Document ID: SEC-2012-0426-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Amex LLC
Posted Date: 2012-03-15T04:00Z

[Federal Register Volume 77, Number 51 (Thursday, March 15, 2012)]
[Notices]
[Pages 15429-15432]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-6239]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66561; File No. SR-NYSEAmex-2012-16]

Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Implementing 
Changes to the Per Contract Execution Costs for Certain Participants

March 9, 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 February 29, 2012, 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 the NYSE Amex Options Fee Schedule 
(``Fee Schedule'') to increase the per contract execution costs for 
certain participants. 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 per 
contract execution costs for certain participants. The Exchange 
believes the proposed fees will better reflect the costs associated 
with supporting a larger number of option classes, option series, and 
overall transaction volumes that have grown over time.
    First, the Exchange proposes an increase of $.03 per contract 
applicable to all NYSE Amex Options Market Maker participants. In 
conjunction with this increase, NYSE Amex Options Market Maker 
participants will have the ability to earn back the lower existing rate 
by executing as a NYSE Amex Options Market Maker 50,000 contracts or 
more on average each day in a month, excluding either Strategy 
Executions or QCC trades. The existing monthly fee cap applicable to 
NYSE Amex Options Market Makers will continue to apply.\3\
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    \3\ See NYSE Amex Options Fee Schedule dated 2/1/12, endnote 5, 
available at http://globalderivatives.nyx.com/sites/globalderivatives.nyx.com/files/nyseamexoptionsfeeschedule_020112.pdf.
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    NYSE Amex Options Specialists and eSpecialists currently pay $.10 
per contract in transaction fees. Under the proposal, the charge 
applicable to NYSE Amex Options Specialist and eSpecialists would 
increase to $.13 per contract. If, however, a NYSE Amex Options 
participant executes on average at least 50,000 contracts each day in a 
month as a Market Maker, then the rate per contract applicable to those 
NYSE Amex Options Specialist or eSpecialist transactions would be 
reduced to $.10 per contract for that month.
    NYSE Amex Options Market Makers that trade with directed order flow 
currently pay $.15 per contract in transaction fees. Under the proposal 
the

[[Page 15430]]

charge applicable to NYSE Amex Options Market Makers trading with 
directed order flow would increase to $.18 per contract. If, however, a 
NYSE Amex Options participant executes on average at least 50,000 
contracts each day in a month as a Market Maker, then the rate per 
contract applicable to those transactions in which a NYSE Amex Options 
Market Maker traded with directed order flow would be reduced to $.15 
per contract for that month.
    NYSE Amex Options Market Makers who trade with non-directed order 
flow currently pay $.17 per contract in transaction fees. Under the 
proposal the charge applicable to NYSE Amex Options Market Makers 
trading with non-directed order flow would increase to $.20 per 
contract. If, however, a NYSE Amex Options participant executes on 
average at least 50,000 contracts each day in a month as a Market 
Maker, then the rate per contract applicable to those transactions in 
which a NYSE Amex Options Market Maker traded with non-directed order 
flow would be reduced to $.17 per contract for that month.
    For purposes of calculating the 50,000 contract average daily 
volume (``ADV'') \4\ threshold, the Exchange will aggregate all of a 
NYSE Amex Options participant's Market Maker activity. For example, a 
NYSE Amex Options participant in one month trades 30,000 contracts ADV 
as a NYSE Amex Options Specialist, 20,000 contracts ADV as a NYSE Amex 
Options eSpecialist, 15,000 contracts as a NYSE Amex Options Market 
Maker trading with directed order flow, and 15,000 contracts ADV 
trading as a NYSE Amex Options Market Maker trading with non-directed 
order flow. This NYSE Amex Options participant will be credited with 
80,000 contracts ADV attributable to NYSE Amex Options Market Maker 
activity and as such will be eligible for the reduced rate for those 
transactions that month. Additionally, in the calculation of the 50,000 
contract or more ADV threshold, the Exchange will exclude both Strategy 
Trades and QCC trades.
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    \4\ In calculating ADV, the Exchange will consider all trading 
days in a month, regardless of the length of the trading day.
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    Professional Customers presently pay a fee of $.20 per contract for 
electronically executed transactions. Under the proposal, the charge 
applicable to electronically executed transactions on behalf of a 
Professional Customer will increase to $.23 per contract. The rate for 
manually executed or open outcry transactions for Professional 
Customers will remain unchanged at $.25 per contract.
    Non-NYSE Amex Options Market Makers presently pay a fee of $.40 per 
contract for electronically executed transactions. Under the proposal 
the charge applicable to electronically executed transactions on behalf 
of a Non-NYSE Amex Options Market Maker will increase to $.43 per 
contract. The rate for manually executed or open outcry transactions 
for Non-NYSE Amex Options Market Makers will remain unchanged at $.25 
per contract.
    In addition, for purposes of consistency and clarity, in footnote 
five of the NYSE Amex Options Fee Schedule the Exchange is amending 
``e-Specialist'' to ``eSpecialist,'' consistent with its use elsewhere 
in the Fee Schedule.
    The proposed changes will be operative on March 1, 2012.
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.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that the proposed change to increase the fee 
for NYSE Amex Specialists, eSpecialists, Market Makers who trade with 
directed and non-directed order flow, Professional Customers and Non-
NYSE Amex Options Market Makers transacting on the Exchange is 
reasonable, given the growth in volumes over the past two years. The 
Exchange notes that ADV on the Exchange has increased from 1,653,156 
contracts in January 2010 to 2,267,022 contracts ADV in January 2012, 
or an increase of over 37%. The proposed per contract increases range 
from a 7.5% increase for Non-NYSE Amex Options Market Makers to a 30% 
increase for Specialists and eSpecialists. The growth in trading 
volumes, option classes and messaging traffic has compelled the 
Exchange to continually invest in software, hardware and personnel, the 
cost of which can reasonably be expected to be borne by participants on 
the Exchange that consume the majority of those resources as evidenced 
by the volume of messages for quotes, orders and trades. For these 
reasons the Exchange believes it is reasonable to increase the per 
contract rate for NYSE Amex Specialists, eSpecialists, Market Makers 
that trade with directed and non-directed order flow, Professional 
Customers, and Non-NYSE Amex Options Market Makers.
    The Exchange believes that the proposed change to increase the fee 
for NYSE Amex Specialists, eSpecialists, Market Makers who trade with 
directed and non-directed order flow, Professional Customers and Non-
NYSE Amex Options Market Makers is equitable and not unfairly 
discriminatory since the fees as noted are generally tied to an overall 
increase in activity on the Exchange. This heightened activity results 
in greater costs to the Exchange, which in turn is being passed back 
through to those participants who utilize the resources of the 
Exchange. The Exchange notes, for example, that Customers are 
prohibited from engaging in activity that can be construed as market 
making, and as such Customers do not use quotes to trade nor do they 
enter more than 390 orders per day on average, unlike the participants 
subject to the proposed fee change, resulting in less capacity usage 
than the participants subject to the proposed fee change.\7\ For these 
reasons, the Exchange believes that the proposed $.03 per contract 
increase for NYSE Amex Specialists, eSpecialists, Market Makers who 
trade with directed and non-directed order flow, Professional Customers 
and Non-NYSE Amex Options Market Makers is both equitable and not 
unfairly discriminatory.
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    \7\ See NYSE Amex Rule 995NY(b).
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    The Exchange notes that the proposed $.03 per contract increase is 
not applicable to Firm Proprietary electronic transactions or Broker 
Dealer electronic transactions. As noted above, the fee increase is 
designed to offset the higher costs associated with the growth in 
trading volumes, option classes and messaging traffic and is 
specifically targeted at those users who consume the majority of those 
resources. The Exchange has found that, historically and at present, 
both Firm Proprietary electronic transactions and Broker Dealer 
electronic transactions comprise a small portion of the electronic 
transactions relative to the electronic transactions of the 
participants affected by this fee change. In fact, the majority of Firm 
Proprietary and Broker Dealer volumes on the Exchange are executed in 
open outcry and therefore place little burden on the infrastructure of 
the Exchange. For these reasons the Exchange feels that it is 
reasonable, equitable and not unfairly discriminatory to increase the 
fees as proposed, while leaving the fees for Firm Proprietary and 
Broker Dealer electronic transactions as they are.

[[Page 15431]]

    The Exchange believes that the ability for NYSE Amex Specialists, 
eSpecialists, and Market Makers that trade with directed and non-
directed order flow to earn back the lower rate by executing more than 
50,000 contracts ADV each day in a month is reasonable, equitable and 
not unfairly discriminatory for several reasons. First, NYSE Amex 
Specialists, eSpecialists, and Market Makers that trade with directed 
and non-directed order flow all subject themselves to various 
obligations,\8\ including quoting obligations that compel them to put 
themselves at risk to trade with any and all interest in a large number 
of options at any one time. The Exchange believes it is important to 
continue to incentivize NYSE Amex Options Market Makers to obligate 
themselves to accept the risk of trading with any and all interest and 
as such it is warranted in permitting NYSE Amex Options Market Makers, 
which undertake those obligations as evidenced by their trading 
volumes, to earn back a lower per contract rate. Conversely, 
Professional Customers and Non-NYSE Amex Options Market Makers have no 
obligation whatsoever to post a bid or offer but rather can react 
selectively to the bids and offers posted by NYSE Amex Options Market 
Makers who do have obligations. It is these differing levels of 
obligations that cause the Exchange to believe that granting NYSE Amex 
Specialists, eSpecialists, and Market Makers that trade with directed 
and non-directed order flow the ability to earn back a lower rate by 
generating at least 50,000 contracts ADV each day in a month as a 
Market Maker is warranted. Further, the Exchange believes that 
excluding both Strategy Executions and QCC trades from the calculation 
of the 50,000 contract ADV threshold is appropriate since Strategy 
Trades are already subject to a lowered rate and are in turn capped 
while QCC trades can be effected without risk of trading with an 
unknown party. The Exchange does not believe that including QCC trades 
in the calculation of the 50,000 contract ADV threshold is appropriate, 
given the Exchange's desire to continue to incentivize NYSE Amex 
Options Market Makers to continue to provide firm quotes accessible by 
all participants. For these reasons, the Exchange believes the proposed 
change is reasonable, equitable and not unfairly discriminatory.
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    \8\ See NYSE Amex Rules 925NY, 925.1NY(b), 972NY(c), and 
927.5NY.
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    The Exchange also believes that the fees being proposed are 
reasonable because they are within the range of fees presently charged 
by other exchanges. For example, the International Stock Exchange 
(``ISE'') charges Non-ISE Market Makers $.45 per contract,\9\ as well 
as a $.29 fee for Professional Customers in select symbols.\10\ 
Additionally, NASDAQ OMX PHLX LLC charges market makers a rate of 
either $.22 or $.23 per contract depending on whether the option is 
part of the penny pilot or not.\11\
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    \9\ See ISE fee schedule dated 2/1/2012, page 1 of 22, available 
at http://www.ise.com/assets/documents/OptionsExchange/legal/fee/fee_schedule.pdf.
    \10\ Id. at 22.
    \11\ See NASDAQ OMX PHLX LLC Fee Schedule dated 2/6/2012, page 6 
of 39, available at http://nasdaqomxtrader.com/content/marketregulation/membership/phlx/feesched.pdf.
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    The Exchange operates in a highly competitive environment in which 
participants can not only move their business elsewhere, but also, if 
they choose, change the manner in which they access the Exchange. For 
example, Non-NYSE Amex Options Market Makers can avail themselves of 
the lower rates applicable to NYSE Amex Specialists, eSpecialists, and 
Market Makers that trade with directed and non-directed order flow by 
becoming NYSE Amex Options Market Makers. Likewise, a Professional 
Customers could either send fewer than 390 orders on average to begin 
trading as a Customer or they could register as a broker-dealer to 
trade on the Exchange as a Firm Proprietary trader or even a NYSE Amex 
Options Market Maker.
    For the reasons noted above, the Exchange believes that the 
proposed fee changes are fair, equitable, and not unfairly 
discriminatory.

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) \12\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \13\ thereunder, because it establishes a due, fee, or other 
charge imposed by the NYSE Amex.
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 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-NYSEAmex-2012-16 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-2012-16. 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 
a.m. and 3 p.m. 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

[[Page 15432]]

submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-
NYSEAmex-2012-16 and should be submitted on or before April 5, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-6239 Filed 3-14-12; 8:45 am]
BILLING CODE 8011-01-P