Document ID: SEC-2012-0276-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2012-02-16T05:00Z

[Federal Register Volume 77, Number 32 (Thursday, February 16, 2012)]
[Notices]
[Pages 9288-9290]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-3613]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66377; File No. SR-NYSEArca-2012-12]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Implementing 
Changes to the NYSE Arca Options Fee Schedule Relating to Post 
Liquidity Credits

February 10, 2012.
    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 January 31, 2012, NYSE Arca, Inc. (the ``Exchange'' or ``NYSE 
Arca'') 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 Exchange. 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 the NYSE Arca Options Fee Schedule 
(``Fee Schedule'') to increase the Post Liquidity credits on Customer 
posted electronic executions and to delete references to Royalty Fees 
for foreign currency options, which the Exchange no longer trades. The 
text of the proposed rule change is available at the Exchange, the 
Commission's Public Reference Room, and 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 Fee Schedule to increase the 
Post Liquidity credits on Customer posted electronic executions and to 
delete references to Royalty Fees for foreign currency options, which 
the Exchange no longer trades. The Exchange proposes to make the rule 
change operative on February 1, 2012.
Post Liquidity Credits
    Electronic transactions in Penny Pilot issues \3\ are assessed Take 
Liquidity fees and credited with Post Liquidity credits. Under the 
current Fee Schedule, the Post Liquidity credit is $0.25 per contract 
for Customers, $0.32 per contract for Lead Market Makers and Market 
Makers, and $0.10 per contract for Firms and Broker Dealers. OTP 
Holders that provide aggregated Customer posting volume in Penny Pilot 
issues that exceeds certain thresholds receive higher Post Liquidity 
credits on all Customer posted electronic executions. Specifically, an 
OTP Holder sending Customer orders that in the aggregate exceed 500,000 
contracts executed in a month from posting liquidity receives a Post 
Liquidity credit of $0.32 per contract on all executions resulting from 
posted liquidity. If such aggregated Customer orders exceed 800,000 
contracts executed in a month from posting liquidity, the OTP Holder 
receives a Post Liquidity credit of $0.34 per contract on all 
executions resulting from posted liquidity. If such aggregated Customer 
orders exceed 1,200,000 contracts executed in a month from posting 
liquidity, the OTP Holder receives a Post Liquidity credit of $0.38 per 
contract on all executions resulting from posted liquidity. The volume 
thresholds are intended to incentivize firms to route additional 
Customer orders to the Exchange.
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    \3\ Under NYSE Arca Options Rule 6.72, options on certain issues 
have been approved to trade in a minimum price variation of $0.01 as 
part of a pilot program that is scheduled to expire on June 30, 
2012.
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    The Exchange proposes to amend the volume thresholds for the Post 
Liquidity credits by lowering the initial volume threshold to qualify 
for the first level of higher Post Liquidity credits, generally raising 
the amount of the Post Liquidity

[[Page 9289]]

credits for the next two volume thresholds, and creating a new higher 
volume threshold that will pay a higher Post Liquidity credit than is 
currently offered. The Exchange notes, however, that under the proposed 
volume thresholds, an OTP Holder that sends Customer orders that in the 
aggregate exceed 500,000 but not 800,000 contracts executed in a month 
will receive a lower Post Liquidity credit of $0.28 per contract, which 
is lower than the $0.32 Post Liquidity credit under the current Fee 
Schedule. The Exchange believes that the overall redistribution of the 
credits will in turn increase order flow to add liquidity on the 
Exchange and encourage greater participation by the largest market 
participants. The proposed volume thresholds and Post Liquidity credits 
are as follows:

------------------------------------------------------------------------
                                    Monthly total
                                  customer contracts   Per contract rate
                                 executed from posted    on all posted
                                      liquidity            liquidity
------------------------------------------------------------------------
Threshold 1...................  More than 350,000....             -$0.28
Threshold 2...................  More than 800,000....              -0.36
Threshold 3...................  More than 1,200,000..              -0.42
Threshold 4...................  More than 3,500,000..              -0.43
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Royalty Fees for Foreign Currency Options
    The current Fee Schedule sets forth Royalty Fees for certain 
foreign currency options. Because the Exchange no longer trades foreign 
currency options, it proposes to delete references to such Royalty 
Fees.
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'') 
\4\ in general and Section 6(b)(4) of the Act \5\ in particular because 
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 does not unfairly discriminate between customers, 
issuers, brokers or dealers. The proposed change is equitably allocated 
and not unfairly discriminatory because it will apply uniformly to all 
similarly situated OTP Holders that direct Customer orders to the 
Exchange. The proposed fees also are equitably allocated and reasonable 
because they create an incrementally higher incentive for OTP Holders 
to bring additional liquidity to the Exchange, thereby contributing to 
price discovery and benefiting investors generally. Moreover, the 
difference between (1) the Post Liquidity credits received by OTP 
Holders that aggregate Customer orders, and (2) the Post Liquidity 
credit received by Firms and Broker Dealers is not inequitable or 
unfairly discriminatory because the Exchange believes that it has 
structured its Fee Schedule in a manner to attract order flow from all 
such entities. In this regard, the Exchange has found that the higher 
Post Liquidity credit for Firms and Broker Dealers has not caused them 
to send additional order flow to the Exchange. Based on its 
observations, the Exchange believes that such entities focus on the 
ability to trade with Customer order flow to capture the spread rather 
than on rebates and fees. Accordingly, the Exchange is proposing to 
further generally increase the Post Liquidity credits for Customer 
order flow to attract such order flow to the Exchange. Although certain 
OTP Holders that send Customer orders that in the aggregate exceed 
500,000 but not 800,000 contracts executed in a month will receive a 
slightly lower Post Liquidity credit than they currently do, other OTP 
Holders that previously did not qualify for the credit will qualify 
going forward. The Exchange believes that overall redistribution of the 
credits will in turn increase order flow to add liquidity on the 
Exchange and encourage greater participation by the largest market 
participants. With the anticipated increase in such order flow to the 
Exchange, the Exchange expects to attract additional order flow from 
Firms and Broker Dealers to trade with such order flow. The Exchange 
further believes that the proposed change is reasonable because other 
exchanges offer comparable tiers of credits for adding Customer 
liquidity in Penny Pilot issues.\6\
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(4).
    \6\ See, e.g., Nasdaq Options Market pricing, available at 
http://nasdaqtrader.com/Micro.aspx?id=OptionsPricing, and BATS BZX 
Exchange Fee Schedule, Effective January 3, 2012, available at 
http://batstrading.com/FeeSchedule/.
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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) \7\ of the Act and subparagraph (f)(2) of Rule 19b-
4 \8\ thereunder, because it establishes a due, fee, or other charge 
imposed by the NYSE Arca.
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 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-2012-12 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary,

[[Page 9290]]

Securities and Exchange Commission, 100 F Street NE., Washington, DC 
20549-1090.

All submissions should refer to File Number SR-NYSEArca-2012-12. 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-2012-12 and should 
be submitted on or before March 8, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-3613 Filed 2-15-12; 8:45 am]
BILLING CODE 8011-01-P