Document ID: SEC-2013-2017-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2013-11-27T05:00Z

[Federal Register Volume 78, Number 229 (Wednesday, November 27, 2013)]
[Notices]
[Pages 71016-71018]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-28417]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70912; File No. SR-NYSEARCA-2013-128]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the NYSE 
Arca Equities Schedule of Fees and Charges for Exchange Services To 
Specify the Method of Billing When More Than One Pricing Tier Could Be 
Applicable

November 21, 2013.
    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 November 15, 2013, 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 ``Fee Schedule'') to 
specify the method of billing when more than one pricing tier could be 
applicable. The Exchange proposes to implement the Fee Schedule change 
immediately. 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.

[[Page 71017]]

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 specify the method of billing when more 
than one pricing tier could be applicable. The Exchange proposes to 
implement the Fee Schedule change immediately.
    An ETP Holder may qualify for several different pricing ``Tiers'' 
based on its level of activity during a particular month. These Tiers 
each have a corresponding fee or credit that applies to the ETP 
Holder's transactions during the month. Generally, a qualifying ETP 
Holder would be subject to a lower transaction fee or a higher 
transaction credit, depending on the particular Tier. For example, an 
ETP Holder that qualifies for Tape C Step Up Tier 2 receives an 
incremental $0.0002 per share credit for executions that provide 
liquidity to the Book in Tape C securities, which is in addition to the 
ETP Holder's Tiered or Basic Rate credit(s) (e.g., $0.0002 in addition 
to the $0.0030 credit under Tier 1).\4\
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    \4\ To qualify for the Tape C Step Up Tier 2 an ETP Holder must 
directly execute providing average daily volume (``ADV'') 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 Tape C 
Adding ADV during the second quarter of 2012 (``Q2 2012''), subject 
to the ETP Holder's combined providing ADV in Tape A, Tape B, and 
Tape C Securities during the billing month as a percentage of 
consolidated ADV (``CADV'') being no less than during Q2 2012.
     To qualify for Tier 1, an ETP Holder must (1) provide liquidity 
an ADV per month of 0.70% or more of CADV or (2) (a) provide 
liquidity an ADV per month of 0.15% or more of CADV and (b) be 
affiliated with an Options Trading Permit (``OTP'') Holder or OTP 
Firm that provides an ADV of electronic posted executions (including 
all account types) in Penny Pilot issues on NYSE Arca Options 
(excluding mini options) of at least 100,000 contracts, of which at 
least 25,000 contracts must be for the account of a market maker.
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    Due to the lower fee or higher credit that applies, certain of the 
pricing Tiers specify that a qualifying ETP Holder is not able to 
qualify to receive certain other specific Tier pricing. Continuing with 
the example above, Tape C Step Up Tier 2 provides that Investor Tier 1 
and Cross-Asset Tier ETP Holders, among others, cannot qualify for Tape 
C Step Up Tier 2.\5\ Without these exclusions, an ETP Holder could 
receive a higher credit than intended (e.g., $0.0034 under Investor 
Tier 1 plus $0.0002 under Tape C Step Up Tier 2 would be a total credit 
of $0.0036) or lower fees compared to the other fees and credits in the 
Fee Schedule.\6\
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    \5\ To qualify for Investor Tier 1, an ETP Holder must (1) 
provide liquidity of 0.60% or more of CADV per month, (2) maintain a 
ratio of cancelled orders to total orders of less than 30%, 
excluding Immediate-or-Cancel orders, and (3) maintain a ratio of 
executed liquidity adding volume-to-total volume of greater than 
80%.
     To qualify for the Cross Asset Tier, an ETP Holder must (1) 
provide liquidity of 0.40% or more of the CADV per month, and (2) be 
affiliated with an OTP Holder or OTP Firm that provides an ADV of 
electronic posted Customer executions in Penny Pilot issues on NYSE 
Arca Options (excluding mini options) of at least 0.95% of total 
Customer equity and exchange-traded fund option ADV, as reported by 
The Options Clearing Corporation.
    \6\ See Securities Exchange Act Release No. 67461 (July 18, 
2012), 77 FR 43408, 43409 (July 24, 2012) (SR-NYSEArca-2012-69) in 
which the Exchange noted its belief that prohibiting certain ETP 
Holders from qualifying for the Tape C Step Up Tier 2 was 
reasonable, equitable and not unfairly discriminatory because the 
ETP Holders that qualify for certain other Tiers would already 
receive a higher credit for such executions.
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    The Exchange determines qualifications for the Tiers after the 
billing month ends. If an ETP Holder or Market Maker qualifies for more 
than one Tier in the Fee Schedule, the Exchange applies the most 
favorable rate available under such Tiers. For example, if an ETP 
Holder or Market Maker qualifies for both the Cross-Asset Tier and the 
Tape C Step Up Tier 2, the Exchange will apply the single most 
favorable tier to the ETP Holder or Market Maker. The Exchange has 
consistently applied pricing in this manner and now proposes to codify 
this practice by adding text to the Tiers in the Fee Schedule that 
could be effected.
    The proposed change is not otherwise intended to address any other 
issues and the Exchange is not aware of any problems that ETP Holders 
would have in complying with the proposed change.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\7\ in general, and furthers the 
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\8\ 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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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed change is reasonable 
because it specifies the Exchange's current method of billing when more 
than one pricing Tier could be applicable to an ETP Holder. This method 
of billing is reasonable because it results in the application of the 
most beneficial fees and credits for which an ETP Holder qualifies when 
an ETP Holder qualifies for more than one pricing Tier. The proposed 
change is equitable and not unfairly discriminatory because it applies 
to all ETP Holders equally. The proposed change is also equitable and 
not unfairly discriminatory because it eliminates the potential for an 
ETP Holder that qualifies for more than one pricing Tier to receive 
less favorable pricing than other ETP Holders that qualify for one of 
the same Tiers.
    Finally, the Exchange believes that it is subject to significant 
competitive forces, as described below in the Exchange's statement 
regarding the burden on competition.
    For these reasons, the Exchange believes that the proposal is 
consistent with the Act.

B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act,\9\ 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. Instead, the proposed change describes the 
Exchange's existing method of applying fees and credits for ETP Holders 
that qualify for the various Tiers within the Fee Schedule. This 
billing method is designed to result in the application of the most 
beneficial fees and credits for which an ETP Holder qualifies if such 
ETP Holder qualifies for more than one pricing Tier. This billing 
method is also designed to increase competition on the Exchange by 
eliminating a potential disincentive for ETP Holders to submit orders 
on the Exchange--i.e., if less beneficial fees and credits could apply 
as a result of qualifying for multiple Tiers. 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 or 
credit levels at a particular venue to be unattractive. In such an 
environment, the Exchange must continually review, and consider 
adjusting, its fees and credits to remain competitive with other 
exchanges. The billing method described herein is based on objective 
standards that are applicable to all ETP Holders and reflects the need 
for the Exchange to offer significant financial incentives to attract 
order flow. For these reasons, the Exchange believes that the proposed 
rule change reflects this competitive environment and is therefore 
consistent with the Act.
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    \9\ 15 U.S.C. 78f(b)(8).

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[[Page 71018]]

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 Exchange.
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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. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \12\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \12\ 15 U.S.C. 78s(b)(2)(B).
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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 email to rule-comments@sec.gov. Please include 
File Number SR-NYSEARCA-2013-128 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-2013-128. 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 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-2013-128 and should 
be submitted on or before December 18, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-28417 Filed 11-26-13; 8:45 am]
BILLING CODE 8011-01-P