Document ID: SEC-2014-1177-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE MKT, LLC
Posted Date: 2014-07-15T04:00Z

[Federal Register Volume 79, Number 135 (Tuesday, July 15, 2014)]
[Notices]
[Pages 41333-41335]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-16500]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72574; File No. SR-NYSEMKT-2014-55]

Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Amending the NYSE Amex 
Options Fee Schedule in a Number of Different Ways

July 9, 2014.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on July 1, 2014, NYSE MKT LLC (the ``Exchange'' or ``NYSE 
MKT'') 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 self-regulatory 
organization. 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\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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

    The Exchange proposes to amend the NYSE Amex Options Fee Schedule 
(``Fee Schedule'') in a number of different ways. The proposed changes 
will be operative on July 1, 2014. 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.

[[Page 41334]]

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 in a number of 
different ways as described below. The proposed changes will be 
operative on July 1, 2014.
    First, the Exchange proposes to adopt separate fees for electronic 
transactions in securities that are not included as part of the Penny 
Pilot Program (``Non Penny Pilot'') for Broker Dealers, Professional 
Customers, Non NYSE Amex Options Market Makers and Firms, similar to 
how NYSE Amex Options Markets Makers liable for Marketing Charges pay a 
different rate for electronic executions in Penny versus Non Penny 
Pilot names.\4\ Specifically, the Exchange is proposing a fee of $0.58 
per contract for Broker Dealers, Professional Customers, Non NYSE Amex 
Options Market Maker and Firms who electronically transact in Non Penny 
Pilot issues. The rate per contract for those same participants who 
electronically transact in Penny Pilot issues will be the same rate 
they are presently charged for electronic transactions generally. For 
example, Broker Dealers, Professional Customers and Firms presently pay 
$0.32 per contract for electronic transactions and Non NYSE Amex 
Options Market Makers pay $0.43 per contract for electronic 
transactions--these will continue to be the rates charged to those 
participants for electronic transactions in Penny Pilot issues.
---------------------------------------------------------------------------

    \4\ The Exchange charges $0.25 per contract for manual 
transactions in both Penny and Non Penny issues and this rate will 
remain unchanged.
---------------------------------------------------------------------------

    The Exchange is also proposing a non-substantive, formatting change 
to the section of the fee schedule that applies to Transaction Fees. 
The Exchange is proposing to re-format that section of the fee schedule 
as a table with distinct rows and columns (to distinguish charges for 
manual versus electronic transactions) to make the fee schedule easier 
for participants to understand.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6(b) \5\ of the Act, in general, and 
Section 6(b)(4) and (5) \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 and does not unfairly discriminate between customers, 
issuers, brokers, or dealers.
---------------------------------------------------------------------------

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

    The Exchange believes that the proposal to adopt separate fees for 
electronic transactions in Non Penny Pilot securities for Broker 
Dealers, Professional Customers, Non NYSE Amex Options Market Makers 
and Firms is reasonable, equitable and not unfairly discriminatory for 
the following reasons. First, the Exchange notes that the proposed per 
contract fee of $0.58 is within the range of fees charged by other 
exchanges for Broker Dealers, Professional Customers, Non NYSE Amex 
Options Market Makers and Firms who electronically transact in Non 
Penny Pilot issues.\7\ Further, the Exchange notes that the proposed 
fee for these participants is still less than the fees for which a NYSE 
Amex Options Market Maker might be liable. For example, an NYSE Amex 
Options Market Maker that has reached the monthly fee cap 
applicable,\8\ that electronically trades against a Customer in a Non 
Penny issue will be liable for a maximum charge of $0.66 (comprised of 
a $0.01 service fee and Marketing Charges of $0.65). For an NYSE Amex 
Options Market Maker that has not reached the monthly fee cap and has 
traded less than 50,000 contracts of ADV each day in the month, the 
same transaction would result in a maximum fee of $0.85 per contract 
(comprised of a transaction fee of $0.20 and Marketing Charges of 
$0.65).
---------------------------------------------------------------------------

    \7\ See NASDAQ OMX PHLX (``PHLX'') fee schedule, as of 6/19/2014 
located here: http://www.nasdaqtrader.com/Micro.aspx?id=phlxpricing. 
PHLX charges Professionals, Broker Dealers, and Firms $0.70 per 
contract to transact electronically in Non Penny Pilot issues and 
$0.48 per contract in Penny issues. See also the Nasdaq Options 
Market (``NOM'') fee schedule located here: http://www.nasdaqtrader.com/Micro.aspx?id=OptionsPricing, which charges 
$0.89 per contract in Non Penny issues and $0.49 per contract in 
Penny issues for Professionals, Broker Dealers, Firms and Non NOM 
Market Makers who take liquidity.
    \8\ See NYSE Amex Options fee schedule dated June 12, 2014 
located here: https://www.theice.com/publicdocs/nyse/markets/amex-options/NYSE_Amex_Options_Fee_Schedule.pdf.
---------------------------------------------------------------------------

    NYSE Amex Options Market Makers are subject to other fees that are 
either higher or not charged at all to Broker Dealers, Professional 
Customers, Non NYSE Amex Options Market Makers and Firms, such as ATP 
Permit fees and Rights Fees.\9\ For example, in order to transact 
electronically on the Exchange, a NYSE Amex Options Market Maker is 
required to have at least one options trading permit (``ATP'') that 
allows it to quote sixty issues, plus the bottom 45% of issues traded 
on the Exchange by volume. The cost of one ATP is $8,000 per month. A 
NYSE Amex Options Market Maker that wishes to transact electronically 
in all issues on the Exchange is required to have five ATPs, at a 
monthly cost of $26,000. By comparison, in order to transact 
electronically on the Exchange, Broker Dealers, Professional Customers, 
Non NYSE Amex Options Market Makers and Firms are only required to have 
a single ATP, at a monthly cost of $1,000.\10\ The Exchange notes the 
monthly cost differential of $7,000 to $25,000 in ATP fees paid by NYSE 
Amex Options Market Makers, while Broker Dealers, Professional 
Customers, Non NYSE Amex Options Market Makers and Firms incur no such 
cost. Therefore, while the NYSE Amex Options Markets Makers may be 
charged a lower per contract rate than the rate proposed for Broker 
Dealers, Professional Customers, Non NYSE Amex Options Market Makers 
and Firms transacting electronically in Non Penny issues, when all 
costs to these participants are considered, the cost differential is 
much less or even transposed, with NYSE Amex Options Market Makers 
paying higher fees.\11\ As such, the Exchange believes that charging 
Broker Dealers, Professional Customers, Non NYSE Amex Options Market 
Makers and Firms a higher rate to transact electronically in Non Penny 
issues is equitable and reasonable as the higher rate is designed to 
reflect the costs to the Exchange in supporting trading in Non Penny 
issues.\12\ While Non Penny issues account for the vast majority of 
issues by count, Non Penny issues represent a relatively small 
percentage of overall total industry volume. For example, there are 
currently 358 issues in the Penny Pilot as compared with 2,054 Non 
Penny issues listed on the Exchange. However, with respect to volume 
during the past

[[Page 41335]]

two months ending in May 2014, Penny Pilot options accounted for 81% of 
Total Industry Equity Option volume, while Non Penny issues accounted 
for only 19% of Total Industry Equity Option Volume.
---------------------------------------------------------------------------

    \9\ Id.
    \10\ Of the participants in question, only Firms are members of 
the Exchange that are billed directly for any ATPs they own. All of 
the other participants conduct business through an Exchange member 
that is only required to have a single ATP for all business that 
flows through them. For example, an Order Flow Provider with a 
single ATP may route electronic orders to the Exchange on behalf of 
Broker Dealers, Professional Customers and Non NYSE Amex Options 
Market Makers.
    \11\ For example, an NYSE Amex Market Makers [sic] that 
electronically trades contra to a Customer is potentially liable for 
Marketing Charges. Further, the Exchange notes that a subset of NYSE 
Amex Options Market Makers (Specialists, e-Specialists and Directed 
Order Market Makers) also incur monthly Rights Fees, which fees are 
not charged to Broker Dealers, Professional Customers, Non NYSE Amex 
Options Market Makers and Firms. See supra n. 8.
    \12\ The Exchange notes that this higher rate is still below the 
rate charged to an NYSE Amex Options Market Maker that 
electronically trades with a Customer. See supra n. 8.
---------------------------------------------------------------------------

    For the forgoing reasons, the Exchange believes that the proposal 
to charge $0.58 per contract to Broker Dealers, Professional Customers, 
Non NYSE Amex Options Market Makers and Firms that transact 
electronically in Non Penny Pilot issues is reasonable, equitable and 
not unfairly discriminatory. The proposed fee is also reasonable, 
equitable and not unfairly discriminatory because the charge will apply 
equally to all Broker Dealers, Professional Customers, Non NYSE Amex 
Options Market Makers and Firms electronically executed volumes in Non 
Penny Pilot issues on the Exchange.
    The Exchange believes that the proposal to re-format the section of 
the fee schedule describing Transaction Fees into a table and 
delineating cost by transaction type (manual versus electronic) is 
reasonable, equitable and not unfairly discriminatory as the proposed 
change will reduce confusion and will make the fee schedule more 
transparent and easier for all participants to understand.

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. The Exchange believes the 
proposed fee change is reasonably designed to be fair and equitable, 
and therefore, will not unduly burden any particular group of market 
participants trading on the Exchange vis-[agrave]-vis another group 
(i.e., Market Markers versus non-Market Makers). Specifically, the 
Exchange believes that Broker Dealers, Professional Customers, Non NYSE 
Amex Options Market Makers and Firms who are not subject to the 
additional dues and fees of NYSE Amex Market Makers, will not be unduly 
burdened by the increased transaction fee. In addition, the Exchange 
believes that the proposed changes will enhance the competiveness of 
the Exchange relative to other exchanges. 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 review, and consider adjusting, its fees and credits 
to remain competitive with other exchanges. For the reasons described 
above, the Exchange believes that the proposed rule change reflects 
this competitive environment.

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) \13\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \14\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 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. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \15\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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-2014-55 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSEMKT-2014-55. 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-2014-55, and should 
be submitted on or before August 5, 2014.
---------------------------------------------------------------------------

    \16\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-16500 Filed 7-14-14; 8:45 am]
BILLING CODE 8011-01-P