Document ID: SEC-2013-1480-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange, LLC
Posted Date: 2013-08-20T04:00Z

[Federal Register Volume 78, Number 161 (Tuesday, August 20, 2013)]
[Notices]
[Pages 51251-51254]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-20191]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70193; File No. SR-NYSE-2013-56]

Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Changes to the 
Price List

August 14, 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 July 31, 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 to (i) add a new 
credit for agency cross trades, (ii) revise the fees for executions at 
the close, (iii) revise the fees for market at-the-close (``MOC'') and 
limit at-the-close (``LOC'') orders, (iv) revise the fees for Floor 
broker Discretionary e-Quotes (``d-Quotes''), and (v) revise the fees 
for certain other Floor broker transactions. The Exchange proposes to 
implement the fee changes effective August 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 
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 to (i) add a new 
credit for agency cross trades, (ii) revise the fees for executions at 
the close, (iii) revise the fees for MOC and LOC orders, (iv) revise 
the fees for d-Quotes, and (v) revise the fees for certain other Floor 
broker transactions. The proposed transaction fee changes described 
below apply to transactions in stocks with a per share stock price of 
$1.00 or more. The Exchange proposes to implement the fee changes 
effective August 1, 2013.
Agency Cross Trades
    Currently, the Exchange does not charge member organizations a fee 
for agency cross trades (i.e., a trade where a member organization has 
customer orders to buy and sell an equivalent amount of the same 
security). The Exchange proposes to offer a per share credit per 
transaction of $0.0003, which will be credited to both sides of the 
transaction.
Executions at the Close
    Currently, the Exchange does not charge member organizations a fee 
for (i) executions at the close (except MOC and LOC orders) or (ii) 
Floor broker executions swept into the close. The Exchange proposes 
that if a member organization executes an average daily trading volume 
(``ADV'') on the Exchange during the billing month of at least 
1,000,000 shares in (i) executions at the close (except MOC and LOC 
orders), and/or (ii) Floor broker executions swept into the close, then 
the Exchange will charge such member organization $0.0001 per share per 
transaction (charged to both sides).\3\ Such executions will continue 
to be free of charge if the member organization

[[Page 51252]]

executes an ADV on the Exchange during the billing month of fewer than 
1,000,000 shares.
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    \3\ For example, a fee would be charged if a member organization 
executed an ADV on the Exchange during the billing month of (1) 
1,000,000 shares in executions at the close (excluding MOC and LOC 
orders), but had no Floor broker executions swept into the close; 
(2) 1,000,000 shares in Floor broker executions swept into the 
close, but had no other closing executions; or (3) 500,000 shares in 
executions at the close (excluding MOC and LOC orders) and 500,000 
shares in Floor broker executions swept into the close.
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MOC and LOC Orders
    Currently, the Exchange charges $0.00095 per share per transaction 
(charged to both sides) for all MOC and LOC orders unless a member 
organization meets a specified consolidated ADV in NYSE-listed 
securities during the billing month (``NYSE CADV''). Specifically, if a 
member organization executes an ADV of MOC and LOC activity on the 
Exchange in that month of at least 0.375% of NYSE CADV, then the 
Exchange charges $0.00055 per share per transaction (charged to both 
sides) for all MOC and LOC orders. The Exchange proposes to add an 
additional fee tier for MOC and LOC orders. The Exchange proposes to 
charge $0.00050 per share per transaction (charged to both sides) for 
all MOC and LOC orders from any member organization executing an ADV of 
MOC and LOC activity on the Exchange in the billing month of at least 
0.575% of NYSE CADV.
Floor Broker d-Quotes
    Currently, the Exchange charges $0.0005 per share per transaction 
for Floor broker d-Quotes that remove liquidity. The Exchange proposes 
to add an additional pricing tier for Floor broker d-Quotes. 
Specifically, the Exchange proposes to charge $0.0010 per share per 
transaction for all Floor broker d-Quotes that remove liquidity from 
any member organization executing an ADV of at least 500,000 shares in 
d-Quotes that remove liquidity from the Exchange in that month.
Other Floor Broker Transactions
    Currently, Floor broker transactions (i.e. when taking liquidity 
from the Exchange) that are not otherwise specified in the Price List 
are charged $0.0024 per share per transaction. The Exchange proposes to 
lower this fee to $0.0022 per share per transaction. For Floor brokers 
that execute an ADV in such Floor broker transactions that is at least 
10% more than their May 2013 ADV for such Floor broker transactions, 
the Floor broker transaction charge will be $0.0020 per share per 
transaction.
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 credit for agency cross 
trades is reasonable because such trades are typically large block 
orders, and providing a credit will encourage their submission to a 
public exchange, thereby promoting price discovery and transparency. 
The Exchange believes that the proposed credit is equitable and not 
unfairly discriminatory because all member organizations that engage in 
agency trading will be eligible to receive the credit, and all market 
participants will benefit from the price discovery and transparency 
provided for large block orders.
    The Exchange believes that offering a new, lower fee tier for 
member organizations that execute a higher NYSE CADV of MOC and LOC 
orders is reasonable because it will incent member organizations to 
provide higher volumes of MOC and LOC orders, and higher volumes of MOC 
and LOC orders will contribute to the quality of the Exchange's closing 
auction and provide market participants whose orders are swept into the 
close with a greater opportunity for execution. The Exchange believes 
that the proposed tier is equitable and not unfairly discriminatory 
because all member organizations will be subject to the same fee 
structure, which will automatically adjust based on prevailing market 
conditions. The Exchange believes that it is equitable and not unfairly 
discriminatory to charge a lower fee to member organizations that make 
significant contributions to market quality by providing higher volumes 
of liquidity, which benefit all market participants.
    The Exchange believes that it is reasonable to charge a fee of 
$0.0001 for executions at the close (other than MOC and LOC orders) and 
Floor broker executions swept into the close if a member organization 
executes an ADV of at least 1,000,000 such executions on a combined 
basis. The Exchange's closing auction is a recognized industry 
benchmark,\6\ and member organizations receive a substantial benefit 
from the Exchange in obtaining an ADV of 1,000,000 or more such 
executions at the Exchange's closing price on a daily basis. In that 
respect, this fee increase is designed in part to offset the reduction 
in the Exchange's revenues from the fee reduction described in the 
preceding paragraph. The Exchange also believes that the proposed fee 
is equitable and not unfairly discriminatory. While member 
organizations that reach the threshold of an ADV of at least 1,000,000 
combined executions are generally larger member organizations that are 
deriving a substantial benefit from this high volume of executions, the 
Exchange must nonetheless encourage liquidity from multiple sources. 
Allowing member organizations with lower execution volumes to continue 
to obtain executions at the close at no charge will encourage them to 
continue to send orders to the Exchange for the closing auction. The 
Exchange believes that the threshold it has selected will continue to 
incent order flow from multiple sources and help maintain the quality 
of the Exchange's closing auctions, which benefits all market 
participants.
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    \6\ For example, the pricing and valuation of certain indices, 
funds, and derivative products require primary market prints.
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    The Exchange believes that the proposed d-Quote rate of $0.0010 per 
share for Floor brokers executing an ADV of at least 500,000 d-Quotes 
that remove liquidity from the Exchange is reasonable because a 
substantial benefit is derived from obtaining executions for such a 
high volume of d-Quotes. The Exchange believes that the proposed tier 
is equitable and not unfairly discriminatory. While Floor brokers that 
reach the threshold of an ADV of at least 500,000 combined executions 
are generally larger member organizations that are deriving a 
substantial benefit from this high volume of executions, the Exchange 
must nonetheless encourage liquidity from multiple sources. Allowing 
Floor brokers with lower execution volumes to continue to use d-Quotes 
to remove liquidity at the lower fee of $0.0005 will continue to incent 
order flow from multiple sources and help maintain the quality of order 
execution on the Exchange, which benefits all market participants. The 
Exchange further believes it is reasonable to continue to maintain d-
Quote take rates that are lower than the take rate that applies to 
Floor broker transactions not otherwise specified on the Price List 
(i.e., the proposed $.0022 and $0.0020 per share rates) because d-
Quotes in particular encourage additional liquidity during the trading 
day and incent Floor brokers to provide additional intra-quote price 
improved trading, which contribute to the overall quality of the 
Exchange's market.
    The Exchange believes that it is reasonable to lower the fees for 
Floor

[[Page 51253]]

broker transactions that take liquidity but are not otherwise specified 
in the Price List in light of the two proposed increases in other Floor 
broker fees. The Exchange also believes it is equitable and not 
unfairly discriminatory to continue to charge Floor brokers that take 
liquidity lower fees ($0.0022 or $0.0020 per share) than non-Floor 
brokers that take liquidity (which pay $0.0025 per share) because Floor 
brokers have slower access to the Exchange (via handheld technology) 
than non-Floor brokers and are prohibited from routing directly to 
other market centers from handheld devices, which prevents them from 
accessing any associated pricing opportunities that might exist at 
those away markets.
    The Exchange believes that the lower Floor broker take liquidity 
fee of $0.0020 for take liquidity over the proposed 10% threshold is 
reasonable because it is designed to strike a balance in the fees and 
incentives offered by the Exchange for taking and providing liquidity. 
The Exchange believes that it is reasonable to use May 2013 as the 
threshold date because that is the last month without exceptional 
market activity, such as an index rebalancing. Moreover, customer 
orders that take liquidity encourage liquidity providers to post in the 
expectation of having their own orders filled. Accordingly, the 
Exchange believes that it is equitable and not unfairly discriminatory 
to use pricing incentives, such as a reduced fee for taking liquidity, 
to encourage Floor brokers to increase their participation in the 
market by submitting their customers' liquidity taking orders to the 
Exchange.
    Finally, the Exchange believes that it is subject to significant 
competitive forces in setting its fees and credits, 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,\7\ 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.
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    \7\ 15 U.S.C. 78f(b)(8).
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    Specifically, the Exchange believes the proposed credit for agency 
cross trades will provide an alternative to reporting them to FINRA's 
trade reporting facility and allow the Exchange to more effectively 
compete for market share. The proposed new fee for executions at the 
close and Floor broker executions swept into the close will only apply 
to member organizations that obtain high volumes of executions at the 
close on a daily basis; to date, such executions have been free, and 
the Exchange does not believe competition will be burdened by 
instituting a small fee for members that are obtaining a substantial 
benefit from these executions. Similarly, the Exchange does not believe 
that Floor brokers that are removing higher volumes of liquidity via d-
Quotes from the Exchange would be burdened by paying a higher fee for 
such executions. The increases in these Floor broker fees in turn will 
be offset by the fee reductions for all other Floor broker transactions 
that take liquidity that are not otherwise specified in the Price List. 
The additional pricing tier for MOC and LOC orders reflect the need for 
the Exchange to adjust financial incentives to attract order flow.
    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 or rebate 
opportunities available at other venues to be more favorable. In such 
an environment, the Exchange must continually adjust its fees and 
rebates to remain competitive with other exchanges and with alternative 
trading systems that have been exempted from compliance with the 
statutory standards applicable to exchanges. Because competitors are 
free to modify their own fees and credits in response, and because 
market participants may readily adjust their order routing practices, 
the Exchange believes that the degree to which fee changes in this 
market may impose any burden on competition is extremely limited. As a 
result of all of these considerations, the Exchange does not believe 
that the proposed changes will impair the ability of member 
organizations or competing order execution venues to maintain their 
competitive standing in the financial markets.

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) \8\ of the Act and subparagraph (f)(2) of Rule 19b-
4 \9\ thereunder, because it establishes a due, fee, or other charge 
imposed by the Exchange.
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 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) \10\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \10\ 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 rule-comments@sec.gov. Please include 
File Number SR-NYSE-2013-56 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-2013-56. 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

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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-2013-56 and should be submitted on or before 
September 10, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-20191 Filed 8-19-13; 8:45 am]
BILLING CODE 8011-01-P