Notice2024-03337
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify the NYSE Arca Options Fee Schedule
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Published
February 20, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 34 (Tuesday, February 20, 2024)</title>
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[Federal Register Volume 89, Number 34 (Tuesday, February 20, 2024)]
[Notices]
[Pages 12917-12919]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-03337]
[[Page 12917]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99532; File No. SR-NYSEARCA-2024-15]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Modify the NYSE
Arca Options Fee Schedule
February 13, 2024.
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 February 12, 2024, 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 the Limit of Fees on Options Strategy
Executions. The Exchange proposes to implement the fee change effective
February 12, 2024.\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
February 1, 2024 (SR-NYSEArca-2024-14) and withdrew such filing on
February 12, 2024.
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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 modify
the Limit of Fees on Options Strategy Executions (the ``Strategy Cap''
or ``Cap''), effective February 12, 2024.
Background
The Exchange first notes that it operates in a highly competitive
market in which market participants can readily direct order flow to
competing venues if they deem fee levels at a particular venue to be
excessive or incentives to be insufficient. More specifically, the
Exchange is only one of 17 options venues to which market participants
may direct their order flow. Based on publicly available information,
no single options exchange has more than 16% of the market share of
executed volume of multiply-listed equity and ETF options trades.
Therefore, no exchange possesses significant pricing power in the
execution of multiply-listed equity and ETF options order flow. More
specifically, in December 2023, the Exchange had less than 13% market
share of executed volume of multiply-listed equity and ETF options
trades. Thus, in such a low-concentrated and highly competitive market,
no single options exchange possesses significant pricing power in the
execution of option order flow.
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 use of certain categories of products,
in response to fee changes. Accordingly, competitive forces constrain
the Exchange's transaction fees, and market participants can readily
trade on competing venues if they deem pricing levels at those other
venues to be more favorable. In response to the competitive
environment, the Exchange offers specific rates and credits in its Fees
Schedule, as do other competing options exchanges, which the Exchange
believes provide incentive to OTP Holder and OTP Firms (collectively,
``OTP Holders'') to increase order flow of certain qualifying orders--
the Strategy Cap (as described below) is one such incentive.
Proposed Fee Change
Currently, the Fee Schedule provides that transaction fees for OTP
Holders are limited or capped at $1,000 for certain options strategy
executions ``on the same trading day,'' meaning the Strategy Cap is a
daily fee cap.\5\ Strategy executions that qualify for the Strategy Cap
are (a) reversals and conversions, (b) box spreads, (c) short stock
interest spreads, (d) merger spreads, (e) jelly rolls, and (f)
dividends, which are described in detail in the Fee Schedule (the
``Strategy Executions'').\6\ The Exchange also offers a lower daily
Strategy Cap of $200 for OTP Holders that trade at least 25,000 monthly
billable contract sides in Strategy Executions (the ``minimum billable
sides requirement''). Thus, the Exchange caps the daily Strategy
Execution fees at $200 for each day of the month (as opposed to $1,000
for nonqualifying OTP Holders) for OTP Holders that meet the minimum
billable sides requirement.
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\5\ See Fee Schedule, Limit of Fees on Options Strategy
Executions, available here: <a href="https://www.nyse.com/publicdocs/nyse/markets/arcaoptions/NYSE_Arca_Options_Fee_Schedule.pdf">https://www.nyse.com/publicdocs/nyse/markets/arcaoptions/NYSE_Arca_Options_Fee_Schedule.pdf</a>.
\6\ See id., Endnote 10 (describing each Strategy Execution).
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The Exchange proposes to reduce the Strategy Cap from $1,000 to
$200 and to remove the minimum billable sides requirement to qualify
for this lower $200 daily Cap. Put another way, the Exchange proposes
to cap daily fees for Strategy Executions at $200 for each day of the
month regardless of an OTP Holder's monthly billable volume in Strategy
Executions.\7\
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\7\ See proposed Fee Schedule, Limit of Fees on Options Strategy
Executions.
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The Exchange notes that the proposed fee change is designed to
compete with other options exchanges that likewise cap fees on certain
options strategies.\8\ Therefore, the Exchange believes the proposed
reduction of the Strategy Cap may further incentivize OTP Holders to
direct Strategy Executions to the Exchange.
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\8\ The Exchange notes that at least three other options
exchanges offer a daily fee cap on certain option strategies, which
caps range from as little $0 (on Cboe Exchange, Inc. (``Cboe'') to
as much as $1,100 (on Nasdaq PHLX LLC (``PHLX '') and differ based
on the specific strategies executed and the type of market
participants on the trade. See, e.g., Cboe Fee Schedule, Footnote
13, available here: <a href="https://cdn.cboe.com/resources/membership/Cboe_FeeSchedule.pdf">https://cdn.cboe.com/resources/membership/Cboe_FeeSchedule.pdf</a>; PHLX Options 7, Pricing Schedule, Section 4
(Strategy Caps), available here: <a href="https://listingcenter.nasdaq.com/rulebook/phlx/rules/Phlx%20Options%207">https://listingcenter.nasdaq.com/rulebook/phlx/rules/Phlx%20Options%207</a>. See also BOX Options Market
LLC (``BOX'') Fee Schedule, Section V.D, Strategy Qualified Open
Outcry ``QOO'' Order Fee Cap and Rebate, available here: <a href="https://boxexchange.com/regulatory/fees/">https://boxexchange.com/regulatory/fees/</a>. Despite the nuances in how each
option exchange applies the various strategy caps, the Exchange
directly competes with these exchanges for order flow in options
strategy executions.
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[[Page 12918]]
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 Exchange believes that the proposed change to the Strategy Cap
is reasonable, equitable, and not unfairly discriminatory. As noted
above, the Exchange operates in highly competitive market. The Exchange
is only one of several options venues to which market participants may
direct their order flow, and it represents a small percentage of the
overall market. As such, market participants can readily direct order
flow to competing venues if they deem fee levels at a particular venue
to be excessive or incentives to be insufficient. The Exchange believes
that the proposed fee change is reasonable, equitable, and not unfairly
discriminatory in that the Exchange and competing options exchanges
currently offer reduced fees or credits in connection with strategy
orders.\11\
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\11\ See, e.g., supra note 8 (describing similar fee caps
available on Cboe, PHLX, and BOX).
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The Exchange notes that the proposed change would be applied
uniformly to all similarly-situated OTP Holders. Moreover, the Exchange
believes that the proposed change would further incentivize OTP Holder
[sic] to direct Strategy Executions to the Exchange and may encourage
them to aggregate their Strategy Executions at the Exchange as the
primary execution venue. For example, this proposed change may
encourage OTP Holders to increase their Strategy Execution volumes by
executing (often smaller) strategies that are not necessarily
economically viable on a per symbol basis, but which may be profitable
when fees on Strategy Executions--regardless of symbol--are capped for
the trading day. To the extent that the proposed change attracts more
Strategy Executions, this increased order flow may make the Exchange a
more competitive venue for order execution. In addition, the Exchange
notes that all market participants stand to benefit from increased
volume, which promotes market depth, facilitates tighter spreads, and
enhances price discovery, and may lead to a corresponding increase in
order flow from other market participants.
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 differently,
changes 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 change is a reasonable attempt to effectively compete for
Strategy Executions. The Exchange believes that the proposed change may
encourage OTP Holders to conduct Strategy Executions on the Exchange
and, in turn, may increase the depth of the market to the benefit of
all market participants. The Exchange notes that OTP Holders may avail
themselves of the Exchange's proposed Strategy Cap or they can opt for
similar offerings at another exchange.\12\
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\12\ See, e.g., supra note 8 (describing similar fee caps
available on Cboe, PHLX, and BOX).
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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.
The proposed change is designed to attract additional order flow to
the Exchange, particularly Strategy Executions. In particular, the
Exchange believes that the proposed change could further incentivize
market participants to direct their Strategy Executions to the
Exchange. As noted herein, the proposed Strategy Cap would be
applicable to all similarly-situated market participants, and, as such,
the proposed change would not impose a disparate burden on competition
among OTP Holders. The Exchange believes that the proposed change may
continue to encourage OTP Holders to conduct Strategy Executions on the
Exchange, which increased liquidity and quote competition on the
Exchange benefits all market participants.
The Exchange also does not believe that the proposed Strategy Cap
will impose any burden on intermarket competition that is not necessary
or appropriate in furtherance of the Act because, as noted above, other
competing options exchanges currently has [sic] a similar fee cap in
place in connection with strategy orders.\13\ Because competitors are
free to modify their own fees or fee caps in response to competing
exchanges, the Exchange believes that the degree to which changes in
this market may impose any burden on competition is limited. Further,
the Exchange believes that the proposed change could promote
competition between the Exchange and other execution venues, including
those that currently offer similar strategy order fees or fee caps.
Finally, the Exchange notes that it operates in a highly competitive
market in which market participants can readily favor competing venues.
In such an environment, the Exchange must continually review, and
consider adjusting, its fees and credits to remain competitive with
other exchanges. For the reasons described above, the Exchange believes
that the proposed rule change reflects this competitive environment.
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\13\ Id.
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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,
[[Page 12919]]
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#2755524b420a44484a4a424953546754424409404851"><span class="__cf_email__" data-cfemail="b2c0c7ded79fd1dddfdfd7dcc6c1f2c1d7d19cd5ddc4">[email protected]</span></a>. Please include
file number SR-NYSEARCA-2024-15 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-2024-15. 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-2024-15 and should
be submitted on or before March 12, 2024.
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. 2024-03337 Filed 2-16-24; 8:45 am]
BILLING CODE 8011-01-P
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