchange is not proposing any retroactive 
fees as part of this filing.
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    The Exchange also proposes to make certain non-substantive changes 
to better organize the text that accompanies the LMM rights fee table 
in the Fee Schedule, which was added when the Exchange introduced the 
lowest-volume LMM rights fee tier.\9\ First, the Exchange proposes to 
delete the reference to ``grandfathering,'' while at the same time 
adding detail to specify that this sentence is referring to issues 
listed before October 1, 2013 with an ADV of Customer contracts of 0-
100. The ``grandfathering'' reference was added to explain the fees 
applicable to issues that were already listed on the Exchange when the 
lowest-volume LMM rights fee tier was introduced,\10\ but it is not 
necessary and could be confusing in light of the six-month period 
proposed herein for newly-listed issues on the Exchange. Second, the 
Exchange proposes to specify that the reference to ``existing options'' 
refers to issues listed on the Exchange before October 1, 2013. 
Finally, the Exchange proposes to clearly distinguish the two 
categories of issues for which the fee for the lowest-volume LMM rights 
fee tier would apply, which would be (i) a new issue listed on the 
Exchange on or after October 1, 2013, except that the fee for the next 
highest tier would apply during the first six months after listing on 
the Exchange if the issue is not listed on any other market as of the 
date of listing, or (ii) an issue that was listed on the Exchange 
before October 1, 2013 that is reallocated to a new LMM on or after 
October 1, 2013.
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    \9\ See supra note 6.
    \10\ Id.
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    The proposed change is not otherwise intended to address any other 
issues, and the Exchange is not aware of any problems that LMMs 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,\11\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\12\ 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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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed change is reasonable 
because applying the lower LMM rights fee of $45 to LMMs appointed to 
issues with an ADV of Customer contracts of 0-100 contracts would 
create an incentive for LMMs to request appointments during the first 
six months that such low-volume issues are listed on the Exchange. This 
would provide a specific period of time during which trading interest 
in the newly-listed issues would be generated, but without the 
appointed LMMs being subject to the higher LMM rights fee that 
corresponds to the lowest-volume LMM rights fee tier. The Exchange 
believes that this may increase the likelihood of LMMs seeking 
appointments to low-volume issues during their initial listing on the 
Exchange, which would contribute to increased levels of available 
liquidity on the Exchange and therefore benefit investors.
    The Exchange believes that the proposed change is equitable and not 
unfairly discriminatory because it would apply to all new issues listed 
on the Exchange with an ADV of Customer contracts of 0-100 contracts, 
and all LMMs appointed thereto, during the first six months of listing 
on the Exchange if the issue is not listed on another market at the 
time of initial listing on the Exchange. The proposed change is also 
equitable and not unfairly discriminatory because the overall quality 
of the Exchange's market could benefit from the liquidity provided by 
LMMs appointed to these low-volume issues during the first six months 
of listing on the Exchange, which would contribute to the Exchange 
balancing its cost and revenue when listing such low-volume issues.

[[Page 68110]]

    The proposed change is also equitable and not unfairly 
discriminatory because of the uncertainty surrounding issues to which 
this proposed change would apply. Specifically, because such issues 
would not be listed on any other market at the time an LMM would be 
appointed, such an LMM would not be able to predict that the ADV of 
Customer contracts would correspond to the lowest-volume LMM rights fee 
tier and therefore that the higher corresponding fee would apply. The 
Exchange believes that the proposed change would account for this 
uncertainty by providing LMMs with a specified period of time after an 
issue is listed on the Exchange, during which the higher fee for the 
lowest-volume LMM rights fee tier would not apply. The Exchange 
believes that six months is a reasonable period of time because new 
issues may take several months to generate meaningful trading volume on 
the Exchange. This could be compounded if other option exchanges do not 
list the new issue on their markets. However, even when another option 
exchange lists the new issue within a short period of time after its 
initial listing on the Exchange, trading interest in such issue could 
still take several months to increase to a point where the Exchange 
believes it would be reasonable and equitable to apply the higher fee 
for the lowest-volume LMM rights fee tier.
    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.
    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,\13\ 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 proposed change would enhance competition 
by creating an incentive for LMMs to seek appointments in low-volume 
issues that are not listed on other markets. The Exchange does not 
believe that the proposed change would burden competition among LMMs 
because LMMs apply for such appointments based on their own business 
decisions.
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    \13\ 5 U.S.C. 78f(b)(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 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) \14\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \15\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 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) \16\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \16\ 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-2013-114 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-2013-114. 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 available publicly. All 
submissions should refer to File Number SR-NYSEArca-2013-114, and 
should be submitted on or before December 4, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013-27042 Filed 11-12-13; 8:45 am]
BILLING CODE 8011-01-P