Document ID: SEC-2012-1196-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2012-07-24T04:00Z

[Federal Register Volume 77, Number 142 (Tuesday, July 24, 2012)]
[Notices]
[Pages 43408-43410]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-17979]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67461; File No. SR-NYSEArca-2012-69]

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

 July 18, 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 July 12, 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 Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the NYSE Arca Equities Schedule of 
Fees and Charges for Exchange Services (``Fee Schedule''). The Exchange 
proposes to implement the fee changes on July 12, 2012. 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend the Fee Schedule, as described 
below, and implement the fee changes on July 12, 2012.
    ETP Holders, including Market Makers, are currently eligible to 
qualify for the Tape C Step Up Tier and the corresponding reduced 
execution fee of $0.0029 per share for orders that take liquidity from 
the Exchange in Tape C securities.
    The Exchange proposes to introduce a Tape C Step Up Tier 2 for ETP 
Holders, including Market Makers, that, on a daily basis, measured 
monthly, directly execute providing volume in Tape C Securities (``Tape 
C Adding ADV'') during the billing month that is at least 2 million 
shares greater than the ETP Holder's or Market Maker's Tape C Adding 
ADV during the second calendar quarter of 2012 (``Q2 2012''), subject 
to the ETP Holder's or Market Maker's combined providing ADV in Tape A, 
Tape B, and Tape C securities during the billing month as a percentage 
of CADV being no less than during Q2 2012.\4\
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    \4\ For purposes of determining whether a firm that becomes an 
ETP Holder after Q2 2012 qualifies for the Tape C Step Up Tier 2, 
the new ETP Holder's Tape C Adding ADV during Q2 2012 would be zero. 
Similarly, the ETP Holder's combined providing ADV in Tape A, Tape 
B, and Tape C securities during Q2 2012 would be zero. Additionally, 
the ADV of a firm that becomes an ETP Holder during Q2 2012 would be 
calculated based on the number of trading days during Q2 2012, not 
the number of trading days during which the firm was an ETP Holder.
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    ETP Holders and Market Makers that satisfy the requirements for the 
Tape C Step Up Tier 2 will receive a $0.0002 per share credit for 
orders that provide liquidity to the Exchange in Tape C Securities, 
which shall be in addition to the ETP Holder's or Market Maker's Tiered 
or Basic Rate credit(s).\5\ As

[[Page 43409]]

proposed, Investor Tier 1 and Investor Tier 2 ETP Holders and Market 
Makers could not qualify for the Tape C Step Up Tier 2. However, 
Investor Tier 3 ETP Holders and Market Makers could qualify for the 
Tape C Step Up Tier 2 credit. For all other fees and credits, Tiered or 
Basic Rates would apply based on a firm's qualifying levels. The 
Exchange proposes prohibiting Investor Tier 1 and Investor Tier 2 ETP 
Holders from qualifying for the Tape C Step Up Tier 2 because the ETP 
Holders that qualify for Investor Tier 1 and Investor Tier 2 would 
already receive a higher credit for such executions. In contrast, the 
Exchange proposes permitting Investor Tier 3 ETP Holders to qualify for 
the Tape C Step Up Tier 2 credit because, even when combined with the 
$0.0002 Tape C Step Up Tier 2 credit, the ETP Holders that qualify for 
Investor Tier 3 would not achieve an overall credit rate that is higher 
than that which is available under Investor Tiers 1 or 2.
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    \5\ The Exchange notes that, for purposes of determining whether 
an ETP Holder or Market Maker qualifies for the Tape C Step Up Tier 
2 for the month of July 2012, the ETP Holder's or Market Maker's 
Tape C Adding ADV during the billing month would be measured 
beginning on July 12, 2012, the effective and operative date of this 
proposed change, through the end of the month and would not take 
into account the activity or trading days prior to that date. 
Similarly, the ETP Holder's or Market Maker's combined providing ADV 
in Tape A, Tape B, and Tape C securities during the billing month as 
a percentage of CADV would be calculated using the period beginning 
on July 12, 2012 through the end of the month and would not take 
into account the activity or trading days prior to that date. For an 
ETP Holder or Market Maker that qualifies for the $0.0002 per share 
credit for July 2012, the credit would not apply to the ETP Holder's 
or Market Maker's orders that provide liquidity to the Exchange in 
Tape C Securities prior to July 12, 2012.
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    For example, assume that a particular ETP Holder's Tape C Adding 
ADV during the billing month is 4 million shares and that its Tape C 
Adding ADV during Q2 2012 was 1.5 million shares. Additionally, assume 
that the ETP Holder's combined providing ADV in Tape A, Tape B, and 
Tape C securities during the billing month was 0.25% of CADV and that 
its combined providing ADV in Tape A, Tape B, and Tape C securities 
during Q2 2012 was 0.23% of CADV. In this example, the ETP Holder would 
qualify for the Tape C Step Up Tier 2 and would receive a credit of 
$0.0002 per share for its orders that provide liquidity to the Exchange 
in Tape C securities, which would be in addition to the ETP Holder's 
Tiered or Basic Rate credit(s).\6\ However, if the ETP Holder's Tape C 
Adding ADV during the billing month were 3 million shares, i.e., less 
than 2 million shares greater than the Q2 2012 amount, then the ETP 
Holder would not qualify for the Tape C Step Up Tier 2. Similarly, if 
the ETP Holder's combined providing ADV in Tape A, Tape B, and Tape C 
securities during the billing month were 0.20% of CADV, i.e., less than 
the Q2 2012 percentage, then the ETP Holder would not qualify for the 
Tape C Step Up Tier 2.
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    \6\ For example, if the ETP Holder submits a Mid-Point Passive 
Liquidity Order that provides liquidity on the Exchange and the ETP 
Holder is billed according to Basic Rates, the ETP Holder would 
receive a total credit of $0.0017 per share (i.e., $0.0015 per share 
pursuant to the Basic Rates plus $0.0002 per share pursuant to the 
Tape C Step Up Tier 2).
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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''), 
in general, and furthers the objectives of Section 6(b)(4) of the Act, 
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.
    The Exchange believes that the proposed rule change is reasonable, 
equitable and not unfairly discriminatory because it would encourage 
ETP Holders to send additional orders in Tape C securities to the 
Exchange for execution in order to qualify for an incrementally higher 
credit for such executions that add liquidity on the Exchange. In this 
regard, the Exchange believes that this may incentivize ETP Holders to 
increase the orders sent directly to the Exchange and therefore provide 
liquidity that supports the quality of price discovery and promotes 
market transparency.
    The Exchange believes that the rate proposed for the Tape C Step Up 
Tier 2 credit is reasonable because it is directly related to an ETP 
Holder's level of executions in Tape C securities during the month. The 
Exchange also believes that the proposed rate is reasonable because, 
when combined with other Tier or Basic Rate credits that are available 
to ETP Holders, it is consistent with certain other credits, such as 
the Investor Tier 2 credit of $0.0032, which are available to ETP 
Holders that satisfy certain criteria related to the ETP Holder's level 
of trading activity on the Exchange. Additionally, the Exchange 
believes that the proposed Tape C Step Up Tier 2 credit is equitable 
and not unfairly discriminatory because it would incentivize ETP 
Holders to submit orders in Tape C securities to the Exchange and would 
result in a credit that is reasonably related to an exchange's market 
quality that is associated with higher volumes. Moreover, like existing 
pricing on the Exchange that is tied to ETP Holder volume levels, the 
Exchange believes that the proposed Tape C Step Up Tier 2 credit is 
equitable and not unfairly discriminatory because it would be available 
for all ETP Holders, including Market Makers, on an equal and non-
discriminatory basis.
    Additionally, the Exchange believes that prohibiting Investor Tier 
1 and Investor Tier 2 ETP Holders from qualifying for the Tape C Step 
Up Tier 2 is reasonable, equitable and not unfairly discriminatory 
because the ETP Holders that qualify for Investor Tier 1 and Investor 
Tier 2 would already receive a higher credit for such executions. In 
contrast, the Exchange believes that permitting Investor Tier 3 ETP 
Holders to qualify for the Tape C Step Up Tier 2 credit is reasonable, 
equitable and not unfairly discriminatory because, even when combined 
with the $0.0002 Tape C Step Up Tier 2 credit, the ETP Holders that 
qualify for Investor Tier 3 would not achieve an overall credit rate 
that is higher than that which is available under Investor Tiers 1 or 
2.
    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) \7\ of the Act and subparagraph (f)(2) of Rule 19b-
4 \8\ thereunder, because it establishes a due, fee, or other charge 
imposed by NYSE Arca.
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 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.

[[Page 43410]]

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-2012-69 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-2012-69. 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 Section, 100 F Street 
NE., Washington, DC 20549-1090. Copies of the filing will also be 
available for inspection and copying at the NYSE's principal office and 
on its Internet Web site at www.nyse.com. 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-2012-69 and should be submitted 
on or before August 14, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-17979 Filed 7-23-12; 8:45 am]
BILLING CODE 8011-01-P