Document ID: SEC-2012-0930-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2012-06-12T04:00Z

[Federal Register Volume 77, Number 113 (Tuesday, June 12, 2012)]
[Notices]
[Pages 35089-35091]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-14190]

[[Page 35089]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67143; File No. SR-NYSEArca-2012-52]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending the 
Qualifications for Credits for Electronic Executions of Posted Customer 
Liquidity in Penny Pilot Issues and To Amend the Fees for Electronic 
Complex Order Executions

June 6, 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 Arca, Inc. (the ``Exchange'' or ``NYSE Arca'') 
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 qualifications for credits for 
electronic executions of posted Customer liquidity in Penny Pilot 
issues and to amend the fees for Electronic Complex Order executions. 
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 qualifications for credits for 
electronic executions of posted Customer liquidity in Penny Pilot 
issues and to amend the fees for Electronic Complex Order executions. 
The Exchange proposes to make the changes operative on June 1, 2012.
    For executions prior to May 8, 2012, OTP Holders and OTP Firms that 
exceed the following thresholds of total monthly electronic executions 
of Customer posted liquidity receive the corresponding credits for all 
electronic executions of Customer posted liquidity in Penny Pilot 
issues:\3\
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    \3\ As provided under NYSE Arca Options Rule 6.72, options on 
certain issues have been approved to trade with a minimum price 
variation of $0.01 as part of a pilot program that is currently 
scheduled to expire on June 30, 2012. The Exchange will submit a 
separate rule filing to extend the terms of the pilot.

                   Customer Monthly Posting Thresholds
------------------------------------------------------------------------
                                        Monthly total      Per contract
                                     contracts executed     rate on all
                                         from posted          posted
                                          liquidity          liquidity
------------------------------------------------------------------------
Threshold 1.......................  More than 350,000...          -$0.28
Threshold 2.......................  More than 800,000...          -$0.36
Threshold 3.......................  More than 1,200,000.          -$0.42
Threshold 4.......................  More than 3,500,000.          -$0.43
------------------------------------------------------------------------

    For executions beginning May 8, 2012, OTP Holders and OTP Firms 
that meet or exceed the qualifications below receive the corresponding 
credit for all electronic executions of Customer posted liquidity in 
Penny Pilot issues:

----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
         Tier              Qualification basis (average electronic executions per day) **      Credit applied to
                                                                                               posted electronic
                                                                                                        customer
                                                                                                   executions in
                                                                                                     penny pilot
                                                                                                          issues
----------------------------------------------------------------------------------------------------------------
Base.................  ......................  ......................  ......................            ($0.25)
Tier 1...............  15,000 Customer Posted  ......................  ......................             (0.38)
                        Contracts in Penny
                        Pilot Issues.
Tier 2...............  25,000 Customer Posted  75,000 Posted           ......................             (0.40)
                        Contracts in Penny      Contracts in Penny
                        Pilot Issues, or.       Pilot Issues, any
                                                Account Type\*\.
Tier 3...............  50,000 Customer Posted  ......................  ......................             (0.43)
                        Contracts in Penny
                        Pilot Issues.
Tier 4...............  65,000 Customer Posted  100,000 Posted          100,000 Customer                   (0.44)
                        Contracts in Penny      Contracts in Penny      Posted and Removing
                        Pilot Issues, Plus      Pilot Issues, any       Contracts in Penny
                        0.3% of U.S. Equity     Account type,\*\ or.    Pilot Issues.
                        Market Share Posted
                        and Executed on NYSE
                        Arca Equity
                        Market,\*\ or.
----------------------------------------------------------------------------------------------------------------
* Includes transaction volume from the OTP Holder's or OTP Firm's affiliates.
** For the month of May 2012, calculation of average electronic executions per day shall begin on May 8, 2012.

[[Page 35090]]

    The Exchange proposes to amend the Fee Schedule as follows. First, 
the Exchange proposes to eliminate the transitional tiers for 
electronic executions of posted Customer liquidity in Penny Pilot 
issues that were applicable through May 7, 2012 because they will no 
longer apply as of June 1, 2012.
    Second, for the Customer monthly posting tier qualifications, the 
Exchange proposes that each qualification calculation also include an 
OTP Holder's or OTP Firm's executions of Electronic Complex Orders, 
including those from the OTP Holder's or OTP Firm's affiliates, for all 
issues and regardless of account type.\4\ For example, to qualify for 
Tier 2, an OTP Holder or OTP Firm would be required to either execute 
electronically (1) an average daily volume (``ADV'') of 25,000 
contracts from the combination of (i) posted Customer orders in Penny 
Pilot issues and (ii) Electronic Complex Orders from all OTP Holders 
and Firms and their affiliates, in all issues and regardless of account 
type, or (2) an ADV of 75,000 contracts from the combination of (i) 
posted contracts in Penny Pilot issues, regardless of account type, and 
(ii) Electronic Complex Orders from all OTP Holders and Firms and their 
affiliates, in all issues and regardless of account type. There would 
be no change to the credit rates that correspond to the tiers.
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    \4\ Although the Exchange will include these Electronic Complex 
Orders in the calculation of the Customer monthly posting tier 
qualifications, executions of Electronic Complex Orders will not 
receive a credit under this section of the Fee Schedule.
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    Finally, the Exchange proposes to amend the rates for Electronic 
Complex Order executions. Under NYSE Arca Options Rule 6.91, an 
Electronic Complex Order means any Complex Order \5\ or any Stock/
Option Order \6\ or Stock/Complex Order \7\ that is entered into the 
NYSE Arca System. As proposed, all Complex to Complex Order executions 
would be 0.06 per contract side, rather than the current 0.10 per 
contract side. Additionally, a Complex to Complex Order for which the 
same OTP Holder or OTP Firm represents both sides will no longer be 
free, but would instead be charged the 0.06 rate per contract side 
proposed herein.
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    \5\ Under NYSE Arca Options Rule 6.62(e), a Complex Order is any 
order involving the simultaneous purchase and/or sale of two or more 
different option series in the same underlying security, for the 
same account, in a ratio that is equal to or greater than one-to-
three (.333) and less than or equal to three-to-one (3.00) and for 
the purpose of executing a particular investment strategy.
    \6\ Under NYSE Arca Options Rule 6.62(h), a Stock/Option Order 
is an order to buy or sell a stated number of units of an underlying 
stock or a security convertible into the underlying stock 
(``convertible security'') coupled with the purchase or sale of 
option contract(s) on the opposite side of the market representing 
either (A) the same number of units of the underlying stock or 
convertible security, or (B) the number of units of the underlying 
stock necessary to create a delta neutral position, but in no case 
in a ratio greater than eight option contracts per unit of trading 
of the underlying stock or convertible security established for that 
series by the Options Clearing Corporation.
    \7\ Under NYSE Arca Options Rule 6.62(h), a Stock/Complex Order 
is the purchase or sale of a Complex Order coupled with an order to 
buy or sell a stated number of units of an underlying stock or a 
security convertible into the underlying stock (``convertible 
security'') representing either: (A) The same number of units of the 
underlying stock or convertible security as are represented by the 
options leg of the Complex Order with the least number of Options 
contracts, or (B) the number of units of the underlying stock 
necessary to create a delta neutral position, but in no case in a 
ratio greater than 8 options contracts per unit of trading of the 
underlying stock or convertible security established for that series 
by the Clearing Corporation, as represented by the options leg of 
the Complex Order with the least number of options contracts.
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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''),\8\ in general, and furthers the objectives of Section 6(b)(4) 
of the Act,\9\ in particular, because it provides for the equitable 
allocation of reasonable dues, fees, and other charges among its 
members, issuers and other persons using its facilities and does not 
unfairly discriminate between customers, issuers, brokers or dealers.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that deleting outdated text adds clarity to 
the Fee Schedule and makes it easier to use.
    The Exchange believes that charging all Complex to Complex Order 
executions $0.06 per contract side, rather than the current $0.10 per 
contract side, and eliminating the special rate (i.e., no charge) for 
Complex to Complex Orders when the same firm represents both sides is 
reasonable, equitable, and non-discriminatory because the Exchange has 
determined that the special rate has not led to increased trading 
volumes and therefore it would be more equitable to charge all 
participants the same rate.
    The Exchange further believes that including Electronic Complex 
Orders in the eligibility for Customer posting credits in Penny Pilot 
issues is reasonable, equitable, and not unfairly discriminatory 
because it would incent OTP Holders and OTP Firms to increase the level 
of order flow sent to, and liquidity added on, the Exchange, thereby 
potentially improving the quality and efficiency of order interaction 
and executions on the Exchange. The inclusion of Complex trades will 
also encourage more complex orders to be sent to the Exchange, thereby 
increasing trade opportunities for all participants. The Exchange 
further believes that the tiers, as amended, are reasonable, equitable 
and not unfairly discriminatory because they are set at levels that 
would be more achievable for OTP Holders and OTP Firms. Overall, the 
Exchange believes that this will result in more OTP Holders and OTP 
Firms qualifying for the tiers, receiving the credits, and therefore 
reducing their overall transaction costs on the Exchange. The Exchange 
further believes that the proposed change is reasonable, equitable and 
not unfairly discriminatory because the tiers, and the corresponding 
credits, will apply uniformly to all OTP Holders and OTP Firms.
    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. The Exchange believes that the 
proposed rule change reflects this competitive environment because it 
would broaden the conditions under which OTP Holders and OTP Firms may 
qualify for the tiers and because it would result in an increase in the 
corresponding credit rates.

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) \10\ of the Act and

[[Page 35091]]

subparagraph (f)(2) of Rule 19b-4 \11\ thereunder, because it 
establishes a due, fee, or other charge imposed by the NYSE Arca.
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 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-2012-52 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-2012-52. 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-2012-52 and should 
be submitted on or before July 3, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-14190 Filed 6-11-12; 8:45 am]
BILLING CODE 8011-01-P