Document ID: SEC-2012-0932-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE MKT LLC
Posted Date: 2012-06-13T04:00Z

[Federal Register Volume 77, Number 114 (Wednesday, June 13, 2012)]
[Notices]
[Pages 35437-35439]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-14336]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67153; File No. SR-NYSEMKT-2012-05]

Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Modifying the NYSE Amex 
Options Fee Schedule To Amend the Rights Fee That Is Charged to 
Specialists, e-Specialists and Directed Order Market Makers

 June 7, 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 May 31, 2012, NYSE MKT LLC (the ``Exchange'' or ``NYSE MKT'') 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 amend the Rights Fee that is charged to 
Specialists, e-Specialists and Directed Order Market Makers. 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 to amend the Rights 
Fee that is charged to Specialists, e-Specialists, and Directed Order 
Market Makers (``DOMMs''). The Exchange believes the proposed change 
will allow it to recoup some of the costs of listing new option classes 
that may not generate sufficient trading activity and, in turn, 
trading-related revenues.
    Presently, the Exchange assesses a monthly Rights Fee to 
Specialists, e-Specialists, and DOMMs. The current Rights Fee is 
variable, based on the Average Daily National Customer Contracts 
traded, calculated over the prior three months, with a one-month lag. 
For example, the Average Daily National Customer Contracts traded for 
January, February, and March are used to arrive at the Rights Fee 
applicable to a particular option for trading in the month of May. The 
table below contains the Average Daily National Customer Contracts 
traded tiers and the associated Rights Fee:

------------------------------------------------------------------------
                                                               Monthly
    Average national daily customer contracts per issue       base rate
                                                              per issue
------------------------------------------------------------------------
0 to 2,000.................................................          $75
2,001 to 5,000.............................................          200
5,001 to 15,000............................................          375
15,001 to 100,000..........................................          750
Over 100,000...............................................        1,500
------------------------------------------------------------------------

    The Exchange proposes to amend the tiers and fees as follows:

------------------------------------------------------------------------
                                                               Monthly
    Average national daily customer contracts per issue       base rate
                                                              per issue
------------------------------------------------------------------------
0 to 200...................................................         $250
201 to 2,000...............................................           75
2,001 to 5,000.............................................          200
5,001 to 15,000............................................          375
15,001 to 100,000..........................................          750
Over 100,000...............................................        1,500
------------------------------------------------------------------------

    The 0-to-200 tier will only apply to options listed after June 1, 
2012. Options listed before June 1, 2012 will be ``grandfathered'' and, 
as such, subject to the monthly base rate per issue of $75 if they fall 
into the 0 to 200 contract volume tier. The Exchange will publish on 
its Web site a list of all ``grandfathered'' options.
    By adding a new, lower volume tier, the Exchange intends to recoup 
the costs associated with a new options listing that does not in turn 
generate sufficient trading volume and associated

[[Page 35438]]

trade-related revenues. The Exchange believes that the higher Rights 
Fee for the new lower volume tier will encourage more efficient use of 
the Exchange's resources. Unfettered growth in option listings without 
an offsetting growth in volume will ultimately result in increased 
costs for all participants. By instituting the proposed Rights Fee for 
lower volume issues, the Exchange intends to encourage the delisting of 
inactive options. In those instances where participants instead wish to 
continue to trade relatively inactive options, they will directly 
contribute toward some of the Exchange costs to support that trading 
instead of having those costs shared among all Exchange participants.
    Additionally, the Exchange wishes to explain the manner in which 
the monthly Rights Fee is apportioned among the Specialist, e-
Specialist and DOMM participants in the event that participant volumes 
are all zero in a given month. Presently, the Rights Fee is shared 
among participants according to the relative amount of trading volume 
each participant accounts for.\3\ Consider the following example of an 
option that has Average Daily National Customer Contracts traded 
between 5,001 and 15,000--such option has a Rights Fee of $375. During 
the month, each of the participants accounts for the following volumes:
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    \3\ See endnote 1 to the Fee Schedule dated May 1, 2012, 
available at http://globalderivatives.nyx.com/sites/globalderivatives.nyx.com/files/nyse_amex_options_fee_schedule_05_01_12.pdf.

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Specialist...................................................      5,000
e-Specialist.................................................      5,000
DOMM 1.......................................................      2,500
DOMM 2.......................................................      2,500
                                                              ----------
                                                                  15,000
------------------------------------------------------------------------

    The participants in aggregate account for 15,000 contracts. Each 
participant is then charged based on its proportion of the total 
volume. For example:

----------------------------------------------------------------------------------------------------------------
 
------------------------------------------------------------------------------------------------------
Specialist..................................  5,000/15,000 = 33.3% x $375 =..........................    $125.00
e-Specialist................................  5,000/15,000 = 33.3% x $375 =..........................    $125.00
DOMM 1......................................  2,500/15,000 = 16.6% x $375 =..........................     $62.50
DOMM 2......................................  2,500/15,000 = 16.6% x $375 =..........................     $62.50
                                                                                                      ----------
                                                                                                         $375.00
----------------------------------------------------------------------------------------------------------------

    In the scenario where the Specialist, the e-Specialist, or DOMMs 
transact zero volume in a month, the Exchange splits the Rights Fee 
equally among the Specialist and e-Specialist, such that each 
Specialist and/or e-Specialist participant is liable for 50% of the 
Rights Fee. In the event that there is only a Specialist or e-
Specialist and there are no DOMM volumes, then that sole Specialist or 
e-Specialist incurs 100% of the Rights Fee applicable to the option 
issue.
    Finally, the Exchange proposes to amend the Fee Schedule to reflect 
the Exchange's name change to NYSE MKT LLC.
    The proposed changes will be operative on June 1, 2012.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6(b) \4\ of the Securities Exchange Act 
of 1934 (the ``Act''), in general, and Section 6(b)(4) \5\ 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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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that the proposed change to Rights Fees are 
reasonable, given the need to offset some of the costs associated with 
listing new options that do not subsequently trade sufficiently to 
generate trade-related revenues for the Exchange.
    The proposed change is reasonable and equitable because it averts 
the need to share the costs of supporting low volume option issues 
among all Exchange participants. Instead, those participants, 
specifically Specialists, e-Specialists, and DOMMs that are subject to 
the new, lower volume tier and Rights Fee contribute toward some of the 
Exchange's costs in supporting trading in low volume issues. The 
Exchange notes that unless a Specialist or e-Specialist applies to be 
the Specialist or e-Specialist in a new option issue, it cannot be 
subject to the Rights Fee charges. Similarly, a Market Maker can opt 
out of receiving Directed Orders on a symbol-by-symbol basis and 
thereby avert incurring the Rights Fee. Given this ability to knowingly 
incur the fee, or conversely avoid it, the Exchange believes that the 
proposal is reasonable, equitable, and not unfairly discriminatory, as 
participants may decide of their own accord to subject themselves to 
the proposed fee. Further, other Exchange participants are not being 
asked to subsidize the listing of new options that subsequently do not 
generate sufficient trading revenues to offset the Exchange's costs in 
supporting those new option listings.
    The Exchange believes that it is reasonable, equitable and not 
unfairly discriminatory to apportion the Rights Fee equally among the 
Specialist and e-Specialist in the event that none of the Specialist, 
e-Specialist or DOMMs have any volume in a given month. Specifically, 
the Exchange is unable to list an option unless a Specialist or e-
Specialist opts to include it in their assignment; it is able to list 
an option without a DOMM. As such, in the event that participant 
volumes are all zero in a given month, limiting the Rights Fee 
assessment to the Specialist and e-Specialist is warranted given that, 
unlike a DOMM, they can request to have the option delisted if they 
feel that the opportunity cost of the listing, i.e. the Rights Fee, 
outweighs the benefit of the listing, the potential trading 
opportunities.
    The proposed change also is not unfairly discriminatory as it 
applies equally to all Specialists, e-Specialists, and DOMMs. As noted, 
those participants are able to avoid incurring the fee by simply not 
applying to trade options listed on or after June 1, 2012. The fee for 
options in the newly proposed volume tier of 2 [sic] to 200 Average 
National Daily Customer Contracts is only $250 per issue, so any one 
participant would never pay more than that per option class. As noted, 
the Exchange is implementing this fee for all options listed on or 
after June 1, 2012, and then only when the option fails to achieve 
greater than 200 Average National Daily Customer Contracts.
    For these reasons, the Exchange believes that the proposed change 
is 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

[[Page 35439]]

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) \6\ of the Act and subparagraph (f)(2) of Rule 19b-
4 \7\ thereunder, because it establishes a due, fee, or other charge 
imposed by the NYSE MKT.
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    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 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-NYSEMKT-2012-05 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-2012-05. 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 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-NYSEMKT-2012-05 and should 
be submitted on or before July 5, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-14336 Filed 6-12-12; 8:45 am]
BILLING CODE 8011-01-P