Notice2024-05490
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
March 15, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 52 (Friday, March 15, 2024)</title>
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[Federal Register Volume 89, Number 52 (Friday, March 15, 2024)]
[Notices]
[Pages 18976-18978]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-05490]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99708; File No. SR-NYSEARCA-2024-24]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Modify the NYSE
Arca Options Fee Schedule
March 11, 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 29, 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 certain fees and credits applicable to
Lead Market Makers. The Exchange proposes to implement the fee change
effective March 1, 2024. 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 18977]]
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 modify the Fee Schedule, effective
March 1, 2024, regarding the Lead Market Maker (``LMM'') Rights Fee and
LMM posting credits for electronic transactions in Penny issues.
LMM Rights Fee
The LMM Rights Fee (``Rights Fee'') is charged on a per issue basis
to the OTP Firm acting as LMM in the issue.\4\ The Rights Fee applies
to each issue in an LMM's allocation, where the monthly fee is based on
the average national daily Customer contracts in such issue as follows:
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\4\ See Fee Schedule, Lead Market Maker Rights and Endnote 2,
available here, <a href="https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf">https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf</a>.
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Monthly
Average national daily customer contracts issue fee
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0 to 100.................................................... $25
101 to 1,000................................................ 35
1,001 to 2,000.............................................. 75
2,001 to 5,000.............................................. 200
5,001 to 15,000............................................. 750
15,001 to 100,000........................................... 1,500
Over 100,000................................................ 3,000
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Currently, the Exchange also offers opportunities for LMMs to earn
discounts on Rights Fees for issues in the four highest activity tiers.
The discounts are based on the amount of monthly (i) total electronic
volume and/or (ii) total posted volume executed in the Market Maker
range relative to other Market Makers appointed in that issue. The
discounts are cumulative, and an LMM is eligible to achieve the
discount for both monthly volume categories.\5\
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\5\ For example, if an LMM was first in Total Electronic Volume
in an issue (qualifying for a 50% discount), and third in Total
Posting Volume in the same issue (qualifying for a 30% discount),
the LMM would receive an 80% discount on the Rights Fee for that
issue.
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The Exchange also offers a 50% discount on Rights Fees to LMMs who
achieve either (1) daily contract volume traded electronically of at
least 0.32% total industry Customer equity and ETF option ADV
(``TCADV), of which 0.08% TCADV is in its LMM appointment, or (2) daily
contract volume traded manually of at least 0.75% of TCADV in all
account types, which can include transaction volume from the OTP
Holder's or OTP Firm's affiliates (per Endnote 8) or its Appointed OFP
(per Endnote 15). Qualifying LMM volume is based on an average of the
daily contract volume traded electronically by an LMM or traded
manually by an LMM and affiliated/appointed entities each trading day
in a calendar month.
The Exchange proposes to eliminate both of the discounts currently
offered on Rights Fees. To effect this change, the Exchange proposes to
delete the text following the asterisk below the table in the Fee
Schedule setting forth Rights Fees (as well as the asterisks in the
table itself) describing the discounts based on monthly volume, as well
as text in Endnote 2 describing the discount based on daily volume.
Although the proposed change would eliminate discounts currently
offered to LMMs on Rights Fees, the Exchange believes it would not
discourage LMMs from seeking appointments or from continuing to direct
order flow to the Exchange, particularly in conjunction with the
proposed change described below to offer LMMs additional posting
credits in Penny issues.
LMM Post Liquidity Credits
Currently, LMMs receive a credit of $0.32 per contract for posted
liquidity in electronic executions in Penny Issues.\6\ LMMs also
receive an additional $0.04 per contract credit for executions in Penny
issues in their LMM appointment, in addition to credits they qualify
for through the Market Maker Penny and SPY Posting Credit Tiers.
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\6\ See Fee Schedule, TRANSACTION FEE FOR ELECTRONIC
EXECUTIONS--PER CONTRACT.
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The Exchange proposes to increase the Post Liquidity credit for
LMMs in all Penny issues other than SPY to $0.33 per contract. In
addition, the Exchange proposes to increase the credit for executions
in Penny issues in an LMM's appointment, other than SPY, to an
additional $0.05 above the tiered credits outlined in the Market Maker
Penny and SPY Posting Credit Tiers. The Exchange further proposes to
clarify the Fee Schedule to provide that the post liquidity credit for
the LMM in SPY will continue to be $0.32 per contract and that the LMM
in SPY will continue to be eligible for an additional $0.04 per
contract credit over the tiered credits set forth in the Market Maker
Penny and SPY Posting Credit Tiers for eligible executions in SPY.
Although the Exchange cannot predict with certainty whether the
proposed change would incent LMMs to direct additional posted liquidity
to the Exchange, the Exchange believes that the proposed change could
encourage LMMs to increase their transactions executed on the Exchange
to earn the increased posting credits in Penny issues other than SPY or
to continue to achieve the existing credits available for executions in
SPY. The Exchange notes that these credits are not volume-based and are
available to all LMMs.
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 Exchange believes that the proposed change is reasonable
because, although it would eliminate the volume-based discounts on the
LMM Rights Fee, it would offer LMMs increased posting credits (which
are not based on volume) on trades in Penny issues other than SPY. The
Exchange further believes that the proposed change is equitable and not
unfairly discriminatory because it would generally apply to all LMMs
equally. The Exchange believes that it is reasonable, equitable, and
not unfairly discriminatory to maintain the current posted liquidity
credits for the LMM in SPY because Market Makers in SPY are already
eligible for a higher credit through the Market Maker Penny and SPY
Posting Credit Tiers, and the Exchange offers certain Market Maker
incentives for SPY that are not applicable to other Penny issues.\9\
The Exchange also believes that offering increased credits to LMMs is
equitable and not unfairly discriminatory to non-LMM market
participants because of LMMs' heightened quoting obligations and
because increased LMM posting liquidity in Penny issues would continue
to make the Exchange a more competitive venue for, among other things,
order execution. To the extent the proposed change encourages LMMs to
continue or increase their liquidity posting business in Penny issues
on the Exchange, it would encourage active quoting and improved market
quality to the benefit of all market participants.
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\9\ See Fee Schedule, MARKET MAKER PENNY AND SPY POSTING CREDIT
TIERS Super Tier; Market Maker Incentives for SPY.
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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 will impose any burden on
competition that
[[Page 18978]]
is not necessary or appropriate in furtherance of the purposes of the
Act.
The proposed change is designed to continue to encourage LMMs to
increase liquidity directed to the Exchange by increasing the credits
available to LMMs on posted liquidity in Penny issues other than SPY.
Although the proposed change would eliminate the volume-based Rights
Fee discounts, it would offer increased posting credits to LMMs that
are not based on volume achieved. The proposed change would apply to
all similarly-situated market participants and would not impose a
disparate burden on competition. The Exchange does not believe that
maintaining the current posted liquidity credits for the LMM in SPY
would impose a disparate burden on competition given the unique
incentives available to Market Makers in SPY.\10\ The Exchange further
believes that, to the extent the proposed change results in increased
liquidity on the Exchange, it would improve market quality for the
benefit of all market participants.
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\10\ See id.
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The Exchange also does not believe that the proposed change would
impose any burden on intermarket competition that is not necessary or
appropriate in furtherance of the Act; as order execution venues are
free to modify their own fees in response to competitors' fees, the
Exchange believes that the degree to which the proposed change could
impose any burden on competition is limited. The Exchange further
believes that the proposed change could promote competition between the
Exchange and other execution venues to the extent the proposed change
encourages increased order flow to the Exchange, thereby making the
Exchange a more attractive venue for, among other things, order
execution. 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.
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) \11\ of the Act and subparagraph (f)(2) of Rule
19b-4 \12\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 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) \13\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\13\ 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#0e7c7b626b236d6163636b607a7d4e7d6b6d20696178"><span class="__cf_email__" data-cfemail="5022253c357d333f3d3d353e2423102335337e373f26">[email protected]</span></a>. Please include
file number SR-NYSEARCA-2024-24 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-2024-24. 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-2024-24 and should
be submitted on or before April 5, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-05490 Filed 3-14-24; 8:45 am]
BILLING CODE 8011-01-P
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