Notice2023-10243
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify 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
May 15, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 93 (Monday, May 15, 2023)</title>
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[Federal Register Volume 88, Number 93 (Monday, May 15, 2023)]
[Notices]
[Pages 31087-31090]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-10243]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97460; File No. SR-NYSEARCA-2023-35]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Modify the NYSE
Arca Options Fee Schedule
May 9, 2023.
Pursuant to section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on May 1, 2023, 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 and II
below, which Items have been prepared by the self-regulatory
organization. The
[[Page 31088]]
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 Ratio Threshold Fee. The Exchange
proposes to implement the fee change effective May 1, 2023. 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.
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 further extend the waiver of the
Ratio Threshold Fee that was originally implemented in connection with
the Exchange's migration to the Pillar platform.\4\ The Exchange
proposes to implement the rule change on May 1, 2023.
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\4\ See Securities Exchange Act Release No. 94095 (January 28,
2022), 87 FR 6216 (February 3, 2022) (SR-NYSEArca-2022-04) (Notice
of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend the NYSE Arca Options Fee Schedule).
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The Ratio Threshold Fee is based on the number of orders entered as
compared to the number of executions received in a calendar month and
is intended to deter OTP Holders from submitting an excessive number of
orders that are not executed.\5\ Because order to execution ratios of
10,000 to 1 or greater have the potential residual effect of exhausting
system resources, bandwidth, and capacity, such ratios may create
latency and impact other OTP Holders' ability to receive timely
executions.\6\ In connection with the Exchange's migration to the
Pillar platform, the Exchange implemented a waiver of the Ratio
Threshold Fee (the ``Waiver'') that took effect beginning in the month
in which the Exchange began its migration to the Pillar platform and
would remain in effect for the three months following the month during
which the Exchange completed its migration to the Pillar platform. As
the Exchange completed the migration in July 2022, the Waiver was
originally due to expire on October 31, 2022. The Exchange previously
filed to extend the Waiver until January 31, 2023 and, subsequently, to
extend the Waiver until April 30, 2023.\7\
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\5\ See Fee Schedule, RATIO THRESHOLD FEE; see also Securities
Exchange Act Release No. 60102 (June 11, 2009), 74 FR 29251 (June
19, 2009) (SR-NYSEArca-2009-50).
\6\ See id.
\7\ See Securities Exchange Act Release Nos. 96252 (November 7,
2022), 87 FR 68210 (November 14, 2022) (SR-NYSEARCA-2022-74)
(extension of Waiver until January 31, 2023); 96878 (February 10,
2023), 88 FR 10156 (February 16, 2023) (SR-NYSEARCA-2023-14)
(extension of Waiver until April 30, 2023).
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The Exchange believes that extending the Waiver would allow the
Exchange additional time to continue to monitor and to further analyze
traffic rates and order to execution ratios, without imposing a
financial burden on OTP Holders based on their order to execution
ratios. The Exchange thus proposes to modify the Fee Schedule to
provide that the Waiver would extend through June 30, 2023.\8\
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\8\ See proposed Fee Schedule, RATIO THRESHOLD FEE.
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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, no exchange possesses significant pricing power
in the execution of multiply-listed equity and ETF options order flow.
More specifically, in March 2023, the Exchange had less than 13% market
share of executed volume of multiply-listed equity and 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 a compilation of OCC data for monthly volume of
equity-based options and monthly volume of equity-based ETF options,
see id., the Exchange's market share in equity-based options
decreased from 13.57% for the month of March 2022 to 12.83% for the
month of March 2023.
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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. Stated otherwise,
modifications to exchange transaction fees can have a direct effect on
the ability of an exchange to compete for order flow.
The Exchange believes that the proposed extension of the Waiver is
reasonable because it is designed to lessen the impact of the migration
on OTP Holders and would allow OTP Holders to continue trading on the
Pillar platform without incurring excess Ratio Threshold Fees while the
Exchange continues to evaluate and conduct further analysis on traffic
rates and order to execution ratios. To the extent the proposed rule
change encourages OTP Holders to maintain their trading activity on the
Exchange, the Exchange believes the proposed change would sustain the
Exchange's overall competitiveness and 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
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mitigate the impacts of the Pillar migration without affecting its
competitiveness.
The Proposed Rule Change Is an Equitable Allocation of Credits and Fees
The proposed extension of the Waiver is an equitable allocation of
fees and credits because the Waiver would continue to apply to all OTP
Holders. All OTP Holders would have the opportunity to continue trading
on the Pillar platform without incurring Ratio Threshold Fees, while
the Exchange continues to evaluate post-migration traffic rates and
order to execution ratios. Thus, the Exchange believes the proposed
rule change would continue to mitigate the impact of the migration
process for all market participants on the Exchange, thereby sustaining
market-wide quality.
The Proposed Rule Change Is Not Unfairly Discriminatory
The Exchange believes the proposed extension of the Waiver is not
unfairly discriminatory because it would apply to all OTP Holders on an
equal and non-discriminatory basis. The Waiver, as proposed, would
permit all OTP Holders to continue trading on the Pillar platform,
without incurring additional fees based on their monthly order to
execution ratios, while the Exchange continues to evaluate post-
migration traffic rates and order to execution ratios. The Exchange
thus believes that the proposed change would support continued trading
opportunities for all market participants, thereby promoting just and
equitable principles of trade, removing impediments to and perfecting
the mechanism of a free and open market and a national market system
and, in general, protecting 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 change 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 Exchange does not believe the proposed
extension of the Waiver would impose any burden on intramarket
competition that is not necessary or appropriate because it would apply
equally to all OTP Holders. All OTP Holders would continue to be
eligible for the Waiver for an additional two months while the Exchange
continues to assess traffic rates and order to execution ratios
following the migration to Pillar.
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 and ETF options order flow. More specifically,
in March 2023, the Exchange had less than 13% market share of executed
volume of multiply-listed equity and ETF options trades.\16\
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\15\ 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>.
\16\ Based on a compilation of OCC data for monthly volume of
equity-based options and monthly volume of equity-based ETF options,
see id., the Exchange's market share in equity-based options
decreased from 13.57% for the month of March 2022 to 12.83% for the
month of March 2023.
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The Exchange does not believe the proposed extension of the Waiver
would impose any burden on intramarket competition that is not
necessary or appropriate because it would apply equally to all OTP
Holders. All OTP Holders would continue to be eligible for the Waiver
for an additional two months while the Exchange continues to assess
traffic rates and order to execution ratios following the migration to
Pillar.
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) \17\ of the Act and subparagraph (f)(2) of Rule
19b-4 \18\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\17\ 15 U.S.C. 78s(b)(3)(A).
\18\ 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) \19\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\19\ 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="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#3f4d4a535a125c5052525a514b4c7f4c5a5c11585049"><span class="__cf_email__" data-cfemail="fb898e979ed6989496969e958f88bb889e98d59c948d">[email protected]</span></a>. Please include
File Number SR-NYSEARCA-2023-35 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-2023-35. This
file number should be included on the subject line if email is used. To
help the Commission process and review your
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comments more efficiently, please use only one method. The Commission
will post all comments on the Commission's internet website (<a href="https://www.sec.gov/rules/sro.shtml">https://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 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. Do not include personal identifiable
information in submissions; you should submit only information that you
wish to make available publicly. We may redact in part or withhold
entirely from publication submitted material that is obscene or subject
to copyright protection. All submissions should refer to File Number
SR-NYSEARCA-2023-35, and should be submitted on or before June 5, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-10243 Filed 5-12-23; 8:45 am]
BILLING CODE 8011-01-P
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