[Federal Register Volume 85, Number 91 (Monday, May 11, 2020)]
[Notices]
[Pages 27787-27789]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-09956]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88812; File No. SR-NYSEArca-2020-38]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Modify the NYSE 
Arca Options Fee Schedule

May 5, 2020.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on April 29, 2020, 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, II, 
and III 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'') to waive certain Floor-based fixed fees for the 
month of May 2020. The Exchange proposes to implement the fee change 
effective April 29, 2020. The proposed rule change is available on the 
Exchange's website at www.nyse.com, 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this filing is to modify the Fee Schedule to waive 
certain Floor-based fixed fees for the month of May 2020. The Exchange 
proposes to implement the fee change effective April 29, 2020.
    On March 18, 2020, the Exchange announced that it would temporarily 
close the Trading Floor, effective Monday, March 23, 2020, as a 
precautionary measure to prevent the potential spread of COVID-19. 
Following the temporary closure of the Trading Floor, the Exchange 
waived certain Floor-based fixed fees for April

[[Page 27788]]

2020 (the ``fee waiver'').\4\ Although the Trading Floor will be 
partially reopened on May 4, 2020 and normal open outcry activity will 
be supported, because the Trading Floors remained closed for a longer 
period than expected--including seven business days in March, and will 
continue to operate with reduced capacity, the Exchange proposes to 
extend the fee waiver through May 2020.
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    \4\ See Securities Exchange Act Release No. 88596 (April 8, 
2020), 85 FR 20796 (April 14, 2020) (SR-NYSEArca-2020-29). See Fee 
Schedule, NYSE Arca OPTIONS: FLOOR and EQUIPMENT and CO-LOCATION 
FEES.
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    Specifically, the fee waiver covers the following fixed fees, which 
relate directly to Floor operations, are charged only to Floor 
participants and do not apply to participants that conduct business 
off-Floor:
     Floor Booths;
     Market Maker Podia;
     Options Floor Access;
     Wire Services; and
     ISP Connection.\5\
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    \5\ See proposed Fee Schedule, NYSE Arca OPTIONS: FLOOR and 
EQUIPMENT and CO-LOCATION FEES.
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    This proposed extension of the fee waiver would reduce monthly 
costs for Floor participants whose operations have been disrupted by 
the unanticipated Floor closure for more than a month. In reducing this 
monthly financial burden, the proposed change would allow affected 
participants to reallocate funds to assist with the cost of shifting 
and maintaining their previously on-Floor operations to off-Floor and 
recoup losses as a result of the unanticipated Floor closure. Absent 
this change, such participants may experience an unexpected increase in 
the cost of doing business on the Exchange.\6\
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    \6\ The Exchange will refund participants of the Floor Broker 
Prepayment Program for any prepaid May 2020 fees that are waived. 
See proposed Fee Schedule, FLOOR BROKER FIXED COST PREPAYMENT 
INCENTIVE PROGRAM (the ``FB Prepay Program'') (providing that ``the 
Exchange will refund certain of the prepaid Eligible Fixed costs 
that were waived for April 2020, per NYSE Arca OPTIONS: FLOOR and 
EQUIPMENT and CO-LOCATION FEES'').
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    The Exchange believes that all OTP Holders that conduct business on 
the Trading Floor would benefit from this proposed fee change.
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 operates in a highly competitive 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.'' \9\
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    \9\ 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 16 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.\10\ Therefore, currently no exchange possesses significant 
pricing power in the execution of multiply-listed equity & ETF options 
order flow. More specifically, in January 2020, the Exchange had less 
than 10% market share of executed volume of multiply-listed equity & 
ETF options trades.\11\
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    \10\ The OCC publishes options and futures volume in a variety 
of formats, including daily and monthly volume by exchange, 
available here: https://www.theocc.com/market-data/volume/default.jsp.
    \11\ Based on OCC data, see id., in 2019, the Exchange's market 
share in equity-based options was 9.57% for the month of January 
2019 and 9.59% for the month of January 2020.
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    This proposed extension of the fee waiver is reasonable, equitable, 
and not unfairly discriminatory because it would reduce monthly costs 
for Floor participants whose operations have been disrupted by the 
unanticipated Floor closure for more than a month. In reducing this 
monthly financial burden, the proposed change would allow affected 
participants to reallocate funds to assist with the cost of shifting 
and maintaining their previously on-Floor operations to off-Floor and 
recoup losses as a result of the unanticipated Floor closure. Absent 
this change, such participants may experience an unexpected increase in 
the cost of doing business on the Exchange.
    The Exchange believes that all OTP Holders that conduct business on 
the Trading Floor would benefit from this proposed fee change.
    The Exchange believes the proposed rule change is an equitable 
allocation of its fees and credits as it merely continues the fee 
waiver, which impacts fees charged only to Floor participants and do 
not apply to participants that conduct business off-Floor.
    The Exchange believes that the proposal is not unfairly 
discriminatory because the proposed continuation of the fee waiver 
would affect all similarly-situated market participants on an equal and 
non-discriminatory basis.
    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. The Exchange believes that the proposed changes 
would encourage the continued participation of affected OTP Holders, 
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 of 
individual stocks for all types of orders, large and small.'' \12\
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    \12\ See Reg NMS Adopting Release, supra note 9, at 37499.
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    Intramarket Competition. The proposed continuation of the fee 
waiver is designed to reduce monthly costs for Floor participants whose 
operations have been disrupted by the unanticipated Floor closure. In 
reducing this monthly financial burden, the proposed change would allow 
affected participants to reallocate funds to assist with the cost of 
shifting and maintaining their previously on-Floor operations to off-
Floor. Absent this change, such participants may experience an 
unintended increase in the cost of doing business on the Exchange. The 
Exchange believes that the proposed waiver of fees would not impose a 
disparate burden on competition among market participants on the 
Exchange because off-Floor market participants are not subject to these 
Floor-based fixed fees.
    Intermarket Competition. The Exchange operates in a highly

[[Page 27789]]

competitive market in which market participants can readily favor one 
of the 16 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 currently has more than 16% of the market share of executed 
volume of multiply-listed equity and ETF options trades.\13\ Therefore, 
currently no exchange possesses significant pricing power in the 
execution of multiply-listed equity & ETF options order flow. More 
specifically, in January 2020, the Exchange had less than 10% market 
share of executed volume of multiply-listed equity & ETF options 
trades.\14\
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    \13\ See supra note 10.
    \14\ Based on OCC data, supra note 11, the Exchange's market 
share in equity-based options was 9.57% for the month of January 
2019 and 9.59% for the month of January, 2020.
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    The Exchange believes that the proposed rule change reflects this 
competitive environment because it continues the fee waiver, which is 
designed to reduce monthly costs for Floor participants whose 
operations have been disrupted by the unanticipated Floor closure. In 
reducing this monthly financial burden, the proposed change would allow 
affected participants to reallocate funds to assist with the cost of 
shifting and maintaining their previously on-Floor operations to off-
Floor. Absent this change, such participants may experience an 
unintended increase in the cost of doing business on the Exchange, 
which would make the Exchange a less competitive venue on which to 
trade as compared to other options exchanges.

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) \15\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \16\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 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) \17\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \17\ 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

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NYSEArca-2020-38 on the subject line.

Paper Comments

     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-2020-38. 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 (http://www.sec.gov/rules/sro.shtml). 
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 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NYSEArca-2020-38 and should be submitted 
on or before June 1, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-09956 Filed 5-8-20; 8:45 am]
 BILLING CODE 8011-01-P