Daily Rules, Proposed Rules, and Notices of the Federal Government
The Exchange proposes to amend the NYSE Arca Options Fee Schedule ("Fee Schedule") to change the monthly cost for Option Trading Permits ("OTPs"). 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.
The Exchange proposes to amend its Fee Schedule to change the monthly cost for OTPs. The Exchange proposes to make the change immediately operative.
The Exchange requires that a Market Maker have an OTP in order to operate on the Exchange. For electronic Market Making, a Market Maker must have four OTPs in order to submit electronic quotations in every class on the Exchange. These four Market Maker OTPs also permit the firm to have at least one trader on the Floor of the Exchange as a Floor-based open outcry Market Maker. However, the manner in which those OTPs are assigned to individual traders may reduce the permissible number of issues in which electronic quotes are assigned. For instance, two associated Market Makers may assign OTP 1, 2, and 3 to trader A, while the fourth is assigned to trader B. Trader A may now only stream quotes electronically in 750 issues, while trader B may submit quotes electronically in 100 issues. To retain the appointment in more than 750 issues, all four OTPs must be in the same name, and to have an additional individual Market Maker on the Floor, a fifth OTP must be acquired.
To remain competitive in fixed fees among exchanges with trading floors, the Exchange is proposing to reduce the cost of additional Market Maker OTPs beyond the minimum of four that are required to submit electronic quotations in all issues listed on the Exchange. Accordingly, the Exchange proposes to specify that the existing fee of $4,000 per OTP per month would apply to a Market Maker firm that has between one and four Market Maker OTPs.
The Exchange also proposes to adopt a similar reduction for additional OTPs for Floor Brokers as well as for Office and Clearing Firms.
Accordingly, the Exchange proposes to specify that the existing fee of $1,000 per OTP per month would apply to a Floor Broker's first OTP and a charge of $250 per OTP per month would apply for each additional OTP.
The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Securities Exchange Act of 1934 (the "Act"),
The Exchange believes that the proposed change is reasonable because it will lower the cost for firms to acquire additional Market Maker OTPs. The Exchange believes that the proposed OTP pricing may lead to, among other things, additional Market Makers quoting in open outcry, which would increase the quality of the Exchange's market by increasing the depth of liquidity on the Exchange, which will benefit investors.
The Exchange also believes that the proposed change is reasonable because it will lower the cost for firms to acquire additional OTPs related to their Floor Broker activity, which will allow Floor Broker firms to price their services at a level that will enable them to attract higher levels of volume to the Floor of the Exchange while satisfying the Exchange's requirements related to entering, reporting and managing Floor volume. To the extent that Floor Brokers are able to attract higher volumes, they will bring more liquidity and price discovery to the Exchange. The Exchange also believes that the proposed change is equitable and not unfairly discriminatory because all firms may choose the particular type of OTP and function on the Exchange (e.g., Market Maker versus Floor Broker) that best suits their operational and business plans and needs.
The proposed change is also equitable and not unfairly discriminatory because it would lower the fees for additional OTPs beyond the minimum necessary in a manner that the Exchange believes reflects the differences in the roles and activity on the Exchange between different market participants. Specifically, the Exchange believes that it is equitable and not unfairly discriminatory to charge $2,000 for each additional Market Maker OTP beyond four, as compared to $250 for an additional OTP for a Floor Broker firm. In this regard, the additional Market Maker OTP would permit the firm, which already has the ability to make markets in every class on the Exchange, to have an additional trader on the Floor of the Exchange as an open outcry Market Maker. However, an additional OTP for a Floor Broker firm would not permit the firm to have a second trader on the Floor in the capacity of a Floor Broker, but would instead be utilized for operational/administrative purposes in order to satisfy applicable order entry and reporting requirements through EOC, for which one OTP per EOC login is required. Accordingly, this differential is equitable and not unfairly discriminatory because a Market Maker firm would derive an increased presence on the Floor via the additional OTP, but the Floor Broker firm would not. The Exchange believes that the additional OTP for the Market Maker firm, and in turn the increased presence on the Floor, could represent a proportionately increased economic value as compared to the additional OTP for the Floor Broker firm.
Finally, the Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues. In such an environment, the Exchange must continually review, and consider adjusting, its fees and credits to remain competitive with other exchanges. For the reasons described above, the Exchange believes that the proposed rule change reflects this competitive environment.
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)
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.
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.