Notice2023-25204
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
November 15, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 219 (Wednesday, November 15, 2023)</title>
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[Federal Register Volume 88, Number 219 (Wednesday, November 15, 2023)]
[Notices]
[Pages 78410-78413]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-25204]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-98894; File No. SR-NYSEARCA-2023-76]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Modify the NYSE
Arca Options Fee Schedule
November 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 October 31, 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 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 certain Customer incentives. The Exchange
proposes to implement the fee change effective November 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 amend the Fee Schedule to modify a
qualification basis applicable to the Customer Penny Posting Credit
Tiers, Customer Posting Credits [sic] in Non-Penny Issues, and Customer
Incentive Program. The Exchange proposes to implement the rule change
on November 1, 2023.
The Fee Schedule provides for certain incentive programs through
which an OTP Holder or OTP Firm (collectively, ``OTP Holder'') may earn
credits on posted interest. The Customer Penny Posting Credit Tiers
offers qualifying OTP Holders tiered credits on electronic executions
of Customer posted interest in Penny issues, and the Customer Penny
[sic] Posting Credit Tiers in Non-Penny Issues offers qualifying OTP
Holders tiered credits on electronic executions of Customer posted
interest in non-Penny issues.\4\ OTP Holders may also qualify for the
Customer Incentive Program, which offers an additional
[[Page 78411]]
credit on Customer posting credits in Penny or non-Penny issues.\5\
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\4\ See Fee Schedule, CUSTOMER PENNY POSTING CREDIT TIERS;
CUSTOMER POSTING CREDIT TIERS IN NON-PENNY ISSUES.
\5\ See Fee Schedule, CUSTOMER INCENTIVE PROGRAM.
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Currently, an OTP Holder that achieves 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 the NYSE Arca Equities market will qualify for the
credits offered in Tier 4 of the Customer Penny Posting Credit Tiers,
Tier C of the Customer Posting Credit Tiers in Non-Penny Issues, and
the Customer Incentive Program.
The Exchange now proposes to adjust this qualifying basis for each
of the Customer Penny Posting Credit Tiers, Customer Posting Credits
[sic] in Non-Penny Issues, and Customer Incentive Program to reduce the
Customer posted interest TCADV requirement from 0.30% to 0.20% and the
equity market ADV requirement from 0.60% to 0.50%. In other words, as
proposed, an OTP Holder could qualify for Tier 4 of the Customer Penny
Posting Credit Tiers, Tier C of the Customer Posting Credit Tiers in
Non-Penny Issues, and the Customer Incentive Program by achieving at
least 0.20% of TCADV from Customer posted interest in all issues, not
including Professional Customer interest, plus executed ADV of 0.50% of
U.S. equity market share posted and executed on the NYSE Arca Equities
market.
The Exchange does not propose any changes to the amounts of the
credits offered in the Customer Penny Posting Credit Tiers, Customer
Posting Credits [sic] in Non-Penny Issues, or Customer Incentive
Program. Accordingly, OTP Holders who achieve the proposed
qualification described above would continue to be eligible for the
($0.47) on electronic executions of Customer posted interest in Penny
issues through Tier 4 of the Customer Penny Posting Credit Tiers; the
($0.97) credit applied to electronic executions of Customer posted
interest in non-Penny issues through the Customer Posting Credits [sic]
in Non-Penny Issues; and/or the additional ($0.03) credit on Customer
posting credits offered in the Customer Incentive Program.
The Exchange cannot predict with certainty whether any OTP Holders
would seek to qualify for the Customer Penny Posting Credit Tiers,
Customer Posting Credit Tiers in Non-Penny Issues, or Customer
Incentive Program. However, the Exchange believes that the proposed
change would continue to encourage OTP Holders to direct Customer
posted interest to the Exchange by reducing the volume requirements for
certain credits on Customer posted interest, thereby potentially making
such credits more attainable for OTP Holders.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\6\ in general, and furthers the
objectives of Sections 6(b)(4) and (5) of the Act,\7\ 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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\6\ 15 U.S.C. 78f(b).
\7\ 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.'' \8\
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\8\ 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 17 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.\9\ Therefore, no exchange possesses significant pricing power
in the execution of multiply-listed equity and ETF options order flow.
More specifically, in September 2023, the Exchange had less than 12%
market share of executed volume of multiply-listed equity and ETF
options trades.\10\
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\9\ 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>.
\10\ 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
increased from 10.84% for the month of September 2022 to 11.48% for
the month of September 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 changes to the Customer
Penny Posting Credit Tiers, Customer Posting Credit Tiers in Non-Penny
Issues, and Customer Incentive Program are reasonable because they are
intended to continue to incent OTP Holders to send Customer posting
interest to the Exchange in order to earn credits on such interest. The
Exchange also believes the proposed change is reasonable because it
decreases certain volume requirements for the Customer Penny Posting
Credit Tiers, Customer Posting Credit Tiers in Non-Penny Issues, and
Customer Incentive Program, which could make credits offered in those
programs more attainable for OTP Holders.
To the extent the proposed rule change attracts greater volume and
liquidity by encouraging OTP Holders to increase their options volume
on the Exchange, 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 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 attempt to qualify for the various Customer posting credits or
not. Moreover, the proposal is designed to continue to incent OTP
Holders to aggregate all Customer posting interest at the Exchange as a
primary execution venue. To the extent that the proposed change
attracts more opportunities for execution of Customer posted interest
on the Exchange, this increased order flow would continue to
[[Page 78412]]
make the Exchange a more competitive venue for 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 Proposed Rule Change Is Not Unfairly Discriminatory
The Exchange believes the proposed changes are not unfairly
discriminatory because they would apply to all similarly-situated
market participants, and the credits offered in the Customer Penny
Posting [sic] Tiers, Customer Posting Credit Tiers in Non-Penny Issues,
and Customer Incentive Program would continue to be available to all
similarly-situated market participants on an equal and non-
discriminatory basis.
The proposed change is based on the amount and type of business
transacted on the Exchange, and OTP Holders are not obligated to try to
qualify for the various credits, nor are they obligated to execute
posted interest. To the extent that the proposed change attracts more
interest to the Exchange, particularly Customer posting interest, this
increased order flow would continue to make the Exchange a more
competitive venue for 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
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 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.'' \11\
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\11\ See Reg NMS Adopting Release, supra note 8, at 37499.
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Intramarket Competition. The proposed change is designed to attract
additional order flow to the Exchange, particularly Customer posted
interest. The Exchange believes that the proposed change would continue
to incent OTP Holders to direct Customer posting interest to the
Exchange in order to earn the credits available through the Customer
Penny Posting Credit Tiers, Customer Posting Credit Tiers in Non-Penny
Issues, and Customer Incentive Program. Greater liquidity benefits all
market participants on the Exchange and increased liquidity-posting
order flow would increase opportunities for execution of other trading
interest. The proposed change would apply to all similarly-situated
market participants and, accordingly, 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 17 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.\12\ Therefore, currently
no exchange possesses significant pricing power in the execution of
multiply-listed equity and ETF options order flow. More specifically,
in September 2023, the Exchange had less than 12% 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
increased from 10.84% for the month of September 2022 to 11.48% for
the month of September 2023.
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The Exchange believes that the proposed rule change reflects this
competitive environment because it modifies the Exchange's fees in a
manner designed to continue to incent OTP Holders to direct trading to
the Exchange, to provide liquidity and to attract order flow. 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.
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) \14\ of the Act and subparagraph (f)(2) of Rule
19b-4 \15\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\14\ 15 U.S.C. 78s(b)(3)(A).
\15\ 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) \16\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\16\ 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:
[[Page 78413]]
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#82f0f7eee7afe1edefefe7ecf6f1c2f1e7e1ace5edf4"><span class="__cf_email__" data-cfemail="becccbd2db93ddd1d3d3dbd0cacdfecddbdd90d9d1c8">[email protected]</span></a>. Please include
file number SR-NYSEARCA-2023-76 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-2023-76. 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-2023-76 and should
be submitted on or before December 6, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-25204 Filed 11-14-23; 8:45 am]
BILLING CODE 8011-01-P
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