Document ID: SEC-2013-1899-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2013-11-06T05:00Z

[Federal Register Volume 78, Number 215 (Wednesday, November 6, 2013)]
[Notices]
[Pages 66794-66796]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-26558]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70795; File No. SR-NYSEArca-2013-109]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending the NYSE 
Arca Options Fee Schedule To Apply Routing Fees to Penny Pilot Issues

October 31, 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 October 22, 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-

[[Page 66795]]

regulatory organization. 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\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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

    The Exchange proposes to amend the NYSE Arca Options Fee Schedule 
(``Fee Schedule'') to apply routing fees to Penny Pilot issues. The 
Exchange proposes to implement the fee change effective November 1, 
2013. 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to apply routing fees to Penny Pilot issues. 
The Exchange proposes to implement the fee change effective November 1, 
2013.
    The Exchange currently charges a routing fee of $0.11 per contract 
for orders in non-Penny Pilot issues that are routed and executed at 
away market centers pursuant to order protection requirements of the 
Options Order Protection and Locked/Crossed Market Plan.\4\ The fee 
applies to standard and Mini option contracts. In addition, the 
Exchange passes through any transaction fees charged by the destination 
exchange on executions of such routed orders. The Exchange pays a fee 
to its routing brokers, and in turn pays clearing fees to OCC to clear 
routed orders.
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Release No. 64216 (April 6, 
2011), 76 FR 20396 (April 12, 2011) (SR-NYSEArca-2011-16).
---------------------------------------------------------------------------

    The Exchange proposes to begin charging the same $0.11 per contract 
routing fee for orders in Penny Pilot issues, which would apply to both 
standard and Mini option contracts. The Exchange also proposes to pass 
through any transaction fees charged by the destination exchange on 
executions of routed orders in Penny Pilot issues. The proposed change 
would not affect the applicable liquidity take rates for Penny Pilot or 
non-Penny Pilot issues. The Exchange notes that it did not initially 
impose the routing fee on Penny Pilot issues because Penny Pilot issues 
were charged a take liquidity fee that offset the cost of routing.\5\ 
The Exchange subsequently imposed a take liquidity fee on non-Penny 
Pilot issues.\6\ The Exchange believes that imposing a routing fee 
would further defray the cost of routing orders and would allow routed 
orders in Penny Pilot issues to be charged in the same manner as routed 
orders in non-Penny Pilot issues, which may reduce investor confusion. 
The Exchange notes that firms may avoid routing charges by either 
routing orders themselves directly to the away market that is at the 
National Best Bid or Offer (``NBBO''), or by use of various order types 
on the Exchange that carry an instruction to not route the order.
---------------------------------------------------------------------------

    \5\ Id. at 20398.
    \6\ See Securities Exchange Act Release No. 68179 (November 8, 
2012), 77 FR 68163 (November 15, 2012) (SR-NYSEArca-2012-121).
---------------------------------------------------------------------------

    The proposed change is not otherwise intended to address any other 
issues, and the Exchange is not aware of any problems that firms 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 (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.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    The Exchange believes that it is reasonable to impose routing fees 
on Penny Pilot issues because it would further defray the cost of 
routing orders. These charges may be avoided by direct routing of an 
order to the away market that is at the NBBO or by the use of do-not-
route order types on the Exchange. The Exchange believes that it is 
equitable and not unfairly discriminatory to impose routing fees on 
Penny Pilot issues because they are applied in an identical manner to 
all market participants with similarly situated orders. In addition, 
the Exchange would be imposing the same routing fees that currently 
apply to non-Penny Pilot issues. The Exchange also believes that 
harmonizing the routing fees that apply to Penny Pilot and non-Penny 
Pilot issues would reduce client confusion.
    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. The proposed changes will assist the Exchange in 
balancing its revenues and costs when routing orders to away market 
centers and allow routed orders in Penny Pilot issues to be charged in 
the same manner as routed orders in non-Penny Pilot issues, which may 
reduce investor confusion. The Exchange also notes that firms may avoid 
these charges by direct routing of an order to the away market that is 
at the NBBO or by the use of do-not-route order types on the Exchange.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    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 
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.

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

[[Page 66796]]

subparagraph (f)(2) of Rule 19b-4 \11\ thereunder, because it 
establishes a due, fee, or other charge imposed by the Exchange.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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-2013-109 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-2013-109. 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 such 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-2013-109, and 
should be submitted on or before November 27, 2013.

For the Commission, by the Division of Trading and Markets, pursuant 
to delegated authority.\13\
---------------------------------------------------------------------------

    \13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-26558 Filed 11-5-13; 8:45 am]
BILLING CODE 8011-01-P