Document ID: SEC-2012-0965-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2012-06-15T04:00Z

[Federal Register Volume 77, Number 116 (Friday, June 15, 2012)]
[Notices]
[Pages 36027-36029]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-14622]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67180; File No. SR-NYSEArca-2012-56]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the NYSE 
Arca Equities Schedule of Fees and Charges for Exchange Services

June 11, 2012.
    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 May 31, 2012, 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''). 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, as described 
below, and implement the fee changes on June 1, 2012.
Passive Liquidity Orders
    A Passive Liquidity Order is an order to buy or sell a stated 
amount of a security at a specified, undisplayed price.\4\ Passive 
Liquidity Orders are available for all Equity Trading Permit (``ETP'') 
Holders.\5\
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    \4\ See NYSE Arca Equities Rule 7.31(h)(4).
    \5\ See NYSE Arca Equities Rule 1.1(n).
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    The Exchange does not currently make credits available for Passive 
Liquidity Orders in Exchange-listed and other Tape B securities that 
provide liquidity on the Exchange. The Exchange hereby proposes to 
implement credits for Passive Liquidity Orders in Exchange-listed and 
other Tape B securities that provide liquidity, as follows:
     $0.0015 per share for Tier 1 and Step Up Tier 1;
     $0.0010 per share for Tier 2, Tier 3, Step Up Tier 2 and 
Basic Rates; and
     For Investor Tiers 1-3, the applicable rate based on an 
ETP Holder's qualifying levels.
    The Exchange also does not currently charge a fee for Passive 
Liquidity Orders in Exchange-listed securities that remove liquidity 
from the Exchange.\6\ The Exchange hereby proposes to implement fees 
for Passive Liquidity Orders in Exchange-listed securities that remove 
liquidity, which would be the same as the applicable Tier, Step Up Tier 
or Basic Rate and would be based on an ETP Holder's qualifying levels, 
as follows:
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    \6\ The Exchange currently charges ETP Holders for Passive 
Liquidity Orders in non-Exchange-listed Tape B securities based on 
an ETP Holder's qualifying levels.
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     $0.0026 per share fee for Tape B Step Up Tier;
     $0.0028 per share fee for Tiers 1-3 and Step Up Tiers 1 
and 2;
     $0.0030 per share fee for Basic Rates; and
     For Investor Tiers 1-3, the applicable rate based on an 
ETP Holder's qualifying levels.
    The Exchange also proposes to reflect in the Fee Schedule that, as 
is the case today, there is neither a fee nor a credit for Passive 
Liquidity Orders in Tape A and Tape C securities that provide 
liquidity, but that Passive Liquidity Orders that remove liquidity 
would be charged a fee of $0.0030 per share, unless the ETP Holder 
qualifies for the Tape A or Tape C Step Up rate of $0.0029 per share.
    Finally, for Lead Market Makers (``LMMs''),\7\ the Exchange 
proposes to implement a $0.0015 per share credit for Passive Liquidity 
Orders that provide liquidity in securities for which they are 
registered as the LMM.
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    \7\ The term ``Lead Market Maker'' means a registered Market 
Maker that is the exclusive Designated Market Maker in listings for 
which the Exchange is the primary market. See NYSE Arca Equities 
Rule 1.1(ccc).
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PO and PO+ Orders
    The Exchange proposes to amend the Fee Schedule to increase the 
Tier 1, Tier 2 and Basic Rate fee for PO and PO+ Orders in Tape A 
securities that are routed to the New York Stock Exchange (``NYSE'') 
that execute in the opening or closing auction, from $0.00085 to 
$0.00095 per share.\8\ Related to this proposed increase, the Exchange 
proposes to explicitly state that the Tier 3 fee for PO and PO+ Orders 
routed to the NYSE that execute in the opening or

[[Page 36028]]

closing auction would be $0.00095 per share. The Exchange notes that 
the current rate is the $0.00085 fee applicable under the Basic Rate 
section of the Fee Schedule. The increase from $0.00085 to $0.00095 for 
the Tier 3 rate would be a substantive change consistent with the 
proposed increase in the Basic Rate, but charging a fee for these 
transactions for Tier 3 ETP Holders would not be a change.
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    \8\ See NYSE Arca Equities Rule 7.31(x). A PO+ Order is a PO 
Order entered for participation in the primary market, other than 
for participation in the primary market opening or primary market 
re-opening. See also NYSE Arca Equities Rule 7.31(x)(3).
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Cross-Asset Tier
    The Exchange also proposes to provide for a new Cross-Asset Tier 
credit of $0.0030 for orders that provide liquidity on the Exchange, 
which would apply to ETP Holders that (1) provide liquidity of 0.50% or 
more of the U.S. Consolidated Average Daily Volume (``CADV'') \9\ per 
month, and (2) are affiliated with an NYSE Arca Options Trading Permit 
(``OTP'') Holder or OTP Firm that provides an Average Daily Volume 
(``ADV'') of electronic posted Customer executions in Penny Pilot 
issues on NYSE Arca Options of at least 110,000 contracts.\10\
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    \9\ U.S. CADV means United States Consolidated Average Daily 
Volume for transactions reported to the Consolidated Tape and 
excludes volume on days when the market closes early.
    \10\ An affiliate of an ETP Holder would be a person or firm 
that directly, or indirectly through one or more intermediaries, 
controls or is controlled by, or is under common control with, the 
ETP Holder. See NYSE Arca Rule 1.1(b). As provided under NYSE Arca 
Options Rule 6.72, options on certain issues have been approved to 
trade with a minimum price variation of $0.01 as part of a pilot 
program that is currently scheduled to expire on June 30, 2012.
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    Related to the introduction of the proposed Cross-Asset Tier credit 
of $0.0030, the Exchange proposes to specify in the Fee Schedule that 
Investor Tier 3 ETP Holders would become eligible to qualify for the 
Tape A, Tape B and Tape C Step Up Tiers. Currently, Investor Tier 1-3 
ETP Holders are ineligible to qualify for the reduced fees provided 
under the Tape A, Tape B and Tape C Step Up Tiers. However, Investor 
Tier 3 ETP Holders are currently eligible for the same $0.0030 credit 
for their orders that provide liquidity on the Exchange as is proposed 
for the Cross-Asset Tier credit. Accordingly, this proposed change 
would align the fees that are applicable to ETP Holders that qualify 
for the Cross-Asset Tier and ETP Holders that qualify for Investor Tier 
3.\11\
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    \11\ As is the case today, Investor Tier 1 and Investor Tier 2 
ETP Holders would remain ineligible to qualify for the Tape A, Tape 
B or Tape C Step Up Tiers.
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NYSE Amex Name Change
    NYSE Amex LLC (``NYSE Amex'') recently changed the name of its 
equities market to NYSE MKT LLC.\12\ Accordingly, the Exchange proposes 
to update references in the Fee Schedule from ``NYSE Amex'' to ``NYSE 
MKT.''
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    \12\ See Securities Exchange Act Release No. 67037 (May 21, 
2012), 77 FR 31415 (May 25, 2012) (SR-NYSEAmex-2012-32).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Securities Exchange Act of 1934 (the ``Act''), 
in general, and furthers the objectives of Section 6(b)(4) of the Act, 
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.
    The Exchange believes that the proposed rule change is reasonable, 
equitable and not unfairly discriminatory because the credits for 
Passive Liquidity Orders in Exchange-listed and other Tape B securities 
that provide liquidity to the Exchange are designed to incentivize ETP 
Holders to submit orders in such securities that provide liquidity on 
the Exchange and could therefore increase the quality of the Exchange's 
market in these securities. The Exchange also believes that the 
proposed rule change is reasonable, equitable and not unfairly 
discriminatory because the fees and credits for Passive Liquidity 
Orders in Exchange-listed and other Tape B securities that provide 
liquidity on the Exchange would apply to all ETP Holders that choose to 
submit this order type.
    With respect to the LMM credit for Passive Liquidity Orders that 
provide liquidity, the Exchange believes that the change is reasonable, 
because it will provide the LMM with incentives to increase liquidity 
in a security. Moreover, the Exchange believes that the LMM credit is 
equitable and not unfairly discriminatory because LMMs have unique 
quoting obligations including maintaining continuous two-sided quotes, 
NBBO requirements, minimum displayed size requirements, minimum quoted 
spread requirements and participation requirements for opening and 
closing auctions. The undisplayed Passive Liquidity Orders add 
liquidity to the Book and enhance the possibility of price improvement; 
however, their undisplayed status does not contribute to the BBO. To 
the contrary, the credit LMMs receive for displayed liquidity 
executions is much larger, which is consistent with the added 
transparency created through decreased quoted spreads and increased 
quoted sizes of the BBO. In addition, the credit is reasonable, 
equitable and not unfairly discriminatory because all similarly 
situated LMMs would be subject to the same proposed fee structure.
    Additionally, the Exchange believes that the proposed rule change 
is reasonable, equitable and not unfairly discriminatory because it 
would result in a clearer and more explicit description of the fees and 
credits that are applicable to Passive Liquidity Orders in Tape A, Tape 
C, and non-Exchange-listed Tape B securities. The Exchange also 
believes that the proposed rule change is reasonable, equitable and not 
unfairly discriminatory because it would result in the removal of 
obsolete text from the Fee Schedule related to the name change from 
NYSE Amex to NYSE MKT.
    Also, the Exchange believes that the proposed rule change is 
reasonable, equitable and not unfairly discriminatory because it would 
result in an increase in the per share fee for PO and PO+ Orders routed 
to NYSE that execute in the opening or closing auction, thereby 
aligning the rate that the Exchange charges to ETP Holders with the 
rate that the Exchange is charged by NYSE. In this regard, the Exchange 
notes that a related fee on NYSE was recently increased for NYSE Market 
At-The-Close (``MOC'') Orders and Limit At-The-Close (``LOC'') 
Orders.\13\ Accordingly, the Exchange is proposing this increase so 
that the rate it charges to ETP Holders corresponds to the rate that 
the Exchange is charged by NYSE.\14\
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    \13\ See Securities Exchange Act Release No. 66600 (March 14, 
2012), 77 FR 16298 (March 20, 2012) (SR-NYSE-2012-07).
    \14\ The Exchange notes that it does not differentiate between 
the rate it charges to ETP Holders for PO and PO+ Orders routed to 
NYSE that execute in the opening auction and those that execute in 
the closing auction.
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    Additionally, the Exchange believes that the proposed rule change 
is reasonable, equitable and not unfairly discriminatory because the 
proposed Cross-Asset Tier would directly relate to the activity of an 
ETP Holder and the activity of an affiliated OTP Holder or OTP Firm on 
NYSE Arca Options, thereby encouraging increased trading activity on 
both the NYSE Arca equity and option markets. In this regard, the 
proposal is designed to bring additional posted order flow to NYSE Arca 
Options, so as to provide additional opportunities for all OTP Holders 
and OTP Firms to trade on NYSE Arca Options. Furthermore, the Exchange

[[Page 36029]]

notes that, similar to the proposed Cross-Asset Tier, the NYSE Arca 
Options Fee Schedule includes a credit for OTP Holders and OTP Firms 
that is based on both equity and option volume. Similarly, the NASDAQ 
Stock Market LLC (``NASDAQ'') charges certain fees based on both equity 
and option volume.\15\ Additionally, specifying that Investor Tier 3 
ETP Holders would become eligible to qualify for the Tape A, Tape B and 
Tape C Step Up Tiers would align the fees that are applicable to ETP 
Holders that qualify for the Cross-Asset Tier and ETP Holders that 
qualify for Investor Tier 3.\16\
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    \15\ See NASDAQ Rule 7018. See also Securities Exchange Act 
Release Nos. 59879 (May 6, 2009), 74 FR 22619 (May 13, 2009) (SR-
NASDAQ-2009-041) and 65317 (September 12, 2011), 76 FR 57778 
(September 16, 2011) (SR-NASDAQ-2011-127).
    \16\ As noted above, and as is the case today, Investor Tier 1 
and Investor Tier 2 ETP Holders would remain ineligible to qualify 
for the Tape A, Tape B or Tape C Step Up Tiers.
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    Finally, 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 reflects this 
competitive environment.

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) \17\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \18\ thereunder, because it establishes a due, fee, or other 
charge imposed by the NYSE Arca.
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 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.

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-2012-56 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-NYSEArca-2012-56. 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 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-2012-56 and should 
be submitted on or before July 6, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-14622 Filed 6-14-12; 8:45 am]
BILLING CODE 8011-01-P