Document ID: SEC-2012-2066-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE MKT LLC
Posted Date: 2012-12-17T05:00Z

[Federal Register Volume 77, Number 242 (Monday, December 17, 2012)]
[Notices]
[Pages 74710-74712]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-30324]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68407; File No. SR-NYSEMKT-2012-74]

Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Proposing To Amend the 
NYSE Amex Options Fee Schedule for Professional Customers and Broker-
Dealers To Modify Existing Volume-Based Tiers and the Associated Rate 
per Contract for Certain Electronic Executions

December 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 November 29, 2012, NYSE MKT LLC (the ``Exchange'' or 
``NYSE MKT'') 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C.78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend the NYSE Amex Options Fee Schedule 
(``Fee Schedule'') for Professional Customers and Broker-Dealers to 
modify existing volume-based tiers and the associated rate per contract 
for certain electronic executions. 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 for Professional 
Customers and Broker-Dealers to modify existing volume-based tiers and 
the associated rate per contract for certain electronic executions.
    Presently, electronic executions for Professional Customers and 
Broker-Dealers that take liquidity are charged according to the 
following schedule:

------------------------------------------------------------------------
  Average daily volume (``ADV'') tiers for professional      Rate per
     customers and broker- dealers taking liquidity          contract
------------------------------------------------------------------------
0 to 50,000.............................................            $.28
50,001 to 100,000.......................................             .26
Over 100,000............................................             .23
------------------------------------------------------------------------

    A Professional Customer or Broker-Dealer is treated as a ``taker'' 
of liquidity any time they send a marketable order to the Exchange and 
it immediately trades against a posted bid or offer in the Exchange's 
Consolidated Order Book. When a Professional Customer or Broker Dealer 
is resting a bid or offer in the Exchange's Consolidated Order Book, it 
is treated as a ``maker'' of liquidity and any volumes arising from 
making liquidity do not count toward these volume tiers for the 
month.\4\
---------------------------------------------------------------------------

    \4\ See endnote 16 of the Fee Schedule. Volumes arising from 
making liquidity are eligible for the lower per contract rate(s) if 
sufficient taking liquidity ADV is executed. ADV is calculated by 
using the total of taking liquidity volume divided by the number of 
days in the month when the Exchange was open for business. Volumes 
arising from the execution of either Complex Orders or Qualified 
Contingent Cross (``QCC'') orders do not count towards the 
calculation of ADV for purposes of these volume tiers. Complex Order 
volumes from electronic executions are eligible for the reduced 
rates that a participant may achieve based on their take volumes. 
QCC orders continue to be billed at the $.20 per contract rate 
applicable to Non-Customers. Id.

---------------------------------------------------------------------------

[[Page 74711]]

    The Exchange proposes to change the tiers and the associated rate 
per contract as shown below:

------------------------------------------------------------------------
    ADV tiers for professional
   customers and broker-dealers      Proposed rate     Former rate per
         taking liquidity            per contract         contract
------------------------------------------------------------------------
0 to 16,999.......................            $.32  $.28.
17,000 to 49,999..................            $.28  $.28.
Over 49,999.......................            $.23  $.28 for 50,000
                                                     Contracts.
                                                    $.26 for 50,001 to
                                                     100,000 Contracts.
                                                    $.23 for over
                                                     100,000 Contracts.
------------------------------------------------------------------------

    Thus, only Professional Customers and Broker-Dealers that have an 
average daily volume of 16,999 contracts or less (the lowest proposed 
tier) will pay a higher rate per contract under the proposed change; 
Professional Customers and Broker-Dealers with a higher ADV will pay 
either the same rate or a lower rate than they do today.
    Since adopting tiered pricing for Professional Customer and Broker-
Dealer electronic transactions, the Exchange has not garnered as much 
electronic Professional Customer and Broker-Dealer electronic take 
volume as expected. To attract more of this business, the Exchange 
proposes to reduce the levels of take volumes necessary to achieve 
certain lower per contract rates on all Professional Customer and 
Broker-Dealer electronic volumes but to raise fees for Professional 
Customers and Broker-Dealers that execute relatively lower volumes on 
the Exchange. By reducing the tiers and reducing the rate at relatively 
higher levels of volume, the Exchange expects to attract more 
Professional Customer and Broker-Dealer taking volume to the Exchange. 
The Exchange further notes that the proposed fees fall within the range 
of fees charged in the industry for Professional Customer and Broker 
Dealer electronic transaction charges.\5\
---------------------------------------------------------------------------

    \5\ See ISE fee schedule as of November 6, 2012, under which 
that exchange charges Professional Customer and Broker-Dealer 
``take'' fees of $.33 per contract in Select Symbols, and the Nasdaq 
Options Market fee schedule as of November 1, 2012, under which that 
exchange charges Professional Customers and Broker-Dealers $.49 
[sic] to take liquidity in Penny Pilot symbols and $.89 per contract 
to take liquidity in non-Penny Pilot symbols.
---------------------------------------------------------------------------

    The proposed change will be operative on December 1, 2012.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6(b) \6\ of the Securities Exchange Act 
of 1934 (the ``Act''), in general, and Section 6(b)(4) \7\ 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 and is not unfairly 
discriminatory.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Exchange believes that the proposed changes to the volume-based 
tiers and the associated rates per contract for electronically executed 
orders of Professional Customers and Broker-Dealers that take liquidity 
are reasonable, equitable and not unfairly discriminatory. The Exchange 
believes the fees are reasonable because they are within the range of 
comparable fees on at least two other exchanges.\8\ Moreover, the fee 
increase at the proposed lowest volume tier is reasonable because these 
Professional Customers and Broker-Dealers are bringing less volume to 
the Exchange and the higher fees will offset the loss in revenue 
associated with reducing fees at lower volume thresholds. The Exchange 
notes that with only a modest increase in trading activity, 
Professional Customers and Broker-Dealers will be able to maintain the 
same rate as they are currently paying. A more significant increase in 
trading activity will result in such participants paying a lower 
transaction rate than they pay today. The Exchange believes that it is 
reasonable to adjust the tier thresholds in this manner to encourage 
greater participation and thereby foster more transparency and price 
discovery for the benefit of all market participants.
---------------------------------------------------------------------------

    \8\ See supra note 5.
---------------------------------------------------------------------------

    The Exchange notes that while other participants may pay less for 
electronic transactions that take liquidity, such participants also pay 
substantially more for the ability to trade on the Exchange. For 
example, Market Makers have much higher fixed monthly costs as compared 
to Professional Customers and Broker-Dealers. A Market Maker seeking to 
stream quotes in the entire universe of names traded on the Exchange 
would have to pay $33,000 per month in Amex Trading Permit (``ATP'') 
fees and Premium Product Fees. In addition, a Market Maker acting as a 
Specialist, e-Specialist, or Directed Order Market Maker will incur 
monthly Rights Fees that range from $75 per option to $1,500 per 
option. Professional Customers and Broker-Dealers, which access the 
Exchange via an order routing firm, pay only $500 per month in ATP fees 
(assuming the cost is passed back to them), and for that low monthly 
cost are able to send orders in all issues traded on the Exchange. 
Broker-Dealers that are ATP Holders and access the Exchange directly 
incur the monthly ATP fee of $500 and in turn have the ability to send 
orders in all issues traded on the Exchange. Given these facts, coupled 
with the aforementioned range in Professional Customer fees on other 
exchanges, the Exchange believes that the proposed change is 
reasonable, equitable, and not unfairly discriminatory.
    The Exchange believes the proposed change to increase fees to $.32 
per contract for the lowest volume Professional Customer and Broker-
Dealer participants is equitable and not unfairly discriminatory 
because the change will apply to all Professional Customers and Broker-
Dealers equally and the increase will offset the costs to the Exchange 
associated with offering more favorable rates at lower trading 
thresholds. Furthermore, Professional Customers and Broker-Dealers are 
free to change the manner in which they access the Exchange. A 
Professional Customer may, by sending fewer than 390 orders per day 
across the industry, begin participating as a Customer and avoid 
incurring any transaction fees. Broker-Dealers and Professional 
Customers may apply to become Market Makers to transact on a 
proprietary basis as Market Makers or become ATP Holders to transact on 
the Exchange as a Firm. In light of the ability to access the Exchange 
in a variety of ways, each of which is priced differently, Professional 
Customers, Broker-Dealers, and other participants may access the 
Exchange in a manner that makes the most economic sense for them.
    The Exchange believes that the proposed change to modify the 
existing

[[Page 74712]]

volume-based tiers for Professional Customers and Broker-Dealers that 
transact electronically is equitable and not unfairly discriminatory 
because the change will apply to all participants in those categories 
equally and such participants are free to change the manner in which 
they access the Exchange. The proposed change also will reward 
Professional Customers and Broker-Dealers that bring relatively higher 
volumes of trading activity to the Exchange. Moreover, as noted 
previously, these participants have lower aggregate fees when compared 
to, for example, the ATP fees incurred by a NYSE Amex Market Maker to 
quote the entire universe of names traded on the Exchange. Further, the 
establishment of the tiers will enable Professional Customers and 
Broker-Dealers that transact in sufficient volumes to obtain a lower 
per contract rate on all of their electronic volumes in a given month. 
This is equitable and not unfairly discriminatory given that a higher 
volume of marketable orders, which these volume tiers will encourage, 
is beneficial to other Exchange participants due to the increased 
opportunity to trade.
    The Exchange notes that it operates in a highly competitive market 
in which market participants can readily favor competing venues if they 
determine that such venues offer more favorable trading conditions and 
rates.

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) \9\ of the Act and subparagraph (f)(2) of Rule 19b-
4 \10\ thereunder, because it establishes a due, fee, or other charge 
imposed by NYSE MKT.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    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-NYSEMKT-2012-74 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-NYSEMKT-2012-74. 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 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 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-NYSEMKT-2012-74, and should 
be submitted on or before January 7, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
---------------------------------------------------------------------------

    \11\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-30324 Filed 12-14-12; 8:45 am]
BILLING CODE 8011-01-P