Document ID: SEC-2015-0104-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange, LLC
Posted Date: 2015-01-16T05:00Z

[Federal Register Volume 80, Number 11 (Friday, January 16, 2015)]
[Notices]
[Pages 2462-2465]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-00575]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74031; File No. SR-NYSE-2014-78]

Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Amending Its Price List Relating to Fees for Bond Trading License Firms

January 12, 2015.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that on December 29, 2014, New York Stock Exchange LLC (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``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 its Price List, effective January 1, 
2015, to (i) waive new firm application fees for applicants seeking 
only to obtain a bond trading license (``BTL'') for 2015 and 2016; (ii) 
establish a separate Regulatory Fee for member organizations that 
solely operate under a BTL; and (iii) waive the BTL fee for 2015 and 
2016. 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

[[Page 2463]]

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, effective January 1, 
2015, to (i) waive new firm application fees for applicants seeking 
only to obtain a BTL for 2015 and 2016; (ii) establish a separate 
Regulatory Fee for member organizations that solely operate under a 
BTL; and (iii) waive the BTL fee for 2015 and 2016.
    The Exchange proposes to waive the New Firm Fee for 2015 and 2016 
for new member organization applicants that are seeking only to obtain 
a BTL and not trade equities at the Exchange. The Exchange currently 
charges a New Firm Fee ranging from $2,500 to $20,000, depending on the 
type of firm, that is charged per application for any broker-dealer 
that applies to be approved as an Exchange member organization. The 
proposed waiver of the New Firm Fee would be available only to 
applicants seeking approval as a new member organization, including 
carrying firms, introducing firms, or non-public organizations, that 
would be seeking to obtain a BTL at the Exchange and not trade 
equities. As further proposed, if new firm that is approved as a member 
organization and has had the New Firm Fee waived converts a BTL to a 
full trading license within one year of approval, the New Firm Fee 
would be charged retroactively. The Exchange believes that charging the 
New Firm Fee retroactively within a year of approval is appropriate 
because it would discourage applicants to claim that they are applying 
for a BTL solely to avoid New Firm Fees.
    The Exchange also proposes to establish a separate Regulatory Fee 
for member organizations that operate solely under a BTL. Currently, 
all member organizations are subject to a monthly gross FOCUS revenue 
fee, which is calculated based on a firm's gross FOCUS revenues. This 
fee is intended to cover the Exchange's costs to regulate its 
members.\4\ Because member organizations with a BTL are only eligible 
to trade on the Exchange's bond platform, the Exchange does not believe 
that the regulatory costs associated with this membership are as high 
as they are for member organizations that trade equities at the 
Exchange. Moreover, the Exchange notes that Exchange member 
organizations that do business with the public, including trading 
bonds, must be members of the Financial Industry Regulatory Authority, 
Inc. (``FINRA'') and therefore are separately subject to regulation by 
FINRA. To more closely align the regulatory fee for BTLs with the 
Exchange's associated regulatory cost, the Exchange proposes to set an 
annual regulatory fee for member organizations that solely operate 
under a BTL of $500.00.
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    \4\ The current Regulatory Fee is $0.12 per $1,000 in Gross 
FOCUS revenue, subject to annual minimums for certain classes of 
member organizations. The Exchange proposes a non-substantive change 
to the Fee Schedule to delete the Regulatory Fee that was in effect 
before April 1, 2013.
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    The Exchange currently charges a BTL fee of $1,000 per year. The 
Exchange proposes to amend the Price List to waive the BTL fee for 2015 
and 2016. The Exchange also proposes a non-substantive change to the 
Price List to specify that the BTL fee is an annual fee.
    The Exchange believes that the proposed fee changes would provide 
increased incentives for bond trading firms that are not currently 
Exchange member organizations to apply for Exchange membership and a 
BTL. The Exchange believes that having more member organizations 
trading on the Exchange's bond platform would benefit investors through 
the additional display of liquidity and increased execution 
opportunities in Exchange-traded bonds at the Exchange.
    The proposed change is not otherwise intended to address any other 
issues, and the Exchange is not aware of any problems that members and 
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,\5\ in general, and furthers the 
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\6\ 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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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(4), (5).
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    The Exchange believes that it is reasonable to waive the New Firm 
Fee and the annual BTL fee for 2015 and 2016 to provide an incentive 
for bond trading firms to apply for Exchange membership and a BTL. The 
Exchange believes that providing an incentive for bond trading firms 
that are not currently Exchange member organizations to apply for 
membership and a BTL would encourage market participants to become 
members of the Exchange and bring additional liquidity to the only 
transparent bond market. The proposed waiver of the New Firm Fee and 
BTL fee is equitable and not unfairly discriminatory because it would 
be offered to all market participants that wish to trade at the 
Exchange the narrower class of debt securities only. To the extent the 
existing New Firm Fees or the BTL fee serves as a disincentive for bond 
trading firms to become Exchange member organizations, the Exchange 
believes that the proposed fee change could provide an incentive for 
additional bonds trading firms to apply for Exchange membership, and 
therefore is not unfairly discriminatory. The Exchange believes 
creating incentives for bond trading firms to trade bonds on the 
Exchange protects investors and the public interest by increasing the 
competition and liquidity on the only transparent market for bond 
trading.
    The Exchange believes that the proposed Regulatory Fee for member 
organizations that operate solely under a BTL is reasonable because the 
proposed change would more closely align the regulatory costs 
associated with member organizations that only trade bonds on the 
Exchange with the fee charged to such member organizations. In 
addition, the Exchange believes that the proposed Regulatory Fee for 
BTLs is reasonable because it is expected to generate revenues that 
will be less than or equal to the Exchange's regulatory costs with 
respect to regulating member organizations that solely trade bonds at 
the Exchange. The Exchange believes that this is consistent with the 
Commission's previously stated view that regulatory fees be used for 
regulatory purposes and not to support the Exchange's business side.
    The Exchange further believes that the proposed Regulatory Fee for 
member organizations that operate solely under a BTL is equitable and 
not unfairly discriminatory because it would be applied equally to all 
market participants that wish to trade at the Exchange the narrower 
class of debt securities only. In particular, the Exchange does not 
believe that it is unfairly discriminatory to charge member 
organizations that only trade bonds a different Regulatory Fee than

[[Page 2464]]

what is charged to member organizations that trade equities at the 
Exchange because of the relatively low volume of trading on the bonds 
platform as compared to the volume of trading on the Exchange's 
equities platform. The Exchange believes that the current Regulatory 
Fee for member organizations serves as a disincentive for broker-
dealers that trade bonds, but do not trade equities at the Exchange, to 
become Exchange member organizations for purposes of trading bonds. The 
Exchange further notes that if a member organization that only has a 
BTL at the Exchange is conducting business with the public, that member 
organization must be a member of FINRA and therefore is separately 
subject to regulation by FINRA.
    Finally, recognizing the statements of Commissioners who have 
expressed concern about the state of the U.S. corporate and municipal 
bond markets as well as recommendations outlined in the Commission's 
release of its Report on the Municipal Securities Market (Report), the 
Exchange believes that expanding the number of member organizations 
eligible to trade bonds at the Exchange would be an important element 
in the democratization of the fixed income market.\7\ As highlighted in 
SEC Chair White's statement during the SEC's 2013 Roundtable on Fixed 
Income Markets, the Report makes recommendations that include (1) 
improving pre- and post-trade transparency; (2) promoting the use of 
transparent and open trading venues, and (3) requiring dealers to seek 
``best execution'' for customers and to provide customers with relevant 
pricing information in connection with their transactions.\8\ Achieving 
these recommendations and applying them to both the municipal and 
corporate bond markets would, in the Exchange's view, assist in 
lowering the systemic risk that is anticipated to increase as interest 
rates rise and the closed network of bond trading comes under pressure 
as retirement and pension managers seek to adjust their positions.
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    \7\ See SEC Report on the Municipal Securities Market, July 
2012. http://www.sec.gov/news/studies/2012/munireport073112.pdf; 
``SEC's Gallagher Says Retail Bond Investors Fighting `Headwinds' 
'', Jesse Hamilton, Bloomberg News. Sep. 20, 2012. See http://www.bloomberg.com/news/2012-09-19/sec-s-gallagher-says-retail-bond-investors-fighting-headwinds-.html.
    \8\ See Opening remarks of Chairman Mary Jo White at SEC 
Roundtable on Fixed Income Markets. http://www.sec.gov/News/Speech/Detail/Speech/1365171515300.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act,\9\ the Exchange 
believes that the proposed rule change would not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. Debt securities typically trade in a decentralized 
over-the-counter (``OTC'') dealer market that is less liquid and 
transparent than the equities markets. The Exchange believes that the 
proposed change would increase competition with these OTC venues by 
reducing the cost of being approved as and operating as an Exchange 
member organization that solely trades bonds at the Exchange, which the 
Exchange believes will enhance market quality through the additional 
display of liquidity and increased execution opportunities in Exchange-
traded bonds at the Exchange.
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    \9\ 15 U.S.C. 78f(b)(8).
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    The Exchange notes that it operates in a highly competitive market 
in which market participants can readily favor competing venues that 
are not transparent. In such an environment, the Exchange must 
continually review, and consider adjusting its fees and rebates to 
remain competitive with other exchanges as well as with alternative 
trading systems and other venues that are not required to comply 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 change 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) \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-NYSE-2014-78 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSE-2014-78. 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

[[Page 2465]]

printing in the Commission's Public Reference Section, 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 will also be available 
for Web site viewing and printing at the NYSE's principal office and on 
its Internet Web site at www.nyse.com. 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-2014-78 and should be submitted on 
or before February 6, 2015.

    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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Brent J. Fields,
Secretary.
[FR Doc. 2015-00575 Filed 1-15-15; 8:45 am]
BILLING CODE 8011-01-P