Document ID: SEC-2013-0517-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2013-03-18T04:00Z

[Federal Register Volume 78, Number 52 (Monday, March 18, 2013)]
[Notices]
[Pages 16731-16733]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-06108]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69078; File No. SR-NYSEArca-2013-19]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending the NYSE 
Arca Options Schedule of Fees and Charges for Exchange Services To 
Reduce the Floor Broker Rebate for Qualified Contingent Cross 
Transactions

March 8, 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 March 1, 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 Schedule of 
Fees and Charges for Exchange Services (``Fee Schedule'') to (i) reduce 
the Floor Broker rebate for Qualified Contingent Cross (``QCC'') 
transactions and (ii) remove an outdated reference. The Exchange 
proposes to implement the changes on March 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 the Fee Schedule to (i) reduce the 
Floor Broker rebate for QCC transactions and (ii) remove an outdated 
reference. The Exchange proposes to implement the changes on March 1, 
2013.
    Currently, Floor Brokers that execute QCC transactions receive a 
rebate of $0.05 per contract side. The Exchange proposes reducing that 
rebate to $.035 per contract side. When the Exchange originally adopted 
the Floor Broker rebate, the Exchange noted that OTP Holders have two 
primary means of bringing a QCC order to the Exchange for possible 
execution: (1) They can configure their systems to deliver the QCC 
order to the Exchange matching engines for validation and execution; or

[[Page 16732]]

(2) they can utilize the services of another OTP Holder acting as a 
Floor Broker.\4\ With the latter means, a Floor Broker who is in 
receipt of such a QCC order can enter the order through an Exchange-
provided system to be delivered to the Exchange matching engines for 
validation and potential execution.
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    \4\ See Securities Exchange Act Release No. 65730 (November 10, 
2011), 76 FR 71410 (November 17, 2011) (SR-NYSEArca-2011-79) 
(``Approval Order'').
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    Because the Exchange does not offer a front-end for order entry, 
unlike some competing exchanges,\5\ the Exchange believed that it was 
necessary from a competitive standpoint to offer this rebate to the 
executing Floor Broker on a QCC order. In doing so, the Exchange 
expected that the rebate would allow Floor Brokers to price their 
services at a level that would enable them to attract QCC order flow 
from participants who would otherwise utilize the front-end order entry 
mechanism offered by the Exchange's competitors instead of incurring 
the cost in time and money to develop their own internal systems to 
deliver QCC orders directly to the Exchange system. The Exchange 
believed that to the extent Floor Brokers were able to attract QCC 
orders, they would gain important information that would allow them to 
solicit the parties to the QCC orders for participation in other 
trades.\6\ The Exchange further believed that this would, in turn, 
benefit other Exchange participants through the additional liquidity 
that would occur as a result.
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    \5\ The International Securities Exchange offers PRECISE TRADE 
as a means for users to enter orders and Chicago Board Options 
Exchange has a similar front-end order entry system called PULSE. 
Such systems do not require users to develop their own internal 
front-end order entry systems and may provide savings to users in 
terms of development time and costs.
    \6\ See Approval Order, supra note 4; see also Securities 
Exchange Act Release No. 65797 (November 21, 2011), 76 FR 72988 
(November 28, 2011) (SR-NYSEArca-2011-83) (clarifying amendments to 
the description of the QCC rebate amount).
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    Although the rebate has not incented additional liquidity and price 
discovery as expected, the Exchange believes that it is still necessary 
to keep the rebate, albeit in a lower amount, in order for Floor 
Brokers to competitively price their services and for the Exchange to 
remain competitive with other exchanges that offer a similar rebate.\7\
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    \7\ See Securities Exchange Act Release No. 65472 (October 3, 
2011), 76 FR 62887 (October 11, 2011) (SR-NYSEAmex-2011-72) and the 
NASDAQ OMX PHLX fee schedule (describing a rebate program for QCC 
orders that can range as high as $0.11 per contract), available at 
http://nasdaqomxphlx.cchwallstreet.com/NASDAQOMXPHLXTools/PlatformViewer.asp?selectednode=chp%5F1%5F4&manual=%2Fnasdaqomxphlx%2Fphlx%2Fphlx%2Drulesbrd%2F.
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    The Exchange also proposes to eliminate an obsolete reference in 
the Fee Schedule concerning the Options Regulatory Fee. Specifically, 
prior to December 1, 2012, the Options Regulatory Fee was $0.004 per 
contract. As reflected in the current Fee Schedule, the fee rose to 
$0.005 per contract on December 1, 2012. The Exchange proposes to 
remove the outdated reference to the $0.004 per contract fee in order 
to make clearer that the current Options Regulatory Fee is $0.005 per 
contract.
    The proposed change is not otherwise intended to address any other 
problem, and the Exchange is not aware of any significant problem that 
the affected 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,\8\ in general, and furthers the 
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\9\ 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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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that reducing the Floor Broker rebate for QCC 
transactions is reasonable. Specifically, although the rebate has not 
incented additional liquidity and price discovery as expected, the 
Exchange believes that it is still necessary to keep the rebate, albeit 
at a lower amount, in order for Floor Brokers to competitively price 
their services and for the Exchange to remain competitive with other 
exchanges that offer a similar rebate. The Exchange believes the 
proposed rebate is equitable and not unfairly discriminatory because it 
would uniformly apply to all QCC orders entered by a Floor Broker for 
validation by the system and potential execution. The rebate is not 
unfairly discriminatory to firms that enter QCC orders directly into 
the Exchange's system through an electronic connection because the fee 
for the QCC order is the same whether it is entered electronically or 
through a Floor Broker. In addition, under Commentary .01 to NYSE Arca 
Options Rule 6.90, only Floor Brokers may enter a QCC order from the 
Floor; therefore, providing the rebate to Floor Brokers does not 
discriminate against other QCC orders entered into the Exchange's 
system. Furthermore, any participant will be able to engage a rebate-
receiving Floor Broker in a discussion surrounding the appropriate 
level of fees that they may be charged for entrusting the entry of the 
QCC order to the Floor Broker into the Exchange systems for validation 
and execution. In addition, the Exchange believes that removing the 
outdated reference concerning the Options Regulatory Fee will make the 
Fee Schedule more user-friendly for Exchange participants.

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

    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, reducing the 
rebate for QCC transactions will not impose a burden on competition 
because the rebate has not encouraged liquidity and price discovery as 
originally intended. Instead, reducing the rebate for QCC transactions 
will promote competition because, while the rebate has not incented 
additional liquidity and price discovery as expected, the Exchange 
believes that it is still necessary to keep the rebate, albeit at a 
lower amount, in order for Floor Brokers to competitively price their 
services and for the Exchange to remain competitive with other 
exchanges that offer a similar rebate. The Exchange does not believe 
that Exchange participants will be adversely affected by the reduced 
rebate because they were not availing themselves of it in the manner 
intended by the Exchange. Moreover, eliminating the obsolete reference 
to the Options Regulatory Fee will not have an effect on competition 
because the amendment is technical in nature.
    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 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.

[[Page 16733]]

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 
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-NYSEArca-2013-19 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-2013-19. 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 20549-1090, 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-
NYSEArca-2013-19, and should be submitted on or before April 8, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-06108 Filed 3-15-13; 8:45 am]
BILLING CODE 8011-01-P