Notice2024-30682
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
December 26, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 247 (Thursday, December 26, 2024)</title>
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[Federal Register Volume 89, Number 247 (Thursday, December 26, 2024)]
[Notices]
[Pages 105140-105142]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-30682]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-101962; File No. SR-NYSEARCA-2024-114]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Modify the NYSE
Arca Options Fee Schedule
December 18, 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 December 17, 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 transaction fees. The Exchange
proposes to implement the fee change effective December 17, 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.
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. Specifically, the Exchange proposes to adopt
pricing incentives to encourage trading in options on Exchange Traded
Funds that hold digital assets (``digital asset ETFs'') that are listed
on NYSE Arca Equities. The Exchange proposes to implement the fee
change effective December 17, 2024.\4\
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\4\ On December 2, 2024, the Exchange filed to amend the Fee
Schedule (NYSEARCA-2024-107) and withdrew such filing on December 3,
2024 (SR-NYSEARCA-2024-109), which latter filing the Exchange
withdrew on December 17, 2024.
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On November 22, 2024, the Exchange began trading options on the
following digital asset ETFs, each of which is listed on NYSE Arca
Equities: Grayscale Bitcoin Trust ETF (GBTC); Grayscale Bitcoin Mini
Trust ETF (BTC); and Bitwise Bitcoin ETF Trust (BITB).\5\ To
incentivize trading in these newly available options on digital asset
ETFs (as well as in other options series in digital asset ETFs that may
be listed on NYSE Arca Equities in the future), the Exchange proposes
to offer a per contract discount or credit, which may be combined with
other discounts or credits unless otherwise specified.
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\5\ See Trader Update, November 21, 2024 (announcing that on
November 22, 2024, the Exchange would begin listing and trading
options on GBTC, BTC, and BITB), available here, <a href="https://www.nyse.com/trader-update/history#110000945911">https://www.nyse.com/trader-update/history#110000945911</a>.
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Specifically, the Exchange proposes that executions in options on
NYSE Arca Equities-listed digital asset ETFs (excluding QCC
transactions) will
[[Page 105141]]
receive an additional discount of $0.05 per contract on electronic take
liquidity, manual, and electronic complex-to-complex executions or an
additional credit of $0.05 per contract on electronic post liquidity
executions.\6\ The Exchange proposes to exclude QCC transactions from
this proposal because QCC transactions are subject to separate fees and
credits.\7\ Similarly, the Exchange proposes that the already-
discounted executions in options on NYSE Arca Equities-listed digital
asset ETFs will not be included in the daily fee cap on strategy
executions (i.e., the Limit of Fee [sic] on Options Strategy
Executions) nor will they be included in calculations for or rebates
available through the Manual Billable Rebate Program.\8\
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\6\ See proposed Fee Schedule, Endnote 12, currently held as
``Reserved.'' The Exchange proposes to add reference to new Endnote
12 to reflect the transaction fee change in the applicable sections
of the Fee Schedule Fee. See, e.g., proposed Fee Schedule,
ELECTRONIC COMPLEX ORDER EXECUTIONS, TRANSACTION FEE--PER CONTRACT.
\7\ See Fee Schedule, QUALIFIED CONTINGENT CROSS (``QCC'')
TRANSACTION FEES AND CREDITS.
\8\ See proposed Endnote 12. The Exchange also proposes to
specify these exclusions in the applicable sections of the Fee
Schedule. See proposed Fee Schedule, LIMIT OF FEES ON OPTIONS
STRATEGY EXECUTIONS and FLOOR BROKER FIXED COST PREPAYMENT INCENTIVE
PROGRAM (the ``FB Prepay Program''). Consistent with the Fee
Schedule, manual executions of options on digital asset ETFs would
be subject to the Firm and Broker Dealer Monthly Fee Cap, including
the assessment of the incremental service fee of $0.01 per contract
once that Cap has been reached. See FIRM AND BROKER DEALER MONTHLY
FEE CAP (providing that, ``[o]nce a Firm or Broker Dealer has
reached the Firm and Broker Dealer Monthly Fee Cap, an incremental
service fee of $0.01 per contract for Firm or Broker Dealer Manual
transactions will apply . . . .'').
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Although the Exchange cannot predict with certainty whether any OTP
Holders would seek to trade digital asset ETF options, the Exchange
believes that the proposed change would incentivize OTP Holders to
submit these types of orders to the Exchange, which brings increased
liquidity and order flow for the benefit of all market participants.
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 proposed change 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 18 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 October of 2024, the Exchange had
12.55% 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.
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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 slightly from 12.19% for the month of October 2023 to
12.55% for the month of October 2024.
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The Exchange believes that the proposed discount/credit of five
cents per contract is reasonable because it is designed to encourage
liquidity in options classes on digital asset ETFs newly listed and
traded on the Exchange, thereby promoting market depth, price discovery
and improvement, and enhanced order execution opportunities to the
benefit of all market participants. Moreover, the proposal is designed
to encourage OTP Holders to utilize the Exchange as a primary trading
venue for options on digital asset ETFs.
The Exchange believes the proposed rule change is an equitable
allocation of its fees and credits and is not unfairly discriminatory
as it available equally to all similarly-situated market participants
on an equal and non-discriminatory basis.
To the extent the proposed change continues to attract greater
volume and liquidity, 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 Exchange's fees are constrained by intermarket
competition, as OTP Holders may direct their order flow to any of the
competing options exchanges that list and trade options on digital
asset ETFs.
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 changes 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
[[Page 105142]]
of individual stocks for all types of orders, large and small.'' \14\
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\14\ See Reg NMS Adopting Release, supra note 11, at 37499.
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Intramarket Competition. The proposed change is designed to
encourage market participants to execute options on digital asset ETFs
(and, in particular, those listed on NYSE Arca Equities) and to direct
such executions to the Exchange. The proposed pricing incentive will be
available equally to all similarly-situated market participants. As
such, the proposed change 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.\15\ Therefore, currently
no exchange possesses significant pricing power in the execution of
multiply-listed equity & ETF options order flow. More specifically, in
October 2024, the Exchange had 12.55% market share of executed volume
of multiply-listed equity and ETF options trades.\16\
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\15\ 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>.
\16\ Based on OCC data for monthly volume of equity-based
options and monthly volume of ETF-based options, see id., the
Exchanges market share in equity-based options increased slightly
from 12.19% for the month of October 2023 to 12.55% for the month of
October 2024.
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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 encourage market participants to direct trading
interest (particularly for options on digital assets ETFs) to the
Exchange. 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.
The Exchange believes that the proposed change could promote
competition between the Exchange and other execution venues, including
those that list and trade options on digital asset ETFs, by encouraging
additional orders to be sent to the Exchange for execution.
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) \17\ of the Act and subparagraph (f)(2) of Rule
19b-4 \18\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\17\ 15 U.S.C. 78s(b)(3)(A).
\18\ 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) \19\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\19\ 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#f082859c95dd939f9d9d959e8483b0839593de979f86"><span class="__cf_email__" data-cfemail="7103041d145c121e1c1c141f0502310214125f161e07">[email protected]</span></a>. Please include
file number SR-NYSEARCA-2024-114 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-2024-114. 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-2024-114 and should
be submitted on or before January 16, 2025.
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\20\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2024-30682 Filed 12-23-24; 8:45 am]
BILLING CODE 8011-01-P
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