[Federal Register Volume 78, Number 238 (Wednesday, December 11, 2013)]
[Notices]
[Pages 75432-75434]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-29495]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70997; File No. SR-NYSE-2013-78]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Its Price List To Specify the Exclusion of Odd Lot Transactions 
From Consolidated Average Daily Volume Calculations for a Limited 
Period of Time for Purposes of Certain Transaction Pricing on the 
Exchange Through January 31, 2014

December 5, 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 November 22, 2013, New York Stock Exchange LLC (``NYSE'' or 
``Exchange'') 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 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\ 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 to specify the 
exclusion of odd lot transactions from consolidated average daily 
volume (``CADV'') calculations for a limited period of time for 
purposes of certain transaction pricing 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.

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 its Price List to specify the 
exclusion of odd lot transactions from CADV calculations for a limited 
period of time for purposes of certain transaction pricing on the 
Exchange. The Exchange proposes to implement the Price List change on 
December 9, 2013.
    The Exchange provides a member or member organization with the 
opportunity to qualify for one or more pricing tiers based on its level 
of activity during a particular month. Each tier has a corresponding 
fee or credit that applies to the member's or member organization's 
transactions during the month. Generally, a qualifying member or member 
organization would be subject to a lower transaction fee or a higher 
transaction credit, depending on the particular tier. Many of these 
tiers use a specific percentage of CADV in NYSE-listed securities 
(i.e., Tape A securities) during the billing month (``NYSE CADV'') as a 
threshold that a member's or member organization's activity must meet 
or exceed in order to qualify for the particular tier. For example, in 
order to qualify for a reduced fee of $0.00055 per share for executions 
of market at-the-close (``MOC'') and limit at-the-close (``LOC'') 
orders, a member or member organization must execute an average daily 
volume (``ADV'') of MOC/LOC activity on the Exchange during the month 
that is at least 0.375% of NYSE CADV. As an additional example, 
transaction pricing for a member or member organization that is a 
Designated Market Maker (``DMM'') can depend on whether the security is 
considered ``More Active'' or ``Less Active.'' Such a determination is 
based on the CADV for the security in the previous month.\3\
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    \3\ A ``More Active'' security is one with CADV in the previous 
month equal to or greater than one million shares. A ``Less Active 
security is one with CADV in the previous month of less than one 
million shares.
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    CADV is a measure of transactions in Tape A, Tape B and Tape C 
securities reported to the consolidated tape. NYSE CADV is a measure of 
transactions only in Tape A securities reported to the consolidated 
tape. Transactions in Tape A securities that are not reported to the 
consolidated tape are not included in NYSE CADV for purposes of the 
Price List. An odd lot transaction, which is generally an execution of 
less than 100 shares, is not currently reported to the consolidated 
tape and is therefore not currently included in NYSE CADV.\4\ Beginning 
December 9, 2013, odd lot transactions will be reported to the 
consolidated tape.\5\ The Exchange proposes to amend the Price List to 
specify that odd lot transactions

[[Page 75433]]

reported to the consolidated tape will be excluded from NYSE CADV 
through January 31, 2014 for purposes of billing on the Exchange. This 
proposed change is intended to maintain consistency in the Exchange's 
current method of determining tier qualifications for a limited period 
of time in order to provide members and member organizations with an 
opportunity to adjust to the potential impact of the inclusion of odd 
lot transactions in NYSE CADV.
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    \4\ See NYSE Rule 55. A round lot is generally an execution of 
100 shares or a multiple thereof.
    \5\ See Securities Exchange Act Release No. 70794 (October 31, 
2013), 78 FR 66789 (November 6, 2013) (SR-CTA-2013-05) (Order 
Approving the Eighteenth Substantive Amendment to the Second 
Restatement of the CTA Plan). See also Securities Exchange Act 
Release No. 70793 (October 31, 2013), 78 FR 66788 (November 6, 2013) 
(File No. S7-24-89) (Order Approving Amendment No. 30 to the Joint 
Self-Regulatory Organization Plan Governing the Collection, 
Consolidation and Dissemination of Quotation and Transaction 
Information for Nasdaq-Listed Securities Traded on Exchanges on an 
Unlisted Trading Privileges Basis). See also Securities Exchange Act 
Release No. 70898 (November 19, 2013), 78 FR 70386 (November 25, 
2013) (SR-NYSE-2013-75). See also announcements regarding December 
9, 2013 implementation date, available at https://cta.nyxdata.com/cta/popup/news/2385 and http://www.nasdaqtrader.com/TraderNews.aspx?id=uva2013-11. If the inclusion of odd lot 
transactions in the consolidated tape is delayed to a date after 
December 9, 2013, the manner of inclusion or exclusion of odd lot 
transactions described in this proposal for purposes of billing on 
the Exchange would similarly take effect on such later date.
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    As described above, CADV is also used in the Price List to 
differentiate between ``More Active'' and ``Less Active'' securities 
for purposes of DMM pricing. Odd lot transactions are currently 
excluded when determining whether a security is More Active or Less 
Active because odd lot transactions are not currently reported to the 
consolidated tape. In contrast to the proposed change described above, 
the Exchange will not make any adjustment beginning on December 9, 2013 
to consolidated tape figures for purposes of determining whether a 
security is More Active or Less Active.\6\ Therefore, beginning 
December 9, 2013, odd lot transactions reported to the consolidated 
tape would be included in More Active/Less Active determinations. These 
determinations are based on CADV from the previous month and DMMs would 
therefore be able to adjust their activity immediately on December 9, 
2013 based on November 2013 CADV.
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    \6\ The Exchange considers a change to the text of the Price 
List unnecessary to reflect this result because it will occur 
automatically by operation of odd lot transactions being reported to 
the consolidated tape.
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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 members or 
member organizations 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,\7\ in general, and furthers the 
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\8\ 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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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed change is reasonable 
because it will maintain consistency in the current manner of measuring 
member or member organization activity with respect to transaction 
pricing on the Exchange for a limited period of time. Absent this 
change, the denominator of a tier threshold calculation (i.e., NYSE 
CADV) would increase immediately when odd lot transactions begin to be 
reported to the consolidated tape and a member or member organization 
would therefore need to immediately increase its own activity (i.e., 
the numerator) to qualify for the tier compared to when odd lot 
transactions were not included in the consolidated tape. However, such 
an increase in member or member organization activity would not result 
in any corresponding benefit to the member or member organization, 
because the Exchange is not proposing a change to the tier rates. The 
Exchange anticipates that the eventual impact on determining tier 
qualifications will be minimal when odd lot transactions begin to be 
included in NYSE CADV. Notwithstanding the anticipated minimal impact, 
however, the Exchange believes that it is reasonable to provide members 
and member organizations with a limited transition period to adapt to 
such impact.
    The Exchange believes that it is reasonable to include odd lot 
transactions in More Active/Less Active security determinations 
immediately on December 9, 2013 because such determinations are based 
on CADV from the previous month. DMMs would therefore be able to adjust 
their activity immediately on December 9, 2013 based on November 2013 
CADV. This is different than with excluding odd lot transactions from 
the NYSE CADV calculation for a limited period of time because NYSE 
CADV is determined based on the actual billing month, not a prior 
month. Furthermore, the Exchange does not anticipate that including odd 
lot transactions in these determinations beginning on December 9, 2013 
would have a significant impact on the number of securities that would 
otherwise be considered Less Active absent the inclusion of odd lot 
transactions.\9\
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    \9\ Based on October 2013 data, fewer than 1% of securities to 
which a DMM is assigned would become More Active securities by 
including odd lot transactions.
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    The proposed change is equitable and not unfairly discriminatory 
because it would apply to all members and member organizations equally. 
More specifically, odd lot transactions would be excluded from NYSE 
CADV for billing purposes for all members and member organizations for 
a limited period of time. The proposed change is also equitable and not 
unfairly discriminatory because the inclusion of odd lots in the NYSE 
CADV calculation beginning on February 1, 2014 would occur at the same 
time for all members and member organizations, after the same nearly 
two month transition period. The proposed change is also equitable and 
not unfairly discriminatory because odd lot transactions would be 
immediately included in More Active/Less Active determinations for all 
members and member organizations that operate as DMMs. Immediately 
including odd lot transactions reported to the consolidated tape in 
More Active/Less Active determinations is equitable and not unfairly 
discriminatory because DMMs would be able to adjust their activity 
immediately on December 9, 2013 based on November 2013 CADV. 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,\10\ 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. Instead, the proposed change would maintain 
consistency in the Exchange's current method of determining tier 
qualifications for a limited period of time in order to give members 
and member organizations an opportunity to adjust to the inclusion of 
odd lot transactions in NYSE CADV. This proposed change is also 
designed to maintain competition on the Exchange by eliminating the 
potential for members and member organizations to immediately fail to 
qualify for a tier due to the inclusion of odd lot transactions in the 
consolidated tape beginning on December 9, 2013. The Exchange believes 
that competition would not be burdened by including odd lot 
transactions in More Active/Less Active determinations because the 
Exchange anticipates that this would not have a significant impact on 
the number of securities that would otherwise be considered Less Active 
absent the inclusion of odd lot transactions--i.e., fewer than 1% of 
securities to which a

[[Page 75434]]

DMM is assigned based on October 2013 data.
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    \10\ 15 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 or credit levels at a particular 
venue to be unattractive. In such an environment, the Exchange must 
continually review, and consider adjusting, its fees and credits to 
remain competitive with other exchanges. The billing method described 
herein is based on objective standards that are applicable to all 
members and member organizations and reflects the need for the Exchange 
to offer significant financial incentives to attract order flow. For 
these reasons, the Exchange believes that the proposed rule change 
reflects this competitive environment and is therefore consistent with 
the Act.

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) \11\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \12\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 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) \13\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \13\ 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-2013-78 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-2013-78. 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-NYSE-2013-78 and should be 
submitted on or before January 2, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-29495 Filed 12-10-13; 8:45 am]
BILLING CODE 8011-01-P