Daily Rules, Proposed Rules, and Notices of the Federal Government
The Exchange proposes to amend its 2011 Price List ("Price List") for equity transactions to amend the tiered structure of credits to Supplemental Liquidity Providers ("SLPs") for adding liquidity to the Exchange in NYSE-listed securities with a per share stock price of $1.00 or more, to include criteria based on an SLP's Average Daily Volume ("ADV") in added liquidity in the applicable month. The amended pricing will take effect on August 1, 2011. The text of the proposed rule change is available at the Exchange, at
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.
The Exchange proposes to amend its tiered structure of credits to SLPs for adding liquidity to the Exchange in NYSE-listed securities. The Exchange proposes to change the tiered volume requirements in the Price List from numerical thresholds (
Under the current tiered structure of credits, SLPs that meet the 10% average or more quoting requirement in an assigned security pursuant to NYSE Rule 107B receive a credit per share per transaction for adding liquidity, based on total ADV of added liquidity in the applicable month for all assigned SLP securities, as follows:
* $0.0022 credit per share per transaction if total ADV of added liquidity is more than 50 million shares;
* $0.0021 credit per share per transaction if total ADV of added liquidity is more than 20 million shares but not more than 50 million shares;
* $0.0020 credit per share per transaction if total ADV of added liquidity is more than 10 million shares but not more than 20 million shares.
The Exchange proposes to amend such credits with respect to SLP transactions as described below. SLPs that meet the 10% average or more quoting requirement in an assigned security pursuant to NYSE Rule 107B will receive a credit per share per transaction for adding liquidity, based on total ADV of added liquidity in the applicable month for all assigned SLP securities, as follows:
* 0.0022 credit per share per transaction if added liquidity is the greater of (a) an ADV of more than 35 million shares or (b) more than 1.25% of US Tape A ADV ("SLP Tier 1");
* $0.0021 credit per share per transaction if added liquidity is the greater of (a) an ADV of more than 15 million shares but not more than 35 million shares or (b) more than 0.50% but not more than 1.25% of US Tape A ("SLP Tier 2"); and
* $0.0020 credit per share per transaction if added liquidity is an ADV of more than 10 million shares but not more than the greater of 15 million shares or
The following table sets forth the differences between the current thresholds for the SLP credits as well as the proposed structure:
The proposed ADV thresholds for SLP Tiers 1 and 2 will fluctuate according to monthly market volumes, but will be subject to fixed minimum numerical thresholds as shown in the following example.
The minimum numerical thresholds for SLP Tier 2 of 15 million and for SLP Tier 1 of 35 million are set lower than the current numerical thresholds of 20 million for SLP Tier 2 and 50 million for SLP Tier 1 because current equity market volume has declined from recent historical levels.
The Exchange is proposing to add numerical minimum ADV thresholds to
The Exchange believes that the SLP Tier 3 minimum requirement of 10 million ADV, which remains unchanged and not tied to any percentage ADV threshold, continues to be an appropriate minimum requirement for the SLP program, given that it is a reasonable requirement to get a significantly larger increase of $.0005 over the client rebate of $.0015, and that the larger volume requirements needed for SLP Tier 2 and SLP Tier 1 are likely to be more sensitive to fluctuations in market volumes. In addition, the SLP Tier 3 maximum requirement is being lowered from 20 million ADV to 15 million ADV in order to correspond to, and avoid overlap with, the minimum 15 million ADV requirement in SLP Tier 2.
For two of its SLP Tiers, NYSE is moving to an approach that will compare the liquidity added by an SLP to the greater of a numerical threshold or a percentage threshold based upon the average daily traded volume of the relevant security, for several reasons. The percentage threshold will adjust each calendar month based on the U.S. average daily consolidated share volume in Tape A Securities for that month, while the numerical threshold remains unchanged from month to month, thereby providing a consistent floor against which to measure the SLPs' performance. The Exchange also believes that the proposed approach will provide a more straightforward way to communicate floating volume tiers, while maintaining a minimum threshold, which, as noted above, is an approach similar to that adopted by other exchanges.
These changes are intended to be effective immediately for all transactions beginning August 1, 2011 and are only applicable to those NYSE-listed securities with a per share stock price of $1.00 or more.
The Exchange believes that the proposed rule change is consistent with the provisions of Section 6 of the Securities Exchange Act of 1934 (the "Act"), in general, and Section 6(b)(4) of the Act,
With respect to the addition of percentage ADV thresholds to the existing share thresholds for certain of NYSE's existing pricing tiers, NYSE believes that the change is reasonable, because the levels of liquidity provision required to receive the applicable credits will move month to month with respect to the levels of market volumes. NYSE believes the levels of activity required to achieve higher tiers will be generally consistent with existing requirements for these tiers. Moreover, like existing pricing tiers tied to volume levels, as in effect at NYSE and other markets, the proposed pricing tiers are equitable and non-discriminatory because they are open to all SLPs on an equal basis and provide discounts that are reasonably related to the value to an exchange's market quality associated with higher volumes.
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. In such an environment, the Exchange must continually adjust its fees to remain competitive with other exchanges and with alternative trading systems that have been exempted from compliance with the statutory standards applicable to exchanges. The Exchange believes that the proposed rule change reflects this competitive environment because it will broaden the conditions under which customers may qualify for higher liquidity provider credits.
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.
No written comments were solicited or received with respect to the proposed rule change.
The foregoing rule change is effective upon filing pursuant to Section 19(b)(3)(A)
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:
* Use the Commission's Internet comment form (
* Send an e-mail to
* Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.