Notice2021-12473
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Modifying the NYSE Arca Options Fee Schedule
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
June 15, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
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[Federal Register Volume 86, Number 113 (Tuesday, June 15, 2021)]
[Notices]
[Pages 31754-31759]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-12473]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-92132; No. SR-NYSEArca-2021-51]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Modifying the NYSE
Arca Options Fee Schedule
June 9, 2021.
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 June 4, 2021, NYSE Arca, Inc. (``NYSE Arca'' 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 modify the NYSE Arca Options Fee Schedule
(``Fee Schedule'') regarding the Customer Posting Credit Tiers and the
Customer Incentive Program. The Exchange proposes to implement the fee
change effective June 4, 2021.\4\ The proposed rule change is available
on the Exchange's website at <a href="http://www.nyse.com">www.nyse.com</a>, at the principal office of
the Exchange, and at the Commission's Public Reference Room.
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\4\ The Exchange originally filed to amend the Fee Schedule on
June 1, 2021 (SR-NYSEArca-2021-48) and withdrew such filing on June
4, 2021.
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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 purpose of this filing is to amend the Fee Schedule to make
modifications to the Customer Penny Posting Credit Tiers, Customer
Incentive Program, and Customer Posting Credit Tiers in Non-Penny
Issues.
Currently, the Fee Schedule provides that OTP Holders and Firms
(``OTP Holders'') can qualify for per contract credits applied to
options transactions based on meeting certain minimum volume thresholds
from Customer posting interest in Penny issues and Non-Penny issues and
also qualify for an additional credit by meeting specified incentive
volume levels. The Exchange proposes to make modifications to certain
of its incentive programs as set forth below.
The Exchange proposes to implement the fee change effective June 4,
2021.
Customer Penny Posting Credit Tiers (the ``Penny Tiers'')
The Exchange proposes to make the following modifications to the
Penny Tiers, which provide per contract
[[Page 31755]]
credits on executions of Customer posted interest in Penny Issues.
First, the Exchange proposes to modify one of the alternative minimum
volume thresholds to achieve Penny Tier 4, eliminate Penny Tier 5, and
modify both alternative minimum volume thresholds to achieve Penny Tier
7 (which will also be renumbered to Tier 6). One of the two alternative
means of achieving current Penny Tier 4 is for OTP Holders to execute
at least 0.85% of TCADV from posted interest in Penny Issues, all
account types. The Exchange is proposing to modify this alternative
threshold to require at least 0.30% of TCADV from Customer posted
interest in all issues, not including Professional Customer interest,
plus executed ADV of 0.60% of U.S. Equity Market Share Posted and
Executed on NYSE Arca Equity Market. The Exchange is not proposing to
modify the Penny Tier 4 per contract credit of ($0.47).
The Exchange's proposed changes to Penny Tier 4 would modify the
qualification threshold for options order flow such that the qualifying
volume would be restricted to posted Customer interest (not including
Professional Customer interest) but would apply to posted Customer
volume in all issues (not just Penny Issues). The proposed change
excludes Professional Customer interest and is designed to attract
Customer order flow, which provides benefits distinct from Professional
Customer volume. Customer liquidity benefits all market participants by
providing more trading opportunities, which attracts Market Makers. An
increase in the activity of these market participants in turn
facilitates tighter spreads, which may cause an additional
corresponding increase in order flow from other market participants.
The Exchange believes this proposed change would still encourage OTP
Holders to achieve Tier 4 albeit with increased Customer posted
interest. The Exchange's proposed change to Penny Tier 4 to add a
cross-asset component is designed to incentivize OTP Holders to execute
volume on the Exchange's equities platform which would make the
Exchange a more attractive execution venue.
Notwithstanding the proposed change to Penny Tier 4, the Exchange
notes that OTP Holders are still eligible to qualify for the Penny Tier
4 per contract credit of per contract credit [sic] of ($0.47) under the
alternative (and unchanged) threshold, which requires that an OTP
Holder execute at least 0.75% of TCADV from Customer posted interest in
all issues. By continuing to provide such alternative methods to
qualify for a Penny Tier, the Exchange believes the opportunities to
qualify for credits is increased, which benefits all participants
through increased volume to the Exchange.
In connection with the proposed change to Penny Tier 4, the
Exchange proposes to eliminate current Penny Tier 5, which provides a
($0.48) per contract credit to OTP Holders that execute at least 0.22%
of TCADV from Customer posted interest in all Issues, plus Executed ADV
of 0.90% of U.S. Equity Market Share Posted and Executed on NYSE Arca
Equity Market, or at least 0.75% of TCADV from Customer posted interest
in all issues, plus at least 0.45% of TCADV from Market Maker Total
Electronic Volume. The Exchange is eliminating Tier 5 because OTP
Holders failed to consistently achieve this Tier and thus the incentive
did not operate as intended. The Exchange notes that the proposed
changes to Penny Tier 4 incorporates a cross-asset pricing component
similar to the one being eliminated with existing Tier 5.
The Exchange proposes to modify current Penny Tier 7 by increasing
both of the minimum alternative volume thresholds to achieve the same
($0.50) per contract credit. First, the Exchange is proposing to
require that OTP Holders execute at least 1.30% (up from 1.00%) of
TCADV from Customer posted interest in all issues, or execute at least
1.00% (up from 0.80%) of TCADV from Customer posted interest in all
issues, plus executed ADV of 0.30% of U.S. Equity Market Share Posted
and Executed on NYSE Arca Equity Market.\5\
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\5\ Regarding this alternative minimum threshold, the Exchange
also proposes to make a non-substantive correction of a
typographical error to eliminate an extraneous ``ADV,'' which would
add clarity and transparency to the Fee Schedule.
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The Exchange believes the proposed change to Penny Tier 7, which
increases the minimum volume required, would not discourage OTP Holders
from directing volume to the Exchange because the Penny Tier 7 per
contract credit of ($0.50) is competitive with other options
exchanges.\6\
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\6\ See, e.g., BZX Options Fee Schedule, available at, <a href="https://markets.cboe.com/us/options/membership/fee_schedule/bzx/">https://markets.cboe.com/us/options/membership/fee_schedule/bzx/</a> (providing
a $0.52 per contract credit to members that achieve Tier 4 of the
Customer Penny Add Volume Tiers).
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The Exchange proposes to renumber current Penny Tiers 6 and 7 as
new Penny Tiers 5 and 6, respectively.
Customer Incentive Program (the ``Incentive Credits'')
The Exchange also proposes modifications to the Incentive Credits,
which enables OTP Holders to achieve one additional credit (to the
Customer Posting Credits Tiers in Penny and Non-Penny Issues) if
certain volume criteria and thresholds are met. The Exchange proposes
to eliminate three of the existing Incentive Credits because such
incentives failed to consistently incent OTP Holders to direct order
flow to the Exchange. The Incentives Credits to be eliminated are:
<bullet> The additional ($0.01) per contract credit for OTP Holders
that executed at least 0.50% of TCADV from Customer posted interest in
all issues, plus, an ADV from Market Maker posted interest in Penny
Issues equal to at least 0.30% of TCADV; and
<bullet> The additional ($0.03) per contract credit for OTP Holders
that executed ADV of 0.90% of U.S. Equity Market Share Posted and
Executed on NYSE Arca Equity Market; and
<bullet> The additional ($0.03) per contract credit for OTP Holders
that executed at least 1.50% of TCADV from Customer posted interest in
both Penny and non-Penny Issues, plus Executed ADV of 0.10% of U.S.
Equity Market Share Posted and Executed on NYSE Arca Equity Market.
The Exchange also proposes to add a new Incentive Credit which
would provide an additional ($0.03) per contract credit for OTP Holders
that executed at least 0.30% of TCADV from Customer posted interest in
all issues, not including Professional Customer interest, plus executed
ADV of 0.60% of U.S. Equity Market Share Posted and Executed on NYSE
Arca Equity Market. The proposed new Incentive Credit excludes
Professional Customer interest and is designed to attract Customer
order flow, which provides benefits distinct from Professional Customer
volume. Customer liquidity benefits all market participants by
providing more trading opportunities, which attracts Market Makers. An
increase in the activity of these market participants in turn
facilitates tighter spreads, which may cause an additional
corresponding increase in order flow from other market participants.
The Exchange believes this proposed Incentive Credit would encourage
OTP Holders to achieve this additional credit albeit with increased
Customer posted interest. The Exchange's proposed inclusion of a cross-
asset component is designed to incentivize OTP Holders to execute
volume on the Exchange's equities platform (in addition to the options
platform) which would make the Exchange a more attractive execution
venue.
Customer Posting Credit Tiers in Non-Penny Issues (the ``Non-Penny
Tiers'')
The Exchange proposes to modify the Non-Penny Tiers, which provide
per
[[Page 31756]]
contract credits on executions of Customer posted interest in Non-Penny
Issues, in several ways. First, the Exchange proposes to eliminate Tier
B of the Non-Penny Tiers and the associated ($0.94) per contract
credit, which Tier includes the same minimum volume requirement as the
to-be-eliminated Penny Tier 5 (i.e., that an OTP Holder achieve at
least 0.75% of TCADV from Customer posted interest in all issues, plus
an ADV from Market Maker Total Electronic Volume equal to 0.45% of
TCADV. [sic] Like the elimination of Penny Tier 5, the Exchange
believes this change would remove an incentive that failed to
consistently incent OTP Holders to direct order flow to the Exchange.
In connection with this change, the Exchange proposes to rename the
current Tier C as new Tier B and to offer a new Tier C.
Proposed Tier C of the Non-Penny Tiers would offer a ($0.97) per
contract credit to OTP Holders that execute at least 0.30% of TCADV
from Customer posted interest in all issues, not including Professional
Customer interest, plus executed ADV of 0.60% of U.S. Equity Market
Share Posted and Executed on NYSE Arca Equity Market. Proposed Tier C,
which excludes Professional Customer interest, is designed to attract
Customer order flow, which provides benefits distinct from Professional
Customer volume. Customer liquidity benefits all market participants by
providing more trading opportunities, which attracts Market Makers. An
increase in the activity of these market participants in turn
facilitates tighter spreads, which may cause an additional
corresponding increase in order flow from other market participants.
The Exchange's proposed inclusion of a cross-asset component is
designed to incentivize OTP Holders to execute volume on the Exchange's
equities platform. The Exchange believes this proposed Tier C would
encourage OTP Holders to achieve this Tier albeit with increased
Customer posted interest and would also encourage increased equities
trading, which would make the Exchange a more attractive execution
venue.
The Exchange also proposes to modify the minimum volume threshold
required to achieve Tier F of the Non-Penny Tiers by offering a ($1.02)
per contract credit to OTP Holders that execute at least 1.00%(up from
0.80%) of TCADV from Customer posted interest in all issues, plus
executed ADV of 0.30% ADV of U.S. Equity Market Share Posted and
Executed on NYSE Arca Equity Market.\7\ The Exchange believes the
proposed change to Non-Penny Tier F, which increases the minimum volume
required, would not discourage OTP Holders from directing volume to the
Exchange because the Non-Penny Tier F per contract credit of ($1.02) is
competitive with other options exchanges.\8\
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\7\ Regarding proposed Tier F, the Exchange also proposes to
make a non-substantive correction of a typographical error to
eliminate an extraneous ``ADV, which would add clarity and
transparency to the Fee Schedule. The Exchange also proposes a non-
substantive change to Non-Penny Tier D to remove an extraneous
comma, which would add clarity and transparency to the Fee Schedule.
\8\ See, e.g., BZX Options Fee Schedule, supra note 6 (providing
a $1.00 per contract credit to members that achieve Tier 2 of the
Customer Non-Penny Add Volume Tiers).
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The Exchange notes that an OTP Holder that qualifies for the new
alternative volume threshold under Penny Tier 4 would also qualify for
new Non-Penny Tier C as well as the new Incentive Credit as all three
programs have the same minimum volume threshold. The Exchange notes
that new Incentive Credit, which is a credit that is achieved in
addition to credits associated with the Penny and Non-Penny Tiers, is
designed to encourage OTP Holders that may already qualify based on the
minimum options volume thresholds to also post and execute a certain
amount of volume on the Exchange's equities trading platform, which
would make the Exchange a more attractive execution venue for both
options and equities.
The Exchange cannot predict with certainty whether any OTP Holders
will avail themselves of the proposed changes to the Penny Tiers,
Incentive Credits or Non-Penny Tiers. At present, whether or when an
OTP Holder would qualify for the enhanced credit varies month-to-month.
Thus, the Exchange cannot predict with any certainty the number of OTP
Holders that may qualify for the proposed new qualifications, but
believes that OTP Holders would be encouraged to increase volume to
take advantage of the credit tiers, and also to increase participation
through posted interest on the NYSE Arca Equity Market.
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 (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 Proposed Rule Change Is Reasonable
The Exchange operates in a highly competitive market. The
Commission has repeatedly expressed its preference for competition over
regulatory intervention in determining prices, products, and services
in the securities markets. In Regulation NMS, the Commission
highlighted the importance of market forces in determining prices and
SRO revenues and, also, recognized that current regulation of the
market system ``has been remarkably successful in promoting market
competition in its broader forms that are most important to investors
and listed companies.'' \11\
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\11\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005) (S7-10-04) (``Reg NMS
Adopting Release'').
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There are currently 16 registered options exchanges competing for
order flow. Based on publicly-available information, and excluding
index-based options, no single exchange has more than 16% of the market
share of executed volume of multiply-listed equity and ETF options
trades.\12\ Therefore, currently no exchange possesses significant
pricing power in the execution of multiply-listed equity & ETF options
order flow. More specifically, in April 2021, the Exchange had less
than 10% market share of executed volume of multiply-listed equity &
ETF options trades.\13\
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\12\ The OCC publishes options and futures volume in a variety
of formats, including daily and monthly volume by exchange,
available here: <a href="https://www.theocc.com/Market-Data/Market-Data-Reports/Volume-and-Open-Interest/Monthly-Weekly-Volume-Statistics">https://www.theocc.com/Market-Data/Market-Data-Reports/Volume-and-Open-Interest/Monthly-Weekly-Volume-Statistics</a>.
\13\ Based on OCC data for monthly volume of equity-based
options and monthly volume of ETF-based options, see id., the
Exchange's market share in equity-based options increased from 7.46%
for the month of April 2020 to 9.28% for the month of April 2021.
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The Exchange believes that the ever-shifting market share among the
exchanges from month to month demonstrates that market participants can
shift order flow or discontinue or reduce use of certain categories of
products, in response to fee changes. Accordingly, competitive forces
constrain options exchange transaction fees. In response to this
competitive environment, the Exchange has established incentives, such
as the Penny Tiers, the Incentive Credits, and the Non-Penny Tiers.
The Exchange believes that the proposed modification to the Penny
Tiers, including eliminating Penny Tier
[[Page 31757]]
5 and modifying the minimum volume thresholds and qualifying criteria
for Penny Tier 4 and current Penny Tier 7 (new Tier 6) are reasonably
designed to continue to incent OTP Holders to increase the amount of
Customer interest sent to the Exchange, especially posted interest. The
proposed changes to the Penny Tiers exclude Professional Customer
interest and are reasonably designed to attract Customer order flow,
which is unique and provides benefits distinct from Professional
Customer volume. An increase in Customer volume would create more
trading opportunities, which, in turn attracts Market Makers. A
resulting increase in Market-Maker activity may facilitate tighter
spreads, which may lead to an additional increase of order flow from
other market participants, further contributing to a deeper, more
liquid market to the benefit of all market participants by creating a
more robust and well-balanced market ecosystem.
As noted above, OTP Holders are still eligible to qualify for Penny
Credit Tier 4 under the existing alternative (unchanged) qualification
basis. By continuing to provide such alternative methods to qualify for
a Penny Tier, the Exchange believes the opportunities to qualify for
credits is increased, which benefits all participants through increased
volume to the Exchange.
The proposed addition of the cross-asset component to Penny Tier 4
is designed to incent OTP Holders (and their affiliates) to transact
more options and equities volume on the Exchange, which may result in
an increase of volume and liquidity on both its options and equites
platforms, which would benefit all market participants by providing
more trading opportunities and tighter spreads, and may lead to a
corresponding increase in order flow from other market participants.
The proposed changes to eliminate certain Incentive Credits and
Non-Penny Tier B are reasonably designed to eliminate from the Fee
Schedule incentives that did not consistently encourage OTP Holders to
direct order flow to the Exchange. The proposed new Incentive Credit
and new Non-Penny Tier C, which each include a cross-asset component,
are reasonably designed to encourage OTP Holders (and their affiliates)
to transact more options and equities volume on the Exchange, which
would benefit all market participants by providing more trading
opportunities and tighter spreads, and may lead to a corresponding
increase in order flow from other market participants.
The Exchange believes that the proposed modification to the Non-
Penny Tier F is reasonably designed to continue to incent OTP Holders
to increase the amount and type of Customer interest sent to the
Exchange, especially posted interest. As noted above, an increase in
posted Customer interest benefits all market participants.
The proposed new Incentive Credit has a minimum volume threshold
identical to proposed Penny Tier 4 and Non-Penny Tier C and similarly
excludes Professional Customer interest. This proposed Incentive Credit
is reasonably designed to attract Customer order flow, which provides
benefits distinct from Professional Customer volume. Customer liquidity
benefits all market participants by providing more trading
opportunities, which attracts Market Makers. An increase in the
activity of these market participants in turn facilitates tighter
spreads, which may cause an additional corresponding increase in order
flow from other market participants. The Exchange believes that this
proposed Incentive Credit would encourage OTP Holders to achieve this
additional credit albeit with increased Customer posted interest. The
Exchange's proposed inclusion of a cross-asset component in the new
Incentive Credit is designed to incentivize OTP Holders to execute
volume on the Exchange's equities platform (in addition to the options
platform) which would make the Exchange a more attractive execution
venue.
To the extent the proposed rule change continues to attract greater
volume and liquidity by encouraging OTP Holders (and their affiliates)
to increase their options and equities volume on the Exchange in an
effort to achieve higher credits through the Penny and Non-Penny Tiers
(as well as one of the additional Incentive Credits), the Exchange
believes the proposed change would improve the Exchange's overall
competitiveness and strengthen its market quality for all market
participants. In the backdrop of the competitive environment in which
the Exchange operates, the proposed rule change is a reasonable attempt
by the Exchange to increase the depth of its market and improve its
market share relative to its competitors.
The proposed non-substantive changes (see supra notes 5 and 7) are
reasonably designed to add clarity and transparency to the Fee Schedule
making it easier to navigate and comprehend.
The Proposed Rule Change is an Equitable Allocation of Credits and Fees
The Exchange believes the proposed rule change is an equitable
allocation of its fees and credits. The proposal is based on the amount
and type of business transacted on the Exchange and OTP Holders can opt
to avail themselves of the credits or not. Moreover, the proposal is
designed to incent OTP Holders to aggregate all Customer posting
interest at the Exchange as a primary execution venue and to attract
more posting interest on the NYSE Arca Equity Market. To the extent
that the proposed change attracts more Customer posting interest to the
Exchange and more posting interest on the NYSE Arca Equity Market, this
increased order flow would continue to make the Exchange a more
competitive venue for, among other things, order execution on both
options and cash equities. Thus, the Exchange believes the proposed
rule change would improve market quality for all market participants on
the Exchange and, as a consequence, attract more order flow to the
Exchange thereby improving market-wide quality and price discovery.
The Proposed Rule Change Is Not Unfairly Discriminatory
The Exchange believes it is not unfairly discriminatory to modify
the Penny Tiers, the Incentive Credits, and the Non-Penny Tiers because
the proposed modifications would be available to all similarly-situated
market participants on an equal and non-discriminatory basis.
The proposal is based on the amount and type of business transacted
on the Exchange and OTP Holders are not obligated to try to achieve the
enhanced qualifications, nor are they obligated to execute posted
interest. Rather, the proposal is designed to encourage OTP Holders to
utilize the Exchange as a primary trading venue for Customer posted
interest (if they have not done so previously) and more posting
interest on the NYSE Arca Equity Market. To the extent that the
proposed change attracts more Customer interest, including posted
interest, to the Exchange, this increased order flow would continue to
make the Exchange a more competitive venue for, among other things,
order execution. Thus, the Exchange believes the proposed rule change
would improve market quality for all market participants on the
Exchange and, as a consequence, attract more order flow to the Exchange
thereby improving market-wide quality and price discovery. The
resulting increased volume and liquidity would provide more trading
opportunities and tighter spreads to all market participants and thus
would promote just and equitable principles of trade, remove
impediments to and perfect the mechanism of a free and
[[Page 31758]]
open market and a national market system and, in general, to protect
investors and the public interest.
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.
B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with Section 6(b)(8) of the Act, 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. Instead, as discussed above, the Exchange believes
that the proposed changes would encourage the submission of additional
liquidity to a public exchange, thereby promoting market depth, price
discovery and transparency and enhancing order execution opportunities
for all market participants. As a result, the Exchange believes that
the proposed change furthers the Commission's goal in adopting
Regulation NMS of fostering integrated competition among orders, which
promotes ``more efficient pricing of individual stocks for all types of
orders, large and small.'' \14\
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\14\ See Reg NMS Adopting Release, supra note 11, at 37499.
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Intramarket Competition. The proposed change is designed to attract
additional order flow (particularly Customer posted interest and posted
equity interest) to the Exchange. The Exchange believes that the
proposed modification to the Penny Tiers, the Incentive Credits, and
the Non-Penny Tiers would incent OTP Holders to direct their Customer
order flow and their posted equity order flow to the Exchange. Greater
liquidity benefits all market participants on the Exchange and
increased Customer order flow and posted equity order flow would
increase opportunities for execution of other trading interest. The
proposed modifications to the Penny Tiers, the Incentive Credits, and
the Non-Penny Tiers would be available to all similarly-situated market
participants that execute Customer posted interest (excluding
Professional Customer interest), and, as such, the proposed change
would not impose a disparate burden on competition among market
participants on the Exchange.
Intermarket Competition. The Exchange operates in a highly
competitive market in which market participants can readily favor one
of the 16 competing option exchanges 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 to attract order flow to the Exchange. Based on publicly-
available information, and excluding index-based options, no single
exchange has more than 16% of the market share of executed volume of
multiply-listed equity and ETF options trades.\15\ Therefore, currently
no exchange possesses significant pricing power in the execution of
multiply-listed equity & ETF options order flow. More specifically, in
April 2021, the Exchange had less than 10% market share of executed
volume of multiply-listed equity & ETF options trades.\16\
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\15\ See supra note 12.
\16\ Based on OCC data for monthly volume of equity-based
options and monthly volume of ETF-based options, see id., the
Exchange's market share in equity-based options increased from 7.46%
for the month of April 2020 to 9.28% for the month of April 2021.
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The Exchange believes that the proposed rule change reflects this
competitive environment because it modifies the Exchange's fees and
credits in a manner that is competitive and designed to incent OTP
Holders to direct trading interest (particularly Customer posted
interest and posted equity interest) to the Exchange, to provide
liquidity and to attract order flow.\17\ To the extent that this
purpose is achieved, all the Exchange's market participants should
benefit from the improved market quality and increased opportunities
for price improvement.
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\17\ See supra notes 6 and 8.
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The Exchange believes that the proposed change could promote
competition between the Exchange and other execution venues, including
those that currently offer similar Customer posting credits, by
encouraging additional orders to be sent to the Exchange for execution.
The Exchange also believes that the proposed change is designed to
provide the public and investors with a Fee Schedule that is clear and
consistent, thereby reducing burdens on the marketplace and
facilitating investor protection.
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) \18\ of the Act and subparagraph (f)(2) of Rule
19b-4 \19\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\18\ 15 U.S.C. 78s(b)(3)(A).
\19\ 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 under
Section 19(b)(2)(B) \20\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\20\ 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
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#4c3e392029612f2321212922383f0c3f292f622b233a"><span class="__cf_email__" data-cfemail="f280879e97df919d9f9f979c8681b2819791dc959d84">[email protected]</span></a>. Please include
File Number SR-NYSEArca-2021-51 on the subject line.
Paper Comments
<bullet> 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-2021-51. 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 website (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
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 website viewing and
[[Page 31759]]
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 also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change. Persons submitting
comments are cautioned that we do not redact or edit personal
identifying information from comment submissions. You should submit
only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSEArca-2021-51, and should
be submitted on or before July 6, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-12473 Filed 6-14-21; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on June 15, 2021.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.