Document ID: SEC-2007-0202-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: NYSE Arca, Inc.
Posted Date: 2007-02-09T05:00Z

[Federal Register: February 9, 2007 (Volume 72, Number 27)]
[Notices]               
[Page 6306-6308]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09fe07-95]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55223; File No. SR-NYSEArca-2007-07]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change and Amendment No. 2 
Thereto Relating to Exchange Fees and Charges

February 1, 2007.
    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 January 22, 2007, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'') 
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 substantially prepared by NYSE Arca. On January 29, 
2007, the Exchange filed Amendment No. 1 to the proposed rule change. 
On January 31, 2007, NYSE Arca withdrew Amendment No. 1 and filed 
Amendment No. 2 to the proposed rule change. The Exchange has 
designated this proposal as one establishing or changing a due, fee or 
other charge imposed by the Exchange under Section 19(b)(3)(A) \3\ and 
Rule 19b-4(f)(2) 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, as amended, 
from interested persons.
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    \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)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NYSE Arca proposes to amend its Schedule of Fees and Charges for 
Services (``Schedule'') in order to revise certain Transaction Fees and 
to eliminate Marketing Fees for issues that trade as part of the Penny 
Pilot Program (``Pilot'' or ``Penny Pilot Program'').\5\ The text of 
the proposed rule change is available at http://www.nysearca.com/regulation/filings.asp
, at the Exchange, and at the Commission's Public 

Reference Room.
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    \5\ See Securities Exchange Act Release No. 55156 (January 23, 
2007) 72 FR 4759 (February 1, 2007) (SR-NYSEArca-2006-73).

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[[Page 6307]]

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, NYSE Arca included statements 
concerning the purpose of, and basis for, the proposed rule change and 
discussed any comments it received on the proposal. The text of these 
statements may be examined at the places specified in Item IV below. 
NYSE Arca has prepared summaries, set forth in sections A, B, and C 
below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to revise the existing 
NYSE Arca Schedule in conjunction with the introduction of the Penny 
Pilot Program. The Exchange plans to include the following issues as 
part of the Penny Pilot Program. Agilent Technologies: (A), Advanced 
Micro Devices (AMD), Caterpillar (CAT), Flextronics International 
(FLEX), General Electric (GE), Intel (INTC), iShares Russell 2000 Index 
fund (IWM), Microsoft (MSFT), Nasdaq-100 Index Tracking Stock (QQQQ), 
Semiconductor Holders Trust (SMH), Sun Microsystems (SUNW), Texas 
Instruments (TXN), and Whole Foods Markets (WFMI). NYSE Arca is 
proposing to amend its Schedule in order to make the following changes 
to certain fees and charges that are assessed to OTP Holders and OTP 
Firms \6\ in the above listed issues.
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    \6\ The terms OTP Holders and OTP Firms are defined in NYSE Arca 
Rules 1.1(q) and 1.1(r), respectively. OTP Holders and OTP Firms 
have the status of a ``member'' of NYSE Arca as that term is defined 
in Section 3 of the Act.
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Transaction Fees

    NYSE Arca is proposing to implement a Post/Take pricing model for 
electronically executed transactions in issues that are part of the 
Penny Pilot Program. Under the proposed rate schedule, all electronic 
orders that add or ``post'' liquidity to the Consolidated Book (resting 
orders and resting quotes) will receive a transaction credit upon 
execution. Registered Market Makers \7\ will receive a credit of $0.30 
per contract. All other trade participants, including but not limited 
to Brokers-Dealers and OTP Firms representing both Firm and Public 
Customer orders, will receive a credit of $0.25 per contract.
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    \7\ The term Market Maker is defined in NYSE Arca Rules 6.1(c) 
and 6.1A(a)(8).
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    The Transaction Fee for all trade participants that ``take'' 
liquidity from the Consolidated Book (incoming electronic quotes and 
orders that are executed upon receipt) will be $0.50 per contract. This 
fee will be applied to all trade participants, including Market Makers, 
Broker-Dealers and OTP Firms executing orders on behalf of Public 
Customers.
    Electronically entered Contingency Orders, such as All or None 
(``AON'') and Immediate or Cancel (``IOC'') are deemed to be taking 
liquidity and therefore will be assessed the $0.50 per contract fee.
    Orders that take place as part of an Opening Auction are deemed to 
neither take nor post liquidity. For this reason, in issues that trade 
as part of the Penny Pilot Program, executions that take place as part 
of an Opening Auction will neither be assessed nor credited the 
Transaction Fee.

Linkage Fees

    Linkage Orders executed at NYSE Arca are subject to the same 
billing treatment as other Broker Dealer orders.\8\ Since Linkage 
Orders that are sent to and executed on NYSE Arca will be taking 
liquidity, these orders will be assessed a $0.50 per contract fee. This 
fee remains unchanged from the present fee. Linkage Orders that are not 
executed upon receipt are rejected back to the sender and are never 
posted in the Consolidated Book. Therefore, a Linkage Order would never 
be eligible to receive a credit of the Transaction Fee.
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    \8\ Fees imposed on Linkage Orders are subject to an Exchange 
pilot program and will expire on July 31, 2007.
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Royalty Fees

    For electronic executions in issues included in the Penny Pilot 
Program, where the Exchange pays a Royalty Fee to a licensed 
underwriter, the Royalty Fee will be passed through to the trading 
participant on the ``take'' side of the transaction. Royalty Fees will 
not be assessed on executions occurring during the Opening Auction in 
Pilot issues. Open Outcry executions in Pilot issues and all executions 
in non-Pilot issues will be subject to the current billing treatment 
covering Royalty Fees.
    The above rates apply only to electronically executed transactions 
in Penny Pilot issues mentioned above, effective upon the date that 
they rollout as part of the Pilot. Initial plans for the Penny Pilot 
Program do not include any issues that have Royalty Fees associated 
with them. In the event that the Exchange was to propose the inclusion 
of a Royalty Fee issue in the Penny Pilot Program, it would do so 
through a rule filing with the Commission pursuant to Rule 19b-4.

Marketing Fees

    The Exchange presently assesses Market Makers \9\ a $0.65 per 
contract Marketing Fee on all transactions involving public customer 
orders. For orders in the NASDAQ-100 Tracking Stock (QQQQ), the 
Exchange charges Market Makers $0.95 per contract; in the Standard and 
Poor's Depository Receipts (SPY), the Exchange charges $1.00 per 
contract. Market Makers are assessed Marketing Fees on both public 
customer orders and Broker Dealer orders in the QQQQ and the SPY. 
Market Maker to Market Maker orders are never assessed a Marketing Fee.
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    \9\ See supra, note 7.
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    As part of the Penny Pilot Program, NYSE Arca will be quoting and 
trading a limited number of issues in one cent increments. For 
transactions in issues which are included as part of the Penny Pilot 
Program, the Exchange will no longer collect a Marketing Fee. All other 
aspects of the Marketing Fee will remain the same.

Rollout of the Pilot

    The Penny Pilot Program commenced on January 26, 2007.\10\ 
Initially, as mentioned above, only a limited number of issues will be 
included in the Pilot. It is anticipated that the rollout of all issues 
will be completed over a three week period. The above rate changes 
apply only to transactions in Pilot issues, effective upon the date 
that they rollout as part of the Penny Pilot Program.
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    \10\ See supra, note 5.
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2. Statutory Basis
    NYSE Arca believes that the proposed rule change is consistent with 
Section 6(b) of the Act,\11\ in general, and furthers the objectives of 
Section 6(b)(4) of the Act,\12\ in particular, in that it is designed 
to provide for the equitable allocation of dues, fees and other charges 
among its members.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    NYSE Arca 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.

[[Page 6308]]

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 has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act \13\ and subparagraph (f)(2) of Rule 19b-4 
thereunder \14\ because it establishes or changes a due, fee or other 
charge imposed by the Exchange. At any time within 60 days of the 
filing of such proposed rule change, the Commission may summarily 
abrogate such rule change if it appears to the Commission that such 
action is necessary of appropriate in the public interest, for the 
protection of investors, or otherwise in the furtherance of the 
purposes of the Act.
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b7-4(f)(2).
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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-2007-07 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE, 
Washington DC 20549-1090.

All submissions should refer to File Number SR-NYSEArca-2007-07. 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. Copies of such 
filing also will be available for inspection and copying at the 
principal office of NYSE Arca. 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 No. SR-NYSEArca-2007-07 and should be submitted on or before March 
2, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-2129 Filed 2-8-07; 8:45 am]

BILLING CODE 8010-01-P