Document ID: SEC-2012-0055-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2012-01-12T05:00Z

[Federal Register Volume 77, Number 8 (Thursday, January 12, 2012)]
[Notices]
[Pages 1969-1971]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-419]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66115; File No. SR-NYSEArca-2011-101]

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 
Replacing Numerical Thresholds With Percentage Thresholds for the 
Investor Tiers' Volume Requirements

January 6, 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 December 30, 2011, 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 (the ``Schedule'') to replace 
numerical thresholds with percentage thresholds for the Investor Tiers' 
volume requirements. The text of the proposed rule change is available 
at the Exchange, the Commission's Public Reference Room, and 
www.nyse.com.

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
    Effective January 1, 2012, NYSE Arca proposes to amend the 
Schedule, as described below.
Investor Tier Volume Requirements: Replacing Numerical Thresholds With 
Percentage Thresholds
    Effective June 1, 2011, NYSE Arca introduced two pricing tier 
levels, Investor Tier 1 and Investor Tier 2.\4\ Currently, Investor 
Tier 1 allows customers to earn a credit of $0.0032 per share and 
Investor Tier 2 allows customers to earn a credit of $0.0030 per share 
for executed orders that provide liquidity to the Book for Tape A, Tape 
B and Tape C securities when they meet all of the following criteria on 
a monthly basis:
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    \4\ See Securities Exchange Act Release No. 64593 (June 3, 
2011), 74 FR 33380 (June 8, 2011) (SR-NYSEArca-2011-34)[sic].

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[[Page 1970]]

     Maintain a ratio of cancelled orders to total orders of 
less than 30%. In calculating this ratio, the Exchange will exclude 
Immediate-or-Cancel orders, which are liquidity removing in nature.
     Maintain a ratio of executed liquidity adding volume to 
total volume of greater than 80%.
     Firms must add at least 35 million shares of liquidity per 
day on NYSE Arca to qualify for Investor Tier 1 and add at least 10 
million shares of liquidity per day on NYSE Arca to qualify for 
Investor Tier 2. Trade activity on days when the market closes early is 
excluded from both Investor Tiers.
    The Exchange proposes to change the Investor Tier 1 and Investor 
Tier 2 adding volume requirements from numerical thresholds (e.g., 35 
million shares) to percentage thresholds of average US consolidated 
daily volumes (e.g., 0.45% of the volumes). Volume requirements to 
reach the tiered pricing levels will adjust each calendar month based 
on US average daily consolidated share volume in Tape A, Tape B, and 
Tape C securities (``US ADV'') for that given month. US ADV is equal to 
the volume reported by all exchanges and trade reporting facilities to 
the Consolidated Tape Association Plan for Tapes A, B and C securities; 
however, US ADV does not include trades on days when the market closes 
early.
    Transactions that are not reported to the Consolidated Tape, such 
as odd-lots and Crossing Session 2 transactions, are not included in US 
ADV. The Exchange currently makes this data publicly available on a T + 
1 basis from a link at http://www.nyxdata.com/US-and-European-Volumes.
    In order to adopt a requirement that is consistent from month to 
month, NYSE Arca is modifying both the 35 million share volume per day 
requirement (for Investor Tier 1) and 10 million share volume per day 
requirement (for Investor Tier 2) so that they are directly tied to a 
customer's percentage of total US ADV. Effective January 1, the per day 
volume requirement for Investor Tier 1 will be changed from the current 
35 million share adding volume per day requirement to adding liquidity 
that represents 0.45% or more of the total US ADV. Also effective 
January 1, the per day volume requirements for Investor Tier 2 will be 
changed from the current 10 million share adding volume per day 
requirement to adding liquidity that represents 0.20% or more, but less 
than 0.45% of the total US ADV. All other requirements for Investor 
Tier 1 and Investor Tier 2 remain unchanged.
    For example, if US ADV is 8.5 billion shares in a given month, the 
minimum adding ADV requirement for Investor Tier 1 would be 38.250 
million adding shares a day, and the minimum adding ADV requirement for 
Investor Tier 2 would be 17.0 million adding shares a day.
    NYSE Arca is moving to the percentage approach for several reasons. 
The Exchange believes that it is a more straightforward way to 
communicate floating volume tiers and, as noted in a previous filing, 
other exchanges have adopted a similar approach.\5\ The Exchange notes 
that the percentage approach allows tiers to move in sync with 
consolidated volume, whereas the current approach has distinct break 
points and is set at varying percentages of consolidated volume. The 
proposed change will ensure that a customer providing that level of 
liquidity will consistently receive the Investor Tier 1 or Tier 2 
credits, whereas a customer providing that level of liquidity under the 
current schedule might receive the Investor Tier 1 or Tier 2 credits in 
some months but not in others as overall market volumes fluctuated.
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    \5\ See Securities Exchange Act Release No. 64627 (June 8, 
2011), 74 FR 34788 (June 14, 2011) (SR-NYSEArca-2011-35)[sic]. See 
Securities Exchange Act Release No. 64453 (May 10, 2011), 76 FR 
28252 (May 16, 2011); and Securities Exchange Act Release No. 64452 
(May 10, 2011), 76 FR 28252 (May 16, 2011) [sic]. See Nasdaq Stock 
Market LLC Price List--Trading & Connectivity, ``Add and Remove 
Rates'' at http://www.nasdaqtrader.com/Trader.aspx?id=PriceListTrading2#rebates, and EDGX Exchange Fee 
Schedule, n. 1 at http://www.directedge.com/Membership/FeeSchedule/EDGXFeeSchedule.aspx.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Securities Exchange Act of 1934 
(the ``Act''),\6\ in general, and Section 6(b)(4) of the Act,\7\ 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. The Exchange believes 
that the proposal does not constitute an inequitable allocation of 
fees, as all similarly situated member organizations and other market 
participants will be charged the same amount and access to the 
Exchange's market is offered on fair and non-discriminatory terms.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(4).
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    With respect to the replacement of share thresholds with percentage 
thresholds for the adding liquidity requirements in the Investor Tiers, 
NYSE Arca believes that the change is reasonable, because it will 
result in more predictability from month to month with respect to the 
levels of liquidity provision required to receive the applicable 
pricing levels. Although the changes will make it easier to achieve the 
applicable Investor Tier in some months and more difficult in other 
months, depending on overall market volumes, NYSE Arca believes the 
levels of activity required to achieve the applicable Investor Tier are 
generally consistent with existing requirements for these tiers. 
Moreover, like existing pricing tiers tied to volume levels, as in 
effect at NYSE Arca and other markets, the proposed pricing tiers are 
equitable and non-discriminatory because they are open to all customers 
on an equal basis and provide discounts that are reasonably related to 
the value to an exchange's market quality associated with higher 
volumes. NYSE Arca believes that the overall effect of the changes may 
make it easier for customers to receive higher rebates in months with 
lower trading volumes, thereby reducing prices for those customers that 
were previously unable to qualify for an enhanced credit, but that are 
able to do so under the revised pricing schedule.
    NYSE Arca also notes that a number of exchanges previously adopted 
tiers based on percentage thresholds, including Nasdaq, and Direct Edge 
EDGX.\8\ NYSE Arca also previously adopted tiers based on percentage 
thresholds for its Tier 1, Tier 2, and Tier 3.\9\
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    \8\ See n. 5.
    \9\ See Securities Exchange Act Release No. 64627 (June 8, 
2011), 74 FR 34788 (June 14, 2011) (SR-NYSEArca-2011-35)[sic].
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    Finally, 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 adjust 
its fees to remain competitive with other exchanges and with 
alternative trading systems that have been exempted from compliance 
with the statutory standards applicable to exchanges. The Exchange 
believes that the proposed rule change reflects this competitive 
environment because it will broaden the conditions under which 
customers may qualify for higher liquidity provider credits.

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

[[Page 1971]]

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 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-2011-101 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-2011-101. 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 
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 
submissions should refer to File Number SR-NYSEArca-2011-101 and should 
be submitted on or before February 2, 2012.

    \12\ 17 CFR 200.30-3(a)(12).
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    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-419 Filed 1-11-12; 8:45 am]
BILLING CODE 8011-01-P