80 FR 25758 - Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Modifying Its Rules To Provide for the Use of Ports That Provide Connectivity to the Exchange's Trading Systems Solely for the Cancellation or “Takedown” of Quotes and Changes to the NYSE Arca Options Fee Schedule Related to Quote Takedown Service
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 80, Issue 86 (May 5, 2015)
Federal Register Volume 80, Issue 86 (May 5, 2015)
| Page Range | 25758-25761 | |
| FR Document | 2015-10411 |
[Federal Register Volume 80, Number 86 (Tuesday, May 5, 2015)] [Notices] [Pages 25758-25761] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2015-10411] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-74841; File No. SR-NYSEARCA-2015-32] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Modifying Its Rules To Provide for the Use of Ports That Provide Connectivity to the Exchange's Trading Systems Solely for the Cancellation or ``Takedown'' of Quotes and Changes to the NYSE Arca Options Fee Schedule Related to Quote Takedown Service April 29, 2015. 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 April 17 2015, NYSE Arca, Inc. (the ``Exchange'' or ``NYSE Arca'') filed with the Securities and Exchange Commission (the ``Commission'') the proposed rule change as described in Items I and II 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. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 15 U.S.C. 78a. \3\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to modify its rules to provide for the use of ports that provide connectivity to the Exchange's trading systems solely for the cancellation or ``takedown'' of quotes. In addition, the proposed rule change reflects changes to the NYSE Arca Options Fee Schedule (``Fee Schedule'') related to this quote takedown service. 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 modify its rules to provide for the use of ports that provide connectivity to the Exchange's trading systems solely for the cancellation or ``takedown'' of quotes. In addition, the proposed rule change reflects changes to the Fee Schedule related to this quote takedown service. Order/Quote Entry Ports The Exchange currently makes available to OTP Holders and OTP Firms (``OTPs'') order/quote entry ports for connectivity to Exchange trading systems (each an ``order/quote entry port''). OTPs may be authorized to utilize order/quote entry ports for option activity on NYSE Arca Options and incur monthly Port Fees. Currently, the Exchange charges $450 per month, per order/quote entry port for the first 40 ports and $150 per month, per order/quote entry port for any additional ports in excess of 40 (i.e., ports 41 and [[Page 25759]] greater).\4\ While order/quote entry ports may be used by OTPs registered as Market Makers to both enter and cancel or remove quotes, Market Makers may dedicate certain ports solely to the removal of quotes, i.e., a ``quote takedown port,'' \5\ and, until now, the Exchange has treated such dedicated quote takedown ports the same as order/quote entry port [sic] for Port Fee purposes. --------------------------------------------------------------------------- \4\ See Fee Schedule, available at, https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf. Unutilized order/quote entry ports that connect to the Exchange via its backup datacenter are considered established for backup purposes and are not subject to Port Fees. In addition, for purpose of calculating the number of order/quote entry ports, the Exchange shall aggregate the ports of affiliates. See id. \5\ See Trader Update regarding Options Pre-Trade and Post-Trade Risk Controls, available at, https://www.nyse.com/publicdocs/nyse/markets/amex-options/US_Options_Risk_Controls_Client_Document.pdf (announcing availability of ports dedicated to quote takedown to minimize latency for quote takedowns). --------------------------------------------------------------------------- Quote Takedown Ports The Exchange is proposing to modify its rules to provide ports specifically dedicated to quote cancellation or ``quote takedown'' (each a ``Quote Takedown Port'') as a service distinct from order/quote entry ports, which may be used both for entering quotes or orders and removing or cancelling quotes. The proposed Quote Takedown Ports would be designed to assist OTPs registered as Marker Makers in the management of, and risk control over, their quotes, particularly if they have a large number of options issues in their appointment. For example, if a Market Maker detects market indications that may influence the direction or bias of its quotes, the Market Maker may attempt to cancel all of its quotes in a number of classes, thereby avoiding unintended executions, while it evaluates the direction of the market. Thus, to reduce uncertainty, the Marker Maker may submit to the Exchange a ``quote takedown'' message through a dedicated Quote Takedown Port for the prompt removal of quotes. By entering a quote takedown message through a dedicated Quote Takedown Port, a Market Maker may reduce its exposure to risk because of heavy quote traffic- induced latency. The Exchange proposes to modify the Fee Schedule to provide that certain Quote Takedown Ports would not be subject to Port Fees. Specifically, for each order/quote entry port utilized, the Exchange proposes to allow Market Makers to utilize, free of charge, one Quote Takedown Port. Because Quote Takedown Ports would not be available for quote or order submission, the Exchange is proposing to allow one Quote Takedown Port free of charge for every order/quote entry port that a Market Maker utilizes. In other words, provided a Market Maker does not exceed a 1-to-1 ratio of order/quote entry port-to-Quote Takedown Port, the Quote Takedown Port(s) would be free (the ``1-to-1 ratio''). However, a Market Maker that exceeds the 1-to-1 ratio would be charged for additional Quote Takedown Ports. For example, a Market Maker with thirty-five (35) order/quote entry ports and forty-two (42) Quote Takedown Ports would have forty-two (42) ports subject to charge because the Exchange would charge for the 35 order/quote entry ports and the seven Quote Takedown Ports that exceed the 1-1 ratio (42 - 35 = 7). The Exchange would not charge for the first 35 Quote Takedown Ports because those ports would meet the 1-to-1 ratio. Similarly, the Exchange would not include those Quote Takedown Ports that meet the 1-to-1 ratio to determine a Market Maker's total number of ports for purposes of calculating Port Fees. As noted above, the Exchange charges $450 per month, per port for the first forty ports, and $150 per month for each additional port in excess of forty. Thus, using the example above, the Exchange would not count the thirty- five (35) Quote Takedown Ports (which align with the 35 order/quote entry ports) against the Market Maker's total number of ports utilized, but would count seven (7) additional Quote Takedown Ports. Thus, because the Market Maker would have forty-two (42) chargeable ports, the Market Maker's total monthly port fee would be $18,300 (i.e., 40 ports x $450 per port = $18,000; and 2 ports x $150 per port $300). The Exchange notes that options Market Makers typically require more than forty (40) order/quote entry ports, in part to satisfy their obligation to maintain continuous two-sided markets in their appointed classes. Thus, the Exchange believes that the proposed change would enhance the ability of Market Maker firms to manage quotes, quote traffic, and their quoting obligations by eliminating fees for certain Quote Takedown Ports, which function as risk management tools rather than trade opportunity tools. The Exchange believes this proposed change would permit the Exchange to remain competitive with other exchanges with respect to fees charged for ports. To reflect the proposed change, the Exchange proposes to add to the Fee Schedule, in the table regarding Port Fees under the section ``NYSE Arca OPTIONS: FLOOR and EQUIPMENT and CO-LOCATION FEES,'' a new category for ``Quote Takedown Ports,'' together with the following language: ``For each order/quote entry port utilized, NYSE Arca Market Makers may utilize, free of charge, one port dedicated to quote cancellation or `quote takedown,' which port(s) will not be included in the count of order/quote entry ports utilized. Any quote takedown port utilized by a NYSE Arca Market Maker that is in excess of the number of order/quote entry ports utilized will be counted and charged as an order/quote entry port.'' In addition, to add clarity regarding Port Fees, the Exchange proposes to move the existing text regarding how the Exchange will aggregate the order/quote entry ports of a Marker Maker's affiliate to appear immediately below the Quote Takedown Ports and to specify that the Exchange will similarly aggregate the Quote Takedown Ports of affiliates.\6\ --------------------------------------------------------------------------- \6\ See proposed Fee Schedule, Port Fees (``For purpose of calculating the number of order/quote entry ports and quote takedown ports, the Exchange shall aggregate the ports of affiliates.''). --------------------------------------------------------------------------- The Exchange believes the proposal to offer Quote Takedown Ports would ensure a fair and reasonable use of resources by eliminating charges to Market Makers for certain Quote Takedown Ports (described above), which are used to control and manage risk exposure to the benefit of all marker participants. 2. Statutory Basis The proposed rule change is consistent with Section 6(b) \7\ of the Securities Exchange Act of 1934 (the ``Act''), in general, and furthers the objectives of Section 6(b)(5),\8\ in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, and to remove impediments to and perfect the mechanism of a free and open market and a national market system. --------------------------------------------------------------------------- \7\ 15 U.S.C. 78f(b). \8\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- The Exchange believes that the proposed rule change would promote just and equitable principles of trade and remove impediments to and perfect the mechanism of a free and open market because offering OTPs registered as Market Makers designated Quote Takedown Ports would enhance Market Makers' ability to manage quotes, quote traffic, and their quoting obligations, which would, in turn, improve their risk controls to the benefit of all participants. The Exchange believes that the Quote Takedown Ports would foster [[Page 25760]] cooperation and coordination with persons engaged in facilitating transactions in securities because Quote Takedown Ports minimize latency for quote takedown, which would enable the fair and reasonable use of Market Makers' resources. Because Quote Takedown Ports, as the name suggests, are only available for quote takedowns and not order or quote entry (or order cancellation), the Quote Takedown Ports are not designed to permit unfair discrimination but rather are designed to enable Market Makers, that are subject to heightened obligations that other market participants are not, to meet their quoting obligations, which, in turn, benefits all market participants. The Exchange also 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 (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. --------------------------------------------------------------------------- \9\ 15 U.S.C. 78f(b). \10\ 15 U.S.C. 78f(b)(4) and (5). --------------------------------------------------------------------------- The Exchange believes the proposed change is reasonable, equitable and not unfairly discriminatory for the following reasons. First, all OTPs would be subject to the same schedule of Port Fees and OTPs would continue to be able to request, and pay for only those ports that they require, with no impact to other OTPs. As noted above, because Quote Takedown Ports are uniquely designed to address quotes and only Market Makers are obliged to quote, the proposed fee structure for Quote Takedown Ports would not disadvantage non-Market Makers trading on the Exchange. Second, the proposal to enable Market Makers to utilize certain Quote Takedown Ports free of charge would result in the fair and reasonable use of resources by Market Makers and would encourage trading on the Exchange, thus improving liquidity and price discovery, to the benefit of all market participants. In addition, providing Market Makers a free Quote Takedown Port for each order/quote entry port may increase use of Quote Takedown Ports as a cost effective means of improving risk controls. The increased use of Quote Takedown Ports by Market Makers would improve Market Makers' ability to manage quotes, quote traffic, and their quoting obligations, which would, in turn, improve their risk controls to the benefit of all participants. The Exchange likewise believes that not including those Quote Takedown Ports that meet the 1-to-1 ratio (order/quote entry ports-to- Quote Takedown Ports) in the count against a Market Maker's total number of ports utilized for purposes of calculating the monthly Port Fees is reasonable, equitable and not unfairly discriminatory. The Exchange notes that options Market Makers, require more than 40 ports in order to satisfy their responsibilities and obligations to investors, which stem from the significant number of series that exist for any particular option class \11\ and the corresponding obligations that Market Makers have to maintain continuous quotations in all series in their appointed classes. Furthermore, Market Makers that quote across a significant number, if not all, of the 2,710 classes traded on the Exchange could have responsibility for upwards of 620,000 individual option series.\12\ Accordingly, the level of activity that is required to satisfy the quoting obligations, which directly relates to the number of ports needed, is such that the Exchange believes it is equitable and not unfairly discriminatory to only include the number of order/quote entry and Quote Takedown Ports in excess of the 1-to-1 ratio in determining the per port charge for Market Makers. --------------------------------------------------------------------------- \11\ For example, as of February 24, 2015, there were more than 1,952 individual option series overlying Chipotle Mexican Grill, Inc. \12\ As of February 24, 2015. --------------------------------------------------------------------------- Finally, the Exchange believes that the proposed change is reasonable, because the Quote Takedown Ports are used for purposes distinct from order/quote entry ports, for which the Exchange charges.\13\ In this regard, the Exchange believes that its Port Fees are competitive with those charged by other venues, and that in some cases its Port Fees are less expensive than many of its primary competitors. For example, the Chicago Board Options Exchange (``CBOE'') charges $750 per port per month for a Network Access Port.\14\ The NASDAQ Options Market (``NOM'') charges $650 per port per month.\15\ --------------------------------------------------------------------------- \13\ The Exchange also charges for use of drop copy ports, which are not discussed in this filing. See supra n. 4. \14\ See CBOE fee schedule, Command Connectivity Charges, at p 11, available at, http://www.cboe.com/publish/feeschedule/CBOEFeeSchedule.pdf (charging $750 per month for each Network Access Port (1 Gbps) and $3,500 per month for each Network Access Port (10 Gbps)). \15\ See NOM Price List, Section 3, NASDAQ Options Market, Access Services, available at, http://nasdaq.cchwallstreet.com/NASDAQTools/bookmark.asp?id=nasdaq-rule-options_XVS3&manual=/nasdaq/main/nasdaq-optionsrules/. --------------------------------------------------------------------------- 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,\16\ the Exchange does not believe that the proposed rule change would impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. Because the proposed change results in the fair and reasonable use of resources by OTPs, particularly Market Makers, in that the Exchange allows OTPs to utilize one Quote Takedown Port per one order/quote entry port free of charge, the Exchange believes this change would benefit all market participants. In addition, because Quote Takedown Ports enhance Market Makers' risk controls for transactions executed on the Exchange, the Exchange believes the proposal is pro-competitive. --------------------------------------------------------------------------- \16\ 15 U.S.C. 78f(b)(8). --------------------------------------------------------------------------- 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. 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 Exchange has filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act \17\ and Rule 19b-4(f)(6) thereunder.\18\ Because the 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 prior to 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) [[Page 25761]] of the Act and Rule 19b-4(f)(6)(iii) thereunder. --------------------------------------------------------------------------- \17\ 15 U.S.C. 78s(b)(3)(A)(iii). \18\ 17 CFR 240.19b-4(f)(6). --------------------------------------------------------------------------- A proposed rule change filed under Rule 19b-4(f)(6) \19\ normally does not become operative prior to 30 days after the date of the filing. However, pursuant to Rule 19b4(f)(6)(iii),\20\ the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has requested that the Commission waive the 30-day operative delay so that the proposal may become operative immediately upon filing and thereby enable Market Makers to enhance their risk controls and risk management processes without delay. The Commission believes that waiving the 30- day operative delay is consistent with the protection of investors and the public interest. Therefore, the Commission hereby waives the 30-day operative delay and designates the proposal effective upon filing.\21\ --------------------------------------------------------------------------- \19\ 17 CFR 240.19b-4(f)(6). \20\ 17 CFR 240.19b-4(f)(6)(iii). \21\ For purposes of waiving the 30-day operative delay, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). --------------------------------------------------------------------------- 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) \22\ of the Act to determine whether the proposed rule change should be approved or disapproved. --------------------------------------------------------------------------- \22\ 15 U.S.C. 78s(b)(2)(B). --------------------------------------------------------------------------- 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 CommentsUse the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or Send an email to [email protected]. Please include File Number SR-NYSEARCA-2015-32 on the subject line. Paper Comments Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-NYSEARCA-2015-32. 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 the filing will also be available for inspection and copying 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-NYSEARCA-2015-32, and should be submitted on or before May 26, 2015. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\23\ --------------------------------------------------------------------------- \23\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Brent J. Fields, Secretary. [FR Doc. 2015-10411 Filed 5-4-15; 8:45 am] BILLING CODE 8011-01-P
![25758 Federal Register / Vol. 80, No. 86 / Tuesday, May 5, 2015 / Notices
operative immediately upon filing and communications relating to the solicit comments on the proposed rule
thereby enable Market Makers to proposed rule change between the change from interested persons.
enhance their risk controls and risk Commission and any person, other than
I. Self-Regulatory Organization’s
management processes without delay. those that may be withheld from the
Statement of the Terms of Substance of
The Commission believes that waiving public in accordance with the
provisions of 5 U.S.C. 552, will be the Proposed Rule Change
the 30-day operative delay is consistent
with the protection of investors and the available for Web site viewing and The Exchange proposes to modify its
public interest. Therefore, the printing in the Commission’s Public rules to provide for the use of ports that
Commission hereby waives the 30-day Reference Room, 100 F Street NE., provide connectivity to the Exchange’s
operative delay and designates the Washington, DC 20549, on official trading systems solely for the
proposal effective upon filing.21 business days between the hours of cancellation or ‘‘takedown’’ of quotes. In
At any time within 60 days of the 10:00 a.m. and 3:00 p.m. Copies of the addition, the proposed rule change
filing of such proposed rule change, the filing will also be available for reflects changes to the NYSE Arca
Commission summarily may inspection and copying at the NYSE’s Options Fee Schedule (‘‘Fee Schedule’’)
temporarily suspend such rule change if principal office and on its Internet Web related to this quote takedown service.
it appears to the Commission that such site at www.nyse.com. All comments The text of the proposed rule change is
action is necessary or appropriate in the received will be posted without change; available on the Exchange’s Web site at
public interest, for the protection of the Commission does not edit personal www.nyse.com, at the principal office of
investors, or otherwise in furtherance of identifying information from the Exchange, and at the Commission’s
the purposes of the Act. If the submissions. You should submit only Public Reference Room.
Commission takes such action, the information that you wish to make
Commission shall institute proceedings available publicly. All submissions II. Self-Regulatory Organization’s
under Section 19(b)(2)(B) 22 of the Act to should refer to File Number SR– Statement of the Purpose of, and
determine whether the proposed rule NYSEMKT–2015–31, and should be Statutory Basis for, the Proposed Rule
change should be approved or submitted on or before May 26, 2015. Change
disapproved. For the Commission, by the Division of In its filing with the Commission, the
IV. Solicitation of Comments Trading and Markets, pursuant to delegated self-regulatory organization included
authority.23
Interested persons are invited to statements concerning the purpose of,
Brent J. Fields, and basis for, the proposed rule change
submit written data, views, and
Secretary. and discussed any comments it received
arguments concerning the foregoing,
[FR Doc. 2015–10410 Filed 5–4–15; 8:45 am] on the proposed rule change. The text
including whether the proposed rule
change is consistent with the Act. BILLING CODE 8011–01–P of those statements may be examined at
Comments may be submitted by any of the places specified in Item IV below.
the following methods: The Exchange has prepared summaries,
SECURITIES AND EXCHANGE set forth in sections A, B, and C below,
Electronic Comments COMMISSION of the most significant parts of such
• Use the Commission’s Internet [Release No. 34–74841; File No. SR– statements.
comment form (http://www.sec.gov/ NYSEARCA–2015–32]
rules/sro.shtml); or A. Self-Regulatory Organization’s
• Send an email to rule-comments@ Self-Regulatory Organizations; NYSE Statement of the Purpose of, and
sec.gov. Please include File Number SR– Arca, Inc.; Notice of Filing and Statutory Basis for, the Proposed Rule
NYSEMKT–2015–31 on the subject line. Immediate Effectiveness of Proposed Change
Rule Change Modifying Its Rules To 1. Purpose
Paper Comments Provide for the Use of Ports That
• Send paper comments in triplicate Provide Connectivity to the The Exchange proposes to modify its
to Secretary, Securities and Exchange Exchange’s Trading Systems Solely rules to provide for the use of ports that
Commission, 100 F Street NE., for the Cancellation or ‘‘Takedown’’ of provide connectivity to the Exchange’s
Washington, DC 20549–1090. Quotes and Changes to the NYSE Arca trading systems solely for the
All submissions should refer to File Options Fee Schedule Related to cancellation or ‘‘takedown’’ of quotes. In
Number SR–NYSEMKT–2015–31. This Quote Takedown Service addition, the proposed rule change
file number should be included on the reflects changes to the Fee Schedule
April 29, 2015. related to this quote takedown service.
subject line if email is used.
To help the Commission process and Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the Order/Quote Entry Ports
review your comments more efficiently,
please use only one method. The ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 The Exchange currently makes
Commission will post all comments on notice is hereby given that, on April 17 available to OTP Holders and OTP
the Commission’s Internet Web site 2015, NYSE Arca, Inc. (the ‘‘Exchange’’ Firms (‘‘OTPs’’) order/quote entry ports
(http://www.sec.gov/rules/sro.shtml). or ‘‘NYSE Arca’’) filed with the for connectivity to Exchange trading
Copies of the submission, all subsequent Securities and Exchange Commission systems (each an ‘‘order/quote entry
amendments, all written statements (the ‘‘Commission’’) the proposed rule port’’). OTPs may be authorized to
asabaliauskas on DSK5VPTVN1PROD with NOTICES
with respect to the proposed rule change as described in Items I and II utilize order/quote entry ports for
change that are filed with the below, which Items have been prepared option activity on NYSE Arca Options
Commission, and all written by the self-regulatory organization. The and incur monthly Port Fees. Currently,
Commission is publishing this notice to the Exchange charges $450 per month,
21 For purposes of waiving the 30-day operative
23 17
per order/quote entry port for the first
delay, the Commission has considered the proposed CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
40 ports and $150 per month, per order/
rule’s impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f). 2 15 U.S.C. 78a. quote entry port for any additional ports
22 15 U.S.C. 78s(b)(2)(B). 3 17 CFR 240.19b–4. in excess of 40 (i.e., ports 41 and
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![Federal Register / Vol. 80, No. 86 / Tuesday, May 5, 2015 / Notices 25759
greater).4 While order/quote entry ports Exchange is proposing to allow one category for ‘‘Quote Takedown Ports,’’
may be used by OTPs registered as Quote Takedown Port free of charge for together with the following language:
Market Makers to both enter and cancel every order/quote entry port that a ‘‘For each order/quote entry port
or remove quotes, Market Makers may Market Maker utilizes. In other words, utilized, NYSE Arca Market Makers may
dedicate certain ports solely to the provided a Market Maker does not utilize, free of charge, one port
removal of quotes, i.e., a ‘‘quote exceed a 1-to-1 ratio of order/quote dedicated to quote cancellation or
takedown port,’’ 5 and, until now, the entry port-to-Quote Takedown Port, the ‘quote takedown,’ which port(s) will not
Exchange has treated such dedicated Quote Takedown Port(s) would be free be included in the count of order/quote
quote takedown ports the same as order/ (the ‘‘1-to-1 ratio’’). However, a Market entry ports utilized. Any quote
quote entry port [sic] for Port Fee Maker that exceeds the 1-to-1 ratio takedown port utilized by a NYSE Arca
purposes. would be charged for additional Quote Market Maker that is in excess of the
Takedown Ports. For example, a Market number of order/quote entry ports
Quote Takedown Ports
Maker with thirty-five (35) order/quote utilized will be counted and charged as
The Exchange is proposing to modify entry ports and forty-two (42) Quote an order/quote entry port.’’ In addition,
its rules to provide ports specifically Takedown Ports would have forty-two to add clarity regarding Port Fees, the
dedicated to quote cancellation or (42) ports subject to charge because the Exchange proposes to move the existing
‘‘quote takedown’’ (each a ‘‘Quote Exchange would charge for the 35 order/ text regarding how the Exchange will
Takedown Port’’) as a service distinct quote entry ports and the seven Quote aggregate the order/quote entry ports of
from order/quote entry ports, which Takedown Ports that exceed the 1–1 a Marker Maker’s affiliate to appear
may be used both for entering quotes or ratio (42 ¥ 35 = 7). The Exchange immediately below the Quote
orders and removing or cancelling would not charge for the first 35 Quote Takedown Ports and to specify that the
quotes. The proposed Quote Takedown Takedown Ports because those ports Exchange will similarly aggregate the
Ports would be designed to assist OTPs would meet the 1-to-1 ratio. Quote Takedown Ports of affiliates.6
registered as Marker Makers in the Similarly, the Exchange would not The Exchange believes the proposal to
management of, and risk control over, include those Quote Takedown Ports offer Quote Takedown Ports would
their quotes, particularly if they have a that meet the 1-to-1 ratio to determine ensure a fair and reasonable use of
large number of options issues in their a Market Maker’s total number of ports resources by eliminating charges to
appointment. For example, if a Market for purposes of calculating Port Fees. As Market Makers for certain Quote
Maker detects market indications that noted above, the Exchange charges $450 Takedown Ports (described above),
may influence the direction or bias of its per month, per port for the first forty which are used to control and manage
quotes, the Market Maker may attempt ports, and $150 per month for each risk exposure to the benefit of all marker
to cancel all of its quotes in a number additional port in excess of forty. Thus, participants.
of classes, thereby avoiding unintended using the example above, the Exchange
executions, while it evaluates the 2. Statutory Basis
would not count the thirty-five (35)
direction of the market. Thus, to reduce Quote Takedown Ports (which align The proposed rule change is
uncertainty, the Marker Maker may with the 35 order/quote entry ports) consistent with Section 6(b) 7 of the
submit to the Exchange a ‘‘quote against the Market Maker’s total number Securities Exchange Act of 1934 (the
takedown’’ message through a dedicated of ports utilized, but would count seven ‘‘Act’’), in general, and furthers the
Quote Takedown Port for the prompt (7) additional Quote Takedown Ports. objectives of Section 6(b)(5),8 in
removal of quotes. By entering a quote Thus, because the Market Maker would particular, in that it is designed to
takedown message through a dedicated have forty-two (42) chargeable ports, the prevent fraudulent and manipulative
Quote Takedown Port, a Market Maker Market Maker’s total monthly port fee acts and practices, to promote just and
may reduce its exposure to risk because would be $18,300 (i.e., 40 ports × $450 equitable principles of trade, to foster
of heavy quote traffic-induced latency. per port = $18,000; and 2 ports × $150 cooperation and coordination with
The Exchange proposes to modify the per port $300). persons engaged in facilitating
Fee Schedule to provide that certain The Exchange notes that options transactions in securities, and to remove
Quote Takedown Ports would not be Market Makers typically require more impediments to and perfect the
subject to Port Fees. Specifically, for than forty (40) order/quote entry ports, mechanism of a free and open market
each order/quote entry port utilized, the in part to satisfy their obligation to and a national market system.
Exchange proposes to allow Market maintain continuous two-sided markets The Exchange believes that the
Makers to utilize, free of charge, one in their appointed classes. Thus, the proposed rule change would promote
Quote Takedown Port. Because Quote Exchange believes that the proposed just and equitable principles of trade
Takedown Ports would not be available change would enhance the ability of and remove impediments to and perfect
for quote or order submission, the Market Maker firms to manage quotes, the mechanism of a free and open
quote traffic, and their quoting market because offering OTPs registered
4 See Fee Schedule, available at, https:// obligations by eliminating fees for as Market Makers designated Quote
www.nyse.com/publicdocs/nyse/markets/arca- certain Quote Takedown Ports, which Takedown Ports would enhance Market
options/NYSE_Arca_Options_Fee_Schedule.pdf. Makers’ ability to manage quotes, quote
Unutilized order/quote entry ports that connect to
function as risk management tools
the Exchange via its backup datacenter are rather than trade opportunity tools. The traffic, and their quoting obligations,
considered established for backup purposes and are Exchange believes this proposed change which would, in turn, improve their risk
not subject to Port Fees. In addition, for purpose of would permit the Exchange to remain controls to the benefit of all
asabaliauskas on DSK5VPTVN1PROD with NOTICES
calculating the number of order/quote entry ports, participants. The Exchange believes that
the Exchange shall aggregate the ports of affiliates.
competitive with other exchanges with
See id. respect to fees charged for ports. the Quote Takedown Ports would foster
5 See Trader Update regarding Options Pre-Trade To reflect the proposed change, the
6 See proposed Fee Schedule, Port Fees (‘‘For
and Post-Trade Risk Controls, available at, Exchange proposes to add to the Fee
https://www.nyse.com/publicdocs/nyse/markets/ purpose of calculating the number of order/quote
Schedule, in the table regarding Port entry ports and quote takedown ports, the Exchange
amex-options/US_Options_Risk_Controls_Client_
Document.pdf (announcing availability of ports
Fees under the section ‘‘NYSE Arca shall aggregate the ports of affiliates.’’).
dedicated to quote takedown to minimize latency OPTIONS: FLOOR and EQUIPMENT 7 15 U.S.C. 78f(b).
for quote takedowns). and CO-LOCATION FEES,’’ a new 8 15 U.S.C. 78f(b)(5).
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![Federal Register / Vol. 80, No. 86 / Tuesday, May 5, 2015 / Notices 25761
of the Act and Rule 19b–4(f)(6)(iii) Commission, 100 F Street NE., and Rule 19b–4 2 thereunder, notice is
thereunder. Washington, DC 20549–1090. hereby given that on April 17, 2015, The
A proposed rule change filed under All submissions should refer to File Depository Trust Company (‘‘DTC’’)
Rule 19b–4(f)(6) 19 normally does not Number SR–NYSEARCA–2015–32. This filed with the Securities and Exchange
become operative prior to 30 days after file number should be included on the Commission (‘‘Commission’’) the
the date of the filing. However, pursuant subject line if email is used. proposed rule change as described in
to Rule 19b4(f)(6)(iii),20 the Commission To help the Commission process and Items I, II and III below, which Items
may designate a shorter time if such review your comments more efficiently, have been prepared by DTC. DTC filed
action is consistent with the protection please use only one method. The the proposed rule change pursuant to
of investors and the public interest. The Commission will post all comments on section 19(b)(3)(A) 3 of the Act and Rule
Exchange has requested that the the Commission’s Internet Web site 19b–4(f)(2) 4 thereunder. The proposed
Commission waive the 30-day operative (http://www.sec.gov/rules/sro.shtml). rule change was effective upon filing
delay so that the proposal may become Copies of the submission, all subsequent with the Commission. The Commission
operative immediately upon filing and amendments, all written statements is publishing this notice to solicit
thereby enable Market Makers to with respect to the proposed rule comments on the proposed rule change
enhance their risk controls and risk change that are filed with the from interested persons.
management processes without delay. Commission, and all written I. Clearing Agency’s Statement of the
The Commission believes that waiving communications relating to the Terms of Substance of the Proposed
the 30-day operative delay is consistent proposed rule change between the Rule Change
with the protection of investors and the Commission and any person, other than
public interest. Therefore, the those that may be withheld from the The proposed rule change consists of
Commission hereby waives the 30-day public in accordance with the a change to DTC’s Fee Schedule (‘‘Fee
operative delay and designates the provisions of 5 U.S.C. 552, will be Schedule’’) with respect to the DTC
proposal effective upon filing.21 available for Web site viewing and Custody Service.5
At any time within 60 days of the printing in the Commission’s Public II. Clearing Agency’s Statement of the
filing of such proposed rule change, the Reference Room, 100 F Street NE., Purpose of, and Statutory Basis for, the
Commission summarily may Washington, DC 20549, on official Proposed Rule Change
temporarily suspend such rule change if business days between the hours of In its filing with the Commission,
it appears to the Commission that such 10:00 a.m. and 3:00 p.m. Copies of the DTC included statements concerning
action is necessary or appropriate in the filing will also be available for the purpose of and basis for the
public interest, for the protection of inspection and copying at the NYSE’s proposed rule change and discussed any
investors, or otherwise in furtherance of principal office and on its Internet Web comments it received on the proposed
the purposes of the Act. If the site at www.nyse.com. All comments rule change. The text of these statements
Commission takes such action, the received will be posted without change; may be examined at the places specified
Commission shall institute proceedings the Commission does not edit personal in Item IV below. DTC has prepared
under Section 19(b)(2)(B) 22 of the Act to identifying information from summaries, set forth in sections A, B,
determine whether the proposed rule submissions. You should submit only and C below, of the most significant
change should be approved or information that you wish to make aspects of such statements.
disapproved. available publicly. All submissions
should refer to File Number SR– (A) Clearing Agency’s Statement of the
IV. Solicitation of Comments
NYSEARCA–2015–32, and should be Purpose of, and Statutory Basis for, the
Interested persons are invited to submitted on or before May 26, 2015. Proposed Rule Change
submit written data, views, and For the Commission, by the Division of
arguments concerning the foregoing, 1. Purpose
Trading and Markets, pursuant to delegated
including whether the proposed rule authority.23 The proposed rule change would
change is consistent with the Act. Brent J. Fields,
revise the Fee Schedule with respect to
Comments may be submitted by any of a fee charged to Participants that use the
Secretary.
the following methods: Custody Service, as described below.
[FR Doc. 2015–10411 Filed 5–4–15; 8:45 am] The Custody Service provides safe
Electronic Comments BILLING CODE 8011–01–P keeping and physical transaction
• Use the Commission’s Internet processing for securities certificates and
comment form (http://www.sec.gov/ other items (collectively, ‘‘certificates’’),
SECURITIES AND EXCHANGE including certificates for securities and
rules/sro.shtml); or
COMMISSION
• Send an email to rule- other assets not eligible for deposit in
comments@sec.gov. Please include File [Release No. 34–74831; File No. SR–DTC– DTC’s core depository services.6 In
Number SR–NYSEARCA–2015–32 on 2015–004] utilizing the Custody Service,
the subject line. Participants are able to leverage DTC’s
Self-Regulatory Organizations; The vault facility to outsource the safe
Paper Comments Depository Trust Company; Notice of
• Send paper comments in triplicate Filing and Immediate Effectiveness of 2 17 CFR 240.19b–4.
asabaliauskas on DSK5VPTVN1PROD with NOTICES
to Secretary, Securities and Exchange Proposed Rule Change Relating to a 3 15 U.S.C. 78s(b)(3)(A).
DTC Custody Service Fee Change 4 17 CFR 240.19b–4(f)(2).
5 Each term not otherwise defined herein has its
19 17 CFR 240.19b–4(f)(6). April 29, 2015. respective meaning as set forth in the DTC Rules
20 17 CFR 240.19b–4(f)(6)(iii).
Pursuant to section 19(b)(1) 1 of the (the ‘‘Rules’’), available at http://www.dtcc.com/
21 For purposes of waiving the 30-day operative legal/rules-and-procedures.aspx.
delay, the Commission has considered the proposed Securities Exchange Act of 1934 (‘‘Act’’) 6 Please see the DTC Custody Service Guide at p.
rule’s impact on efficiency, competition, and capital 5, available at http://www.dtcc.com/∼/media/Files/
formation. See 15 U.S.C. 78c(f). 23 17 CFR 200.30–3(a)(12). Downloads/legal/service-guides/Custody.pdf for an
22 15 U.S.C. 78s(b)(2)(B). 1 15 U.S.C. 78s(b)(1). overview on Custody Service eligibility.
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Document Created: 2015-12-16 07:54:06
Document Modified: 2015-12-16 07:54:06
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 80 FR 25758 |
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