Document ID: SEC-2009-1451-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Activity Assessment Fees
Posted Date: 2009-10-09T04:00Z

[Federal Register: October 9, 2009 (Volume 74, Number 195)]
[Notices]               
[Page 52285-52288]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09oc09-120]                         

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60766; File No. SR-NYSEArca-2009-86]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Relating to 
Activity Assessment Fees

October 1, 2009.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is 
hereby given that, on September 28, 2009, NYSE Arca, Inc. (``NYSE 
Arca'' or the ``Exchange'') filed with the Securities and Exchange 
Commission (the ``Commission'') the proposed rule change as described 
in Items I and II below, which Items have been prepared by the 
Exchange. NYSE Arca filed the proposed rule change as a ``non-
controversial'' proposal pursuant to Section 19(b)(3)(A) of the Act \3\ 
and Rule 19b-4(f)(6) thereunder,\4\ which renders the proposal 
effective upon filing with the Commission. 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\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

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

    NYSE Arca proposes to, among other changes, (1) amend NYSE Arca 
Equities Rule 2.17(a) to provide for an Activity Assessment Fee to be 
paid by ETP Holders in connection with the Exchange's required payments 
to the Commission under Section 31 of the Exchange Act; \5\ (2) add 
Commentary .01 to NYSE Arca Equities Rule 2.17 to allow ETP Holders to 
voluntarily submit to the Exchange, on or before December 31, 2009, 
funds that may have been previously accumulated by them to satisfy 
their, and subsequently NYSE Arca's, obligation to remit Section 31-
related fees; and (3) amend NYSE Arca Options Rule 2.18(a) to provide 
for an Activity Assessment Fee to be paid by OTP Firms and Holders in 
connection with the required payments to the Commission under Section 
31 of the Exchange Act.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78ee.
---------------------------------------------------------------------------

    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.nyse.com, at the Exchange's principal office and 
at the Public Reference Room of the Commission.

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
    Pursuant to Section 31 of the Exchange Act and Rule 31 
thereunder,\6\ national securities exchanges and associations 
(collectively, ``SROs'') are required to pay a transaction fee to the 
SEC that is designed to recover the costs related to the government's 
supervision and regulation of the securities markets and securities 
professionals. To offset this obligation, the ETP Holders (under NYSE 
Arca Equities Rule 2.17) and OTP Firms and OTP Holders (under NYSE Arca 
Options Rule 2.18) are assessed charges in connection with satisfaction 
of the Exchange's payment obligations under Section 31. The Exchange 
calculates such fees by multiplying the aggregate dollar amount of 
``covered sales'' (as defined in Section 31 of the Exchange Act) 
effected on the Exchange during the appropriate period by the Section 
31(b) fee rate in effect during that period. Clearing members may in 
turn seek to charge a fee to their customers or correspondent firms. 
Any allocation of the fee between the clearing member and its 
correspondent firm or customer is the responsibility of the clearing 
member.
---------------------------------------------------------------------------

    \6\ 17 CFR 240.31.
---------------------------------------------------------------------------

    NYSE Arca Equities Rule 2.17 and NYSE Arca Options Rule 2.18 relate 
to payment by ETP Holders (pursuant to NYSE Arca Equities Rule 2.17) 
and by

[[Page 52286]]

OTP Firms and OTP Holders (pursuant to NYSE Arca Options Rule 2.18) of 
charges imposed by the Exchange in connection with the Exchange's 
payment to the Commission of amounts required under Section 31 of the 
Exchange Act. The Exchange proposes to (1) provide for an Activity 
Assessment Fee to be paid by ETP Holders in connection with the 
Exchange's required payments to the Commission under Section 31 of the 
Exchange Act; (2) add Commentary .01 to NYSE Arca Equities Rule 2.17 to 
allow ETP Holders to voluntarily submit to the Exchange, on or before 
December 31, 2009, funds that may have been previously accumulated by 
them to satisfy their, and subsequently NYSE Arca's, obligation to 
remit Section 31-related fees; and (3) amend NYSE Arca Options Rule 
2.18(a) to provide for an Activity Assessment Fee to be paid by OTP 
Firms and Holders in connection with the required payments to the 
Commission under Section 31 of the Exchange Act.
Proposed Amendments to NYSE Arca Equities Rule 2.17
    The Exchange proposes to amend NYSE Arca Equities Rule 2.17(a) to 
delete outdated language regarding amounts payable under Section 31. 
The rule, as amended, characterizes the fees payable under such rule as 
Activity Assessment Fees. The proposed rule states that each ETP Holder 
that effects securities transactions on the Corporation that are 
defined in Section 31 of the Exchange Act as ``covered sales'' of 
securities shall pay to the Corporation Activity Assessment Fees based 
upon all of their covered sales. The proposed rule provides that the 
Exchange shall calculate Activity Assessment Fees by multiplying the 
aggregate dollar amount of covered sales effected on the Corporation by 
the ETP Holder during the appropriate computational period by the 
Section 31(b) fee rate in effect during that computational period. The 
proposed rule provides that Activity Assessment Fees shall be due and 
payable at such times and intervals as prescribed by the Exchange, and 
that ETP Holders that cease to effect securities transactions on the 
Corporation shall promptly pay to the Corporation any sum due pursuant 
to the rule. In addition, the Exchange proposes to add paragraph (c) to 
NYSE Arca Equities Rule 2.17 to provide that, to the extent that there 
may be excess monies collected under NYSE Arca Equities Rule 2.17(a), 
the Corporation may retain those monies to help fund its regulatory 
expenses.
Program for Payment of Accumulated Funds or Designation of Exchange 
Accumulated Excess
    Reconciling the amounts billed by the Exchange and the amounts 
collected from the customers historically had been difficult for ETP 
Holders, possibly causing surpluses to accumulate at some broker-dealer 
firms (referred to herein as ``accumulated funds''). Such accumulated 
funds may not have been remitted to the Exchange by certain firms, 
despite the fact that these charges may have been previously identified 
as ``Section 31 Fees'' or ``SEC Fees'' by the firms.\7\ In addition, 
the Exchange has accumulated amounts remitted to the Corporation by ETP 
Holders collected by such ETP Holders in excess of their Rule 2.17 
assessment, and in excess of amounts paid by the Corporation to the SEC 
pursuant to Section 31 of the Exchange Act (``Corporation accumulated 
excess'').
---------------------------------------------------------------------------

    \7\ The SEC stated in its release adopting new Rule 31 and Rule 
31T that ``it is misleading to suggest that a customer or an SRO 
member incurs an obligation to the Commission under Section 31.'' 
See Securities Exchange Act Release No. 49928 (June 28, 2004), 69 FR 
41060, 41072 (July 7, 2004).
---------------------------------------------------------------------------

    In November 2004, the Exchange and other self-regulatory 
organizations (``SROs'') received a letter from the SEC's Division of 
Market Regulation (now the Division of Trading and Markets) requesting, 
among other things, that the Exchange conduct an analysis to ascertain 
the amount of accumulated funds and present a plan for broker-dealers 
to dispose of or otherwise resolve title to such accumulated funds. 
Following discussion among the SROs and staff of the Division of Market 
Regulation, in an effort to ascertain the amount of accumulated funds, 
the NASD (now FINRA) surveyed 240 member clearing and self-clearing 
firms to review their practices regarding the collection of such fees 
from customers. After compiling and analyzing the data provided by 
member firms, NASD staff found that over half of the firms surveyed did 
not have an accumulated funds balance. NASD worked with the other SROs 
to recommend a potential solution to allow NASD and other SRO member 
firms to resolve title to the accumulated funds. It was determined, 
based upon information provided in connection with NASD's survey, that 
it would be virtually impossible to return customer-related accumulated 
funds to the customers that had paid these funds to the firms.\8\
---------------------------------------------------------------------------

    \8\ NASD has asked all surveyed firms whether they could 
``identify and relate the funds to specific customers on a 
transaction by transaction basis.'' The surveyed firms universally 
stated that tracking fractions of a penny to individual customers 
would be impossible and any over-collections could not be passed 
back at the customer level. See Securities Exchange Act Release No. 
34-55697 (May 2, 2007), 72 FR 26432 (May 9, 2007) (SR-NASD-2007-
027).
---------------------------------------------------------------------------

    The proposed rule change is aimed at enabling those fees that may 
have been collected for purposes of paying an ``SEC Fee'' or ``Section 
31 Fee'' to be used to pay such fees. The Exchange is proposing new 
NYSE Arca Equities Rule 2.17, Commentary .01 that will allow ETP 
Holders, on a one-time-only basis, voluntarily to remit historically 
accumulated funds to the Exchange. These funds then would be used to 
pay the Exchange's current Section 31 fees in conformity with prior 
representations made by ETP Holders. In addition, an ETP Holder may 
designate all or part of the Exchange accumulated excess held by the 
Exchange and allocated to ETP Holder to be used by the Exchange in 
accordance with the terms of NYSE Arca Equities Rule 2.17, Commentary 
.01.
    Finally, to the extent the payment of these historically 
accumulated funds or Exchange accumulated excess is in excess of the 
fees due the SEC from NYSE Arca under Section 31 of the Exchange Act, 
such surplus shall be used by the Exchange to offset Exchange 
regulatory costs. Specifically, the Exchange will subject such surplus 
to the same treatment utilized with respect to unused fine income that 
has accumulated beyond a level reasonably necessary for future 
contingencies. That is, the board of directors of NYSE Regulation, Inc. 
will utilize such surplus to fund one or more special projects of NYSE 
Regulation, Inc., to reduce fees charged by NYSE Regulation, Inc. to 
its member organizations or the markets that it serves, or for a 
charitable purpose.\9\
---------------------------------------------------------------------------

    \9\ See Securities Exchange Act Release No. 55003 (December 22, 
2006), 71 FR 78497 (December 29, 2007) (SR-NYSE-2006-109) (approved 
in Securities Exchange Act Release No. 55216 (January 31, 2007), 72 
FR 5779 (February 7, 2007), relating to NYSE Regulation, Inc. 
policies regarding exercise of power to fine NYSE member 
organizations and use of money collected as fines).
---------------------------------------------------------------------------

    The Exchange proposes that the effective date of the proposed rule 
change would be the date of filing with the Commission pursuant to Rule 
19b-4(f)(6) under the Exchange Act.\10\ In addition, NYSE Arca Equities 
Rule 2.17, Commentary .01 would automatically sunset on December 31, 
2009.
---------------------------------------------------------------------------

    \10\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

Proposed Amendments to NYSE Arca Options Rule 2.18
    Similar to the proposed changes to NYSE Arca Equities Rule 2.17, 
described above, the Exchange also

[[Page 52287]]

proposes to delete outdated language regarding amounts payable under 
Section 31 in NYSE Arca Options Rule 2.18 and to characterize the fees 
payable under such rule as Activity Assessment Fees. The proposed rule 
states the current practice relating to collection and payment of 
Section 31-related fees for options transactions, namely, that Activity 
Assessment Fees are collected from OTP Firms and OTP Holders through 
their clearing firms by the Options Clearing Corporation on behalf of 
the Exchange. In addition, the Exchange proposes to add paragraph (c) 
to NYSE Arca Options Rule 2.18 to provide that, to the extent that 
there may be excess monies collected under NYSE Arca Equities Rule 
2.18(a), the Corporation may retain those monies to help fund its 
regulatory expenses.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) \11\ of 
the Exchange Act, in general, and furthers the objectives of Section 
6(b)(4) of the Exchange Act,\12\ which permits the rules of an Exchange 
to provide for the equitable allocation of reasonable dues, fees, and 
other charges among its members, and issuers and other persons using 
its facilities. In addition, the proposed rule change is consistent 
with Section 6(b)(5) \13\ of the Exchange Act in that it is designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities, and to remove impediments to and perfect the mechanisms of 
a free and open market and a national market system. The Exchange 
believes that the proposed rule change will provide a transparent way 
of addressing the issue of accumulated funds held at the member firm 
level as well as the Corporation accumulated excess. As this proposed 
rule change would automatically sunset, it will be of a limited 
duration. Moreover, based on the reminder set forth in the proposed 
NYSE Arca Equities Rule 2.17, Commentary .01 and the issuance of prior 
Information Memos on this matter, any accumulation of funds that are 
collected and disclosed as ``Section 31 Fees'' or ``SEC Fees'' should 
not reoccur.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(4).
    \13\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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 Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \14\ and Rule 19b-4(f)(6) thereunder.\15\ 
Because the proposed rule change does not: (i) Significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act \16\ and Rule 19b-
4(f)(6)(iii) thereunder.\17\
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \15\ 17 CFR 240.19b-4(f)(6).
    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's intent to file the proposed rule change along with a 
brief description and text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission. The 
Exchange has satisfied the pre-filing requirement.
---------------------------------------------------------------------------

    The Exchange requests that the Commission waive the 30-day 
operative delay to allow for implementation of the proposed voluntary 
program in a timely manner to accommodate the proposed December 31, 
2009 sunset date. The Commission has previously approved proposals for 
similar programs at other exchanges.\18\ Therefore, the Commission 
believes that waiving the 30-day operative delay to allow the Exchange 
to implement this proposed rule change without delay is consistent with 
the protection of investors and the public interest. The Commission 
hereby designates the proposal operative upon filing.\19\
---------------------------------------------------------------------------

    \18\ See, e.g., Securities Exchange Act Release Nos. 55886 (June 
8, 2007), 72 FR 32935 (June 14, 2007) (SR-NASD-2007-027); 57829 (May 
16, 2008), 73 FR 30173 (May 23, 2008) (SR-Amex-2007-107); and 58108 
(July 7, 2008), 73 FR 40413 (July 14, 2008) (SR-NYSE-2007-64).
    \19\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate 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-2009-86 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-2009-86. 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 inspection 
and copying 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 submissions. You should 
submit only information that you wish to make available publicly. All

[[Page 52288]]

submissions should refer to File Number SR-NYSEArca-2009-86 and should 
be submitted on or before October 30, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
---------------------------------------------------------------------------

    \20\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-24351 Filed 10-8-09; 8:45 am]

BILLING CODE 8011-01-P