
[Federal Register Volume 79, Number 21 (Friday, January 31, 2014)]
[Notices]
[Pages 5506-5508]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-01970]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71410; File No. SR-NYSEMKT-2014-09]


Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change to Increase Its Options 
Regulatory Fee

January 27, 2014.
    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 January 22, 2014, NYSE MKT LLC (the ``Exchange'' or 
``NYSE MKT'') filed with the Securities and Exchange

[[Page 5507]]

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 the 
Substance of the Proposed Rule Change

    The Exchange proposes to increase its Options Regulatory Fee. The 
Exchange proposes to implement this change on February 3, 2014. 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to increase its Options Regulatory Fee 
(``ORF''), effective February 3, 2014.
Background
    The ORF, which is currently $0.005 per contract, is assessed by the 
Exchange on each ATP Holder for all options transactions executed or 
cleared by the ATP Holder that are cleared by The Options Clearing 
Corporations (``OCC'') in the customer range, i.e., transactions that 
clear in the customer account of the ATP Holder's clearing firm at OCC, 
regardless of the marketplace of execution.\4\ In other words, the 
Exchange imposes the ORF on all customer-range transactions executed by 
an ATP Holder even if the transactions do not take place on the 
Exchange. In the case where an ATP Holder executes a transaction and a 
different ATP Holder clears the transaction, the ORF would be assessed 
to the ATP Holder that executes the transaction. In the case where a 
non-ATP Holder executes a transaction and an ATP Holder clears the 
transaction, the ORF would be assessed to the ATP Holder that clears 
the transaction.
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    \4\ See Securities Exchange Act Release No. 34-68183 (November 
8, 2012), 77 FR 68186 (November 15, 2012) (SR-NYSEMKT-2012-54).
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    The dues and fees paid by ATP Holders go into the general funds of 
the Exchange, a portion of which is used to help pay the costs of 
regulation. In particular, the ORF is designed to recover a material 
portion of the costs to the Exchange of the supervision and regulation 
of ATP Holders, including performing routine surveillances and 
investigations, as well as policy, rulemaking, interpretive, and 
enforcement activities. The Exchange monitors the amount of revenue 
collected from the ORF to ensure that this revenue, in combination with 
other regulatory fees and fines, does not exceed regulatory costs. The 
ORF is collected indirectly from ATP Holders through their clearing 
firms by OCC on behalf of the Exchange.
Proposed Change
    The Exchange proposes to increase the ORF from $0.005 per contract 
to $0.0055 per contract in order to recoup increased regulatory 
expenses while also ensuring that the ORF will not exceed such 
expenses. Transaction volumes across the industry have increased 
moderately since the ORF was last changed in December 2012, but the 
Exchange's regulatory expenses have increased at a faster rate. The 
Exchange believes that revenue generated from the proposed ORF, when 
combined with all of the Exchange's other regulatory fees, will cover a 
material portion but not all of the Exchange's regulatory costs. The 
Exchange will continue to monitor the amount of revenue collected from 
the ORF to ensure that it, in combination with its other regulatory 
fees and fines, does not exceed regulatory costs. If the Exchange 
determines that regulatory revenues exceed regulatory costs, the 
Exchange will adjust the ORF by submitting a fee filing change to the 
Commission.\5\ The Exchange proposes to implement this fee change on 
February 3, 2014.

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    \5\ The Exchange notes that its regulatory responsibilities with 
respect to member compliance with options sales practice rules have 
been allocated to FINRA under an SEC Rule 17d-2 agreement; the ORF 
is not designed to cover the cost of options sales practice 
regulation. See Securities Exchange Act Release No. 34-64400 (May 4, 
2011), 76 FR 27118 (May 10, 2011) (SR-NYSEAmex-2011-27).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Securities Exchange Act of 1934 (the 
``Act''),\6\ in general, and furthers the objectives of Section 6(b)(4) 
and (5) of the Act,\7\ in particular, because it provides for the 
equitable allocation of reasonable dues, fees, and other charges among 
its members and issuers and other persons using its facilities and does 
not unfairly discriminate between customers, issuers, brokers, or 
dealers.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed fee change is reasonable 
because the Exchange's revenue from the collection of the ORF has not 
kept pace with Exchange's regulatory expenses. As described above, the 
ORF seeks to recover the costs of supervising and regulating members, 
including performing routine surveillances and investigations, as well 
as policy, rulemaking, interpretive and enforcement activities. The 
proposed ORF increase will help to offset these regulatory expenses, 
but would not result in total regulatory revenue exceeding total 
regulatory costs. The Exchange further notes that another options 
exchange has raised its options regulatory fee to $0.0095 per contract 
and thus the Exchange's ORF of $0.0055 per contract will still be below 
that level.\8\
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    \8\ See Securities Exchange Act Release No. 34-71007 (December 
6, 2013), 78 FR 75653 (December 12, 2013) (SR-CBOE-2013-117).
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    The Exchange believes that the proposed ORF increase is equitable 
and not unfairly discriminatory because it is objectively allocated to 
all ATP Holders on all of their transactions that clear in the customer 
range at OCC. Moreover, the Exchange believes the ORF ensures fairness 
by assessing higher fees to those member firms that require more 
Exchange regulatory services based on the amount of customer options 
business they conduct. Regulating customer trading activity is more 
labor intensive and requires greater expenditure of human and technical 
resources than regulating non-customer trading activity. Surveillance 
and regulation of non-customer trading activity generally tends to be 
more automated and less labor intensive. As a result, the costs 
associated with administering the customer component of the Exchange's 
overall regulatory program are anticipated to be higher than the costs 
associated with administering the non-customer

[[Page 5508]]

component of its regulatory program. As such, the Exchange proposes 
assessing higher fees to those firms that will require more Exchange 
regulatory services based on the amount of customer options business 
they conduct.\9\
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    \9\ The ORF is not charged for orders that clear in categories 
other than the customer range (e.g., market maker orders) because 
members incur the costs of owning memberships and through their 
memberships are charged transaction fees, dues and other fees that 
go into the general funds of the Exchange, a portion of which is 
used to help pay the costs of regulation. See supra note 4.
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    The Exchange believes that the ORF will continue to be equitable 
and not unfairly discriminatory because the fee increase is objectively 
allocated to all ATP Holders. As noted above, the Exchange will 
continue to monitor the amount of revenue collected from the ORF to 
ensure that it, in combination with its other regulatory fees and 
fines, does not exceed regulatory costs. If the Exchange determines 
that regulatory revenues exceed regulatory costs, the Exchange will 
adjust the ORF by submitting a fee filing change to the Commission.

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. The proposed fee change is 
not designed to address any competitive issues. Rather, the proposed 
change is designed to help the Exchange adequately fund its regulatory 
activities while seeking to ensure that total regulatory revenues do 
not exceed total regulatory costs.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change is effective upon filing pursuant to 
Section 19(b)(3)(A) \10\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \11\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \12\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \12\ 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-NYSEMKT-2014-09 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-2014-09. 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-NYSEMKT-2014-09, and should 
be submitted on or before February 21, 2014.
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    \13\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-01970 Filed 1-30-14; 8:45 am]
BILLING CODE 8011-01-P


