
[Federal Register Volume 79, Number 25 (Thursday, February 6, 2014)]
[Notices]
[Pages 7246-7250]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-02500]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71454; File No. SR-NYSE-2014-06]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Amending Its Price List To (i) Increase the Credit for Agency Cross 
Trades; (ii) Increase the Fee for Certain Executions at the Close; 
(iii) Increase the ``Tier 1 Adding Credit;'' (iv) Increase the Fee for 
Certain Floor Broker Discretionary e-Quotes; (v) Increase the Credit 
for Certain Floor Broker Executions That Add Liquidity; (vi) Increase 
the Credit for Certain Supplemental Liquidity Provider Executions; and 
(vii) Increase the Fee for Executions in Crossing Session II

January 31, 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 23, 2014, New York Stock Exchange LLC (``NYSE'' 
or the ``Exchange'') 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 amend its Price List to (i) increase the 
credit for agency cross trades; (ii) increase the fee for certain 
executions at the close; (iii) increase the ``Tier 1 Adding Credit;'' 
(iv) increase the fee for certain Floor broker

[[Page 7247]]

discretionary e-Quotes (``d-Quotes''); (v) increase the credit for 
certain Floor broker executions that add liquidity; (vi) increase the 
credit for certain Supplemental Liquidity Provider (``SLP'') 
executions; and (vii) increase the fee for executions in Crossing 
Session II. The Exchange proposes to implement the fee change effective 
February 1, 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its Price List to (i) increase the 
credit for agency cross trades; (ii) increase the fee for certain 
executions at the close; (iii) increase the ``Tier 1 Adding Credit;'' 
(iv) increase the fee for certain d-Quotes; (v) increase the credit for 
certain Floor broker executions that add liquidity; (vi) increase the 
credit for certain SLP executions; and (vii) increase the fee for 
executions in Crossing Session II. The Exchange proposes to implement 
the fee change effective February 1, 2014.\4\ The proposed change would 
have no impact on pricing for transactions in securities priced below 
$1.00.
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    \4\ The Exchange notes that it has previously filed with the 
Securities and Exchange Commission a proposed rule change to amend 
the Price List (File No. SR-NYSE-2014-05). Exhibit 5 to SR-NYSE-
2014-05 specified an effective date for the revised Price List of 
January 27, 2014 (changed from December 18, 2013). Exhibit 5 to the 
instant proposed rule change specifies an effective date of February 
1, 2014 (changed from December 18, 2013). On January 27, 2014, 
subject to effectiveness of SR-NYSE-2014-05, the Exchange will 
update the Price List to reflect the fee change reflected in SR-
NYSE-2014-05, with an effective date of January 27, 2014. On 
February 1, 2014, the Exchange will further update the Price List to 
reflect the changes set forth in the instant proposed rule change, 
with an effective date of February 1, 2014.
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Agency Cross Trades
    A credit of $0.0003 per share is currently provided for an agency 
cross trade, which is a trade where a member organization has customer 
orders to buy and sell an equivalent amount of the same security. The 
Exchange proposes to increase this credit to $0.0006 per share.
Executions at the Close
    A fee of $0.0001 per share currently applies to executions at the 
close (except for market at-the-close (``MOC'') and limit at-the-close 
(``LOC'') orders) and Floor broker executions swept into the close if a 
member organization executes an average daily volume (``ADV'') on the 
Exchange during the billing month of at least 1,000,000 shares in such 
orders. The Exchange proposes to increase the fee to $0.0002 per share. 
Such executions would continue to be free of charge if the member 
organization does not reach the 1,000,000-share threshold.
Tier 1 Adding Credit
    The Tier 1 Adding Credit currently provides for a credit of $0.0018 
per share (or $0.0010 for a Non-Displayed Reserve Order or $0.0015 for 
a Midpoint Passive Liquidity (``MPL'') Order).\5\ The Exchange proposes 
to increase this credit to $0.0020 per share.\6\
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    \5\ A member organization qualifies for the Tier 1 Adding Credit 
when adding liquidity to the Exchange if (i) the member organization 
has ADV that adds liquidity to the Exchange during the billing month 
(``Adding ADV,'' which excludes any liquidity added by a Designated 
Market Maker (``DMM'')) that is at least 1.5% of consolidated ADV 
(``CADV'') in NYSE-listed securities during the billing month, 
excluding odd lots through January 31, 2014 (``NYSE CADV''), and 
executes MOC and LOC orders of at least 0.375% of NYSE CADV, (ii) 
the member organization has Adding ADV that is at least 0.8% of NYSE 
CADV, executes MOC and LOC orders of at least 0.12% of NYSE CADV, 
and adds liquidity to the NYSE as an SLP for all assigned SLP 
securities in the aggregate (including shares of both an SLP 
proprietary trading unit (``SLP-Prop'') and an SLP market maker 
(``SLMM'') of the same member organization) of more than 0.15% of 
NYSE CADV, or (iii) the member organization has ADV that adds 
liquidity in customer electronic orders to the NYSE (``Customer 
Electronic Adding ADV,'' which shall exclude any liquidity added by 
a Floor broker, DMM, or SLP) during the billing month that is at 
least 0.5% of NYSE CADV, executes MOC and LOC orders of at least 
0.12% of NYSE CADV, and has Customer Electronic Adding ADV during 
the billing month that, taken as a percentage of NYSE CADV, is at 
least equal to the member organization's Customer Electronic Adding 
ADV during September 2012 as a percentage of CADV in NYSE-listed 
securities during September 2012 plus 15%.
    \6\ The applicable credit of $0.0010 for a Non-Displayed Reserve 
Order or $0.0015 for an MPL Order would not change as a result of 
this proposal.
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d-Quotes
    A fee of $0.0010 per share currently applies to d-Quotes of a Floor 
broker that executes an ADV of at least 500,000 shares of d-Quotes that 
remove liquidity from the Exchange during the month. The Exchange 
proposes to increase this fee to $0.0015. Such executions would 
continue to be charged a fee of $0.0005 per share if the member 
organization does not reach the 500,000-share threshold.
Floor Broker Executions That Add Liquidity
    A credit of $0.0019 per share (or $0.0015 for an MPL Order) 
currently applies to executions of orders sent to a Floor broker for 
representation on the Exchange when adding liquidity to the Exchange. 
The Exchange proposes that the applicable credit for a Floor broker 
that is part of a member organization that qualifies for the Tier 1 
Adding Credit would be the same rate that applies to the Tier 1 Adding 
Credit.\7\ This would be the $0.0020 per share credit proposed above. 
For Floor brokers that are not part of a member organization that 
qualifies for the Tier 1 Adding Credit, the current $0.0019 rate would 
continue to apply.
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    \7\ The applicable credit of $0.0015 for an MPL Order would not 
change as a result of this proposal.
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SLP Credits
    A credit of $0.0025 per share (or $0.0020 for a Non-Displayed 
Reserve Order or $0.0015 for an MPL Order) currently applies to SLP 
transactions in securities with a per share price of $1.00 or more that 
add liquidity on the Exchange if the SLP (i) meets the 10% average or 
more quoting requirement in an assigned security pursuant to NYSE Rule 
107B (quotes of an SLP-Prop and an SLMM of the same member organization 
are not aggregated), (ii) adds liquidity for all assigned SLP 
securities in the aggregate (including shares of both an SLP-Prop and 
an SLMM of the same member organization) of an ADV of more than 0.22% 
of NYSE CADV, (iii) adds liquidity for all assigned SLP securities in 
the aggregate (including shares of both an SLP-Prop and an SLMM of the 
same member organization) of an ADV during the billing month that is at 
least equal to the SLP's September 2012 Adding ADV (``SLP Baseline 
ADV'') plus 0.18% of NYSE CADV, and (iv) has a minimum provide [sic] 
ADV for all assigned SLP securities of 12 million shares. The Exchange 
proposes to increase this credit to $0.0027 per share

[[Page 7248]]

or $0.0022 per share if a Non-Displayed Reserve Order.\8\
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    \8\ The applicable credit of $0.0015 for an MPL Order would not 
change as a result of this proposal.
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Crossing Session II
    A fee of $0.0002 per share currently applies to executions in 
Crossing Session II. The Exchange proposes to increase the fee to 
$0.0004. Fees for executions in Crossing Session II would continue to 
be capped at $100,000 per month per member organization.
    The proposed change is not otherwise intended to address any other 
issues, and the Exchange is not aware of any problems that member 
organizations 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,\9\ in general, and furthers the 
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\10\ 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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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed increase in the credit for 
agency cross trades is reasonable because such trades are typically 
large block orders, and providing a higher credit would encourage their 
submission to a public exchange, thereby promoting price discovery and 
transparency. The Exchange believes that the proposed increase is 
equitable and not unfairly discriminatory because all member 
organizations that engage in agency trading would be eligible to 
receive the higher credit, and all market participants would benefit 
from the price discovery and transparency provided by large block 
orders.
    The Exchange believes that it is reasonable to increase the fee for 
executions at the close (other than MOC and LOC orders) and Floor 
broker executions swept into the close if a member organization 
executes an ADV of at least 1,000,000 of such executions on a combined 
basis. Specifically, the Exchange's closing auction is a recognized 
industry benchmark,\11\ and member organizations receive a substantial 
benefit from the Exchange in obtaining an ADV of 1,000,000 or more of 
such executions at the Exchange's closing price on a daily basis. In 
that respect, this fee increase is designed in part to offset the 
reduced fees that the Exchange collects from executions of MOC and LOC 
orders, which were lowered effective August 1, 2013.\12\ The Exchange 
also believes that the proposed fee is equitable and not unfairly 
discriminatory. Specifically, while member organizations that reach the 
threshold of an ADV of at least 1,000,000 combined executions are 
generally larger member organizations that are deriving a substantial 
benefit from this high volume of executions, the Exchange must 
nonetheless encourage liquidity from multiple sources. Allowing member 
organizations with lower execution volumes to continue to obtain 
executions at the close at no charge would encourage them to continue 
to send orders to the Exchange for the closing auction. The Exchange 
believes that the threshold it has selected would continue to incent 
order flow from multiple sources and help maintain the quality of the 
Exchange's closing auctions, which benefits all market participants.
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    \11\ For example, the pricing and valuation of certain indices, 
funds, and derivative products require primary market prints.
    \12\ See Securities Exchange Act Release No. 70193 (August 14, 
2013), 78 FR 51251 (August 20, 2013) (SR-NYSE-2013-56).
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    The Exchange believes that the proposed increase in the Tier 1 
Adding Credit is reasonable because it would further contribute to 
incenting member organizations to provide additional amounts of 
liquidity on the Exchange. The Exchange believes that the proposed 
increase is equitable and not unfairly discriminatory because all 
member organizations would benefit from such increased levels of 
liquidity and because the Tier 1 Adding Credit would continue to 
provide a higher credit to member organizations that is reasonably 
related to the value to the Exchange's market quality associated with 
higher volumes of liquidity. As is currently the case, member 
organizations would continue to have three distinct methods of 
qualifying for the Tier 1 Adding Credit.\13\
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    \13\ See supra note 6.
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    The Exchange believes that the proposed increase in the d-Quote 
rate for Floor brokers executing an ADV of at least 500,000 d-Quotes 
that remove liquidity from the Exchange is reasonable because a 
substantial benefit is derived from obtaining executions for such a 
high volume of d-Quotes. The Exchange also believes that the proposed 
rate is equitable and not unfairly discriminatory. Specifically, while 
Floor brokers that reach the threshold of an ADV of at least 500,000 
combined executions are generally larger member organizations that are 
deriving a substantial benefit from this high volume of executions, the 
Exchange must nonetheless encourage liquidity from multiple sources. 
Allowing Floor brokers with lower execution volumes to continue to use 
d-Quotes to remove liquidity, but at the lower fee of $0.0005, would 
further incent order flow from multiple sources and help maintain the 
quality of order execution on the Exchange, which benefits all market 
participants. The Exchange further believes that it is reasonable to 
continue to maintain d-Quote take rates that are lower than the take 
rate that applies to Floor broker transactions not otherwise specified 
on the Price List (i.e., the $0.0022 and $0.0020 per share rates) 
because d-Quotes, in particular, encourage additional liquidity during 
the trading day and incent Floor brokers to provide additional intra-
quote price improved trading, which contribute to the overall quality 
of the Exchange's market.
    The Exchange believes that the proposed increase in the credit for 
Floor brokers that are part of a member organization that qualifies for 
the Tier 1 Adding Credit is reasonable. Without this proposed change, 
and due to the proposed increase in the Tier 1 Adding Credit from 
$0.0018 to $0.0020, a Floor broker's transactions that add liquidity 
would receive a credit that would be inferior to that of the non-Floor 
broker transactions of the same member organization. The Exchange 
believes that this result would disincentivize member organizations 
from sending orders to a Floor broker and could therefore decrease the 
amount of liquidity-adding volume available on the Exchange's Floor. 
The Exchange believes that the proposed change is equitable and not 
unfairly discriminatory because a Floor broker would only receive the 
Tier 1 Adding Credit rate if it is part of a member organization that 
qualifies for the Tier 1 Adding Credit and because Floor broker volume 
is counted when determining whether a member organization has reached 
the applicable Tier 1 Adding Credit thresholds.
    The Exchange believes that the proposed increase in the credit for 
SLPs that add liquidity to the Exchange with a per share price of $1.00 
or more if the SLP meets certain requirements is reasonable because it 
would create added incentive for SLPs to provide liquidity in assigned 
securities. This is further reasonable because the added incentive 
created by the availability of the increased credit is reasonably 
related to an SLP's liquidity obligations on the Exchange. The 
corresponding

[[Page 7249]]

increase in the credit applicable to Non-Displayed Reserve Orders is 
also reasonable because it would maintain the existing $0.0005 
difference between these order types and all other order types 
(excluding MPL Orders).\14\ The Exchange believes that the proposed 
increase in the credit is equitable and not unfairly discriminatory 
because, as is currently the case under the existing rate, the credit 
is available to all qualifying SLPs on an equal basis and because the 
credit is reasonably related to the value to the Exchange's market 
quality associated with higher volumes.
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    \14\ MPL Order fees and credits apply equally to all market 
participants and MPL Orders are not eligible for any tiered or 
additional credits or reduced fees. See SR-NYSE-2014-05.
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    The Exchange believes that the proposed increase in the fee for 
Crossing Session II transactions is reasonable because it would more 
closely align the rate with the other rates within the Price List. The 
Exchange also believes that the proposed increase in the fee for 
Crossing Session II transactions is equitable and not unfairly 
discriminatory because such fees would apply to executions of all 
member organizations in Crossing Session II and because such fees would 
continue to be capped at $100,000 per member organization per month.
    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,\15\ the Exchange 
believes that the proposed rule change would not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act.
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    \15\ 15 U.S.C. 78f(b)(8).
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    Specifically, the Exchange believes that the proposed increase in 
the credit for agency cross trades would further encourage the 
submission of what are typically large block orders to a public 
exchange and thereby allow the Exchange to more effectively compete 
with alternative trade reporting facilities for market share.
    The proposed increased fee for executions at the close and Floor 
broker executions swept into the close would continue to apply only to 
member organizations that obtain high volumes of executions at the 
close on a daily basis. The Exchange believes that this small fee would 
not result in a burden on competition for these member organizations in 
light of the substantial benefit that they obtain from these 
executions. Participation in the closing by member organizations with 
relatively lower closing activity is also important to the quality of 
the closing, and the Exchange therefore believes that continuing to not 
charge member organizations with executions below the 1,000,000-share 
monthly ADV threshold would not result in a burden on competition.
    The proposed increase in the Tier 1 Adding Credit would not burden 
competition, but rather would encourage member organizations to submit 
additional amounts of liquidity on the Exchange. In addition, the 
method of qualifying for the Tier 1 Adding Credit would continue to not 
burden competition, in that the qualification parameters encourage 
multiple sources of liquidity, including from those member 
organizations without an SLP or Floor broker unit.
    The Exchange believes that Floor brokers that are removing higher 
volumes of liquidity via d-Quotes from the Exchange would not be 
burdened by paying a higher fee for such executions, especially because 
a substantial benefit is derived from obtaining executions for such a 
high volume of d-Quotes. The Exchange also believes that continuing to 
charge Floor brokers below the 500,000-share monthly ADV threshold a 
lower rate of $0.0005 per share would continue to not result in a 
burden on competition, because such rate would continue to incent order 
flow from multiple sources and help maintain the quality of order 
execution on the Exchange, which benefits all market participants.
    The Exchange believes that applying the Tier 1 Adding Credit rate 
to Floor broker executions that add liquidity if the Floor broker is 
part of a qualifying member organization would not burden competition. 
Rather, the Exchange believes that the proposed change would eliminate 
a potential disincentive to sending orders to Floor brokers and would 
therefore prevent decreased levels of available liquidity on the Floor 
of the Exchange.
    The increase in the credit for certain SLP executions would not 
burden competition because all SLPs would have the opportunity to 
qualify for the credit. The increased credit would create an added 
incentive for SLPs to provide liquidity on the Exchange, thereby also 
contributing to the Exchange's competitiveness with other markets.
    The increase in the fee for executions in Crossing Session II would 
not burden competition because it would apply to all member 
organizations and because fees for member organizations that are 
particularly active in Crossing Session II would continue to be capped 
at $100,000 per member organization per month.
    Finally, the Exchange notes that it operates in a highly 
competitive market in which market participants can readily favor 
competing venues if they deem fee levels at a particular venue to be 
excessive 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 
order routing practices, the Exchange believes that the degree to which 
fee 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.

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.
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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 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

[[Page 7250]]

under Section 19(b)(2)(B) \18\ of the Act to determine whether the 
proposed rule change should be approved or disapproved.
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    \18\ 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-2014-06 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-2014-06. 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 inspection and 
copying in the Commission's Public Reference Section, 100 F Street NE., 
Washington, DC 20549-1090, on official business days between the hours 
of 10:00 a.m. and 3:00 p.m. Copies of the filing will also be available 
for Web site viewing and printing at the NYSE's principal office and on 
its Internet Web site at www.nyse.com. 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-2014-06 and should be submitted on 
or before February 27, 2014.
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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. 2014-02500 Filed 2-5-14; 8:45 am]
BILLING CODE 8011-01-P


