Document ID: SEC-2007-1403-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: NYSE Arca, Inc.
Posted Date: 2007-10-09T04:00Z

[Federal Register: October 9, 2007 (Volume 72, Number 194)]
[Notices]               
[Page 57372-57374]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09oc07-124]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56595; File No. SR-NYSEArca-2007-93]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change as Modified by 
Amendment No. 2 Thereto Relating to Exchange Fees and Charges

DATE: October 1, 2007.
    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 18, 2007, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'') 
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 substantially prepared by the Exchange. On September 
28, 2007, the NYSE Arca submitted Amendment No. 1 to the proposed rule 
change. On September 28, 2007, NYSE Arca withdrew Amendment No. 1 and 
filed Amendment No. 2. NYSE Arca has designated this proposal as one 
establishing or changing a due, fee, or other charge imposed by NYSE 
Arca under Section 19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-4(f)(2) 
thereunder,\4\ which renders the proposal effective upon filing with 
the Commission. The Commission is publishing this notice to solicit 
comments on the proposed rule change, as amended, from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NYSE Arca proposes to amend its Schedule of Fees and Charges for 
Exchange Services (``Rate Schedule''). The text of the proposed rule 
change is available at the Exchange, the Commission's Public Reference 
Room, and http://www.nysearca.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 Exchange 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 these statements may be examined at the places specified in 
Item IV below. NYSE Arca has substantially prepared summaries, set 
forth in Sections A, B, and C below, of the most significant aspects of 
such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    NYSE Arca states that the purpose of this filing is to amend the 
existing NYSE Arca Rate Schedule by establishing a pilot program under 
which the Exchange will cap, on a monthly basis, the Firm Facilitation 
Fee (``Pilot Program''). The Exchange also proposes to apply the Firm 
Facilitation Fee when non-OTP Firm \5\ accounts, as well as OTP Firm 
accounts, are used to facilitate customer orders. The Exchange also 
proposes adding language to the Rate Schedule, to clarify that the Firm 
Facilitation Fee is applicable to manually executed orders only. 
Although effective upon filing, the Exchange intends this fee change to 
become operative on October 1, 2007.
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    \5\ A non-OTP Firm is a broker dealer whose proprietary trades 
clear as Firm (clearance symbol F) with the Options Clearing 
Corporation (``OCC'') and is not an NYSE Arca OTP holder.
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    NYSE Arca presently charges OTP Holders a Firm Facilitation Fee of 
$0.15 per contract. The Firm Facilitation Fee is applicable when a 
proprietary trading account of an OTP Firm is used to facilitate an 
order for a customer of the OTP Firm. As part of this filing, the 
Exchange is now proposing to apply the Firm Facilitation Fee to any 
transaction in which a firm proprietary account, of either an OTP Firm 
or non-OTP Firm, is used to facilitate an order for a customer of that 
same firm.\6\ Presently, OTP Firms are charged the Broker Dealer & Firm 
Manual rate of $0.26 for facilitation trades they execute on behalf of 
non-OTP firms. According to the proposal, the Exchange will now apply 
the Firm Facilitation rate of $0.15 to such trades.
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    \6\ In both instances the Firm Facilitation Fee will be applied 
to trades that have an OCC clearance account ``F'' on the trade side 
and an OCC clearance account ``C'' on the contra side of the 
transaction. Both sides of the trade will clear under the same 
clearing firm symbol.
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    The Exchange proposes to establish a pilot program, under which OTP 
Firms will be eligible for a monthly cap of $50,000 on Firm 
Facilitation Fees. The $50,000 cap will be applicable to each firm 
account that is used for facilitating orders of customers of that same 
firm. Examples of how the Firm Facilitation Fee cap will be applied are 
shown below.

Example 1

    OTP Firm A carries accounts for customers of the firm, for which 
the firm may, on occasion, facilitate certain option orders. During 
a given calendar month, the firm facilitates a number of orders for 
their customers, for which the firm incurs Firm Facilitation Fees 
totaling $60,000. Under the Pilot Program, the fee cap would have 
been met, and the Firm would be billed only $50,000.

Example 2

    OTP Firm B carries accounts of public customers, as well as 
accounts of non-OTP Firms, who themselves may wish to facilitate 
orders for their own customers. During a given calendar month, OTP 
Firm B represents facilitation orders for a non-OTP Firm for which 
it incurs Firm Facilitation Fees totaling $60,000. During the same 
month, OTP Firm B also represents facilitation orders for another 
non-OTP Firm for which they incur Facilitation Fees totaling 
$60,000. While OTP Firm B itself has

[[Page 57373]]

incurred $120,000 in total Facilitation Fees for the month, the 
entire amount is not eligible for the fee cap. Orders on behalf of 
the first non-OTP Firm, which amounted to $60,000, are capped at 
$50,000, while orders on behalf of the second non-OTP Firm, which 
amounted to $60,000, are also capped at $50,000. In this example, 
OTP Firm B has incurred Facilitation Fees totaling $120,000, but 
because the fees are eligible for the fee cap under the Pilot 
Program, OTP Firm B will be billed only $100,000.

Example 3

    OTP Firm C carries accounts of public customers, as well as 
accounts of non-OTP Firms, who themselves may wish to facilitate 
orders for their own customers. During a given calendar month, OTP 
Firm C facilitates orders for their customers, for which the firm 
incurs Firm Facilitation Fees totaling $60,000. During the same 
calendar month, OTP Firm C represents facilitation orders for a non-
OTP Firm for which it incurs Facilitation Fees totaling $60,000. 
During the same month, OTP Firm C also represents facilitation 
orders for another non-OTP Firm for which the firm incurs 
Facilitation Fees totaling $40,000. While OTP Firm C itself has 
incurred $160,000 in total Firm Facilitation Fees for the month, the 
entire amount is not eligible for the fee cap. Facilitated orders, 
executed on behalf of OTP Firm C's customer, which amounted to 
$60,000, are capped at $50,000. Facilitated orders executed on 
behalf of the first non-OTP Firm, which amounted to $60,000, are 
also capped at $50,000, but facilitated orders executed on behalf of 
the second non-OTP Firm, which amounted to $40,000, are not subject 
to the fee cap. In this example, OTP Firm C has incurred Firm 
Facilitation Fees totaling $160,000, but because of the fee cap 
under the Pilot Program, OTP Firm C will be billed only $140,000.

    OTP Firms wishing to take advantage of the fee cap must register 
for the Pilot Program with the NYSE Arca Finance Department, prior to 
the end of a calendar month, to ensure that the fee cap is applied 
correctly for billing purposes, for that month. The enrollment process 
will require that an OTP Firm supply the Exchange with information 
concerning the clearing and firm symbols of the OTP Firm's designated 
clearing account that may be used to facilitate customer orders, and/or 
the clearing and firm symbols of any non-OTP Firm customers of the OTP 
Firm that may facilitate their own customer's orders. Enrollment forms 
will be available from the NYSE Arca Finance Department. The enrollment 
information can be provided by the initiating firm, clearing firm or 
executing broker associated with these trades.
    Certain classes of options listed on the NYSE Arca have as their 
underlying security, licensed products that carry a Royalty Fee (or 
license fee), on every contract traded. Royalty Fees that are incurred 
by the Exchange are passed-on to the actual participants executing the 
trade. These passed-through fees are assessed by the issuing agency, 
and are not Exchange Transaction Fees. The Exchange will not include 
Royalty Fees, which are passed-on to trade participants in connection 
with Firm Facilitation trades, when calculating the $50,000 per month 
fee cap.
    By capping this Firm Facilitation Fee, the Exchange states that it 
hopes to garner additional order flow from market participants that are 
attracted to the competitive fee structure. The Exchange plans to offer 
this fee cap on a pilot basis until December 31, 2007. Thirty days 
prior to the conclusion of the Pilot Program, the Exchange will analyze 
the effectiveness of the fee cap and will propose, through a subsequent 
Rule 19b4 filing, to either terminate or extend the Pilot Program, or 
to make the fee cap permanent.
    Facilitation trades, governed by NYSE Arca Rule 6.47, are Crossing 
Orders, and are manually executed by Floor Brokers. Until such time 
that the Exchange's electronic trading system's automated crossing 
mechanism is functional, all Crossing Orders are executed manually. 
Therefore the Firm Facilitation Fee is only applicable to manual 
executions. The Exchange proposes at this time to add language to the 
Rate Schedule to clarify this.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \7\ in general, and furthers the 
objectives of Section 6(b)(4) of the Act \8\ in particular, in that it 
is designed to provide for the equitable allocation of reasonable dues, 
fees, and other charges among NYSE Arca members.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that the proposed rule change will not 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

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing proposed rule change has been designated as a fee 
change pursuant to Section 19(b)(3)(A)(ii) of the Act \9\ and Rule 19b-
4(f)(2) \10\ thereunder, because it establishes or changes a due, fee, 
or other charge imposed on members by the Exchange. Accordingly, the 
proposal will take effect upon filing with the Commission. At any time 
within 60 days of the filing of such proposed rule change, the 
Commission may summarily abrogate 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.\11\
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    \9\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \10\ 17 CFR 240.19b-4(f)(2).
    \11\ For purposes of calculating the 60-day period within which 
the Commission may summarily abrogate the proposed rule change, the 
Commission considers the period to commence on September 28, 2007, 
the date on which the Exchange filed Amendment No. 2. See 15 U.S.C. 
78s(b)(3)(C).
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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-NYSEArca-2007-93 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEArca-2007-93. 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

[[Page 57374]]

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 inspection and copying 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 submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-NYSEArca-2007-93 and should be submitted on or before 
October 30, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
 [FR Doc. E7-19765 Filed 10-5-07; 8:45 am]

BILLING CODE 8011-01-P