Notice2024-13419
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the NYSE Arca Options Fee Schedule
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Published
June 20, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 119 (Thursday, June 20, 2024)</title>
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[Federal Register Volume 89, Number 119 (Thursday, June 20, 2024)]
[Notices]
[Pages 51921-51923]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-13419]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100328; File No. SR-NYSEARCA-2024-55]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend the NYSE
Arca Options Fee Schedule
June 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 June 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 amend the NYSE Arca Options Fee Schedule
(``Fee Schedule'') to replace the Ratio Threshold Fee with an Excessive
Bandwidth Utilization Fee. The Exchange proposes to implement the fee
changes effective June 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\ On May 1, 2024, the Exchange originally filed to amend the
Fee Schedule (NYSEARCA-2024-38), and, on May 16, 2024, the Exchange
withdrew that filing and submitted NYSEARCA-2024-41. On May 30,
2024, the Exchange withdrew NYSEARCA-2024-41 and submitted NYSEARCA-
2024-48, which latter filing the Exchange withdrew on June 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 replace
the Ratio Threshold Fee with an Excessive Bandwidth Utilization Fee to
reflect the Exchange's migration to NYSE Pillar (``Pillar''). The
Exchange proposes to implement the fee changes effective June 12, 2024.
The Exchange imposes certain fees to discourage excessive message
traffic (that do not result in executions or otherwise improve market
quality) that could unnecessarily tax the Exchange's resources,
bandwidth, and capacity, as no system has unlimited capacity.
With the Exchange's migration to the Pillar trading platform,
market participants can send both quote and order message traffic over
a single connection. This functionality allows the Exchange to monitor
the message traffic of each OTP Holder or OTP Firm (collectively, ``OTP
Holders''), which in turn impacts how the Exchange calculates (and
assess fees for) each OTP Holder's use of Exchange bandwidth and
processing resources.
Currently, the Exchange assesses a Ratio Threshold Fee that is
based on the number of orders entered as compared to the number of
executions received in a calendar month.\5\ To reflect the
communication protocol available on Pillar, the Exchange proposes to
replace the Ratio Threshold Fee with a ``Monthly Excessive Bandwidth
Utilization Fee'' or ``EBUF''.\6\ Like the Ratio Threshold Fee, the
proposed EBUF is designed to strike the right balance between deterring
OTP Holders from submitting an excessive number of messages (that do
not result in executions or otherwise improve market quality) without
discouraging OTP Holders from accessing the Exchange, except that it
will include quotes. As proposed, the EBUF will only be assessed on OTP
Holders that send more than 50 million messages per day on average
during a calendar month.\7\ For purposes of EBUF, ``messages'' include
quotes, orders, order cancellations and modifications.\8\
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\5\ See Fee Schedule, Ratio Threshold Fee. See also Endnote 12
(regarding the ratio threshold fee).
\6\ See proposed Fee Schedule, Monthly Excessive Bandwidth
Utilization Fee.
\7\ Id.
\8\ Id.
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The proposed EBUF would calculate an OTP Holder's ``Monthly Message
to Execution Ratio'' (i.e., the number of messages sent versus the
number of executions). The Exchange has determined that, on Pillar,
setting a baseline threshold for this ``Monthly Message to Execution
Ratio'' at 500,000 to 1 or greater should ensure the efficient use of
the Exchange's resources, bandwidth, and capacity by OTP Holders that
are actively trading on the Exchange. Thus, as proposed, the Exchange
will calculate the number of messages submitted by an OTP Holder, and
the number of executions by the OTP Holder, and will only assess the
EBUF if the Monthly Message to Execution Ratio exceeds 500,000 to 1.
The proposed Fee will be assessed to further encourage efficient use of
the Exchange's resources as shown here:
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Monthly message to execution ratio Monthly charge
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Between 500,000 and 749,999 to 1........................ $5,000
Between 750,000 and 999,999 to 1........................ 10,000
1,000,000 to 1 and greater.............................. 15,000
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Like the Ratio Threshold Fee, the higher the Messages to Executions
Ratio (i.e., the more unexecuted message that Pillar ingests), the
higher the proposed fee, which increase is designed to discourage
(increasing levels of) excessive message traffic by OTP Holders. The
Exchange notes that the proposed minimum thresholds for triggering the
proposed EBUF are higher than the thresholds associated with the Ratio
Threshold Fee (but the associated fees are substantially the same),
which reflects the fact that both quotes and orders (and cancellations
or modification thereof) are ``messages'' included in the calculation
as well as the fact that Pillar can accommodate more message traffic
than the Exchange's pre-Pillar system.\9\ The
[[Page 51922]]
proposed EBUF thresholds are set at levels that an OTP Holder should
not hit or exceed in the ordinary course of trading. As such, the
Exchange believes that the proposed EBUF thresholds and associated fees
are set at levels reasonable designed to encourage OTP Holders to
efficiently use message traffic as necessary.
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\9\ For example, the current Ratio Threshold Fee has minimum
``order to execution'' ratio thresholds of between 10,000 and 14,999
to 1, with an accompanying fee of $5,000; between 15,000 and 19,999
to 1, with an accompanying fee of $10,000; between 20,000 and 24,999
to 1, with an accompanying fee of $20,000; and 25,000 to 1 and
greater, with an accompanying fee of $35,000.
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In addition, like the Ratio Threshold Fee, the Exchange will not
assess the EBUF for an OTP Holder's first occurrence in a rolling
twelve-month period (the ``Exemption'').\10\ For example, an OTP Holder
that exceeds the minimum EBUF threshold in October 2024 will not be
assessed the EBUF as long as that OTP Holder does not exceed the
minimum EBUF threshold again before October 2025. If that same OTP
Holder exceeds the minimum EBUF threshold in December 2025, it will not
incur the EBUF if it does not exceed the minimum EBUF before December
2026. As noted above, an OTP Holder should not exceed the EBUF in its
normal course of trading. Therefore, the proposed Exemption acts as a
guardrail of sorts that is designed to protect OTP Holders from
incurring the EBUF when they first encounter lower than expected
executions in a rolling twelve-month period, such as when they are new
to the Pillar 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 EBUF.
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\10\ Compare Endnote 12 to the Fee Schedule with the proposed
Fee Schedule, Monthly Excessive Bandwidth Utilization Fee.
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Further, consistent with the application of the Ratio Threshold
Fee, the Exchange will likewise retain discretion to exclude one or
more days of data for purposes of calculating the proposed EBUF if the
Exchange determines, in its sole discretion, that one or more OTP
Holders or the Exchange was experiencing a bona fide systems problem.
In connection with the proposed EBUF (and associated removal of the
Ratio Threshold Fee), the Exchange proposes to delete the Ratio
Threshold Fee and the now-expired waiver of this fee.\11\
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\11\ See proposed Fee Schedule, Monthly Excessive Bandwidth
Utilization Fee. The Exchange notes that it proposes to delete the
text of Endnote 12 regarding how the Ratio Threshold Fee is
calculated and will hold Endnote 12 in Reserve. See id., Endnote 12.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\12\ in general, and furthers the
objectives of Sections 6(b)(4) and (5) of the Act,\13\ 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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\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange believes that the proposed EBUF is reasonable,
equitable, and not unfairly discriminatory because it is designed to
strike the right balance between deterring OTP Holders from submitting
an excessive number of messages that do not result in an execution (or
improve market quality) without discouraging OTP Holders from accessing
the Exchange. To the extent that the proposed EBUF results in the
efficient use of the Exchange's finite resources, all market
participant stand to benefit from improved market quality.
The Exchange believes that the proposed minimum EBUF thresholds,
which are higher than the thresholds associated with the Ratio
Threshold Fee (but carry roughly the same incremental fees), are
reasonable because, unlike the Ratio Threshold Fee, the proposed EBUF
counts a broader category of ``message,'' including quotes, orders,
order cancellations, and modifications. Therefore, the Exchange
believes the EBUF appropriately accounts for the significantly wider
category of ``messages'' now included and accounts for the increased
capacity available to Exchange participants on the Pillar trading
system. Given that the proposed EBUF is meant to operate as a guardrail
of sorts that an OTP Holder should not ``hit'' or exceed in the
ordinary course of trading, the Exchange proposes to set the EBUF
thresholds at levels reasonably designed to encourage OTP Holders to
efficiently use message traffic as necessary.
The Exchange believes that the proposed Exemption is reasonable,
equitable, and not unfairly discriminatory because is designed to
protect OTP Holders from incurring the EBUF when they first encounter
lower than expected executions in a rolling twelve-month period, such
as when they are new to the Pillar 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 EBUF. The Exchange
believes the proposed Exemption is reasonable as it is intended to
lessen the initial impact of the EBUF while affording OTP Holders an
opportunity to moderate or fine tune their message rates as needed
once- every-twelve-months.
The proposed EBUF is a reasonable, equitable, and not unfairly
discriminatory because it neither targets nor will it have a disparate
impact on any category of market participant. The proposed EBUF would
impact all similarly situated OTP Holders on an equal basis; all OTP
Holders would be eligible for the Exemption the first time they incur
the EBUF in a rolling 12-month period.
The Exchange believes that the removal of the obsolete text from
the Fee Schedule (regarding the Ratio Threshold Fee and associated
stale waiver language) would further the protection of investors and
the public interest by promoting clarity and transparency in Fee
Schedule thereby making the Fee Schedule easier to navigate and
understand.
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.
Intramarket Competition. The Exchange believes the proposed EBUF,
including the Exemption, would not place an unfair burden on
intramarket competition because it is designed to encourage efficient
and rational use of the Exchange's finite resources and would apply to
all market participants.
The deletion of the language relating to the Ratio Threshold Fee
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.
Intermarket Competition. The Exchange believes the proposed EBUF,
including the Exemption, would not place an unfair burden on
intermarket competition as it is not intended to address any
competitive issues but is instead designed solely to encourage the
efficient use of the Exchange's
[[Page 51923]]
resources. The Exchange believes that the proposed EBUF should deter
excessive message traffic that does not improve market quality which,
in turn, will sustain the Exchange's overall competitiveness.
The proposed deletion of text related to the Ratio Threshold Fee
would add clarity to the Fee Schedule by removing obsolete pricing and,
accordingly, would not have any impact on intermarket competition.
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:
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#2153544d440c424e4c4c444f5552615244420f464e57"><span class="__cf_email__" data-cfemail="681a1d040d450b0705050d061c1b281b0d0b460f071e">[email protected]</span></a>. Please include
file number SR-NYSEARCA-2024-55 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-2024-55. 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-2024-55 and should
be submitted on or before July 11, 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. 2024-13419 Filed 6-18-24; 8:45 am]
BILLING CODE 8011-01-P
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