[Federal Register Volume 85, Number 204 (Wednesday, October 21, 2020)]
[Notices]
[Pages 67032-67034]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-23253]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90191; File No. SR-NYSEArca-2020-90]


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

October 15, 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 October 8, 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 extend the waiver of certain Floor-based fixed 
fees. The Exchange proposes to implement the fee change effective 
October 8, 2020.\4\ 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.
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    \4\ The Exchange originally filed to amend the Fee Schedule on 
September 24, 2020. (SR-NYSEArca-2020-86) and withdrew such filing 
on October 8, 2020.
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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 modify the Fee Schedule to extend 
the waiver of certain Floor-based fixed fees for market participants 
that have been unable to resume their Floor operations to a certain 
capacity level, as discussed below. The Exchange proposes to implement 
the fee change effective October 8, 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 and May 2020.\5\ 
Although the Trading Floor partially reopened on May 4, 2020 and Floor-
based open outcry activity is supported, certain participants have been 
unable to resume pre-Floor closure levels of operations. As a result, 
the Exchange extended the fee waiver through June, July, August and 
September 2020, but only for Floor Broker firms that were unable to 
operate at more than 50% of their March 2020 on-Floor staffing levels 
and for Market Maker firms that have vacant or ``unmanned'' Podia for 
the entire month due to COVID-19 related considerations (the 
``Qualifying Firms'').\6\ Because the Trading Floor will continue to 
operate with reduced capacity, the Exchange proposes to extend the fee 
waiver for Qualifying Firms through the earlier of the first full month 
of a full reopening of the Trading Floor facilities to Floor personnel 
or December 2020.\7\ The Exchange also proposes to clarify that 
Qualifying Firms would include firms that began Floor operations after 
March 2020 that are unable to operate at more than 50% of their 
Exchange-approved on-Floor staffing levels.\8\
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    \5\ See Securities Exchange Act Release Nos. 88596 (April 8, 
2020), 85 FR 20796 (April 14, 2020) (SR-NYSEArca-2020-29); 88812 
(May 5, 2020), 85 FR 27787 (May 11, 2020) (SR-NYSEArca-2020-38).
    \6\ See Securities Exchange Act Release Nos. 89038 (June 10, 
2020), 85 FR 36447 (June 16, 2020) (SR-NYSEArca-2020-52); 89242 
(June 7, 2020), 85 FR 42037 (July 13, 2020) (SR-NYSEArca-2020-60); 
89480 (August 5, 2020), 85 FR 48591 (August 11, 2020) (SR-NYSEArca-
2020-69); 89694 (August 27, 2020), 85 FR 54608 (September 2, 2020) 
(SR-NYSEArca-2020-76). See also Fee Schedule, NYSE Arca OPTIONS: 
FLOOR and EQUIPMENT and CO-LOCATION FEES.
    \7\ See proposed Fee Schedule, NYSE Arca OPTIONS: FLOOR and 
EQUIPMENT and CO-LOCATION FEES.
    \8\ See id. The Exchange originally filed in September 2020 (see 
supra note 4) to make explicit the treatment of firms that began 
Floor operations after March 2020 and this change applies to firms 
that joined the Exchange on September 1st or thereafter.
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    Specifically, as with the prior fee waivers, the proposed fee 
waiver covers the following fixed fees for Qualifying Firms, 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.\9\
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    \9\ See id. Given the proposed changes to the preamble of this 
section to update the potential duration of the fee waiver, which 
includes a delineation of each fee waived, the Exchange proposes to 
delete (the now repetitive) references that appear (again) next to 
each fee waived for Qualifying Firms as well as to delete references 
to prior months (now concluded) regarding when the fee waivers were 
in place. See id.

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[[Page 67033]]

    The proposed fee change is designed to reduce monthly costs for all 
Qualifying Firms whose operations continue to be disrupted even though 
the Trading Floor has partially reopened. In reducing this monthly 
financial burden, the proposed change would allow Qualifying Firms that 
had Floor operations in March 2020 to reallocate funds to assist with 
the cost of shifting and maintaining their prior fully-staffed on-Floor 
operations to off-Floor and recoup losses as a result of the partial 
reopening. Absent this change, all Qualifying Firms may experience an 
unexpected increase in the cost of doing business on the Exchange.\10\ 
The Exchange believes that all Qualifying Firms would benefit from this 
proposed fee change.
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    \10\ The Exchange will refund participants of the Floor Broker 
Prepayment Program for any prepaid 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 Qualifying Firms as defined, and set forth in, NYSE Arca 
OPTIONS: FLOOR and EQUIPMENT and CO-LOCATION FEES'').
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\11\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\12\ 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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    \11\ 15 U.S.C. 78f(b).
    \12\ 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.'' \13\
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    \13\ 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.\14\ Therefore, currently no exchange possesses significant 
pricing power in the execution of multiply-listed equity & ETF options 
order flow. More specifically, in August 2020, the Exchange had 
slightly over 10% market share of executed volume of multiply-listed 
equity & ETF options trades.\15\
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    \14\ 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.
    \15\ Based on OCC data, see id., the Exchange's market share in 
equity-based options increased from 9.59% for the month of August 
2019 to 10.20% for the month of August 2020.
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    This proposed fee change is reasonable, equitable, and not unfairly 
discriminatory because it would reduce monthly costs for all Qualifying 
Firms whose operations have been disrupted despite the fact that the 
Trading Floor has partially reopened because of the social distancing 
requirements and/or other health concerns related to resuming operation 
on the Floor. In reducing this monthly financial burden, the proposed 
change would allow Qualifying Firms that had Floor operations in March 
2020 to reallocate funds to assist with the cost of shifting and 
maintaining their prior fully-staffed on-Floor operations to off-Floor 
and recoup losses as a result of the partial reopening of the Floor. 
Absent this change, all Qualifying Firms may experience an unexpected 
increase in the cost of doing business on the Exchange. The Exchange 
believes that all Qualifying Firms 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 previous 
fee waiver for Qualifying Firms, which affects fees charged only to 
Floor participants and does not apply to participants that conduct 
business off-Floor. The Exchange believes it is an equitable allocation 
of fees and credits to extend the fee waiver for Qualifying Firms 
because such firms have either no more than half of their Floor staff 
(as measured by either the March 2020 or Exchange-approved) levels or 
have vacant podia--and this reduction in staffing levels on the Floor 
impacts the speed, volume and efficiency with which these firms can 
operate, which is to their financial detriment.
    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.
    The Exchange believes that it is reasonable to clarify that firms 
that began Floor operations on the Exchange after March 2020 would be 
included as ``Qualifying Firms'' if such firms are unable to operate at 
more than 50% of their Exchange-approved on-Floor staffing levels as 
such treatment places all firms on a level playing field and avoids 
placing ``newer'' Qualifying Firms at a financial disadvantage. The 
Exchange believes that this proposed change would add clarity and 
transparency and reduce the potential for confusion in the Fee Schedule 
as relates to the treatment new Floor participants.
    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 Qualifying Firms, 
thereby promoting market depth, price discovery and transparency and 
would enhance 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.'' \16\
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    \16\ See Reg NMS Adopting Release, supra note 13, at 37499.
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    Intramarket Competition. The proposed change, which continues the 
fee waiver for all Qualifying Firms, is designed to reduce monthly 
costs for those Floor participants whose operations continue to be 
impacted even though the Trading Floor has partially reopened. In 
reducing this monthly financial burden, the proposed change would allow 
Qualifying Firms that had Floor operations in March 2020 to reallocate 
funds to assist with the cost of shifting and maintaining their 
previously on-Floor operations to off-Floor. Absent this change, all 
Qualifying Firms may experience an unintended increase in the cost of 
doing business on

[[Page 67034]]

the Exchange, given that the Floor has only reopened in a limited 
capacity. The Exchange believes that the proposed waiver of fees for 
Qualifying Firms 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. In 
addition, Floor-based firms that are not subject to the extent of 
staffing shortfalls as are Qualifying Firms, i.e., such firms have more 
than 50% of their March 2020--or Exchange-approved--staffing levels on 
the Floor and/or have no vacant Podia during the month, do not face the 
same operational disruption and potential financial impact during the 
partial reopening of the Floor.
    Intermarket Competition. The Exchange operates in a highly 
competitive market in which market participants can readily favor one 
of the 16 competing option exchanges if they deem fee levels at a 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.\17\ Therefore, currently 
no exchange possesses significant pricing power in the execution of 
multiply-listed equity & ETF options order flow. More specifically, in 
August 2020, the Exchange had slightly over 10% market share of 
executed volume of multiply-listed equity & ETF options trades.\18\
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    \17\ See supra note 14.
    \18\ Based on OCC data, supra note 15, the Exchange's market 
share in equity-based options was the Exchange's market share in 
equity-based options increased from 9.59% for the month of August 
2019 to 10.20% for the month of August 2020.
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    The Exchange believes that the proposed rule change reflects this 
competitive environment because it waives fees for Qualifying Firms and 
is designed to reduce monthly costs for Floor participants whose 
operations continue to be disrupted even though the Trading Floor has 
partially reopened. 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 prior fully 
staffed on-Floor operations to off-Floor. Absent this change, 
Qualifying Firms 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) \19\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \20\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \19\ 15 U.S.C. 78s(b)(3)(A).
    \20\ 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) \21\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \21\ 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-2020-90 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-2020-90. 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-2020-90, and should be 
submitted on or before November 12, 2020.
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    \22\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-23253 Filed 10-20-20; 8:45 am]
BILLING CODE 8011-01-P