Notice2024-21283
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend 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
September 19, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 182 (Thursday, September 19, 2024)</title>
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[Federal Register Volume 89, Number 182 (Thursday, September 19, 2024)]
[Notices]
[Pages 76906-76908]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-21283]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-101019; File No. SR-NYSEARCA-2024-72]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend the NYSE
Arca Options Fee Schedule
September 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 August 30, 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'') regarding certain transaction fees. The Exchange
proposes to implement the fee change effective August 30, 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 August 1, 2024, the Exchange filed to amend the Fee
Schedule (NYSEARCA-2024-63) and withdrew such filing on August 15,
2024 (SR-NYSEArca-2024-68), which latter filing the Exchange
withdrew on August 30, 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
certain transaction fees. The Exchange proposes to implement the fee
change effective August 30, 2024.
Currently, the Exchange assesses a fee for orders executed by
taking liquidity from the disseminated market (``Take Liquidity Fee,''
or ``Take Fee''). For non-Customers and Professional Customers, the
Exchange currently charges a per contract Take Fee of $1.10 for
executions in non-Penny issues (the ``non-Penny Take Fee'').\5\ The
Exchange proposes to increase the non-Penny Take Fee for non-Customers
to $1.20 per contract,\6\ which is within the range of fees charged by
competing option exchanges.\7\ The Exchange believes that, despite this
proposed increase, its pricing structure will remain attractive because
the Exchange will continue to offer discounts on non-Penny Take Fees to
non-Customers that meet certain minimum monthly volume qualifications
in average electronic executions per day.\8\
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\5\ For purposes of this fee filing, ``non-Customers'' include:
Lead Market Makers, NYSE Arca Market Makers, and Firm and Broker
Dealers. The Exchange notes that this definition of ``non-
Customers'' does not include Professional Customers.
\6\ See proposed Fee Schedule, TRANSACTION FEE FOR ELECTRONIC
EXECUTIONS--PER CONTRACT (increasing the non-Penny Take Fee for non-
Customer from $1.10 to $1.20). The Exchange notes that Professional
Customers are not impacted by this proposal and will continue to be
assessed a non-Penny Take Fee of $1.10. See id. Also not impacted by
this proposal are the per contract Take Fees for executions in Penny
issues (the ``Penny Take Fee''), which Penny Take Fee will continue
to be $0.50 for both non-Customers and Professional Customers and
$0.49 for Customers. See id.
\7\ See, e.g., the Nasdaq Options Market LLC (``NOM'') Pricing
Schedule at Options 7, Section 2(1), available at: <a href="https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/nasdaq-options-7">https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/nasdaq-options-7</a>
(assessing per contract Take Fees in non-Penny issues of $1.25 for
non-Customers and $0.85 for both Professionals and Customers); and
Nasdaq BX, Pricing Schedule at Options 7, Section 2(1), available
at: <a href="https://listingcenter.nasdaq.com/rulebook/bx/rules/bx-options-7">https://listingcenter.nasdaq.com/rulebook/bx/rules/bx-options-7</a>
(assessing per contract Take Fees in non-Penny issues of $1.25 for
non-Customers, including Professionals, and $0.85 [sic] for
Customers).
\8\ The qualifying volume for Take Fee discounts applies to
executions in all issues (Penny and non-Penny) of liquidity taking
interest or a combination of liquidity taking and liquidity adding
(i.e., posted) interest on behalf of Professional Customers and Non-
Customer execution. See, e.g., Fee Schedule, Take Fee Discount
Qualification for Non-Penny Issues (providing a ($0.02) per contract
Take Fee discount to OTP Holders (including non-Customers and
Professional Customers) that execute ``[a]t least 0.65% of TCADV
from Professional Customer and Non-Customer Liquidity Removing
interest in all issues, plus at least 0.15% of TCADV from posted
interest in all issues and all account types''; or ``[a]t least
1.50% of TCADV from Professional Customer and Non-Customer Liquidity
Removing interest in all issues''). The TCADV (or Total Industry
Customer equity and ETF option average daily volume) includes OCC
calculated Customer volume of all types, including Complex Order
Transactions and QCC transactions, in equity and ETF options. See
Fee Schedule, Endnote 8.
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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
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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 proposed changes to the Fee Schedule are reasonable, equitable,
and not unfairly discriminatory. As a threshold matter, the Exchange is
subject to significant competitive forces in the market for options
securities transaction services that constrain its pricing
determinations in that 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.'' \11\
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\11\ 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.\12\ Therefore, currently no exchange possesses significant
pricing power in the execution of multiply-listed equity & ETF options
order flow. More specifically, in June of 2024, the Exchange had 14.19%
market share of executed volume of multiply-listed equity & ETF options
trades.\13\ In such a low-concentrated and highly competitive market,
no single options exchange possesses significant pricing power in the
execution of option order flow. Within this environment, market
participants can freely and often do shift their order flow among the
Exchange and competing venues in response to changes in their
respective pricing schedules. As such, the proposal represents a
reasonable attempt by the Exchange to remain competitive despite
increasing its non-Penny Take Fee for non-Customers.
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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 Exchanges market share in equity-based options
increased from 12.23% for the month of June 2023 to 14.19% for the
month of June 2024.
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The Exchange believes that the proposed increase to its non-Penny
Take Fee for non-Customers is reasonable, equitable, and not unfairly
discriminatory because it is within the range of fees charged by
competing option exchanges.\14\ Moreover, the proposed non-Penny Take
Fee increase will continue to be offset by Take Fee discounts that are
intended to improve overall market quality on the Exchange by
incentivizing market participants to bring additional order flow and,
in turn, provide more trading opportunities to the benefit of all
market participants.\15\
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\14\ See supra note 7.
\15\ See supra note 8 (regarding the potential ($0.02) per
contract non-Penny Take Fee discount available to non-Customers (and
Professional Customers) that meet certain minimum volume
thresholds).
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The proposed fee change is equitable and not unfairly
discriminatory because it will apply uniformly to all similarly-
situated participants. Specifically, non-Customers will be subject to
the increased non-Penny Take Fee (from $1.10 to $1.20 per contract)
while both Professional Customers and Customers will continue to pay
$1.10 and $0.85 per contract, respectively. Although the proposed fee
increase applies solely to non-Customers, the Exchange notes that
resulting fees are in line with or below the fees charged by other
options exchanges.\16\ As such, to the extent that the Exchange offers
more favorable pricing on non-Customer order flow than competing
options venues, OTP Holders may direct their order flow to the
Exchange, which promotes competition. Furthermore, the Exchange
believes that the increased fees would generate additional revenue to
offset operational costs and would facilitate the provision of the
existing volume-based rebates (described herein).\17\
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\16\ See supra note 7.
\17\ See supra note 8 (regarding the potential ($0.02) per
contract non-Penny Take Fee discount available to non-Customers (and
Professional Customers) that meet certain minimum volume
thresholds).
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The Exchange believes that maintaining the non-Penny Take Fee for
Professional Customers (and Customers) at the current rate is equitable
and not unfairly discriminatory. Professional Customers are a different
type of market participant than non-Customers Firm, Broker Dealers and
Market Makers. Specifically, Professional Customers are not brokers or
dealers in securities; they are persons (or entities) that place more
than 390 orders per day on average for their own beneficial
account.\18\ Per the Fee Schedule, Professional Customers are treated
as Customers unless otherwise specified.\19\ As proposed, the rate
differential between Professional Customers and Customers remains same
and continues to be is in line with or below the fees charged by other
options exchanges.\20\ The Exchange believes this proposal is equitable
because, although the non-Penny Take Fee for Professional Customers
will be lower than for non-Customers, it will enable the Exchange to
remain competitive while continuing to encourage OTP Holders to direct
additional Professional Customer order flow to the Exchange.\21\
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\18\ See Rule 1.1 (Customer and Professional Customer).
\19\ See Fee Schedule, TRANSACTION FEE FOR ELECTRONIC
EXECUTIONS--PER CONTRACT (per the preamble to this section,
``[u]nless Professional Customer executions are specifically
delineated, such executions will be treated as `Customer' executions
for fee/credit purposes'').
\20\ See supra note 7.
\21\ See id.
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Finally, the Exchange has historically provided more favorable
pricing to Customers. Customer liquidity benefits all market
participants by providing more trading opportunities, which attracts
Market Makers. An increase in the activity of these market participants
in turn facilitates tighter spreads, which may cause an additional
corresponding increase in order flow from other market participants. As
such, the Exchange believes that maintaining the non-Penny Take Fee for
Customers is consistent with the Act, which rate is within the range of
fees charged by competing option exchanges.\22\
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\22\ See id.
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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.
In terms of intra-market competition, as discussed herein, the
Exchange does not believe that its proposal will place any category of
market participant at a competitive disadvantage because it will apply
uniformly to all similarly-situated participants (i.e., non-Customers).
Although the fee change results in non-Customers paying a higher non-
Penny Take Fee than Professional Customers (and Customers), the
resulting fees are commensurate with the fees assessed on these market
participants on competing options exchanges. Professional Customers are
a different type of market participant than non-Customers as they are
not brokers or dealers in securities; rather they are persons (or
entities) that place more than 390 orders per day on average for their
own beneficial account. As such, the Exchange believes the
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changes, taken together with existing discounts, will continue to
encourage trading activity on the Exchange.
In terms of inter-market competition, the Exchange notes that it
operates in a highly competitive market in which market participants
can readily favor competing venues if they deem fee levels at a
particular venue to be excessive, or rebate opportunities available at
other venues to be more favorable. In such an environment, the Exchange
must continually adjust its fees to remain competitive with other
exchanges. Because competitors are free to modify their own fees in
response, and because market participants may readily adjust their
order routing practices, the Exchange believes that the degree to which
fee changes in this market may impose any burden on competition is
extremely limited. As noted herein, the proposed fee change is
competitive as it is within the range of fees charged by competing
option exchanges.\23\ If the changes proposed herein are unattractive
to market participants, it is likely that the Exchange will lose market
share as a result. Accordingly, the Exchange does not believe that the
proposed changes will impair the ability of members or competing order
execution venues to maintain their competitive standing in the
financial markets.
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\23\ See 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) \24\ of the Act and subparagraph (f)(2) of Rule
19b-4 \25\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\24\ 15 U.S.C. 78s(b)(3)(A).
\25\ 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) \26\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\26\ 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#7d0f081118501e1210101813090e3d0e181e531a120b"><span class="__cf_email__" data-cfemail="6d1f180108400e0200000803191e2d1e080e430a021b">[email protected]</span></a>. Please include
file number SR-NYSEARCA-2024-72 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-2024-72. 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-2024-72 and should
be submitted on or before October 10, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\27\
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\27\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-21283 Filed 9-18-24; 8:45 am]
BILLING CODE 8011-01-P
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