
[Federal Register Volume 78, Number 63 (Tuesday, April 2, 2013)]
[Notices]
[Pages 19777-19784]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-07620]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69247; File No. SR-NYSEMKT-2013-24]


Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change To Modify the NYSE Amex 
Options Fee Schedule To Establish Fees for Mini-Options Contracts

March 27, 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 March 18, 2013, NYSE MKT LLC (the ``Exchange'' or ``NYSE 
MKT'') 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 modify the NYSE Amex Options Fee Schedule 
to Establish Fees for Mini-Options Contracts. 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 modify the Fee Schedule to establish fees 
for Minis.\4\
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    \4\ In addition to the changes discussed below, the Exchange 
also proposes to make clarifying changes to the endnotes to the Fee 
Schedule to describe the impact, or lack thereof, of the 
introduction of Minis, including within endnotes 1, 5, 6, 7, 9, 10, 
12, 13, 15, 16 and 17.
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    The Exchange represented in its filing with the Commission to 
establish Minis that, ``the current schedule of Fees will not apply to 
the trading of mini-options contracts. The Exchange will not commence 
trading of mini-option contracts until specific fees for mini-options 
contracts trading have been filed with the Commission.'' \5\ As the 
Exchange intends to begin trading Minis on March 18, 2013 it is 
submitting this filing to describe the transaction fees that will be 
applicable to the trading of Minis.
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    \5\ See File No. SR-NYSEMKT-2013-23 available at http://www.nyse.com/nysenotices/nyseamex/rule-filings/pdf;jsessionid=941DFBD950F4931B5A5B9153CB857BDB?file--no=SR-NYSEMKT-
2013-23&seqnum=1.
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    Minis have a smaller exercise and assignment value due to the 
reduced number of shares they deliver as compared to standard option 
contracts. As such, the Exchange is proposing generally lower per 
contract fees as compared to standard option contracts, with some 
exceptions to be fully described below. Despite the smaller exercise 
and assignment value of a Mini, the cost to the Exchange to process 
quotes and orders in Minis, perform regulatory surveillance and retain 
quotes and orders for archival purposes is the same as a for a standard 
contract. This leaves the Exchange in a position of trying to strike 
the right balance of fees applicable to Minis--too low and the costs of 
processing Mini quotes and orders will necessarily cause the Exchange 
to either raise fees for everyone or only for participants trading 
Minis; too high and participants may be deterred from trading Minis, 
leaving the Exchange less able to recoup costs associated with 
development of the product, which is designed to offer investors a way 
to take less risk in high dollar securities. The Exchange, therefore, 
believes that adopting fees for Minis that are in some cases lower than 
fees for standard contracts, and in other cases the same as for 
standard contracts, is appropriate, not unreasonable, not unfairly 
discriminatory and not burdensome on competition between

[[Page 19778]]

participants, or between the Exchange and other exchanges in the listed 
options market place.

General Options and Trading Permit (ATP) Fees

    The following is a discussion of the existing Fee Schedule as it 
relates to the treatment of Mini options as compared to standard option 
contracts.
    Trading Permit Fees: The number of Trading Permits or ATPs required 
by participants is unchanged by the introduction of Mini options.
    Specialist/e-Specialist/DOMM Rights Fees: The monthly rights fees 
charged to Specialists, e-Specialists and Directed Order Market Makers 
(``DOMMs'') will continue to apply to them for transactions executed in 
Mini options. For purposes of calculating the Rights Fee, a transaction 
in a Mini option shall be counted the same as a transaction in a 
standard option contract from a volume perspective (i.e., one contract 
in a Mini will equal one contract in a standard option contract).
    Premium Product Issues List--Monthly NYSE Amex Options Market Maker 
Participation Fee: Currently, the Premium Product Issues List is 
comprised of SPY, AAPL, IWM, QQQ, BAC, EEM, GLD, JPM, XLF and VXX. The 
Exchange notes that of these, three will have Mini options available 
for trading, specifically AAPL, GLD and SPY. To the extent that a NYSE 
Amex Options Market Maker transacts in any option series associated 
with a Premium Product Issue, including Mini option series, it will 
become liable for the associated Monthly Fee of $1,000 per product, 
which is capped at $7,000 per NYSE Amex Options Market Maker per month.
    Options Regulatory Fee: Presently the Exchange charges an Options 
Regulatory Fee (``ORF'') of $0.005 per contract. The ORF is assessed on 
each ATP Holder for all options transactions executed or cleared by the 
ATP Holder that are cleared by The Options Clearing Corporation 
(``OCC'') in the customer range, regardless of the exchange on which 
the transaction occurs. The Exchange is proposing to charge the same 
rate for transactions in Mini options, $0.005 per contract, since, as 
noted, the costs to the Exchange to process quotes, orders, trades and 
the necessary regulatory surveillance programs and procedures in Minis 
are the same as for standard option contracts. As such, the Exchange 
feels that it is appropriate to charge the ORF at the same rate as the 
standard option contract. The Exchange is proposing a non-substantive 
change to remove obsolete text describing a recent effective date for a 
change in the rate of the ORF.\6\
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    \6\ See Securities Exchange Act Release No. 68183 (November 8, 
2012), 77 FR 68186 (November 15, 2012) (SR-NYSEMKT-2012-54).
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Per Contract Trade Related Charges, Including Qualified Contingent 
Cross (``QCC'') Orders
    Below, the Exchange will discuss the newly proposed per contract 
transaction charges applicable to Minis. The table below will show the 
per contract charge applicable to electronic, manual, electronic 
complex orders, and QCC executions in Minis for various participants on 
the Exchange:

 
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                                        Electronic executions           Manual executions         Electronic complex order           QCC executions
---------------------------------------------------------------------------------------------            executions            -------------------------
                                                                                  Marketing  ----------------------------------               Marketing
                                   Fee/rebate    Marketing charge    Fee/rebate     charge     Fee/rebate    Marketing charge    Fee/rebate     charge
--------------------------------------------------------------------------------------------------------------------------------------------------------
Customer........................        $0.00  N/A................        $0.00          N/A        $0.00  N/A................        $0.00          N/A
NYSE Amex Options Market Maker..         0.02  $.02 Penny/$.06 Non         0.02          N/A         0.02  $.02 Penny/$.06 Non         0.10          N/A
                                                Penny.                                                      Penny.
Firm............................         0.09  N/A................         0.09          N/A         0.09  N/A................         0.10          N/A
Non-NYSE Amex Options Market             0.09  N/A................         0.09          N/A         0.09  N/A................         0.10          N/A
 Maker.
Broker Dealer...................         0.09  N/A................         0.09          N/A         0.09  N/A................         0.10          N/A
Professional Customer...........         0.09  N/A................         0.09          N/A         0.09  N/A................         0.10          N/A
NYSE Amex Options Floor Broker..          N/A  N/A................          N/A          N/A          N/A  N/A................       (0.02)          N/A
--------------------------------------------------------------------------------------------------------------------------------------------------------

    As with standard options, Customers transacting Mini options on the 
Exchange will trade for free. Mini options contracts on the Exchange 
will NOT count toward the Customer Electronic average daily volume 
(``ADV'') Tiers or associated rebates paid to Order Flow Providers 
(``OFPs'') described in endnote 17 to the current Fee Schedule.\7\ As 
noted earlier, the cost to the Exchange to process quotes, orders and 
trades in Minis is the same as for standard options. This, coupled with 
the lower per contract transaction fees charged to other participants, 
makes it impractical to offer OFPs a rebate for any Customer electronic 
Mini options volume they transact.
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    \7\ See NYSE Amex Options fee schedule dated January 2, 2013, 
available at http://globalderivatives.nyx.com/sites/globalderivatives.nyx.com/files/nyse_amex_options_fee_schedule_010213.pdf. However, the Exchange proposes to specify in endnote 17 
that Total Industry Customer equity and ETF option average daily 
volume includes OCC calculated Customer volume of all types, 
including Complex Order Transactions, QCC transactions, and mini 
options transactions, in equity and ETF options.
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    NYSE Amex Options Market Makers trading Mini options will be 
charged $.02 per contract, except for QCC executions, where the charge 
will be $.10 per contract. As with standard options, when an NYSE Amex 
Options Market Maker trades contra to a Customer electronic order or 
Customer electronic Complex order, it will be subject to marketing 
charges. The marketing charges for Mini options will be $.02 for Penny 
Pilot names and $.06 for non-Penny Pilot names. These charges are 
generally anywhere from slightly less than \1/10\th to slightly more 
than \1/10\th of the charges incurred by NYSE Amex Options Market 
Makers today for standard option contract

[[Page 19779]]

transactions. One important distinction is that, unlike standard 
contracts, transactions in Minis will NOT be eligible for the $350,000 
fee cap applicable to NYSE Amex Options Market Makers described in 
endnote 5 of the current Fee Schedule, nor will Mini volumes count 
towards the 50,000 ADV threshold described in endnote 5 to the current 
Fee Schedule. As noted earlier, the cost to the Exchange to process 
quotes, orders and trades in Minis is the same as for standard options; 
therefore the Exchange does not wish to include NYSE Amex Options 
Market Maker trades in Mini options in the monthly fee cap.
    Firm transactions in Mini options will be charged at the rate of 
$.09 per contract, except for QCC trades, where they will be charged 
$.10 per contract, and Firm Facilitation trades, which will be charged 
$.00 per contract. Additionally, the existing Firm Proprietary monthly 
fee cap for manual or open outcry trades described in endnote 6 of the 
current Fee Schedule will NOT apply to Mini transactions. As noted 
earlier, the cost to the Exchange to process quotes, orders and trades 
in Minis is the same as for standard options, therefore the Exchange 
does not wish to include Firm trades in Mini options in the monthly fee 
cap. Further, the proposed charge is higher than \1/10\th of the 
current charges applicable to Firm Proprietary trades. This relatively 
higher rate is necessitated by the fact that the cost to the Exchange 
to process quotes, orders and trades in Minis is the same as for 
standard options. However, the Exchange does recognize that Firms can 
be an important source of liquidity when they facilitate their own 
customer's trading activity and, as such, the Firm Facilitation rate of 
$.00, as described in endnote 6 of the current Fee Schedule, will 
continue to apply to Firm Facilitation trades in Minis.
    Non-NYSE Amex Options Market Makers in Mini options will be charged 
at the rate of $.09 per contract, except for QCC trades, where they 
will be charged $.10 per contract ($.05 charge per contract side). The 
proposed charge is higher than \1/10\th of the current charges 
applicable to non-NYSE Amex Options Market Makers. This relatively 
higher rate is necessitated by the fact that the cost to the Exchange 
to process quotes, orders and trades in Minis is the same as standard 
options.
    Professional Customer and Broker Dealer participants in Mini 
options will be charged at the rate of $.09 per contract, except for 
QCC trades, where they will be charged $.10 per contract. The proposed 
charge is higher than \1/10\th of the current charges applicable to 
Professional Customers and Broker Dealers. This relatively higher rate 
is necessitated by the fact that the cost to the Exchange to process 
quotes, orders and trades in Minis is the same as for standard options. 
Mini options volumes will NOT count towards the existing Professional 
Customer and Broker Dealer Electronic ADV Tiers For Taking Liquidity, 
as described in endnote 16 of the current Fee Schedule. This exclusion 
is warranted in the Exchange's view since, as noted, the cost to the 
Exchange to process quotes, orders and trades in Minis is the same as 
for standard options.
    NYSE Amex Floor Brokers who execute Mini options will be eligible 
for a $.02 per contract rebate for Mini options trades executed as a 
QCC trade. As with standard options, the rebate will NOT be paid for 
Customer to Customer QCC trades, as described in endnote 15 to the 
current Fee Schedule.
    Routing Surcharge: In order to comply with the requirements of the 
Distributive Linkage Plan,\8\ the Exchange uses various means of 
accessing better priced interest located on other exchanges. Presently, 
the Exchange charges a Routing Surcharge of $.11 per contract plus a 
pass through of the fees associated with the execution of the routed 
order on the other exchanges. The $.11 is designed to recover the 
Exchanges costs in routing orders to the other exchanges. Those costs 
include clearance charges imposed by The OCC and per contract routing 
fees charged by the broker dealers who charge the Exchange for the use 
of their systems to route orders to other exchanges. The Exchange has 
spoken with both The OCC and the broker dealers who have informed the 
Exchange that their charges applicable to Mini options will be the same 
as for standard option contracts, as their cost to process a contract 
(i.e., routing or clearing) is the same irrespective of the exercise 
and assignment value of the contract. As such, the Exchange intends to 
charge the same Routing Surcharge for Mini options as it presently does 
for standard options, as described in endnote 7 of the current Fee 
Schedule. The Exchange notes that participants can avoid the Routing 
Surcharge in several ways. First, they can simply route to the exchange 
with the best priced interest. The Exchange, in recognition of the fact 
that markets can move while orders are in flight, also offers 
participants the ability to utilize order types that do not route to 
other exchanges. Specifically, the Post No Preference (``PNP'') order 
modifier is one such order that would never route to another exchange. 
In addition, there are others, such as PNP Blind and PNP Plus,\9\ which 
also would never route to another exchange. Given this ability to avoid 
the Routing Surcharge, coupled with the fixed third-party costs 
associated with routing, the Exchange believes it is reasonable to 
charge the same Routing Surcharge for Mini options that is charged for 
standard option contracts.
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    \8\ See Rule 990NY, Rule 991NY, Rule 992NY and Rule 993NY.
    \9\ See Rule 900.3NY(p), Rule 900.3NY(w), and Rule 900.3NY(x).
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    Limit Of Fees On Options Strategy Executions: Presently, the 
Exchange has a $750 cap on transaction fees for Strategy Executions 
involving reversals and conversions, box spreads, short stock interest 
spreads, merger spreads and jelly rolls. The fees for these Strategy 
Executions are further capped at $25,000 per month per initiating firm.
    The Exchange will NOT include Mini option transactions as being 
eligible for any part of these per trade or per month Strategy 
Execution caps. As noted earlier, the cost to the Exchange to process 
quotes, orders and trades in Minis is the same as for standard options. 
Given that the per contract transaction fees are already substantially 
lower than the per contract fees for standard options, inclusion of 
Mini options in these fee caps is not warranted.

Excessive Bandwidth Utilization Fees

    Order To Trade Ratio Fee: For purposes of calculating the Order To 
Trade Ratio Fee, an order and an execution in Mini options will be 
counted the same as an order and an execution in standard option 
contracts.
    Messages To Contracts Traded Ratio Fee: For purpose of calculating 
the Messages to Contracts Traded Ratio Fee, quotes, orders and any 
executed contracts in Mini options will be counted the same as quotes, 
orders and any executed contracts involving standard option contracts.
    Cancellation Fee: For purposes of calculating the Cancellation Fee, 
orders and executions in Mini options will be counted as being 
equivalent to an order or execution for a standard option contract.
    As noted, the cost to the Exchange to process quotes, orders and 
trades in Minis is the same as for standard options and, as such, 
treating Minis the same as standard option contracts for the purposes 
of calculating any of the Excessive Bandwidth Utilization Fees is 
reasonable and equitable.

[[Page 19780]]

    The Exchange proposes to implement these changes on March 18, 2013.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\10\ in general, and furthers the 
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\11\ 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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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(4) and (5).
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General Options and Trading Permit (ATP) Fees

    For purposes of the Fee Schedule relating to ATP fees, Specialist/
e-Specialist/DOMM Rights Fees, the Premium Product Issues List--Monthly 
NYSE Amex Options Market Maker Participation Fee and the regulatory 
fees, including the ORF, the Exchange is not proposing any changes as a 
result of the introduction of Minis. This is due to, in part, the fact 
that the Exchange intends to have the Minis trade with the existing 
Specialist, e-Specialists and NYSE Amex Options Market Makers who trade 
AAPL. The Exchange is doing so as it believes it will foster 
transparency and better price discovery in Minis. This means that for 
example, the existing Specialist, e-Specialist, and NYSE Amex Options 
Market Makers will be able, and in fact obligated, to quote and trade 
AAPL Minis. This being the case, the Exchange believes it is entirely 
appropriate and, in fact, necessary, to treat Mini options the same as 
standard options with respect to the fees listed above. The fees listed 
above for standard options have not been deemed to be unreasonable, 
inequitable, or unfairly discriminatory and the introduction of Mini 
options raises no new issues with respect to such fees. Hence, the 
treatment of Minis in the same manner as standard option contracts for 
purposes of the ATP fees, Specialist/e-Specialist/DOMM Rights Fees, the 
Premium Product Issues List--Monthly NYSE Amex Options Market Maker 
Participation Fee and the regulatory fees, including the ORF, is 
reasonable, equitable and not unfairly discriminatory. Further, the 
Exchange notes, particularly in the context of the ORF, that the cost 
to perform surveillance to ensure compliance with various Exchange and 
industry-wide rules is no different for a Mini option than it is for a 
standard option contract. Reducing the ORF for Mini options could 
result in a higher ORF for standard options. Such an outcome would 
arguably be discriminatory towards investors in standard options for 
the benefit of investors in Minis. As such, the appropriate approach is 
to treat both Minis and standard options the same with respect to the 
amount of the ORF that is being charged.

Per Contract Trade Related Charges, Including QCCs

    The Exchange noted earlier that, while Minis have a smaller 
exercise and assignment value due to the reduced number of shares to be 
delivered as compared to standard option contracts, and despite the 
smaller exercise and assignment value of a Mini, the cost to the 
Exchange to process quotes and orders in Minis, perform regulatory 
surveillance and retain quotes and orders for archival purposes is the 
same as for a standard contract. This leaves the Exchange in a position 
of trying to strike the right balance of fees applicable to Minis--too 
low and the costs of processing Mini quotes and orders will necessarily 
cause the Exchange to either raise fees for everyone or only for 
participants trading Minis; too high and participants may be deterred 
from trading Minis, leaving the Exchange less able to recoup costs 
associated with development of the product, which is designed to offer 
investors a way to take less risk in high dollar securities. Given 
these realities, the Exchange believes that adopting fees for Minis 
that are in some cases lower than standard contracts, and in other 
cases the same as for standard contracts, is appropriate, not 
unreasonable, not unfairly discriminatory and not burdensome on 
competition between participants, or between the Exchange and other 
exchanges in the listed options market place.
    In the case of most trade related charges, the Exchange has decided 
to offer lower per contract fees to participants as part of trying to 
strike the right balance between recovering costs associated with 
trading Minis and encouraging use of the new Mini option contracts, 
which are designed to allow investors to reduce risk in high dollar 
underlying securities.
    The Exchange proposal to charge Customers $.00 per contract is 
reasonable, as Customers have long traded for free all options on the 
Exchange. The ability to trade for free attracts Customer order flow to 
the Exchange, which is beneficial to all other participants on the 
Exchange who generally seek to trade with Customer order flow. The 
proposed fee of $.00 per contract is the same fee charged to Customer 
orders in standard option contracts, which is an effective fee on the 
Exchange and has not been determined to be inequitable or unfairly 
discriminatory. Therefore, the proposed Customer pricing for Minis is 
equitable and not unfairly discriminatory. The Exchange feels that 
different rates for Customer transaction fees as compared to other 
market participants is equitable and not unfairly discriminatory 
because non-Customers wish to have Customer orders attracted to the 
Exchange by having lower fees, and is equitable and not unfairly 
discriminatory to Firms and Broker Dealers because Market Makers have 
obligations that are not required of Firms and Broker Dealers and 
because Market Makers have additional costs that are not applicable to 
Firms and Broker Dealers.
    The Exchange proposal to exclude volumes attributable to Customer 
executions in Mini options from the Customer Electronic ADV Tiers and 
associated rebates paid to OFPs described in endnote 17 to the current 
Fee Schedule is reasonable, equitable and not unfairly discriminatory 
for the following reasons. First, as noted above, the Exchange's cost 
to process quotes, orders and trades in Minis is the same as for 
standard options. Given the overall lower expected revenues from Mini 
options, it is reasonable to exempt Mini option volumes from qualifying 
for the OFP rebate paid on standard option contracts. It is also 
equitable, since paying the rebate on Mini option volumes would likely 
necessitate either reducing the rebates paid to OFPs for all activity, 
or raising other participant fees. It is not unfairly discriminatory, 
as it will apply equally to all Customer executions in Mini options, 
regardless of the market participant submitting the order.
    The Exchange proposal to charge NYSE Amex Market Makers, including 
Specialists, e-Specialists, Non-DOMMs and DOMMs a flat rate of $.02 per 
contract, plus either $.02 (for Penny Pilot issues) or $.06 (for non-
Penny Pilot issues) per contract in Marketing Charges when they trade 
contra to an electronic Customer order or an electronic Customer 
complex order, is reasonable. Generally, these fees range from slightly 
more than, to slightly less than, 10% of what the various NYSE Amex 
Options Market Maker participants pay today. Charging all types of NYSE 
Amex Options Market Makers the same fees to trade Minis is not unfairly 
discriminatory, as it applies to all of them equally. The fees are 
reasonable in light of the fact that the Minis do have a smaller 
exercise and

[[Page 19781]]

assignment value, specifically \1/10\th that of a standard contract, 
and, as such, levying fees that are approximately 10% of what an NYSE 
Amex Options Market Maker pays today is reasonable and equitable.\12\ 
The Exchange's cost to process quotes, orders and trades in Minis is 
the same as for standard options. Considering the lower per contract 
fees that are proposed for NYSE Amex Options Market Makers, it is 
reasonable to exclude Mini option volumes from any part of the monthly 
NYSE Amex Options Market Maker fee cap of $350,000 as well as the 
50,000 contract ADV threshold applicable to standard options. As this 
exclusion will apply to all Mini option volumes executed by all NYSE 
Amex Options Market Makers, it is also equitable and not unfairly 
discriminatory.
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    \12\ NYSE Amex Options Market Makers who are not capped pay 
between $.10 and $.20 per contract plus Marketing Charges of $.25 
for Penny Pilot names and $.65 for Non-Penny Pilot names when they 
trade contra to electronic Customer orders and electronic Customer 
complex orders.
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    The Exchange feels that different rates for NYSE Amex Market Maker 
transaction fees as compared to other market participants is equitable 
and not unfairly discriminatory because non-Customers wish to have 
Customer orders attracted to the Exchange by having lower fees, and is 
equitable and not unfairly discriminatory to Firms and Broker Dealers 
because NYSE Amex Market Makers have obligations that are not required 
of Firms and Broker Dealers and because NYSE Amex Market Makers have 
additional costs that are not applicable to Firms and Broker Dealers. 
For example, NYSE Amex Options Market Makers are required to have 
trading permits in order to stream quotes. The number of permits is 
variable based on the number of options traded, and can cost as much as 
$26,000 per month to quote all issues on the Exchange as an NYSE Amex 
Options Market Maker. Conversely, Firms pay a monthly permit fee of 
$1,000 per month and broker dealers, Professional Customers and Non-
NYSE Amex Options Market Makers typically access the facilities of the 
Exchange through either a Firm or Order Flow Provider who may or may 
not pass along the $1,000 per month permit fee cost. Consequently, when 
all fees are taken together, the difference charged to NYSE Amex 
Options Market Makers as compared to Professional Customers, broker 
dealers, Non-NYSE Amex Options Market Makers and Firms is reasonable, 
equitable and not unfairly discriminatory. The Exchange further notes 
that there are no limits on the number of NYSE Amex Options Market 
Makers that are permitted to quote in a given option and that any of 
the other participant types are free to apply to the Exchange to become 
a NYSE Amex Options Market Maker to avail themselves of the transaction 
charges applicable to NYSE Amex Options Market Makers presuming they 
are willing to accept the quoting obligations applicable to NYSE Amex 
Options Market Makers, which serve to foster price discovery and 
transparency.
    The Exchange proposal to charge Firm proprietary trades $.09 per 
contract, charge Firm Facilitation trades $.00 and to exclude Mini 
options from the Firm monthly fee cap is reasonable, equitable and not 
unfairly discriminatory. First, the per contract charge is lower than 
what Firms pay for a standard contract in acknowledgement of the 
smaller exercise and assignment value. Although more than 10% of the 
rate paid by a Firm for a standard contract, this is warranted by the 
fact that the Exchange's cost to process quotes, orders and trades in 
Minis is the same as for standard options. In this regard the proposal 
is reasonable and it is also equitable, as it allows the Exchange to 
offer this innovative product to investors without raising fees for 
other investors who may have no interest in trading Minis. Likewise, 
excluding Mini option volumes from the Firm monthly fee cap for manual 
trades is reasonable and equitable in light of the Exchange's desire to 
fund the costs associated with Minis with revenues from only those 
participants who trade them. Offering a fee cap for a product with 
reduced fees might necessitate raising costs for other participants; 
therefore, the Exchange believes that the exclusion from the Firm 
monthly fee cap for manual trades is both reasonable and equitable. The 
per contract Mini pricing for all Firms is the same, the proposal is 
also not unfairly discriminatory. Finally, as noted earlier, the 
Exchange recognizes that Firms can be an important source of liquidity 
when they facilitate their own customer volumes. Firm Facilitation 
trades add transparency and promote price discovery to the benefit of 
all market participants. For these reasons, the proposal to bill Firm 
Facilitation trades in Minis at the rate of $.00 per contract is both 
reasonable and equitable. It is also not unfairly discriminatory as it 
applies equally to all Firms and their customers whose business is 
facilitated by the Firms.
    The Exchange proposal to charge non-NYSE Amex Options Market Maker 
Mini trades $.09 per contract is reasonable, equitable and not unfairly 
discriminatory. First, the per contract charge is lower than what non-
NYSE Amex Options Market Makers pay for a standard contract, in 
acknowledgement of the smaller exercise and assignment value. Although 
more than 10% of the rate paid by a non-NYSE Amex Options Market Maker 
for a standard contract, this is warranted by the fact that the 
Exchange's cost to process quotes, orders and trades in Minis is the 
same as for standard options. In this regard, the proposal is 
reasonable and it is also equitable as it allows the Exchange to offer 
this innovative product to investors without raising fees for other 
investors who may have no interest in trading Minis. As the per 
contract Mini pricing for all non-NYSE Amex Options Market Makers is 
the same, the proposal is also not unfairly discriminatory.
    The Exchange feels that different rates for non-NYSE Amex Options 
Market Maker transaction fees as compared to other market participants 
is equitable and not unfairly discriminatory because non-Customers wish 
to have Customer orders attracted to the Exchange by having lower fees, 
and is equitable and not unfairly discriminatory to Firms and Broker 
Dealers, including non-NYSE Amex Market Makers, because NYSE Amex 
Options Market Makers have obligations that are not required of Firms 
and Broker Dealers, including non-NYSE Amex Market Makers, and because 
NYSE Amex Market Makers have additional costs that are not applicable 
to Firms and Broker Dealers, including non-NYSE Amex Market Makers. For 
example, as noted earlier, NYSE Amex Options Market Makers are required 
to have trading permits in order to stream quotes. The number of 
permits is variable based on the number of options traded, and can cost 
as much as $26,000 per month to quote all issues on the Exchange as an 
NYSE Amex Options Market Maker. Conversely, Firms pay a monthly permit 
fee of $1,000 per month and broker dealers, Professional Customers and 
Non-NYSE Amex Options Market Makers typically access the facilities of 
the Exchange through either a Firm or Order Flow Provider who may or 
may not pass along the $1,000 per month permit fee cost. Consequently, 
when all fees are taken together, the difference charged to NYSE Amex 
Options Market Makers as compared to Professional Customers, broker 
dealers, Non-NYSE Amex Options Market Makers and Firms is reasonable, 
equitable and not unfairly discriminatory. The Exchange further notes 
that there are no limits on the number of NYSE Amex Options Market 
Makers that are permitted to quote in a given option and that any of 
the other participant types are free to apply to the

[[Page 19782]]

Exchange to become a NYSE Amex Options Market Maker to avail themselves 
of the transaction charges applicable to NYSE Amex Options Market 
Makers presuming they are willing to accept the quoting obligations 
applicable to NYSE Amex Options Market Makers, which serve to foster 
price discovery and transparency.
    The Exchange proposal to charge Professional Customer and Broker 
Dealer Mini trades $.09 per contract and exclude Mini option volumes 
from the Professional Customer and Broker Dealer Electronic ADV Tiers 
For Taking Liquidity, as described in endnote 16 of the current Fee 
Schedule, is reasonable, equitable and not unfairly discriminatory. 
First, the per contract charge is lower than what Professional 
Customers and Broker Dealers pay for a standard contract, in 
acknowledgement of the smaller exercise and assignment value. Although 
more than 10% of the rate paid by a Professional Customer and Broker 
Dealers for a standard contract, this is warranted by the fact that the 
Exchange's cost to process quotes, orders and trades in Minis is the 
same as for standard options. In this regard, the proposal is 
reasonable and it is also equitable as it allows the Exchange to offer 
this innovative product to investors without raising fees for other 
investors who may have no interest in trading Minis. As the per 
contract Mini pricing for all Professional Customer and Broker Dealers 
is the same, the proposal is also not unfairly discriminatory. The 
Exchange proposal to exclude volumes attributable to Professional 
Customer and Broker Dealer executions in Mini options from the 
Professional Customer and Broker Dealer Electronic ADV Tiers For Taking 
Liquidity, as described in endnote 16 of the current Fee Schedule, is 
reasonable, equitable and not unfairly discriminatory for the following 
reasons. First, as noted above, the Exchange's cost to process quotes, 
orders and trades in Minis is the same as for standard options. Given 
the overall lower expected revenues from Mini options, it is reasonable 
to exempt Mini option volumes from Professional Customer and Broker 
Dealer Electronic ADV Tiers For Taking Liquidity, as the per contract 
charge for Minis is quite low to begin with--for example, the lowest 
fee charged to the highest volume Professional Customer and Broker 
Dealer is $.23 per contract, which is still more than double the 
proposed Mini pricing of $.09 per contract. It is also equitable since 
paying the rebate on Mini option volumes would likely necessitate 
either reducing the rebates paid to Professional Customers and Broker 
Dealers for standard option contracts volumes, or raising other 
participant fees. It is not unfairly discriminatory as it will apply 
equally to all Professional Customer and Broker Dealer executions in 
Mini options.
    The Exchange feels that different rates for Professional Customer 
and Broker Dealer transaction fees as compared to other market 
participants is equitable and not unfairly discriminatory because non-
Customers wish to have Customer orders attracted to the Exchange by 
having lower fees, and is equitable and not unfairly discriminatory to 
Professional Customers, Firms and Broker Dealers because NYSE Amex 
Market Makers have obligations that are not required of Professional 
Customer, Firms and Broker Dealers and because NYSE Amex Market Makers 
have additional costs that are not applicable to Professional 
Customers, Firms and Broker Dealers. For example, as noted earlier, 
NYSE Amex Options Market Makers are required to have trading permits in 
order to stream quotes. The number of permits is variable based on the 
number of options traded, and can cost as much as $26,000 per month to 
quote all issues on the Exchange as an NYSE Amex Options Market Maker. 
Conversely, Firms pay a monthly permit fee of $1,000 per month and 
broker dealers, Professional Customers and Non-NYSE Amex Options Market 
Makers typically access the facilities of the Exchange through either a 
Firm or Order Flow Provider who may or may not pass along the $1,000 
per month permit fee cost. Consequently, when all fees are taken 
together, the difference charged to NYSE Amex Options Market Makers as 
compared to Professional Customers, broker dealers, Non-NYSE Amex 
Options Market Makers and Firms is reasonable, equitable and not 
unfairly discriminatory. The Exchange further notes that there are no 
limits on the number of NYSE Amex Options Market Makers that are 
permitted to quote in a given option and that any of the other 
participant types are free to apply to the Exchange to become a NYSE 
Amex Options Market Maker to avail themselves of the transaction 
charges applicable to NYSE Amex Options Market Makers presuming they 
are willing to accept the quoting obligations applicable to NYSE Amex 
Options Market Makers, which serve to foster price discovery and 
transparency.
    The Exchange proposal for QCC pricing for Minis is to charge 
Customers $.00, as is the case with standard options, and all non-
Customers will be charged $.10 per contract, as compared with $.20 per 
contract for standard options. The Exchange will also offer NYSE Amex 
Floor Brokers a rebate of $.02 per contract for all Mini options they 
execute as a QCC trade, as compared to $.07 per contract rebate for 
standard options. The Exchange believes that this pricing is 
reasonable, equitable and not unfairly discriminatory. First, the 
Exchange has always charged a premium for non-Customer participants for 
QCC trades in standard options due to the fact that qualifying QCC 
trades are executed immediately, upon entry, without exposure or any 
opportunity for other participants to participate on the trade. This 
pricing proposal preserves that premium and, as such, is reasonable. It 
is equitable since, as noted, the Exchange's cost to process quotes, 
orders and trades in Minis is the same as for standard options, so 
charging a relatively small premium for the opportunity to trade 
without exposure is warranted, given the Exchange's need to cover the 
costs of participants trading Minis so as to avoid sharing those costs 
with other participants who are not trading Minis. The proposal is also 
not unfairly discriminatory as it applies equally to all Customers. 
Likewise all non-Customers are treated the same under this proposal. 
The Floor Broker rebate of $.02 is reasonable and equitable as it is 
designed to allow Floor Brokers to compete for QCC volumes that might 
otherwise execute on an exchange that offers a front end order entry 
system, like ISE PrecISE Trade application \13\ or CBOE's HyTS,\14\ 
which would allow participants to potentially avoid paying a brokerage 
fee. The Floor Broker rebate is not unfairly discriminatory as it 
applies equally to all NYSE Amex Floor Brokers who execute Mini options 
as QCC trades.
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    \13\ See http://www.ise.com/WebForm/viewPage.aspx?categoryId=129.
    \14\ See https://www.cboe.org/hybrid/HyTs.aspx.
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    The Exchange feels that different rates for QCC fees for different 
market participants is equitable and not unfairly discriminatory 
because non-Customers wish to have Customer orders attracted to the 
Exchange by having lower fees, and is equitable and not unfairly 
discriminatory to Firms and Broker Dealers because Market Makers have 
obligations that are not required of Firms and Broker Dealers and 
because Market Makers have additional costs that are not applicable to 
Firms and Broker Dealers. The Exchange notes that QCC pricing for 
standard options is $.20 for non-Customers and $.00 for Customers. Such 
differential has been shown by virtue of its effectiveness for

[[Page 19783]]

many months with respect to standard options contracts, to be 
reasonable, equitable and not unfairly discriminatory; therefore the 
Exchange believes that the proposed Mini QCC pricing of $.10 for non-
Customers and $.00 for Customers is reasonable, equitable and not 
unfairly discriminatory as well.
    The Exchange proposal to treat Mini options the same as standard 
options for purposes of the Routing Surcharge is reasonable, equitable 
and not unfairly discriminatory for the following reasons. Presently, 
the Exchange charges a Routing Surcharge of $.11 per contract plus a 
pass through of the fees associated with the execution of the routed 
order on the other exchanges. The $.11 is designed to recover the 
Exchange's costs in routing orders to the other exchanges. Those costs 
include clearance charges imposed by The OCC and per contract routing 
fees charged by the broker dealers who charge the Exchange for the use 
of their systems to route orders to other exchanges. The Exchange has 
spoken with both The OCC and the broker dealers, who have informed the 
Exchange that their charges applicable to Mini options will be the same 
as for standard option contracts, as their cost to process a contract 
(i.e., routing or clearing) is the same irrespective of the exercise 
and assignment value of the contract. As such, the Exchange intends to 
charge the same Routing Surcharge for Mini options as it presently does 
for standard options, as described in endnote 7 of the current Fee 
Schedule. The Exchange notes that participants can avoid the Routing 
Surcharge in several ways. First they can simply route to the exchange 
with the best priced interest. The Exchange, in recognition of the fact 
that markets can move while orders are in flight, also offers 
participants the ability to utilize order types that do not route to 
other exchanges. Specifically, the PNP order modifier is one such order 
that would never route to another exchange. In addition, there are 
others, such as PNP Blind and PNP Plus,\15\ which also would never 
route to another exchange. Given this ability to avoid the Routing 
Surcharge, coupled with the fixed third party costs associated with 
routing, the Exchange feels it is reasonable and equitable to charge 
the same Routing Surcharge for Mini options that is charged for 
standard option contracts. Since the Routing Surcharge will apply to 
all participants in Minis as it is applied for standard options, and 
because such surcharge has not previously been found to be 
unreasonable, inequitable or unfairly discriminatory, the Exchange 
believes it is the case for Minis as well.
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    \15\ See Rule 900.3NY(p), Rule 900.3NY(w), and Rule 900.3NY(x).
---------------------------------------------------------------------------

    The Exchange is proposing to exclude Mini option volumes from being 
eligible for the Limit Of Fees On Options Strategy Executions. 
Presently the Exchange has a $750 cap on transaction fees for Strategy 
Executions involving reversals and conversions, box spreads, short 
stock interest spreads, merger spreads and jelly rolls. The fees for 
these Strategy Executions are further capped at $25,000 per month per 
initiating firm. The Exchange will NOT include Mini option transactions 
as being eligible for any part of these per trade or per month Strategy 
Execution caps. As noted earlier, the cost to the Exchange to process 
quotes, orders and trades in Minis is the same as for standard options. 
Given that the per contract transaction fees for Minis are already 
substantially lower than the per contract fees for standard options, 
inclusion of Mini options in these fee caps is not warranted, and is 
reasonable and equitable. Further, it is not unfairly discriminatory as 
the exclusion on Mini volumes from the cap on fees for Strategy 
Executions applies equally to all participants on the Exchange.

Excessive Bandwidth Utilization Fees

    The Exchange proposes to treat Mini options the same as standard 
options for purposes of the Excessive Bandwidth Utilization Fees, which 
include the Order To Trade Ratio Fee, the Messages to Contracts Traded 
Ratio Fee and the Cancellation Fees. As noted, the cost to the Exchange 
to process quotes, orders and trades in Minis is the same as for 
standard options and, as such, treating Minis the same as standard 
option contracts for the purposes of calculating any of the Excessive 
Bandwidth Utilization Fees is reasonable and equitable. It is also not 
unfairly discriminatory, as such treatment will apply to all 
participants equally.

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) \16\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \17\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 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) \18\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \18\ 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-NYSEMKT-2013-24 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-NYSEMKT-2013-24. 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

[[Page 19784]]

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-NYSEMKT-2013-24 and should be submitted on or before 
April 23, 2013.
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    \19\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-07620 Filed 4-1-13; 8:45 am]
BILLING CODE 8011-01-P


