Document ID: SEC-2011-1418-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Amex LLC
Posted Date: 2011-09-21T04:00Z

[Federal Register Volume 76, Number 183 (Wednesday, September 21, 2011)]
[Notices]
[Pages 58555-58556]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-24173]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65341; File No. SR-NYSEAmex-2011-68]

Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing of 
Proposed Rule Change Relating to the Messages to Contracts Traded Ratio 
Fee in the Options Fee Schedule

September 14, 2011.
    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 September 1, 2011, NYSE Amex LLC (the ``Exchange'' or ``NYSE Amex'') 
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 Options Fee Schedule (the 
``Schedule'') by adjusting the message ratio used to calculate the 
Messages to Contracts Traded Ratio Fee (``Messages Fee''). Changes to 
the Schedule are shown in Exhibit 5. The text of the proposed rule 
change is available at the Exchange, the Commission's Public Reference 
Room, and http://www.nyse.com.

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 Schedule by adjusting the 
message ratio used to calculate the Messages Fee.
    The Exchange recently adopted the Messages Fee to help encourage 
efficient usage of systems capacity by all ATP firms.\3\ The Exchange 
believes that it is in the best interests of all ATP firms and 
investors who access our markets to encourage efficient usage of 
capacity.
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    \3\ See Securities Exchange Act Release No. 64655 (June 13, 
2011), 76 FR 35495 (June 17, 2011) (SR-NYSEAmex-2011-37).
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    The Messages Fee takes into consideration quotes as well as orders 
entered and looks at the number of contracts traded as a result. ATP 
firms that enter excessive amounts of orders and quotes that produce 
little or no volume are assessed the Messages Fee based on the ratio of 
quotes and orders to contracts traded. The Messages Fee is only 
assessed against ATP firms who exceed one billion quotes and/or orders 
(collectively, ``messages'') in a given month in determining whether 
inefficient utilization of systems capacity has occurred. For those ATP 
firms exceeding one billion messages in a month, the Exchange currently 
assesses a fee for those ATP firms that do not execute at least one 
contract for every 1,500 messages entered. An ATP firm failing to meet 
that execution ratio is charged $.01 for every 1,000 messages in excess 
of one billion messages.
    The Exchange proposes to amend the message ratio in the Schedule to 
reflect a range, namely one contract for every 1,500 to 3,000 messages 
entered. Under the proposal, the Exchange would be permitted to select 
the precise number of messages within that range that would be used to 
calculate the Messages Fees. Any change to the number of messages to be 
used in setting the Messages Fee would be announced in an Information 
Memo at least one business day in advance of its implementation and 
would be applicable in the next calendar month and thereafter until 
changed. The fee would not be changed mid-month. Thus, for example, if 
the Exchange determined to change the message ratio as of September 1, 
2011, the Exchange would announce the newly selected ratio in an 
Information Memo not later than August 31, 2011 and that ratio would 
apply in September 2011 and each succeeding month until changed in 
accordance with the notice described above. Under the proposed rule 
change, the Exchange also would be authorized to exclude one or more 
days of data for purposes of calculating the Messages Fee for an ATP 
firm if the Exchange determined, in its sole discretion, that one or 
more ATP Firms or the Exchange was experiencing a bona fide systems 
problem.\4\ Any ATP Firm seeking relief as a result of a systems 
problem will be required to notify the Exchange via e-mail with a 
description of the systems problem. The Exchange shall keep a record of 
all such requests and whether the request was deemed by the Exchange to 
be a bona fide systems problem resulting in waiving that day's activity 
from the calculation of the Messages Fee.
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    \4\ Examples of bona fide systems problems include, but are not 
limited to, an erroneous input (such as an error related to 
volatility or underlying price) that cause the generation of quotes 
that are substantially away from the quoted national best bid and 
offer; or an Exchange systems problem that causes an ATP firm to 
continually attempt to update or withdraw its quotes, generating a 
large volume of message traffic. In those cases, where the bona fide 
systems problem is at the Exchange, the Exchange will exclude that 
day's activity from the calculation of the Messages Fee for all ATP 
firms that were impacted by such bona fide systems problem.

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[[Page 58556]]

    Since implementing the Messages Fee on June 1, 2011, the Exchange 
has heard from several liquidity providers who raised concerns about 
the potential for inadvertently incurring a large Messages Fee as a 
result of a systems problem. Further, several liquidity providers 
indicated that, as month end approached, they were providing less 
aggressive liquidity to avoid any possibility of incurring the Messages 
Fee, particularly when markets are volatile.
    After considering recent market conditions, the Exchange believes 
that the current ratio of 1,500 messages may not be sufficiently 
flexible and could inadvertently result in higher than anticipated fees 
being charged to ATP firms that are providing liquidity in volatile, 
high volume markets. The Exchange does not want to discourage such 
liquidity provision and believes that it should be able to adjust the 
message ratio on a monthly basis within the proposed fixed range of 
1,500 to 3,000 messages with the notice described above.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6(b) \5\ of the Securities Exchange Act 
of 1934 (the ``Act''), in general, and Section 6(b)(4) \6\ of the Act, 
in particular, in that it is designed to provide for the equitable 
allocation of reasonable dues, fees, and other charges among its 
members and other persons using its facilities. The Exchange also 
believes that the proposed rule change furthers the objectives of 
Section 6(b)(5) \7\ of the Act in that it is designed to promote just 
and equitable principles of trade, remove impediments to and perfect 
the mechanisms of a free and open market and a national market system 
and, in general, to protect investors and the public interest by 
ensuring that systems capacity is utilized efficiently while still 
encouraging the provision of liquidity in volatile, high volume 
markets.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(4).
    \7\ 15 U.S.C. 78f(b)(5).
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    The proposed Messages Fee is equitable and not unfairly 
discriminatory because it will apply equally to all members who send 
quotes and/or orders. Additionally, the proposed Messages Fee is 
reasonable and justified because it will encourage efficient 
utilization of system bandwidth; unfettered growth in bandwidth 
consumption can have a detrimental effect on all participants who are 
potentially compelled to upgrade capacity as a result of the bandwidth 
usage of other 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.

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 NYSE Arca [sic].
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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 the 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.

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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-NYSEAmex-2011-68 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-NYSEAmex-2011-68. This 
file number should be included on the subject line if e-mail 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 website 
viewing and printing in the Commission's Public Reference Room, 100 F 
Street, NW., Washington, D.C. 20549, on official business days between 
the hours of 10 a.m. and 3 p.m. The text of the proposed rule change is 
available on the Commission's Web site at http://www.sec.gov. 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-NYSEAmex-2011-68 and should be submitted on or before 
October 12, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-24173 Filed 9-20-11; 8:45 am]
BILLING CODE 8011-01-P