Document ID: SEC-2011-0796-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2011-06-08T04:00Z

[Federal Register Volume 76, Number 110 (Wednesday, June 8, 2011)]
[Notices]
[Pages 33380-33382]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-14129]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64593; File No. SR-NYSEArca-2011-34]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending the NYSE 
Arca Equities Schedule of Fees and Charges for Exchange Services to 
Introduce Two New Pricing Tiers, Investor Tier 1 and Investor Tier 2

 June 3, 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 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 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 amend the NYSE Arca Equities Schedule of Fees 
and Charges for Exchange Services (the ``Schedule'') to introduce two 
new pricing tiers, Investor Tier 1 and Investor Tier 2. The text of the 
proposed rule change is available at the Exchange's principal office, 
at http://www.nyse.com, at the Commission's Public Reference Room, and 
at the Commission's Web site at http://www.sec.gov.

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
    Effective June 1, 2011, NYSE Arca proposes to introduce two new 
pricing tier levels, Investor Tier 1 and Investor Tier 2. Investor Tier 
1 will allow customers to earn a credit of $0.0032 per share for 
executed orders that provide liquidity to the Book for Tape A, Tape B 
and Tape C securities. Investor Tier 2 will allow customers to earn a 
credit of $0.0030 per share for executed orders that provide liquidity 
to the Book for Tape A, Tape B and Tape C securities. All other fees 
and credits will be at the existing tiered and basic rates based on the 
firms qualifying levels.
    In order to qualify for the new Investor Tiers, customers must meet 
all of the following criteria on a monthly basis:

     Maintain a ratio of cancelled orders to total orders of 
less than 30%. In calculating this ratio, the Exchange will exclude 
Immediate-or-Cancel orders, which are liquidity removing in nature.

[[Page 33381]]

     Maintain a ratio of executed liquidity adding volume to 
total volume of greater than 80%.
     For Investor Tier 1, firms must add at least 35 million 
shares of liquidity per day on NYSE Arca to qualify. For Investor 
Tier 2, firms must add at least 10 million shares of liquidity per 
day but less than 35 million shares of liquidity per day on NYSE 
Arca to qualify. Trade activity on days when the market closes early 
is excluded from both Investor Tiers.

    The goal of the Investor Tiers is to incentivize customers to 
maintain low cancellation rates and provide liquidity that supports the 
quality of price discovery and promotes market transparency. The tiers 
reward providers whose orders stay on the Book and do not rapidly 
cancel a large portion of their orders placed, which makes the price 
discovery process more efficient and results in higher fill rates, 
greater depth and lower volatility. It serves to encourage customers to 
post orders that are more likely to be executed.
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''),\3\ in general, and Section 6(b)(4) of the Act,\4\ 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 believes 
that the proposal does not constitute an inequitable allocation of 
fees, as all similarly situated member organizations and other market 
participants will be charged the same amount and access to the 
Exchange's market is offered on fair and non-discriminatory terms.
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    \3\ 15 U.S.C. 78f(b).
    \4\ 15 U.S.C. 78f(b)(4).
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    NYSE Arca believes that the Investor Tiers are equitable and non-
discriminatory because both are open to all customers on an equal basis 
and provide credits that are reasonably related to the value to an 
exchange's market quality associated with higher volumes. While the 
Investor Tiers distinguish among orders, such distinctions ``are not 
designed to permit unfair discrimination'' but rather intended to 
promote submission of liquidity providing orders to NYSE Arca, which 
would benefit all NYSE Arca members and all investors. Similarly, 
NASDAQ established an Investor Support Program (``ISP'') targeting 
retail and institutional investor orders where firms receive a higher 
rebate if they meet all of the following criteria: (1) Add at least 10 
million shares of liquidity per day via ISP-designated ports; (2) 
Maintain a ratio of orders-to-orders executed of less than 10 to 1 
(counting only liquidity-providing orders and excluding certain order 
types) on ISP-designated ports; (3) Exceed the firm's August 2010 
``baseline'' volume of liquidity added across all the firm's ports or, 
if a firm does not have an August baseline, then the firm will be 
deemed to have added an average of 35 million shares per day as the 
baseline starting point to qualify for the higher rebate program.\5\ In 
addition, by offering two Investor Tiers the Exchange believes more 
customers may provide the targeted order flow and more customers will 
be eligible to receive the credits for such orders.
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    \5\ See Securities Exchange Act Release No. 63270 (November 8, 
2010), 75 FR 69489 (November 12, 2012) [sic]; Securities Exchange 
Act Release No. 63414 (December 2, 2010), 75 FR 76505 (December 28, 
2010).
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    Finally, the Exchange notes that it operates in a highly 
competitive market in which market participants can readily favor 
competing venues if they deem fee levels at a particular venue to be 
excessive. In such an environment, the Exchange must continually adjust 
its fees to remain competitive with other exchanges and with 
alternative trading systems that have been exempted from compliance 
with the statutory standards applicable to exchanges. The Exchange 
believes that the proposed rule change reflects this competitive 
environment because it will broaden the conditions under which 
customers may qualify for higher liquidity provider credits.

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) \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 Arca.
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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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2011-34 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-NYSEArca-2011-34. 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

[[Page 33382]]

submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-
NYSEArca-2011-34 and should be submitted on or before June 29, 2011.

    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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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-14129 Filed 6-7-11; 8:45 am]
BILLING CODE 8011-01-P