Document ID: SEC-2011-0845-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Amex LLC
Posted Date: 2011-06-17T04:00Z

[Federal Register Volume 76, Number 117 (Friday, June 17, 2011)]
[Notices]
[Pages 35495-35497]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-15040]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64655; File No. SR-NYSEAmex-2011-37]

Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending the NYSE 
Amex Options Fee Schedule To Establish a New Fee Designed To Encourage 
Efficient Use of Bandwidth by ATP Firms and To Rename a Related 
Existing Fee

June 13, 2011.
    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 June 1, 2011, NYSE Amex LLC (the ``Exchange'' or ``NYSE 
Amex'') 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 Exchange. 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\ 17 CFR 240.19b-4.

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

[[Page 35496]]

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

    The Exchange proposes to amend its Options Fee Schedule (the 
``Schedule'') by renaming an existing fee to better reflect the nature 
of the fee and introducing a new fee designed to encourage efficient 
use of bandwidth by both order sending and quote sending ATP firms. The 
proposed changes will be operative on June 1, 2011. The text of the 
proposed rule change is available at the Exchange, the Commission's 
Public Reference Room, and http://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 purpose of the proposal is to encourage efficient usage of 
systems capacity by all ATP firms. The Exchange feels that it is in the 
best interests of all ATP firms and investors who access our markets to 
encourage efficient usage of capacity.
    The first change proposed is simply a name change to an existing 
fee, the Ratio Threshold Fee, which measures monthly order to trade 
ratios. This fee is being renamed the Order to Trade Ratio Fee to 
better reflect what the fee is based on.
    At the same time, the Exchange proposes the introduction of a new 
fee designed to further encourage efficient systems usage (``Messages 
to Contracts Traded Ratio Fee''). This fee will take into consideration 
quotes as well as orders entered and will look at the number of 
contracts traded as a result. ATP firms that enter excessive amounts of 
orders and quotes that produce little or no volume will be assessed 
this fee based on the ratio of quotes and orders to contracts traded. 
The Exchange recognizes that there can be problems at the level of 
either an ATP firm or its vendor or at the Exchange that can cause 
inadvertent bursts of quotes and/or orders. For that reason, the 
Exchange proposes to only consider those ATP firms who exceed 1 billion 
quotes and/or orders (collectively, ``messages'') in a given month in 
determining whether inefficient utilization of systems capacity has 
occurred. For those ATP firms exceeding 1 billion messages in a month, 
the Exchange proposes to assess a fee for those ATP firms that do not 
execute at least one (1) contract for every 1,500 messages entered. An 
ATP firm failing to meet that execution ratio will be charged $.01 for 
every 1,000 messages in excess of 1 billion messages.
    For example, assume an ATP firm enters a combination of quotes and 
orders in a given month that sum to 1,500,100,000. Assume that same ATP 
firm also traded 1,000,000 contracts that month. Having traded 
1,000,000 contracts, that ATP firm would need to have sent fewer than 
1,500,000,000 messages to stay within the execution ratio of 1 contract 
per 1,500 messages. In this case, the ATP firm sent 100,000 messages in 
excess of what is permitted under the 1 to 1,500 execution ratio. This 
would result in a charge of $.01 per 1,000 messages in excess of 
1,000,000,000, in this case a charge of $5,001 (500,100,000 quotes/
orders in excess of 1,000,000,000 or 500,100 groups of 1,000 messages 
times $.01 per message group).
    The need for the new fee based on the messages to contracts traded 
ratio is based on the fact that the existing Ratio Threshold Fee (to be 
renamed the Order to Trade Ratio Fee) only counts orders, not market 
maker quotes. The proposed Messages to Contracts Traded Ratio Fee 
incorporates market maker quotes, which the Exchange believes to be 
appropriate given that market maker quote traffic represents a 
substantial portion of the total message load that must be processed by 
Exchange systems each day. This proposed new fee will never be 
triggered unless a very high level of traffic is generated by a market 
maker (i.e., over one billion quotes and orders per month); no such 
minimum exists for the Order to Trade Ratio Fee. Therefore, by 
preserving the existing fee and also adding the Messages to Contracts 
Traded Ratio Fee, the Exchange hopes to maintain its existing, well-
understood incentives for order-sending firms to use bandwidth 
efficiently, while ensuring that market makers also have such 
incentives but with a higher level of traffic permitted before the fee 
takes effect. The Exchange feels that this higher level of free message 
traffic is appropriate due to the quoting obligations incurred by 
market makers and their importance as liquidity providers in the 
options market.
    The Exchange proposes that all ATP firms that send quotes and/or 
orders will be subject to the proposed Messages to Contracts Traded 
Ratio Fee as well as to the existing and renamed Order to Trade Ratio 
Fee, which will be referred to collectively as Excessive Bandwidth 
Utilization Fees on the Schedule. In the event that an ATP firm is 
liable for either or both of the Excessive Bandwidth Utilization Fees 
and/or for charges pursuant to the Cancellation Fee in a given month, 
that firm would only be charged the largest one of those three fees for 
the month.\3\ For example, if the fee calculated under the Order to 
Trade Ratio Fee is $10,000, the fee calculated under the Messages to 
Contracts Traded Ratio Fee is $5,001, and the charges calculated 
pursuant to the Cancellation Fee are $6,000, the ATP firm would be 
billed $10,000 for that month.\4\
---------------------------------------------------------------------------

    \3\ Currently, ATP Holders are not charged the Ratio Threshold 
Fee if they incur charges on a monthly basis pursuant to the 
Cancellation Fee. This provision is being deleted from footnote 12 
of the Schedule and being replaced with a new provision stating that 
the Exchange will now look at a firm's liability under the two 
Excess Bandwidth Utilization Fees and the Cancellation Fee and only 
require the firm to pay the largest one of these three fees for the 
month.
    \4\ In calculating the Messages to Contracts Traded Ratio Fee, 
the Exchange will aggregate routing and market making activity in 
the case of an ATP firm that has both a routing and a market making 
arm affiliated with its operation. For purposes of determining 
whether the routing and market making arm are ``affiliated'' with 
the ATP firm, the Exchange will apply a 70% common ownership test as 
the criterion for affiliation.
---------------------------------------------------------------------------

    Unlike the Order to Trade Ratio Fee, the Exchange is not proposing 
to exclude market-improving quotes or orders from the calculation of 
the Messages to Contracts Traded Ratio Fee. Due to the much larger 
amount of traffic generated by market makers, who are potentially 
included in this fee, addressing market-improving quotes or orders 
separately for billing purposes would greatly complicate the 
computation of this fee. In addition, because the parameters of this 
fee, including the exemption of the first 1 billion messages per 
calendar month, allow for a large amount of message traffic before the 
fee is triggered, the Exchange does not believe that including an 
additional exemption for market-improving quotes is necessary.
    The Exchange also proposes to correct certain incorrect footnote 
references under ``Trade-Related Charges'' in the Schedule by (i) 
Eliminating a footnote reference under ``Limit of Fees on Options 
Strategy Executions'' that is not

[[Page 35497]]

applicable and (ii) adding an additional reference to a footnote on 
marketing charges under both ``Electronic Complex Order Executions'' 
and under ``Marketing Charge.'' These error corrections are of a 
cleanup nature and do not represent changes to any of the Exchange's 
current fees or the way that they are calculated and applied.
    The proposed changes will be operative on June 1, 2011.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Securities Exchange Act of 1934 
(the ``Act''),\5\ in general, and Section 6(b)(4) of the Act,\6\ 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. The Exchange also 
believes that the proposed rule change furthers the objectives of 
Section 6(b)(5) of the Act \7\ in that it is designed to promote just 
and equitable principles of trade, remove impediments to and perfect 
the mechanisms of a free and open market and a national market system 
and, in general, to protect investors and the public interest by 
ensuring that systems capacity is utilized efficiently.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(4).
    \7\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    More specifically, the Exchange believes that the proposed 
Excessive Bandwidth Utilization Fees are equitable and not unfairly 
discriminatory since they will apply equally to all members who send 
quotes and/or orders. Additionally, the proposed Excessive Bandwidth 
Utilization Fees are reasonable and justified because they will 
encourage efficient utilization of system bandwidth, and unfettered 
growth in bandwidth consumption can have a detrimental effect on all 
participants who are potentially compelled to upgrade capacity as a 
result of the profligate ways of other participants.
    The Exchange believes that the higher level of free message traffic 
permitted before the proposed new Messages to Contracts Traded Ratio 
Fee is triggered, even though the Order to Trade Ratio Fee has no such 
minimum trigger, is not unfairly discriminatory due to the substantial 
message load that exists from normal market maker quote traffic as well 
as the quoting obligations incurred by market makers and their 
importance as liquidity providers in the options market. In addition, 
the inclusion of market-improving quotes and orders in the calculation 
of the Messages to Contracts Traded Ratio Fee (which orders are 
excluded from the calculation of the Order to Trade Ratio Fee) is not 
unfairly discriminatory because of the very high level of message 
traffic allowed before the fee is triggered (even with the inclusion of 
market-improving quotes and orders), as well as the computation 
complications from excluding such quotes and orders that would exist as 
a result of the much larger amount of quote traffic generated by market 
makers.
    Finally, the fact that only one of the three related fees (the two 
Excessive Bandwidth Utilization Fees and the Cancellation Fee), 
whichever is the highest, will be charged to an ATP firm in a given 
month is an additional factor assuring that the application of these 
fees will be reasonable, 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) \8\ of the Act and subparagraph (f)(2) of Rule 19b-
4\9\ thereunder, because it establishes a due, fee, or other charge 
imposed by NYSE Amex.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-NYSEAmex-2011-37 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-2011-37. 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 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 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-
NYSEAmex-2011-37 and should be submitted on or before July 8, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
---------------------------------------------------------------------------

    \10\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-15040 Filed 6-16-11; 8:45 am]
BILLING CODE 8011-01-P