Document ID: SEC-2013-1692-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2013-10-01T04:00Z

[Federal Register Volume 78, Number 190 (Tuesday, October 1, 2013)]
[Notices]
[Pages 60364-60366]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-23901]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70503; File No. SR-NYSEArca-2013-95]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending the NYSE 
Arca Options Fee Schedule To Add an Additional Tier to the Lead Market 
Maker Rights Fees

September 25, 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 September 19, 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.
---------------------------------------------------------------------------

    \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 add an additional tier to the Lead Market Maker 
(``LMM'') rights fees. The Exchange proposes to implement the fee 
change effective October 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 amend the Fee Schedule to add an 
additional tier to the LMM rights fees. The Exchange proposes to 
implement the fee change effective October 1, 2013.
    OTP Firms acting as LMMs are assessed a fee for LMM rights for each 
appointed issue.\4\ The LMM rights fee is based on the average national 
daily volume (``ADV'') of Customer contracts traded in that issue.\5\ 
The LMM rights fees are assessed at the end of each month on each issue 
that an LMM holds in its LMM appointment. Currently, the LMM rights 
fees are charged as follows:
---------------------------------------------------------------------------

    \4\ ``OTP Firm'' is defined in NYSE Arca Rule 1.1(r). ``Market 
Maker'' is defined in NYSE Arca Rule 6.32. ``Lead Market Maker'' is 
defined in NYSE Arca Rule 6.82.
    \5\ The term ``Customer'' excludes a broker-dealer. See NYSE 
Arca Rule 6.1A(a)(4).

------------------------------------------------------------------------
                                                                Monthly
          Average national daily customer contracts            issue fee
------------------------------------------------------------------------
0-1,000.....................................................         $45
1,001 to 2,000..............................................          75
2,001 to 5,000..............................................         200
5,001 to 15,000.............................................         375
15,001 to 100,000...........................................         750
Over 100,000................................................       1,500
------------------------------------------------------------------------

    The Exchange's formal listing standards are provided under NYSE 
Arca Rule 5.3 (Criteria for Underlying Securities) and prescribe the 
minimum standards that must be satisfied before the Exchange lists a 
particular issue. However, the Exchange is not required to list an 
issue simply because it satisfies the minimum standards. To date, the 
Exchange generally has not listed an issue if the Exchange anticipated 
that it would trade an ADV of 100 or fewer Customer contracts because 
the minimal revenue associated with such low-volume issues would not 
offset the costs of listing and maintaining the listing of such issues. 
However, other exchanges do list such issues, and the Exchange has 
determined that it may be appropriate to list these low-volume issues 
as a convenience for OTP Holders and OTP Firms whose customers wish to 
transact in such issues and to satisfy requests of LMMs that have 
requested appointments in such issues.
    In order to better align the Exchange's revenue with the costs of 
listing these low-volume issues, the Exchange proposes to add an 
additional LMM rights fee tier for issues with an ADV of Customer 
contracts of between 0 and 100. The LMM rights fee for this new tier 
would be $125. The resulting LMM rights fees would be charged as 
follows:

------------------------------------------------------------------------
                                                                Monthly
          Average national daily customer contracts            issue fee
------------------------------------------------------------------------
0-100.......................................................        $125
101-1,000...................................................          45
1001 to 2,000...............................................          75
2,001 to 5,000..............................................         200
5,001 to 15,000.............................................         375
15,001 to 100,000...........................................         750
Over 100,000................................................       1,500
------------------------------------------------------------------------

    The Exchange proposes that the new LMM rights fee tier apply only 
to (i) an option listed on the Exchange for the first time on or after 
October 1, 2013, and (ii) an option listed on the Exchange prior to 
October 1, 2013 that is reallocated to a new LMM on or after October 1, 
2013. Thus, the LMM for an issue with an ADV of Customer contracts 
within the new lowest tier (i.e., 0-100 contracts) that listed on the 
Exchange prior to October 1, 2013 would continue to be subject to the 
$45 monthly issue fee. If, on or after October 1, 2013, the LMM 
relinquished that appointment and a new LMM applied for and was granted 
an appointment in that issue, then the new LMM would be subject to the 
revised fees; following the reallocation, if the issue traded a monthly 
ADV of 100 or fewer Customer contracts, then the new LMM would pay the 
$125 monthly fee.
    The proposed change is not otherwise intended to address any other 
issues, and the Exchange is not aware of any problems that LMMs would 
have in complying with the proposed change.\6\
---------------------------------------------------------------------------

    \6\ The Exchange notes that NYSE MKT LLC submitted a similar 
proposal to implement a rights tier and fee for low-volume issues 
listed on NYSE Amex Options LLC. See Securities Exchange Act Release 
No. 67153 (June 7, 2012), 77 FR 35437 (June 13, 2012) (SR-NYSEMKT-
2012-05).
---------------------------------------------------------------------------

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

[[Page 60365]]

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 including an additional LMM rights fee 
tier with a corresponding fee of $125 is reasonable because it would 
better balance the Exchange's costs to list and maintain the listing of 
these lowest volume issues against the minimal revenue that such issues 
are anticipated to generate for the Exchange. The Exchange also 
believes that it is reasonable to grandfather LMMs that hold an 
appointment in an issue listed before October 1, 2013 at the lower $45 
fee level in order to create an incentive for LMMs to maintain those 
appointments.
    The fee increase is also reasonable, equitable, and not unfairly 
discriminatory because it will encourage more efficient use of the 
Exchange's resources. Unfettered growth in option listings without an 
offsetting growth in volume would ultimately result in increased costs 
for all participants on the Exchange. As a result of the fee increase, 
LMMs that wish to request new appointments in the lowest volume issues 
would directly contribute toward some of the Exchange's costs to 
support that trading instead of having those costs shared among all 
Exchange participants. The Exchange also believes that the fee increase 
is equitable and not unfairly discriminatory because LMMs choose to 
apply for appointments, and thus only those LMMs that are willing to 
pay the applicable fee will apply for the appointment. An LMM that does 
not wish to pay the higher fee for a new appointment after October 1, 
2013 will not request such an appointment, nor will it be required to 
take one. The Exchange believes that it is equitable and not unfairly 
discriminatory to grandfather those LMMs that maintain appointments in 
previously listed issues that have a monthly ADV of 100 or fewer 
Customer contracts after October 1, 2013 at the $45 monthly fee level; 
otherwise, those LMMs would face a significant monthly fee increase. 
The Exchange believes that grandfathering is fair and reasonable in 
light of existing LMMs' expectations concerning fee levels at the time 
their appointments were accepted.
    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 rule change would enhance competition 
among exchanges by permitting the Exchange to better balance its 
revenues and costs when listing extremely low-volume issues that also 
may be listed on other exchanges. The Exchange does not believe that 
the proposed change would burden competition among LMMs because LMMs 
apply for such appointments based on their own business decisions.
---------------------------------------------------------------------------

    \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 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-2013-95 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-2013-95. 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-2013-95, and should 
be submitted on or before October 22, 2013.

[[Page 60366]]

    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. 2013-23901 Filed 9-30-13; 8:45 am]
BILLING CODE 8011-01-P