[Federal Register Volume 79, Number 4 (Tuesday, January 7, 2014)]
[Notices]
[Pages 873-875]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-31605]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71214; File No. SR-NYSEArca-2013-146]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending the NYSE 
Arca Equities Schedule of Fees and Charges for Exchange Services To 
Eliminate the Mid-Point Passive Liquidity Order Tier, Add a New 
Routable Order Cross-Asset Tier, and Make Other Changes Relating to 
Open Orders

December 31, 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 December 19, 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 Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the NYSE Arca Equities Schedule of 
Fees and Charges for Exchange Services (``Fee Schedule'') to eliminate 
the Mid-Point Passive Liquidity (``MPL'') Order Tier, add a new 
Routable Order Cross-Asset Tier, and make other changes relating to 
open orders. The Exchange proposes to implement the changes on January 
2, 2014. 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 to eliminate the 
MPL Order Tier, add a new Routable Order Cross-Asset Tier, and make 
other changes relating to open orders. The Exchange proposes to 
implement the changes on January 2, 2014.
    Currently, the Exchange provides a $0.0020 per share credit for ETP 
holders, including Market Makers, that execute an Average Daily Volume 
(``ADV'') of providing MPL orders during the month that is 0.0775% or 
more of the U.S. Consolidated ADV (``US CADV''). When the Exchange 
proposed the MPL Order Tier credit, the Exchange expected it to 
incentivize ETP Holders to submit additional MPL orders on the 
Exchange; \4\ however, the credit has not had the intended effect. 
Accordingly, the Exchange proposes to eliminate the MPL Order Tier. The 
$0.0015 per share credit would remain in place for the Tier 1, Tier 2, 
and Basic rates.
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    \4\ See Securities Exchange Act Release No. 69926 (July 3, 
2013), 78 FR 41154 (July 9, 2013) (SR-NYSEArca-2013-67).
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    The Exchange also is proposing a new Routable Order Cross-Asset 
Tier. Under the Routable Order Cross-Asset Tier, ETP Holders, including 
Market Makers, that (1) provide liquidity of 0.40% or more of the US 
CADV during the billing month across all Tapes, (2) maintain a ratio 
during the billing month across all Tapes of executed provide liquidity 
that is eligible to route away from the Exchange (``Routable Orders'') 
to total executed provide liquidity of 65% or more, (3) execute an ADV 
of provide liquidity during the billing month across all Tapes that is 
equal to at least the ETP Holder's or Market Maker's May 2013 provide 
liquidity across all Tapes

[[Page 874]]

plus 40%, and (4) are affiliated with an OTP Holder or OTP Firm that 
provides an ADV of manual (i.e., non-electronic) executions (as defined 
in footnote 5 of the NYSE Arca Options Fee Schedule) \5\ on NYSE Arca 
Options (excluding mini options, qualified contingent cross orders, and 
strategy trades) across all account type ranges of at least 1.5% of 
total Customer equity and ETF option ADV as reported by the Options 
Clearing Corporation would qualify for a $0.0032 per share credit for 
Routable and non-Routable Orders that provide liquidity in Tape A and C 
securities and a $0.0027 per share credit for Routable and non-Routable 
Orders that provide liquidity in Tape B securities. The Exchange notes 
that the proposed credits would provide an alternative way to qualify 
for the current Routable Order Tier credit of $0.0032 for Tape A and 
Tape C securities and an alternative way to qualify for the current 
Tape B Step Up Tier credit of $0.0027 for Tape B securities that are 
offered by the Exchange.\6\ The Exchange also proposes to make 
conforming changes to the Tape B Adding Tier, Tape B Step Up Tier, Tape 
C Step Up Tier, and Tape C Step Up Tier 2 to specify that ETP Holders 
and Market Makers that qualify for the proposed Routable Order Cross-
Asset Tier would not additionally qualify for those tiers.
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    \5\ As provided in footnote 5 in the NYSE Arca Options Fee 
Schedule, manual executions exclude certain electronic transactions. 
Specifically, a manual order that executes in part against one or 
more electronic orders or quotes resting on the NYSE Arca Options 
Consolidated Book prior to executing against interest in the NYSE 
Arca Options Trading Crowd would be considered a manual transaction 
order for the entire order. A manual order that executes entirely 
against one or more electronic orders or quotes resting on the 
Consolidated Book would be considered an electronic transaction for 
the entire order. In either case, the contra-side electronic order 
or quote would be considered an electronic transaction. In order to 
be considered a manual transaction, all manual orders must be 
entered into NYSE Arca Options' Electronic Order Capture System. 
Manual orders that are entered into an order entry device approved 
by NYSE Arca Options and contemporaneously recorded into the 
Electronic Order Capture System are also considered manual 
transactions.
    \6\ The $0.0027 per share credit for executions of Tape B 
securities under the Routable Order Cross-Asset Tier is the same 
credit that ETP Holders would receive if they qualified for both the 
Tier 1 ($0.0023) and Tape B Step Up Tier ($0.0004) credits.
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    Lastly, the Exchange proposes to amend footnote 1 in the Fee 
Schedule to eliminate the restriction that credits will not be applied 
to open orders (e.g., ``Good Till Cancelled'' or ``GTC'' Orders) 
executed after the trading date on which they were entered. The 
Exchange is eliminating the restriction to encourage more orders to be 
submitted and enhance liquidity on the Exchange.
    The proposed change is not otherwise intended to address any other 
issues, and the Exchange is not aware of any problems that ETP Holders 
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 (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 eliminating the MPL Order Tier is 
reasonable because it has generally not incentivized ETP Holders to 
submit additional liquidity in MPL orders as intended.\9\ The Exchange 
believes that removal of the MPL Order Tier is equitable and not 
unfairly discriminatory because it would be eliminated for all ETP 
Holders. The Exchange also believes that eliminating the MPL Order Tier 
is reasonable and equitable because ETP Holders can still receive a 
$0.0015 credit for MPL orders that provide liquidity under the Tier 1, 
Tier 2, and Basic rates.
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    \9\ See supra note 4.
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    The Exchange believes that the proposal to add the new Routable 
Order Cross-Asset Tier is reasonable because it would provide firms 
with an alternative way in which to qualify for the current Routable 
Order Tier credit of $0.0032 for Tape A and Tape C securities and an 
alternative way to qualify for the current Tape B Step Up Tier credit 
of $0.0027 for Tape B securities through equity and options orders, 
thereby encouraging increased trading activity on both the NYSE Arca 
equity and option markets. The Exchange believes that the thresholds 
that it has set for qualifying for the new tier are reasonable because 
they are based in part on the qualifications for the existing Routable 
Order Tier. The Exchange believes that lowering the ratio for Routable 
Orders from 75% in the current Routable Order Tier to 65% in the 
proposed Routable Order Cross-Asset Tier is reasonable because under 
the proposed tier, ETP Holders would be required to meet an additional 
threshold in options volume in order to qualify for the credit. The 
Exchange further believes that the proposed Routable Order Cross-Asset 
Tier is equitable and not unfairly discriminatory because ETP Holders 
that are not affiliated with an NYSE Arca Options OTP Holder or OTP 
Firm would continue to have the opportunity to qualify for the same 
levels of credit pursuant to either the Routable Order Tier or the Tier 
1 and Tape B Step Up Tier. The Exchange also believes that it is 
reasonable, equitable, and not unfairly discriminatory for an ETP 
Holder or Market Maker that qualifies for the proposed Routable Order 
Cross-Asset Tier to not be eligible for the Tape B Adding Tier, Tape B 
Step Up Tier, Tape C Step Up Tier, or Tape C Step Up Tier 2 because the 
ETP Holders and Market Makers that qualify for these specified tiers 
would already receive the benefit of a lower fee or an equal or 
incrementally higher credit for such executions that add liquidity.
    The Exchange believes that it is reasonable to include Tape B 
securities within the proposed Routable Order Cross-Asset Tier because 
it would encourage additional liquidity on the Exchange in such 
securities. The Exchange further believes that it is equitable and not 
unfairly discriminatory to apply the same qualifying thresholds to Tape 
B securities as would apply to Tape A and Tape C securities, but to 
apply a lower credit for Tape B securities (i.e., $0.0027 compared to 
$0.0032), because existing pricing on the Exchange for Tape B 
Securities is often different from Tape A and Tape C Securities, with 
different credits and fees.
    The Exchange believes that eliminating the restriction on open 
orders in footnote 1 and making credits available to open orders that 
execute after the day that they are entered is reasonable because it 
may encourage more open orders to be submitted, which may enhance 
liquidity on the Exchange. The Exchange believes that the proposed 
change to footnote 1 is equitable and not unfairly discriminatory 
because all ETP Holders would have the opportunity to earn credits for 
open orders that do not execute on the day entered.
    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.

[[Page 875]]

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. In particular, the removal of the MPL Order 
Tier will not impose a burden on competition because the tier will be 
removed in its entirety and generally has not encouraged liquidity on 
the Exchange, as intended. The proposal to add the new Routable Order 
Cross-Asset Tier will not place a burden on competition because ETP 
Holders that are not affiliated with an OTP Holder or OTP Firm can 
still qualify to receive the same proposed credits pursuant to the 
other existing tiers discussed above. The Exchange believes that the 
proposed change to footnote 1 will not impose a burden on competition 
but rather will create an incentive to submit open orders to the 
Exchange, thereby promoting competition. The Exchange notes that it 
operates in a highly competitive market in which market participants 
can readily favor competing venues. 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 
promotes a competitive environment.
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    \10\ 15 U.S.C. 78f(b)(8).
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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-NYSEArca-2013-146 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-2013-146. 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-NYSEArca-2013-146 and should 
be submitted on or before January 28, 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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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013-31605 Filed 1-6-14; 8:45 am]
BILLING CODE 8011-01-P [FEDREG][VOL]*[/VOL][NO]*[/NO][DATE]*[/
DATE][NOTICES]