
[Federal Register Volume 78, Number 140 (Monday, July 22, 2013)]
[Notices]
[Pages 43947-43950]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-17471]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69992; File No. SR-NYSE-2013-51]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Amending Its Price List To Revise the Credits for Certain Designated 
Market Maker Transactions and Revise the Annual Trading License Fees

July 16, 2013.
    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 July 3, 2013, New York Stock Exchange LLC (the ``Exchange'' or 
``NYSE'') filed with the Securities and Exchange Commission 
(``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 its Price List to revise the credits 
for certain Designated Market Maker (``DMM'') transactions and revise 
the annual trading license fees. The Exchange proposes to implement the 
fee changes effective July 3, 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.

[[Page 43948]]

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 its Price List to revise the credits 
for certain DMM transactions and revise the annual trading license 
fees. The Exchange proposes to implement the fee changes effective July 
3, 2013.
DMM Rebates \3\
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    \3\ Rebates are applied when (i) posting displayed and non-
displayed orders on Display Book, including s-quote and s-quote 
reserve orders; (ii) when providing liquidity on non-displayed 
interest using the Capital Commitment Schedule; or, prior to the 
implementation of the Capital Commitment Schedule, using the 
following message activities: price improvement, size improvement 
(PRIN FILL), matching away market quotes; and (iii) when executing 
trades in the crowd and at Liquidity Replenishment Points. Rebates 
do not apply to executions at the open. See Price List at n.6.
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    DMMs are currently eligible for a per share rebate when adding 
liquidity in shares of each More Active Security \4\ if the More Active 
Security has a stock price of $1.00 or more, the DMM meets both the 
More Active Securities Quoting Requirement \5\ and the More Active 
Securities Quoted Size Ratio Requirement,\6\ and the DMM's providing 
liquidity meets certain thresholds, as follows:
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    \4\ A ``More Active Security'' is one with an average daily 
trading volume in the previous month equal to or greater than one 
million shares. See Price List.
    \5\ A DMM meets the ``More Active Securities Quoting 
Requirement'' when a More Active Security has a stock price of $1.00 
or more and the DMM quotes at the National Best Bid or Offer 
(``NBBO'') in the applicable security at least 10% of the time in 
the applicable month. See Price List.
    \6\ A DMM meets the ``More Active Securities Quoted Size Ratio 
Requirement'' when the DMM Quoted Size for an applicable month is at 
least 15% of the NYSE Quoted Size. The ``NYSE Quoted Size'' is 
calculated by multiplying the average number of shares quoted on the 
NYSE at the NBBO by the percentage of time the NYSE had a quote 
posted at the NBBO. The ``DMM Quoted Size'' is calculated by 
multiplying the average number of shares of the applicable security 
quoted at the NBBO by the DMM by the percentage of time during which 
the DMM quoted at the NBBO. See Price List at n.7.
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     $0.0026 per share if the DMM's providing liquidity is 15% 
or less of the NYSE's total intraday adding liquidity in each such 
security for that month; \7\
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    \7\ The NYSE total intraday adding liquidity is totaled monthly 
and includes all NYSE adding liquidity, excluding NYSE open and NYSE 
close volume, by all NYSE participants, including Supplemental 
Liquidity Providers, customers, Floor brokers and DMMs. See Price 
List.
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     $0.0030 per share if the DMM's providing liquidity is more 
than 15% but less than or equal to 30% of the NYSE's total intraday 
adding liquidity in each such security for that month; and
     $0.0029 per share if the DMM's providing liquidity is more 
than 30% of the NYSE's total intraday adding liquidity in each such 
security for that month.
    The $0.0029 per share rebate is applicable to all of the member 
organization's adding liquidity in each such security for that month, 
not just the incremental liquidity that is more than 30% of the NYSE's 
total intraday adding liquidity.\8\ The Exchange proposes to eliminate 
the third pricing threshold and modify the second pricing threshold so 
that a DMM will receive a rebate of $0.0030 per share if the DMM's 
providing liquidity is more than 15% of the NYSE's total intraday 
adding liquidity in each such security for that month. The $0.0030 per 
share rebate is applicable to all of the member organization's adding 
liquidity in each such security for that month, not just the 
incremental liquidity that is more than 15% of the NYSE's total 
intraday adding liquidity. For example, if a DMM meets both the More 
Active Securities Quoting Requirement and the More Active Securities 
Quoted Size Ratio Requirement, and the DMM's providing liquidity is 1.6 
million shares in a security with NYSE total intraday adding liquidity 
of 10 million shares, then the DMM will be eligible for a rebate of 
$0.0030 per share for all 1.6 million shares. Otherwise, the DMM will 
receive a per share rebate of $0.0026.
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    \8\ See Exchange Act Release No. 68021 (Oct. 9, 2012), 77 FR 
63406, 63407 n.9 (Oct. 16, 2012) (SR-NYSE-2012-50).
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Trading Licenses
    Currently, the Exchange charges an annual fee of $40,000 per 
license for the first two trading licenses held by a member 
organization and $25,000 per license for each additional trading 
license held by a member organization. The fee for trading licenses 
issued after January 1, 2013 is prorated for the portion of the year 
during which the trading license will be outstanding. If a trading 
license is in place for 15 or fewer calendar days in a calendar month, 
proration for that month is at a flat rate of $100 per day with no tier 
pricing involved.\9\ If a trading license is in place for 16 or more 
calendar days in a calendar month, proration for that month is computed 
based on the number of days as applied to the applicable annual fee for 
the license.\10\
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    \9\ See Price List at n.16.
    \10\ Id.
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    The Exchange proposes to amend its trading license fees for 
additional trading licenses issued to a member organization between 
July 1, 2013 and December 31, 2013. If a member organization is issued 
additional trading licenses between July 1, 2013 and December 31, 2013, 
and the total number of trading licenses held by the member 
organization between July 1, 2013 and December 31, 2013 is greater than 
the total number of trading licenses held by the member organization on 
July 1, 2013, then the member organization will not be charged a 
prorated fee for the period from July 3, 2013 to December 31, 2013 for 
those additional trading licenses above the number the member 
organization held on July 1, 2013. For example, if a member 
organization holds 30 trading licenses on July 1, 2013 and between July 
3, 2013 and December 31, 2013, the member organization holds 33 trading 
licenses, the member organization will not be charged a prorated fee 
for those three additional trading licenses. For a firm that becomes a 
member organization after July 1, 2013, the firm will be assigned a 
baseline of one trading license and charged a prorated fee for that 
license for the remainder of 2013; any trading licenses in addition to 
the first trading license will not be charged a prorated fee for the 
period from July 3, 2013 to December 31, 2013.
    If a member organization merges with another member organization on 
or after July 1, 2013, the total combined number of trading licenses 
held by each member organization on July 1, 2013 will be considered the 
baseline number of trading licenses for the successor member 
organization. For example, if Firm A holds five trading licenses on 
July 1, 2013 and Firm B holds eight trading licenses on July 1, 2013, 
and Firm B acquires Firm A on August 1, 2013, then Firm B, as the 
successor member organization, will have a baseline of 13 trading 
licenses as of August 1, 2013.
    The Exchange also proposes to correct a typographical error in 
footnote 15 of the Pricing List, which relates to a credit for floor 
broker licenses. The footnote should refer to November and December 
2012, not November and December 2013.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\11\ in general, and furthers the 
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\12\ in 
particular, because it provides for the equitable allocation of 
reasonable dues, fees, and other charges among its

[[Page 43949]]

members, issuers and other persons using its facilities and does not 
unfairly discriminate between customers, issuers, brokers or dealers.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that with respect to the DMM rebate for 
providing liquidity, eliminating the third pricing threshold and 
modifying the second pricing threshold is reasonable because the 
Exchange believes the rebate for the third pricing threshold did not 
incent DMMs to reach that level of providing liquidity as intended.\13\ 
The Exchange believes that the remaining two pricing thresholds, as 
modified, are at a level that will encourage greater liquidity and 
competition in actively traded securities on the Exchange. The Exchange 
believes that the proposed change is equitable and not unfairly 
discriminatory because all DMMs will be eligible for the higher rebate. 
The Exchange believes it is equitable and not unfairly discriminatory 
to allocate a higher rebate to DMMs than other member organizations 
because DMMs have higher quoting obligations, and in turn provide 
higher volumes of liquidity, which contributes to price discovery and 
benefits all market participants.
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    \13\ See supra note 8.
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    The Exchange believes it is reasonable to offer a temporary 
reduction in the prorated fees for annual trading licenses because it 
will encourage member organizations to hold additional trading 
licenses, which will increase the number of market participants trading 
on the floor of the Exchange, which will promote liquidity, price 
discovery, and the opportunity for price improvement for the benefit of 
all market participants. The Exchange also believes it is reasonable to 
offer a temporary fee reduction because it will provide member 
organizations with greater flexibility in managing their personnel, 
especially in summer months when member organizations tend to 
experience greater staff rotation. The Exchange further believes that 
the July 1 date selected by the Exchange as a baseline for calculating 
additional licenses is reasonable because it is the day before the 
effective date of the fee change. The Exchange believes the proposed 
change is equitable and not unfairly discriminatory because all member 
organizations will be able to take advantage of the temporary fee 
reduction.
    The Exchange believes that it is reasonable to assign new member 
organizations a baseline of one trading license because this will 
incent firms to become Exchange member organizations, thereby 
encouraging trading activity on the Exchange, which benefits all market 
participants. The Exchange believes that the proposed change is 
equitable and not unfairly discriminatory because the discount is 
temporary and firms that become member organizations in the latter half 
of 2013 will be subject to the same trading license fees as other 
member organizations beginning in 2014.
    The Exchange believes that, in the case of a merger of member 
organizations, it is reasonable to assign the successor member 
organization a baseline of the combined number of trading licenses held 
by each member organization on July 1, 2013, effective as of the date 
of the merger, so that the successor member organization's baseline 
reflects the combined operations. The Exchange believes that the 
alternative--i.e., counting only the number of trading licenses held by 
the successor member organization on July 1, 2013 prior to the merger--
would give such member organization an unfair advantage over a member 
organization that had not undergone a business combination, in that the 
successor member organization would not have to pay additional fees for 
the trading licenses gained through the merger for the remainder of the 
year. The Exchange notes that trading licenses effectively acquired 
through a merger would not increase the total number of trading 
licenses on the Exchange, and therefore would not necessarily 
contribute additional trading activity. Moreover, the successor member 
organization will be free to eliminate any trading licenses not needed 
after the merger. Therefore, the Exchange believes its proposed 
approach to merging member organizations is equitable and not unfairly 
discriminatory.
    The Exchange believes that correcting the typographical error in 
the Price List will add greater clarity for member organizations in 
understanding the annual trading license fees.
    Finally, the Exchange believes that it is subject to significant 
competitive forces in setting its fees and credits, 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,\14\ 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.
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    \14\ 15 U.S.C. 78f(b)(8).
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    Specifically, the Exchange believes the revised pricing tiers for 
DMMs reflect the need for the Exchange to adjust financial incentives 
to attract order flow. In addition, the modification to the annual 
trading license fees will help to remove a burden on competition by 
making it easier for member organizations to appropriately staff the 
Floor, which is a key feature of the Exchange's structure for offering 
a fair and orderly market and competing with other exchanges. It will 
also make it more economical to become a member organization in the 
remainder of 2013. In addition, the Exchange does not believe the 
proposed approach to merging member organizations will burden 
competition because it is designed to avoid any unfair advantage a 
successor member organization could have in the absence of resetting 
the baseline of licenses under the proposed fee structure.
    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 or rebate 
opportunities available at other venues to be more favorable. In such 
an environment, the Exchange must continually adjust its fees and 
rebates to remain competitive with other exchanges and with alternative 
trading systems that have been exempted from compliance with the 
statutory standards applicable to exchanges. Because competitors are 
free to modify their own fees and credits in response, and because 
market participants may readily adjust their trading practices, the 
Exchange believes that the degree to which fee or rebate changes in 
this market may impose any burden on competition is extremely limited. 
As a result of all of these considerations, the Exchange does not 
believe that the proposed changes will impair the ability of member 
organizations or competing order execution venues to maintain their 
competitive standing in the financial markets.

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.

[[Page 43950]]

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) \15\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \16\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 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. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \17\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \17\ 15 U.S.C. 78s(b)(2)(B).
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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-NYSE-2013-51 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-NYSE-2013-51. 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 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-NYSE-2013-51 and should be 
submitted on or before August 12, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-17471 Filed 7-19-13; 8:45 am]
BILLING CODE 8011-01-P


