
[Federal Register Volume 76, Number 133 (Tuesday, July 12, 2011)]
[Notices]
[Pages 40974-40976]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-17427]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64820; File No. SR-NYSEArca-2011-41]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending the NYSE 
Arca Equities Schedule of Fees and Charges for Exchange Services To 
Introduce Two New Pricing Tiers, Step-Up Tier 1 and Step-Up Tier 2

July 6, 2011.
    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 June 30, 2011, 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 Exchange. 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\ 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 ``Schedule'') to introduce 
two new pricing tiers, Step-Up Tier 1 and Step-Up Tier 2. The text of 
the proposed rule change is available at the Exchange, at http://www.nyse.com, at the Commission's Public Reference Room, and at the 
Commission's Web site at http://www.sec.gov.

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

[[Page 40975]]

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
    Effective July 1, 2011, NYSE Arca proposes to introduce two new 
pricing tier levels, Step-Up Tier 1 and Step-Up Tier 2.
    Step-Up Tier 1 will allow members to earn a credit of $0.00295 per 
share for executed orders that provide liquidity to the Book for Tape A 
and Tape C securities and a credit of $0.0023 per share for executed 
orders that provide liquidity to the Book for Tape B securities. 
Additionally, such members will be charged a fee of $0.0028 per share 
for orders that take liquidity from the Book for Tape B securities and 
a fee of $0.0029 per share for orders routed outside the Book to any 
away market centers for Tape B securities. Finally, such members also 
will be charged a fee of $0.0023 per share for orders routed outside 
the Book to the NYSE for Tape A securities. Step-Up Tier 2 will allow 
members to earn a credit of $0.0029 per share for executed orders that 
provide liquidity to the Book for Tape A and Tape C securities. 
Additionally, such members will be charged a fee of $0.0028 per share 
for orders that take liquidity from the Book for Tape B securities and 
a fee of $0.0029 per share for orders routed outside the Book to any 
away market centers for Tape B securities. Finally, such members also 
will be charged a fee of $0.0023 per share for orders routed outside 
the Book to the NYSE for Tape A securities. All other fees and credits 
will be at the existing tiered and basic rates based on the members' 
qualifying levels.
    In order to qualify for the Step-Up Tier 1, a member on a daily 
basis, measured monthly, must directly execute providing volume on NYSE 
Arca in an amount that is an increase of no less than 0.15% of US 
average daily consolidated share volume in Tape A, Tape B, Tape C 
securities (``US ADV'') for that month over the member's average daily 
providing volume in June 2011 (the ``Baseline Month''), subject to a 
minimum increase of 15 million average daily providing shares. In order 
to qualify for the Step-Up Tier 2, a member on a daily basis, measured 
monthly, must directly execute providing volume on NYSE Arca in an 
amount that is an increase of no less than 0.10% of US ADV for that 
month over the member's average daily providing volume in the Baseline 
Month, subject to a minimum increase of 10 million average daily 
providing shares.
    By way of example, if a member provided an average daily volume of 
5 million shares in the Baseline Month, then to qualify for Step-Up 
Tier 2 in a month where US ADV is 11 billion shares, that member would 
need to increase its average daily provide by at least 11 million 
shares, or 0.10% of that month's US ADV, for a total daily providing 
average of at least 16 million shares. If that same member in that same 
month increased its average daily provide by at least 16.5 million 
shares, or 0.15% of that month's US ADV, for a total daily providing 
average of at least 21.5 million shares, then that member would then 
qualify for Step-Up Tier 1.
    In addition, for both Step-Up Tier 1 and Step-Up Tier 2, those 
members that did not directly provide volume to NYSE Arca in the 
Baseline Month will be treated as having an Arca average daily 
providing volume of zero for the Baseline Month. With respect to the 
increased percentage of US ADV, the volume requirements to reach the 
Step-Up Tiers pricing levels will adjust each calendar month based on 
the US ADV for that given month. For purposes of clarification, US ADV 
is equal to the volume reported by all exchanges and trade reporting 
facilities to the Consolidated Tape Association (``CTA'') Plan for 
Tapes A, B and C securities, however, US ADV does not include trades on 
days when the market closes early.
    Transactions that are not reported to the Consolidated Tape, such 
as odd-lots and Crossing Session 2 transactions, are not included in US 
ADV. The Exchange currently makes this data publicly available on a T + 
1 basis from a link at http://www.nyxdata.com/US-and-European-Volumes.
    The Exchange notes that members may be able to qualify for more 
than one Tier in a given month, in such case, the most favorable rates 
would apply. For example, if a member directly provided 8 million 
average daily shares in the Baseline Month, and then increases the 
average daily providing volume by 12 million shares to 20 million 
shares in a subsequent month (where US ADV is 8 billion shares) and 
such provided liquidity meets all the requirements of Investor Tier 2 
as well as Step-up Tier 2, then such member would receive Investor Tier 
2 credits of $.0030 per share for providing liquidity, and would be 
charged Step-Up Tier 2 fees for taking liquidity and routing.
    The goal of the Step-Up Tiers is to incentivize members to increase 
the orders sent directly to NYSE Arca and therefore provide liquidity 
that supports the quality of price discovery and promotes market 
transparency. These Tiers would be expected to benefit members whose 
increased order flow provides added levels of liquidity, but may not be 
eligible for Tier 1, 2 and 3, or Investor Tier 1 and 2, thereby 
contributing to the depth and market quality of the Book. Additionally, 
a previous month baseline approach for rebates and fees has also been 
adopted by NASDAQ Stock Market LLC and EDGX for liquidity providers.\3\
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    \3\ See Securities Exchange Act Release No. 63628 (January 3, 
2011), 76 FR 1201 (January 7, 2011); and Securities Exchange Act 
Release No. 64632 (June 8, 2011), 76 FR 34792 (June 14, 2011). See 
EDGX Exchange Fee Schedule, n. 1 at http://www.directedge.com/Membership/FeeSchedule/EDGXFeeSchedule.aspx.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Securities Exchange Act of 1934 
(the ``Act''),\4\ in general, and Section 6(b)(4) of the Act,\5\ in 
particular, in that it is designed to provide for the equitable 
allocation of reasonable dues, fees, and other charges among its 
members and other persons using its facilities. The Exchange believes 
that the proposal does not constitute an inequitable allocation of 
fees, as all similarly situated member organizations and other market 
participants will be charged the same amount and access to the 
Exchange's market is offered on fair and non-discriminatory terms.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(4).
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    NYSE Arca believes that the Step-Up Tiers are equitable because 
they are open to all members on an equal basis and provide credits that 
are reasonably related to the value to an exchange's market quality 
associated with higher volumes. As stated above, the Exchange believes 
that the Step-Up Tiers may incentivize members to increase the orders 
sent directly to NYSE Arca and therefore provide liquidity that 
supports the quality of price discovery and promotes market 
transparency. Moreover, the addition of such Tiers would benefit 
members whose increased order flow provides meaningful added levels of 
liquidity, but may not be eligible for the current Tiers, thereby 
contributing to the depth and market quality of the Book. In addition, 
by offering two Step-Up Tiers the Exchange believes more members may 
provide increased order flow and

[[Page 40976]]

more members will be eligible to receive the credits for such orders. 
NYSE Arca also believes that the higher rebates would incent liquidity, 
and such increased volume increases potential revenue to the Exchange, 
allowing the Exchange to pass on the savings to members in the form of 
a higher rebate. Similar to the Baseline Month approach, NASDAQ and 
EDGX have established credits and fees which are based on increased 
volumes from a previous month baseline.\6\
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    \6\ See n.4 above.
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    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 adjust 
its fees to remain competitive with other exchanges and with 
alternative trading systems that have been exempted from compliance 
with the statutory standards applicable to exchanges. The Exchange 
believes that the proposed rule change reflects this competitive 
environment because it will broaden the conditions under which members 
may qualify for higher liquidity provider credits.

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) \7\ of the Act and subparagraph (f)(2) of Rule 19b-
4 \8\ thereunder, because it establishes a due, fee, or other charge 
imposed by the NYSE Arca.
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2011-41 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-2011-41. 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 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 a.m. and 3 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-2011-41 and should be submitted on or before August 2, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-17427 Filed 7-11-11; 8:45 am]
BILLING CODE 8011-01-P


