[Federal Register Volume 88, Number 230 (Friday, December 1, 2023)]
[Notices]
[Pages 84030-84033]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-26384]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99021; File No. SR-NYSEARCA-2023-80]


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

November 27, 2023.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934

[[Page 84031]]

(``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that, on November 15, 2023, 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 the Firm and Broker Dealer Monthly Fee 
Cap. The Exchange proposes to implement the fee change effective 
November 15, 2023.\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 
October 31, 2023 (SR-NYSEARCA-2023-75) and withdrew such filing on 
November 15, 2023.
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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 Firm and Broker Dealer 
Monthly Fee Cap (the ``Monthly Fee Cap''). The Exchange proposes to 
implement the rule change on November 15, 2023.
    The Exchange proposes to modify the Monthly Fee Cap, which 
currently provides that combined Firm proprietary fees and Broker 
Dealer fees for transactions in standard option contracts cleared in 
the customer range for Manual executions and QCC transactions are 
capped at $200,000 per month.\5\
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    \5\ See Fee Schedule, NYSE Arca OPTIONS: TRADE-RELATED CHARGES 
FOR STANDARD OPTIONS, FIRM AND BROKER DEALER MONTHLY FEE CAP.
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    The Exchange proposes to raise the Monthly Fee Cap to $250,000 per 
month. Accordingly, the Exchange proposes to modify the Fee Schedule to 
replace $200,000 with $250,000 in the description of the Monthly Fee 
Cap. Strategy executions, royalty fees, and firm trades executed via a 
Joint Back Office agreement will continue to be excluded from fees to 
which the Monthly Fee Cap would apply. Once a Firm or Broker Dealer has 
reached the Monthly Fee Cap, an incremental service fee of $0.01 per 
contract for Firm or Broker Dealer Manual transactions will continue to 
apply, except for the execution of a QCC order.
    The Exchange also proposes non-substantive clarifying changes to 
the description of the Monthly Fee Cap to identify the fees included in 
the Monthly Fee Cap more precisely. The proposed changes are not 
intended to modify any fees eligible for the Monthly Fee Cap, but 
rather to improve the clarity of the Fee Schedule.
    The Exchange believes that the proposed change, despite increasing 
the amount of the Monthly Fee Cap, would continue to incent Firms and 
Broker Dealers to direct order flow to the Exchange to receive the 
benefits of a fee cap on Manual and QCC transactions.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\6\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\7\ 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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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(4) and (5).
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The Proposed Rule Change Is Reasonable
    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.'' \8\
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    \8\ 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.\9\ Therefore, no exchange possesses significant pricing power 
in the execution of multiply-listed equity and ETF options order flow. 
More specifically, in September 2023, the Exchange had less than 12% 
market share of executed volume of multiply-listed equity and ETF 
options trades.\10\
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    \9\ 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/Market-Data-Reports/Volume-and-Open-Interest/Monthly-Weekly-Volume-Statistics.
    \10\ 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 Exchange's market share in equity-based options 
increased from 10.84% for the month of September 2022 to 11.48% for 
the month of September 2023.
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    The Exchange believes that the ever-shifting market share among the 
exchanges from month to month demonstrates that market participants can 
shift order flow, or discontinue or reduce use of certain categories of 
products, in response to fee changes. Accordingly, competitive forces 
constrain options exchange transaction fees. Stated otherwise, 
modifications to exchange transaction fees can have a direct effect on 
the ability of an exchange to compete for order flow.
    The proposed increase to the Monthly Fee Cap is reasonable because 
the Exchange believes the fee cap, although higher, would continue to 
incent Firms and Broker Dealers to direct order flow to the Exchange to 
receive the benefits of capped fees. The Exchange also believes the 
proposed change is reasonable because the proposed fee cap amount would 
be applicable to all Firms and Broker Dealers. In addition, although 
the proposed change would raise the amount of the Monthly Fee Cap, it 
would continue to offer Firms and Broker Dealers the opportunity to 
qualify for capped fees on Manual and QCC transactions, which the 
Exchange believes provides Firms and Broker

[[Page 84032]]

Dealers with a benefit not offered by at least one other options 
exchange.\11\
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    \11\ See, e.g., BOX Options Fee Schedule, available at: https://boxoptions.com/fee-schedule/ (no cap on Firm and Broker Dealer 
manual or QCC transaction fees).
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    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 
17 options exchanges. Thus, OTP Holders have a choice of where they 
direct their order flow, including their Manual and QCC transactions. 
The proposed rule change is designed to continue to incent OTP Holders 
to direct liquidity and, in particular, Firm and Broker Dealer 
transactions to the Exchange. In addition, to the extent OTP Holders 
are incentivized to aggregate their trading activity at the Exchange, 
that increased liquidity could promote market depth, price discovery 
and improvement, and enhanced order execution opportunities for market 
participants.
The Proposed Rule Change Is an Equitable Allocation of Credits and Fees
    The Exchange believes the proposed rule change is an equitable 
allocation of its fees and credits because the proposal is based on the 
amount and type of business transacted on the Exchange. The Exchange 
believes that the proposed modification of the Monthly Fee Cap is 
equitable because it would apply to all Firms and Broker Dealers 
equally and would continue to provide for the same fee cap amount for 
all Firms and Broker Dealers. The Exchange also believes that the 
proposed rule change is equitable with respect to non-Firm and non-
Broker Dealer market participants because the Monthly Fee Cap would not 
be meaningful for Customers or Professional Customers (neither of whom 
pay transaction charges for Manual transactions or QCC transactions) 
and because Market Makers are offered other incentives to reduce 
transaction fees.\12\ To the extent the proposed change achieves its 
purpose in continuing to incent Firms and Broker Dealers to aggregate 
their executions at the Exchange as a primary execution venue and does 
not discourage Firms and Broker Dealers from continuing to direct order 
flow to the Exchange to achieve the benefits of capped fees, this 
increased order flow would continue to make the Exchange a more 
competitive venue for, among other things, order execution, and all 
market participants would benefit from enhanced opportunities for price 
improvement and order execution. Thus, the Exchange believes the 
proposed rule change would improve market quality for all market 
participants on the Exchange and, as a consequence, attract more order 
flow to the Exchange, thereby improving market-wide quality and price 
discovery.
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    \12\ See generally Fee Schedule (various incentives available to 
Market Makers for posted monthly volume, including on executions in 
penny issues, non-penny issues, and SPY).
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The Proposed Rule Change Is Not Unfairly Discriminatory
    The Exchange believes that the proposed change to the Monthly Fee 
Cap is not unfairly discriminatory because the fee cap, as proposed, 
would continue to be available to all similarly situated Firms and 
Broker Dealers, any of which could continue to be incented to direct 
order flow to the Exchange to qualify for the fee cap. Moreover, the 
proposed change to the Monthly Fee Cap is not unfairly discriminatory 
because it would continue to apply the same fee cap amount to all Firms 
and Broker Dealers. The Exchange notes that offering the Monthly Fee 
Cap to Firms and Broker Dealers but not other market participants is 
not unfairly discriminatory because the Monthly Fee Cap would not be 
meaningful for Customers or Professional Customers because neither 
Customers nor Professional Customers pay transaction charges for Manual 
transactions or QCC transactions and is not unfairly discriminatory 
towards Market Makers, as Market Makers have alternative avenues to 
reduce transaction fees.\13\
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    \13\ See id.
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    To the extent that the proposed change continues to attract Manual 
and QCC transactions to the Exchange, this increased order flow would 
continue to make the Exchange a more competitive venue for order 
execution. Thus, the Exchange believes the proposed rule change would 
improve market quality for all market participants on the Exchange and, 
as a consequence, attract more order flow to the Exchange, thereby 
improving market-wide quality and price discovery. The resulting 
increased volume and liquidity would provide more trading opportunities 
and tighter spreads to all market participants and thus would promote 
just and equitable principles of trade, remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system and, in general, protect investors and the public interest.
    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 change 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 of individual stocks for all types of 
orders, large and small.'' \14\
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    \14\ See Reg NMS Adopting Release, supra note 8, at 37499.
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    Intramarket Competition. The proposed change is designed to 
continue to attract order flow to the Exchange, which could increase 
the volumes of contracts traded on the Exchange. Greater liquidity 
benefits all market participants on the Exchange, and the Exchange 
believes that the proposed change (even though it would raise the 
amount of the fee cap) would not impose any burden on competition that 
is not necessary or appropriate because it is intended to continue to 
incentivize Firms and Broker Dealers to direct order flow to the 
Exchange to be eligible for the benefits of capped fees on Manual and 
QCC transactions, thereby promoting liquidity on the Exchange to the 
benefit of all market participants.
    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

[[Page 84033]]

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 
and ETF options order flow. More specifically, in September 2023, the 
Exchange had less than 12% 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: https://www.theocc.com/Market-Data/Market-Data-Reports/Volume-and-Open-Interest/Monthly-Weekly-Volume-Statistics.
    \16\ 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 Exchange's market share in equity-based options 
increased from 10.84% for the month of September 2022 to 11.48% for 
the month of September 2023.
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    The Exchange believes that the proposed change reflects this 
competitive environment because it modifies the Exchange's fees in a 
manner designed to continue to incent OTP Holders to direct trading 
interest (particularly Firm and Broker Dealer Manual and QCC 
transactions) to the Exchange, to provide liquidity and to attract 
order flow. To the extent that Firms and Broker Dealers are 
incentivized to utilize the Exchange as a primary trading venue for all 
transactions, all the Exchange's market participants should benefit 
from the improved market quality and increased trading opportunities.
    The Exchange further believes that the proposed change could 
promote competition between the Exchange and other execution venues, 
including those that do not offer a cap on Firm and Broker Dealer 
fees,\17\ by encouraging additional orders to be sent to the Exchange 
for execution. In such an environment, the Exchange must continually 
review, and consider adjusting, its fees and credits to remain 
competitive with other exchanges.
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    \17\ See note 11, supra.
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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) \18\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \19\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \18\ 15 U.S.C. 78s(b)(3)(A).
    \19\ 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) \20\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \20\ 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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-NYSEARCA-2023-80 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-2023-80. 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 (https://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 
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-2023-80 and should 
be submitted on or before December 22, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Christina Z. Milnor,
Assistant Secretary.
[FR Doc. 2023-26384 Filed 11-30-23; 8:45 am]
BILLING CODE 8011-01-P