Document ID: SEC-2012-2071-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2012-12-17T05:00Z

[Federal Register Volume 77, Number 242 (Monday, December 17, 2012)]
[Notices]
[Pages 74723-74725]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-30290]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68399; File No. SR-NYSEARCA-2012-134]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the NYSE 
Arca Options Fee Schedule To Allow Manual Orders Entered Into the 
Exchange's Electronic Order Capture System or Entered Into an Order 
Entry Device and Contemporaneously Recorded Into the EOC System To 
Qualify for the Manual Transaction Fee

December 11, 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 November 29, 2012, 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 Options Fee Schedule 
(``Fee Schedule'') to allow manual orders that are entered into the 
Exchange's Electronic Order Capture (``EOC'') System or entered into an 
order entry device approved by the Exchange and contemporaneously 
recorded into the EOC System to qualify for the manual transaction fee. 
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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend the Fee Schedule to allow manual 
orders that are entered into the Exchange's EOC System \4\ or entered 
into an order entry device approved by the Exchange and 
contemporaneously recorded into the EOC System to qualify for the 
manual transaction fee. The Exchange proposes to make the fee change 
operative on December 1, 2012.
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    \4\ The EOC System is the Exchange's electronic audit trail and 
order tracking system that provides an accurate time-sequenced 
record of all orders and transactions on the Exchange. EOC records 
the receipt of an order and documents the life of the order through 
the process of execution, partial execution, or cancellation. See 
NYSE Arca Options Rule 6.1(b)(39).
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    In December 2011, the Exchange amended endnote 5 of the Fee 
Schedule to reflect that a manual order that executes in part against 
an electronic order or quote resting on the Consolidated Book prior to 
executing against interest in the trading crowd would be assessed the 
applicable manual transaction fee for the entire order.\5\ However, if 
a manual order executes completely against an electronic order or 
quote, and therefore does not execute against interest in the trading 
crowd, then the order would be charged the applicable electronic 
transaction fee. The Exchange also specified that in order to be 
eligible for the manual transaction fee, all orders must be entered 
into the Exchange's EOC System. Therefore, currently, Floor Brokers 
that enter orders into an order entry device rather than only into the

[[Page 74724]]

EOC System are not eligible to take advantage of the lower transaction 
fees for manual orders, even though orders entered into such devices 
are recorded in the EOC System. For example, a Floor Broker manual 
order in a Non Penny Pilot Issue is currently charged a standard 
execution fee of $0.25 per contract. However, if such Floor Broker 
manual order is entered in an order entry device in order to interact 
with orders in the Consolidated Book, then the Floor Broker is charged 
the electronic execution rate of $0.85 per contract for taking 
liquidity. The Exchange proposes to make explicit in endnote 5 that, in 
order to be eligible for the manual transaction fee, all orders must be 
entered into the Exchange's EOC System. In addition, the Exchange 
proposes to expand such eligibility requirement to include manual 
orders entered into an order entry device approved by the Exchange and 
contemporaneously recorded in the Exchange's EOC System. The approved 
order entry devices would provide an audit trail and order tracking 
system for executed orders which would allow such orders to be matched 
upon recordation into the EOC System. The approved order entry devices 
would be announced via Regulatory Bulletin.
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    \5\ See Securities Exchange Act Release No. 65922 (December 9, 
2011), 76 FR 78066 (December 15, 2011) (SR-NYSEArca-2011-91).
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    Currently, electronic orders and quotes resting on the Consolidated 
Book have priority over equal-priced bids or offers in the trading 
crowd.\6\ In this regard, a Floor Broker, after negotiating a price 
with the trading crowd, may be required to trade against resting 
interest on the Consolidated Book (``clear the Book'') before trading 
against interest in the trading crowd. Pursuant to NYSE Arca Rule 6.67, 
Options Trading Permit (``OTP'') Holders and OTP Firms use the EOC for 
the systematization and manual execution of orders executed by open 
outcry.
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    \6\ See NYSE Arca Options Rule 6.75(a) and (b).
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    To avoid Trade-Throughs, which are prohibited by NYSE Arca Rule 
6.94, Floor Brokers often direct their support staff to enter orders 
into an order entry device while they are executing an order in the 
trading crowd in order to clear the Consolidated Book and away markets. 
Floor Brokers are not required to use an order entry device; however, 
the Exchange recognizes that Floor Brokers use order entry devices to 
accommodate their business decisions regarding best practices because 
such devices capture unique order information and OTP identification 
and are able to pass such information to the Exchange for recordation 
into the EOC System. The Exchange believes that Floor Brokers that 
enter orders on order entry devices and contemporaneously record such 
orders into the EOC System achieve the same execution goals for manual 
orders as those entered only through the EOC System, and therefore, 
should be subject to the same manual pricing structure.
    The Exchange notes that the proposed changes are not otherwise 
intended to address any other issues and the Exchange is not aware of 
any problems that OTP Holders and OTP 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 Securities Exchange Act of 1934 (the 
``Act''),\7\ in general, and furthers the objectives of Section 6(b)(4) 
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. 
The Exchange also believes that the proposed rule change is consistent 
with Section 6(b)(5) of the Act,\9\ in particular, because it is 
designed to remove impediments to, and perfect the mechanisms of, a 
free and open market and a national market system and, in general, to 
protect investors and the public interest.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(4).
    \9\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that incorporating the manual transaction fee 
eligibility requirement into the Fee Schedule and expanding the 
requirement to include manual orders entered into an order entry device 
approved by the Exchange and contemporaneously recorded in the 
Exchange's EOC System is reasonable because the Fee Schedule would more 
clearly describe the types of manual orders that qualify for the manual 
transaction fee. In addition, the Exchange believes that expanding the 
requirement to include manual orders entered into order entry devices 
and recorded in the EOC System is reasonable because Floor Brokers that 
use order entry devices are executing trading interest in the 
Consolidated Book on an efficient basis and should be able to benefit 
from the reduced manual transaction fee. The Exchange believes that the 
proposed rule change is equitable and not unfairly discriminatory 
because Floor Brokers that enter orders through order entry devices 
achieve the same execution goals as orders entered only through the EOC 
System, and, therefore, should be subject to the same fee structure. 
Furthermore, any order entered through an order entry device would have 
an audit trail and order tracking, and would be recorded into the EOC 
System. In addition, Floor Brokers use order entry devices to avoid 
Trade-Throughs on the Exchange, which thereby benefits the Exchange and 
all market participants, and therefore, it is equitable and not 
unfairly discriminatory to extend the manual transaction fee to Floor 
Brokers that use such devices to enter manual orders.
    By clarifying the eligibility requirement for the manual 
transaction fee, the proposed rule change eliminates confusion, thereby 
removing an impediment to and perfecting the mechanism of a free and 
open market system. The clarification of this eligibility requirement 
will also make it easier for the Exchange to administer the manual 
transaction fee and ensure that it is appropriately assessed when it is 
applicable.
    Finally, the Exchange notes that it operates in a highly 
competitive market in which market participants can readily favor 
competing venues. 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.

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 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,

[[Page 74725]]

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-2012-134 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-2012-134. 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 20549-1090, 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 NYSE's principal office and 
on its Internet Web site at www.nyse.com. 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-2012-134, and should be 
submitted on or before January 7, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-30290 Filed 12-14-12; 8:45 am]
BILLING CODE 8011-01-P