
[Federal Register Volume 78, Number 238 (Wednesday, December 11, 2013)]
[Notices]
[Pages 75396-75398]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-29496]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70998; File No. SR-NYSEARCA-2013-133]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Proposes To Amend 
the NYSE Arca Equities Schedule of Fees and Charges for Exchange 
Services To Specify the Exclusion of Odd Lot Transactions From 
Consolidated Average Daily Volume Calculations for a Limited Period of 
Time for Purposes of Certain Transaction Pricing on the Exchange 
Through January 31, 2014

December 5, 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 November 22, 2013, NYSE Arca, Inc. (``Exchange'' or ``NYSE 
Arca'') 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 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\ 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 ``Fee Schedule'') to 
specify the exclusion of odd lot transactions from consolidated average 
daily volume (``CADV'') calculations for a limited period of time for 
purposes of certain transaction pricing on the Exchange. 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 specify the 
exclusion of odd lot transactions from CADV calculations for a limited 
period of time for purposes of certain transaction pricing on the 
Exchange. The Exchange proposes to implement the Fee Schedule on 
December 9, 2013.
    The Exchange provides an ETP Holder with the opportunity to qualify 
for one or more pricing Tiers based on its level of activity during a 
particular month. Each Tier has a corresponding fee or credit that 
applies to the ETP Holder's transactions during the month. Generally, a 
qualifying ETP Holder would be subject to a lower transaction fee or a 
higher transaction credit, depending on the particular Tier. Many of 
these Tiers use a specific percentage of CADV as a threshold that an 
ETP Holder's activity must meet or exceed in order to qualify for the 
particular Tier. For example, an ETP Holder must, among other things, 
provide liquidity an average daily volume (``ADV'') of 0.70% or more of 
CADV during the month to qualify for Tier 1 pricing.\3\ As an 
additional example, transaction pricing for an ETP Holder that is a 
Lead Market Maker (``LMM'') can depend on the CADV for the security in 
the previous month.
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    \3\ To qualify for Tier 1, an ETP Holder must (1) provide 
liquidity an ADV per month of 0.70% or more of CADV or (2)(a) 
provide liquidity an ADV per month of 0.15% or more of CADV and (b) 
be affiliated with an Options Trading Permit (``OTP'') Holder or OTP 
Firm that provides an ADV of electronic posted executions (including 
all account types) in Penny Pilot issues on NYSE Arca Options 
(excluding mini options) of at least 100,000 contracts, of which at 
least 25,000 contracts must be for the account of a market maker.
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    CADV is a measure of transactions in Tape A, Tape B and Tape C 
securities reported to the consolidated tape.

[[Page 75397]]

Transactions that are not reported to the consolidated tape are not 
included in CADV for purposes of the Fee Schedule. An odd lot 
transaction, which is generally an execution of less than 100 shares, 
is not currently reported to the consolidated tape and is therefore not 
currently included in CADV.\4\ Beginning December 9, 2013, odd lot 
transactions will be reported to the consolidated tape.\5\ The Exchange 
proposes to amend Footnote 3 in the Fee Schedule to specify that odd 
lot transactions reported to the consolidated tape will be excluded 
from CADV through January 31, 2014 for purposes of billing on the 
Exchange. This proposed change is intended to maintain consistency in 
the Exchange's current method of determining Tier qualifications for a 
limited period of time in order to provide ETP Holders with an 
opportunity to adjust to the potential impact of the inclusion of odd 
lot transactions in CADV.
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    \4\ See NYSE Arca Equities Rule 7.5. A round lot is generally an 
execution of 100 shares or a multiple thereof.
    \5\ See Securities Exchange Act Release No. 70794 (October 31, 
2013), 78 FR 66789 (November 6, 2013) (SR-CTA-2013-05) (Order 
Approving the Eighteenth Substantive Amendment to the Second 
Restatement of the CTA Plan). See also Securities Exchange Act 
Release No. 70793 (October 31, 2013), 78 FR 66788 (November 6, 2013) 
(File No. S7-24-89) (Order Approving Amendment No. 30 to the Joint 
Self-Regulatory Organization Plan Governing the Collection, 
Consolidation and Dissemination of Quotation and Transaction 
Information for Nasdaq-Listed Securities Traded on Exchanges on an 
Unlisted Trading Privileges Basis). See also Securities Exchange Act 
Release No. 70898 (November 19, 2013), 78 FR 70386 (November 25, 
2013) (SR-NYSE-2013-75). See also announcements regarding December 
9, 2013 implementation date, available at https://cta.nyxdata.com/cta/popup/news/2385 and http://www.nasdaqtrader.com/TraderNews.aspx?id=uva2013-11. If the inclusion of odd lot 
transactions in the consolidated tape is delayed to a date after 
December 9, 2013, the manner of inclusion or exclusion of odd lot 
transactions described in this proposal for purposes of billing on 
the Exchange would similarly take effect on such later date.
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    As described above, CADV is also used in the Fee Schedule to 
differentiate between securities with different CADV levels for 
purposes of LMM pricing. Odd lot transactions are currently excluded 
when determining the particular LMM Tier that applies because odd lot 
transactions are not currently reported to the consolidated tape. In 
contrast to the proposed change described above, the Exchange will not 
make any adjustment beginning on December 9, 2013 to consolidated tape 
figures for purposes of determining the applicable LMM Tier.\6\ 
Therefore, beginning December 9, 2013, odd lot transactions reported to 
the consolidated tape would be included in LMM Tier determinations. 
These determinations are based on CADV from the previous month and LMMs 
would therefore be able to adjust their activity immediately on 
December 9, 2013 based on November 2013 CADV.
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    \6\ The Exchange will reflect this in Footnote 3 in the Fee 
Schedule.
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    The proposed change is not otherwise intended to address any other 
issues and the Exchange is not aware of any problems that ETP Holders 
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 Act,\7\ in general, and furthers the 
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\8\ in 
particular, because it provides for the equitable allocation of 
reasonable dues, fees, and other charges among its members, issuers and 
other persons using its facilities and does not unfairly discriminate 
between customers, issuers, brokers or dealers.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed change is reasonable 
because it will maintain consistency in the current manner of measuring 
ETP Holder activity with respect to transaction pricing on the Exchange 
for a limited period of time. Absent this change, the denominator of a 
Tier threshold calculation (i.e., CADV) would increase immediately when 
odd lot transactions begin to be reported to the consolidated tape and 
an ETP Holder would therefore need to immediately increase its own 
activity (i.e., the numerator) to qualify for the Tier compared to when 
odd lot transactions were not included in the consolidated tape. 
However, such an increase in ETP Holder activity would not result in 
any corresponding benefit to the ETP Holder, because the Exchange is 
not proposing a change to the Tier rates. The Exchange anticipates that 
the eventual impact on determining Tier qualifications will be minimal 
when odd lot transactions begin to be included in CADV. Notwithstanding 
the anticipated minimal impact, however, the Exchange believes that it 
is reasonable to provide ETP Holders with a limited transition period 
to adapt to such impact.
    The Exchange believes that it is reasonable to include odd lot 
transactions in LMM Tier determinations immediately on December 9, 2013 
because such determinations are based on CADV from the previous month. 
LMMs would therefore be able to adjust their activity immediately on 
December 9, 2013 based on November 2013 CADV. This is different than 
with excluding odd lot transactions from other CADV calculations for a 
limited period of time because such other CADV calculations are 
determined based on the actual billing month, not a prior month. 
Furthermore, the Exchange does not anticipate that including odd lot 
transactions in these determinations beginning on December 9, 2013 
would have a significant impact on the number of securities for which 
each particular LMM Tier would otherwise apply absent the inclusion of 
odd lot transactions.\9\
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    \9\ Based on October 2013 data, the applicable LMM Tier would 
change for only one security by including odd lot transactions.
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    The proposed change is equitable and not unfairly discriminatory 
because it would apply to all ETP Holders equally. More specifically, 
odd lot transactions would be excluded from CADV for billing purposes 
for all ETP Holders for a limited period of time. The proposed change 
is also equitable and not unfairly discriminatory because the inclusion 
of odd lots in the CADV calculation beginning on February 1, 2014 would 
occur at the same time for all ETP Holders, after the same nearly two 
month transition period. The proposed change is also equitable and not 
unfairly discriminatory because odd lot transactions would be 
immediately included in LMM Tier determinations for all ETP Holders 
that operate as LMMs. Immediately including odd lot transactions 
reported to the consolidated tape in LMM Tier determinations is 
equitable and not unfairly discriminatory because LMMs would be able to 
adjust their activity immediately on December 9, 2013 based on November 
2013 CADV. Finally, the Exchange believes that it is subject to 
significant competitive forces, as described below in the Exchange's 
statement regarding the burden on competition.
    For these reasons, the Exchange believes that the proposal is 
consistent with the Act.

B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act,\10\ 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. Instead, the proposed change would maintain 
consistency in the Exchange's current method of determining Tier

[[Page 75398]]

qualifications for a limited period of time in order to give ETP 
Holders an opportunity to adjust to the inclusion of odd lot 
transactions in CADV. This proposed change is also designed to maintain 
competition on the Exchange by eliminating the potential for ETP 
Holders to immediately fail to qualify for a Tier due to the inclusion 
of odd lot transactions in the consolidated tape beginning on December 
9, 2013. The Exchange believes that competition would not be burdened 
by including odd lot transactions in LMM Tier determinations because 
the Exchange anticipates that this would not have a significant impact 
on the number of securities for which each particular LMM Tier would 
otherwise apply absent the inclusion of odd lot transactions--i.e., 
only one security to which an LMM is assigned based on October 2013 
data.
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    \10\ 15 U.S.C. 78f(b)(8).
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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 or credit levels at a particular 
venue to be unattractive. In such an environment, the Exchange must 
continually review, and consider adjusting, its fees and credits to 
remain competitive with other exchanges. The billing method described 
herein is based on objective standards that are applicable to all ETP 
Holders and reflects the need for the Exchange to offer significant 
financial incentives to attract order flow. For these reasons, the 
Exchange believes that the proposed rule change reflects this 
competitive environment and is therefore consistent with 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) \11\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \12\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 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) \13\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \13\ 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-NYSEArca-2013-133 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEArca-2013-133. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NYSEArca-2013-133 and should 
be submitted on or before January 2, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-29496 Filed 12-10-13; 8:45 am]
BILLING CODE 8011-01-P


