Document ID: SEC-2012-1994-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2012-12-05T05:00Z

[Federal Register Volume 77, Number 234 (Wednesday, December 5, 2012)]
[Notices]
[Pages 72425-72426]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-29316]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68322; File No. SR-NYSEARCA-2012-129]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Permit ETP 
Holders to Designate Orders as Retail Orders By Using a Tag in the 
Order Entry Message

November 29, 2012.
    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 November 16, 2012, NYSE Arca, Inc. (the ``Exchange'' or 
``NYSE Arca'') 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.
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    \1\ 15 U.S.C.78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange proposes to permit ETP Holders to designate orders as 
Retail Orders for the purpose of qualifying for the Retail Order Tier 
by means of a tag in the order entry message. 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 is proposing to permit ETP Holders to designate orders 
as Retail Orders for the purpose of qualifying for the Retail Order 
Tier by means of a tag in the order entry message. The Exchange 
proposes to implement the change effective December 1, 2012.
    On August 1, 2012, the Exchange introduced the ``Retail Order 
Tier,'' a new tier and corresponding credit in the Fee Schedule for ETP 
Holders, including Market Makers, that execute an average daily volume 
(``ADV'') of Retail Orders during the particular month that is 0.40% or 
more of the U.S. Consolidated ADV.\4\ For purposes of the Retail Order 
Tier and credit, a ``Retail Order'' is an agency order that originates 
from a natural person and is submitted to the Exchange by an ETP 
Holder, provided that no change is made to the terms of the order with 
respect to price or side of market and the order does not originate 
from a trading algorithm or any other computerized methodology.
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    \4\ Exchange Act Release No. 34-67540 (July 30, 2012), 77 FR 
46539 (August 3, 2012) (SR-NYSEArca-2012-77).
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    As part of qualifying for the Retail Order Tier, an ETP Holder is 
required to designate certain of its order entry ports at the Exchange 
as ``Retail Order Ports'' and attest, in a form and/or manner 
prescribed by the Exchange, that all orders submitted to the Exchange 
via such Retail Order Ports are Retail Orders.
    The Exchange proposes to provide an additional method for ETP 
Holders to designate orders as Retail Orders. Specifically, the 
Exchange proposes to allow ETP Holders to designate orders as Retail 
Orders by using a tag in the order entry message. ETP Holders would 
still be able to use Retail Order Ports to designate orders as Retail 
Orders.
    As currently required with the use of Retail Order Ports to 
designate orders as Retail Orders, an ETP Holder designating orders as 
Retail Orders by using a tag in the order entry message will be 
required to have written policies and procedures reasonably designed to 
assure that it will only designate orders as Retail Orders if all 
requirements of a Retail Order are met. The written policies and 
procedures must require the ETP Holder to (i) exercise due diligence 
before entering a Retail Order to assure that entry as a Retail Order 
is in compliance with the requirements specified by the Exchange, and 
(ii) monitor whether orders entered as Retail Orders meet the 
applicable requirements. If the ETP Holder represents Retail Orders 
from another broker-dealer customer, the ETP Holder's supervisory 
procedures must be reasonably designed to assure that the orders it 
receives from such broker-dealer customer that it designates as Retail 
Orders meet the definition of a Retail Order. The ETP Holder must (i) 
obtain an annual written representation, in a form acceptable to the 
Exchange, from each broker-dealer customer that sends it orders to be 
designated as Retail Orders that entry of such orders as Retail Orders 
will be in compliance with the requirements specified by the Exchange, 
and (ii) monitor whether its broker-dealer customer's Retail Order flow 
continues to meet the applicable requirements.\5\
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    \5\ The Financial Industry Regulatory Authority, Inc. 
(``FINRA''), on behalf of the Exchange, will review an ETP Holder's 
compliance with these requirements through an exam-based review of 
the ETP Holder's internal controls.

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[[Page 72426]]

    The proposed change is not otherwise intended to address any other 
matter, and the Exchange is not aware of any significant problem that 
ETP Holders would have in complying with the proposed change.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Securities Exchange Act of 1934 (the 
``Act''),\6\ in general, and furthers the objectives of Section 6(b)(4) 
of the Act,\7\ in particular, because it provides for the equitable 
allocation of reasonable dues, fees, and other charges among its 
members and issuers and other persons using its facilities and does not 
unfairly discriminate between customers, issuers, brokers, or dealers.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change is reasonable 
since permitting ETP Holders to use alternative methods to designate 
orders as Retail Orders will encourage the development of the 
Exchange's liquidity pool, and thus support the quality of price 
discovery, promote market transparency, and improve investor 
protection. The Exchange believes the proposed change is reasonable 
because it will provide ETP Holders alternative ways to designate 
orders as Retail Orders while ensuring that ETP Holders are required to 
have written policies and procedures designed to assure that they will 
only designate orders as Retail Orders if all requirements of a Retail 
Order are met.
    The Exchange believes that the proposed rule change is equitable 
and not unfairly discriminatory because it provides a second method for 
Retail Order designation and allows each ETP Holder to choose the 
designation method most convenient to it, recognizing that individual 
firms have different internal system configurations. By providing 
alternative avenues for ETP Holders to designate orders as Retail 
Orders, the Exchange believes that ETP Holders will choose the 
designation method that is most operationally efficient, potentially 
reducing transaction costs.
    Finally, the Exchange notes that it operates in a highly 
competitive market in which market participants can readily favor 
competing venues. 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.

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 the NYSE Arca.
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 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-NYSEARCA-2012-129 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.

All submissions should refer to File Number SR-NYSEARCA-2012-129. 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-NYSEARCA-2012-129 and should 
be submitted on or before December 26, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-29316 Filed 12-4-12; 8:45 am]
BILLING CODE 8011-01-P