Notice2023-14669
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
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Published
July 12, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 132 (Wednesday, July 12, 2023)</title>
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[Federal Register Volume 88, Number 132 (Wednesday, July 12, 2023)]
[Notices]
[Pages 44424-44427]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-14669]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97849; File No. SR-NYSEARCA-2023-45]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Modify the NYSE
Arca Options Fee Schedule
July 6, 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 June 30, 2023, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'')
filed with the Securities and Exchange Commission (``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 Ratio Threshold Fee. The Exchange
proposes to implement the fee change effective July 3, 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.
[[Page 44425]]
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 (1) delete language relating to an
expired waiver of the Ratio Threshold Fee and (2) add an exemption to
the Ratio Threshold Fee for the first time that such fee is assessed in
a rolling 12-month period. The Exchange proposes to implement the rule
change on July 3, 2023.
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.\4\ 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, and again to
June 30, 2023.\5\
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\4\ 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).
\5\ 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); 97460 (May 9, 2023), 88
FR 31087 (May 15, 2023) (SR-NYSEArca-2023-35) (extension of Waiver
until June 30, 2023).
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The Exchange proposes to delete language from the Fee Schedule
providing for the Waiver following its expiration, as it would no
longer be applicable to any OTP Holders. The Exchange also proposes to
adopt an exemption from the Ratio Threshold Fee for the first time that
an OTP Holder incurs such fee in a rolling 12-month period (the
``Exemption''), similar to the exemption currently offered by the
Exchange's affiliate, NYSE American Options.\6\ The Exchange believes
that the Exemption could help protect OTP Holders from incurring the
Ratio Threshold Fee when they first encounter lower than expected
executions in a rolling 12-month period, such as when they are new to
the trading platform, deploying new technologies, or testing different
trading strategies, thereby encouraging OTP Holders to maintain their
trading activity on the Exchange by mitigating the initial impact of
the Ratio Threshold Fee.
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\6\ See NYSE American Options Fee Schedule, Section II. Monthly
Excessive Bandwidth Utilization Fees, available at: <a href="https://www.nyse.com/publicdocs/nyse/markets/american-options/NYSE_American_Options_Fee_Schedule.pdf">https://www.nyse.com/publicdocs/nyse/markets/american-options/NYSE_American_Options_Fee_Schedule.pdf</a> (``The Monthly Excessive
Bandwidth Utilization Fee will not be assessed for the first
occurrence in a rolling 12-month period.'').
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\7\ in general, and furthers the
objectives of Sections 6(b)(4) and (5) of the Act,\8\ 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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\7\ 15 U.S.C. 78f(b).
\8\ 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.'' \9\
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\9\ 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.\10\ Therefore, no exchange possesses significant pricing power
in the execution of multiply-listed equity and ETF options order flow.
More specifically, in May 2023, the Exchange had less than 13% market
share of executed volume of multiply-listed equity and ETF options
trades.\11\
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\10\ 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>.
\11\ 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 13.08% for the month of May 2022 to 12.35% for the
month of May 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 the proposed deletion of the language
describing the Waiver is reasonable because the Waiver would no longer
be in effect, and the deletion would thus improve the clarity of the
Fee Schedule and reduce confusion as to the fees and credits that are
currently in effect. The Exchange also believes that the removal of
obsolete text from the Fee Schedule would further the protection of
investors and the public interest by promoting clarity and transparency
in the Fee Schedule and making the Fee Schedule easier to navigate and
understand.
The Exchange believes that the proposed Exemption is reasonable
because it would offer OTP Holders an exemption from the Ratio
Threshold Fee the first time it is incurred in a rolling 12-month
period and is designed to potentially protect firms that are, for
example, new to the trading platform, deploying new technologies, or
testing different trading strategies, from incurring excess Ratio
Threshold Fees and affording them an opportunity to assess their order
to execution ratios. To the extent the proposed 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 mitigate effects of an ever-changing marketplace
without affecting its competitiveness.
[[Page 44426]]
The Proposed Rule Change Is an Equitable Allocation of Credits and Fees
The Exchange believes the proposed change is an equitable
allocation of fees and credits. The proposed deletion of language
relating to the expired Waiver would eliminate text from the Fee
Schedule no longer applicable to any OTP Holders. Accordingly, the
Exchange believes the proposal would impact all similarly situated OTP
Holders on an equal basis. The proposed Exemption is an equitable
allocation of fees and credits because it would be available to all OTP
Holders; all OTP Holders would be eligible for the Exemption the first
time they incur the Ratio Threshold Fee in a rolling 12-month period.
In addition, to the extent the Exemption encourages OTP Holders to
maintain their trading activity on the Exchange by mitigating the
initial impact of the Ratio Threshold Fee, the Exchange believes the
proposed change would promote market quality to the benefit of all
market participants.
The Proposed Rule Change Is Not Unfairly Discriminatory
The Exchange believes that the proposal is not unfairly
discriminatory because it neither targets nor will it have a disparate
impact on any category of market participant. The proposed elimination
of text describing the expired Waiver would affect all OTP Holders on
an equal and non-discriminatory basis, as the Waiver would no longer be
applicable to any OTP Holders. The Exchange believes the proposed
Exemption is not unfairly discriminatory because it would apply to all
OTP Holders on an equal and non-discriminatory basis. The Exemption, as
proposed, would provide all OTP Holders with an exemption from the
Ratio Threshold Fee the first time such fee is incurred in a rolling
12-month period. The Exchange believes that the proposed change would
encourage OTP Holders to continue trading on the Exchange by lessening
the initial impact of the Ratio Threshold Fee and providing OTP Holders
with an opportunity to evaluate order to execution ratios. The proposed
change would thus 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.'' \12\
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\12\ See Reg NMS Adopting Release, supra note 9, at 37499.
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Intramarket Competition
The Exchange does not believe the proposed changes would impose any
burden on intramarket competition that is not necessary or appropriate.
The deletion of the language relating to the Waiver would remove
language from the Fee Schedule no longer applicable to any OTP Holders
and, accordingly, would not have any impact on intramarket competition.
The proposed Exemption would apply equally to all OTP Holders; all OTP
Holders would be eligible for the Exemption for the first occurrence of
the Ratio Threshold Fee in a rolling 12-month period. To the extent the
proposed change is successful in encouraging OTP Holders to maintain
their trading activity on the Exchange, the Exchange believes the
proposed change could promote market quality to the benefit of all
market participants.
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.\13\ Therefore, currently no exchange possesses
significant pricing power in the execution of multiply-listed equity
and ETF options order flow. More specifically, in May 2023, the
Exchange had less than 13% market share of executed volume of multiply-
listed equity and ETF options trades.\14\
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\13\ 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>.
\14\ 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 13.08% for the month of May 2022 to 12.35% for the
month of May 2023.
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The Exchange does not believe the proposed changes would impose any
burden on intramarket competition that is not necessary or appropriate.
Deleting text describing the Waiver would add clarity to the Fee
Schedule by removing expired pricing and, accordingly, would not have
any impact on intermarket competition. The proposed Exemption would not
impose any burden on competition that is not necessary or appropriate
because it would apply equally to all OTP Holders. All OTP Holders
would be eligible for the Exemption the first time the Ratio Threshold
Fee is applied in a rolling 12-month period. To the extent the
Exemption encourages OTP Holders to continue trading on the Exchange,
the Exchange believes the proposed change would sustain the Exchange's
overall competitiveness and its market quality for all market
participants.
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 has become effective upon filing pursuant
to Section 19(b)(3)(A) \15\ of the Act and paragraph (f) thereunder. At
any time within 60 days of the filing of the proposed rule change, the
Commission summarily may temporarily suspend such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act.
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\15\ 15 U.S.C. 78s(b)(3)(A).
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[[Page 44427]]
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#93e1e6fff6bef0fcfefef6fde7e0d3e0f6f0bdf4fce5"><span class="__cf_email__" data-cfemail="5220273e377f313d3f3f373c2621122137317c353d24">[email protected]</span></a>. Please include
file number SR-NYSEARCA-2023-45 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-2023-45. 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="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
a.m. and 3 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-2023-45 and should
be submitted on or before August 2, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-14669 Filed 7-11-23; 8:45 am]
BILLING CODE 8011-01-P
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