Daily Rules, Proposed Rules, and Notices of the Federal Government
The Exchange proposes to amend the NYSE Amex Options Fee Schedule ("Fee Schedule") to change the number of Amex Trading Permits ("ATP") required by NYSE Amex Market Makers based on the number of options in their appointment. The text of the proposed rule change is available on the Exchange's Web site 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.
NYSE MKT proposes to amend the Fee Schedule to change the number of Amex Trading Permits ("ATP") required by NYSE Amex Market Makers based on the number of options in their electronic appointment.
Currently, NYSE Amex Options Market Makers are free to apply to have any number of option classes in their trading appointment, subject to the following schedule:
(1) Market Makers with one ATP may have up to 100 option issues included in their electronic appointment;
(2) Market Makers with two ATPs may have up to 250 option issues included in their electronic appointment;
(3) Market Makers with three ATPs may have up to 750 option issues included in their electronic appointment; and
(4) Market Makers with four ATPs may have all option issues traded on the Exchange included in their electronic appointment.
Under the proposal, NYSE Amex Options Market Makers (which include Floor Market Makers) will be free to apply to have any number of option classes in their electronic trading appointment, subject to the following schedule:
One ATP = 60 issues, plus the bottom 45% of issues traded on the Exchange by volume;
Two ATPs = 150 issues, plus the bottom 45% of issues traded on the Exchange by volume;
Three ATPs = 500 issues, plus the bottom 45% of issues traded on the Exchange by volume;
Four ATPs = 1,100 issues, plus the bottom 45% of issues traded on the Exchange by volume; and
Five ATPs = All issues traded on the Exchange.
The "bottom 45%" of issues traded on the Exchange refers to the least actively traded issues on the Exchange, ranked by industry volume, as reported by the OCC for each issue during the calendar quarter. Each calendar quarter, with a one-month lag, the Exchange will publish on its Web site a list of the bottom 45% of issues traded by industry volume. For example, based on industry volume for April, May, and June 2012, the Exchange will rank all options traded on the Exchange as of the last day of that period, which will then become the bottom 45% of issues for the period beginning August 1, 2012. As of June 30, 2012, there were 2,196 options traded on the Exchange, so the bottom 45% would total 988 options for that period. The Exchange will recalculate this list using industry volumes for July, August, and September 2012 for the period beginning November 1, 2012, and so on. Any newly listed issues will automatically become part of the bottom 45% until the next evaluation period, at which time they may or may not remain part of the bottom 45% list depending upon their trading volumes and resultant rank among all issues traded on the Exchange.
The proposed rule change is effective upon filing and will not become operative until 30 days after the date of this filing, or such shorter time as the Commission may designate. The Exchange has requested that the Commission waive all or a portion of the 30-day operative delay period so that it may implement the proposed change on September 1, 2012. If the Commission does not waive all or a portion of the 30-day operative delay period, the proposed changes will be implemented on October 1, 2012.
The Exchange believes that the proposed rule change is consistent with the provisions of Section 6(b)
In making the proposed changes, the Exchange's objective is to better align the Fee Schedule with the level of activity on the Exchange while properly incenting Market Makers to quote in a broad range of options, including less liquid and active names, to promote transparency and price discovery in those names, which will benefit all Exchange participants and the public interest.
The proposal to change the number of ATPs required for a certain number of appointments will promote just and equitable principles of trade and will remove impediments to and perfect the mechanisms of a free and open market for the following reasons. First, the proposed rule change allows Market Makers affordable access to all issues traded on the Exchange when viewed in light of the cost for a market maker on at least two other exchanges to obtain a sufficient number of trading permits or rights to quote a similar number of names. For example, on the International Securities Exchange ("ISE"), a Competitive Market Maker ("CMM") is required to have nine CMM Trading Rights in order to quote all issues on the ISE.
A further comparison may be made with the Chicago Board Options Exchange ("CBOE") and the trading permit costs for a market maker to create an assignment there. CBOE has a sliding scale for Trading Permit Holders ("TPHs") who are acting as market makers. The sliding scale is $5,500 per month for permits one to 10, $4,000 per month for permits 11 to 20, and $2,500 for permits 21 and higher. The discounted permit rates of $4,000 and $2,500 are only available to TPHs who commit to a full year of that number of permits. In configuring an appointment on CBOE, a market maker incurs an appointment cost for each option in its appointment based on various tiers.
The Exchange further notes that by virtue of the limited number of CMM Trading Rights available for sale or lease on ISE and the Class Quoting Limit ("CQL")
In designing the proposal, the Exchange wanted to encourage market making in less liquid and active option issues. This is beneficial to all Exchange participants and market participants generally. Under the proposal, the first ATP permits an NYSE Amex Options Market Maker to create an appointment for submitting quotes electronically that will consist of 60 options of its choosing, plus the bottom 45% of options traded on the Exchange. As of June 30, 2012, there were 2,196 options on the Exchange, which means that the bottom 45% consists of 988 options. Under the proposal, this means that a NYSE Amex Options Market Maker with one ATP will be able to create an assignment consisting of 1,048 options, far greater than the 100 options permitted under the current Fee Schedule. The proposal increases the total number of ATPs required to quote all options on the Exchange from four to five and increases the monthly cost for an NYSE Amex Options Market Maker from $23,000 to $26,000 per month. Again, viewed in light of the costs to establish a similar assignment on at least two other exchanges, the proposed rule change is just, equitable, and removes impediments to a free and open market, particularly since the proposal is designed to encourage greater quoting in less liquid names that will benefit the marketplace through increased price discovery. The proposal is consistent with just and equitable principles of trade since it will apply to all NYSE Amex Options Market Makers equally.
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.
Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act
A proposed rule change filed under Rule 19b-4(f)(6)
At any time within 60 days of the filing of the 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 to determine whether the proposed rule should be approved or disapproved.
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 email to
* Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.