[Federal Register Volume 89, Number 34 (Tuesday, February 20, 2024)]
[Notices]
[Pages 12917-12919]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-03337]



[[Page 12917]]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99532; File No. SR-NYSEARCA-2024-15]


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

February 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 February 12, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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 Limit of Fees on Options Strategy 
Executions. The Exchange proposes to implement the fee change effective 
February 12, 2024.\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.
---------------------------------------------------------------------------

    \4\ The Exchange originally filed to amend the Fee Schedule on 
February 1, 2024 (SR-NYSEArca-2024-14) and withdrew such filing on 
February 12, 2024.
---------------------------------------------------------------------------

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 
the Limit of Fees on Options Strategy Executions (the ``Strategy Cap'' 
or ``Cap''), effective February 12, 2024.
Background
    The Exchange first notes that it operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or incentives to be insufficient. More specifically, the 
Exchange is only one of 17 options venues to which market participants 
may direct their order flow. Based on publicly available information, 
no single options exchange has more than 16% of the market share of 
executed volume of multiply-listed equity and ETF options trades. 
Therefore, no exchange possesses significant pricing power in the 
execution of multiply-listed equity and ETF options order flow. More 
specifically, in December 2023, the Exchange had less than 13% market 
share of executed volume of multiply-listed equity and ETF options 
trades. Thus, in such a low-concentrated and highly competitive market, 
no single options exchange possesses significant pricing power in the 
execution of option order flow.
    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 use of certain categories of products, 
in response to fee changes. Accordingly, competitive forces constrain 
the Exchange's transaction fees, and market participants can readily 
trade on competing venues if they deem pricing levels at those other 
venues to be more favorable. In response to the competitive 
environment, the Exchange offers specific rates and credits in its Fees 
Schedule, as do other competing options exchanges, which the Exchange 
believes provide incentive to OTP Holder and OTP Firms (collectively, 
``OTP Holders'') to increase order flow of certain qualifying orders--
the Strategy Cap (as described below) is one such incentive.
Proposed Fee Change
    Currently, the Fee Schedule provides that transaction fees for OTP 
Holders are limited or capped at $1,000 for certain options strategy 
executions ``on the same trading day,'' meaning the Strategy Cap is a 
daily fee cap.\5\ Strategy executions that qualify for the Strategy Cap 
are (a) reversals and conversions, (b) box spreads, (c) short stock 
interest spreads, (d) merger spreads, (e) jelly rolls, and (f) 
dividends, which are described in detail in the Fee Schedule (the 
``Strategy Executions'').\6\ The Exchange also offers a lower daily 
Strategy Cap of $200 for OTP Holders that trade at least 25,000 monthly 
billable contract sides in Strategy Executions (the ``minimum billable 
sides requirement''). Thus, the Exchange caps the daily Strategy 
Execution fees at $200 for each day of the month (as opposed to $1,000 
for nonqualifying OTP Holders) for OTP Holders that meet the minimum 
billable sides requirement.
---------------------------------------------------------------------------

    \5\ See Fee Schedule, Limit of Fees on Options Strategy 
Executions, available here: https://www.nyse.com/publicdocs/nyse/markets/arcaoptions/NYSE_Arca_Options_Fee_Schedule.pdf.
    \6\ See id., Endnote 10 (describing each Strategy Execution).
---------------------------------------------------------------------------

    The Exchange proposes to reduce the Strategy Cap from $1,000 to 
$200 and to remove the minimum billable sides requirement to qualify 
for this lower $200 daily Cap. Put another way, the Exchange proposes 
to cap daily fees for Strategy Executions at $200 for each day of the 
month regardless of an OTP Holder's monthly billable volume in Strategy 
Executions.\7\
---------------------------------------------------------------------------

    \7\ See proposed Fee Schedule, Limit of Fees on Options Strategy 
Executions.
---------------------------------------------------------------------------

    The Exchange notes that the proposed fee change is designed to 
compete with other options exchanges that likewise cap fees on certain 
options strategies.\8\ Therefore, the Exchange believes the proposed 
reduction of the Strategy Cap may further incentivize OTP Holders to 
direct Strategy Executions to the Exchange.
---------------------------------------------------------------------------

    \8\ The Exchange notes that at least three other options 
exchanges offer a daily fee cap on certain option strategies, which 
caps range from as little $0 (on Cboe Exchange, Inc. (``Cboe'') to 
as much as $1,100 (on Nasdaq PHLX LLC (``PHLX '') and differ based 
on the specific strategies executed and the type of market 
participants on the trade. See, e.g., Cboe Fee Schedule, Footnote 
13, available here: https://cdn.cboe.com/resources/membership/Cboe_FeeSchedule.pdf; PHLX Options 7, Pricing Schedule, Section 4 
(Strategy Caps), available here: https://listingcenter.nasdaq.com/rulebook/phlx/rules/Phlx%20Options%207. See also BOX Options Market 
LLC (``BOX'') Fee Schedule, Section V.D, Strategy Qualified Open 
Outcry ``QOO'' Order Fee Cap and Rebate, available here: https://boxexchange.com/regulatory/fees/. Despite the nuances in how each 
option exchange applies the various strategy caps, the Exchange 
directly competes with these exchanges for order flow in options 
strategy executions.

---------------------------------------------------------------------------

[[Page 12918]]

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.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed change to the Strategy Cap 
is reasonable, equitable, and not unfairly discriminatory. As noted 
above, the Exchange operates in highly competitive market. The Exchange 
is only one of several options venues to which market participants may 
direct their order flow, and it represents a small percentage of the 
overall market. As such, market participants can readily direct order 
flow to competing venues if they deem fee levels at a particular venue 
to be excessive or incentives to be insufficient. The Exchange believes 
that the proposed fee change is reasonable, equitable, and not unfairly 
discriminatory in that the Exchange and competing options exchanges 
currently offer reduced fees or credits in connection with strategy 
orders.\11\
---------------------------------------------------------------------------

    \11\ See, e.g., supra note 8 (describing similar fee caps 
available on Cboe, PHLX, and BOX).
---------------------------------------------------------------------------

    The Exchange notes that the proposed change would be applied 
uniformly to all similarly-situated OTP Holders. Moreover, the Exchange 
believes that the proposed change would further incentivize OTP Holder 
[sic] to direct Strategy Executions to the Exchange and may encourage 
them to aggregate their Strategy Executions at the Exchange as the 
primary execution venue. For example, this proposed change may 
encourage OTP Holders to increase their Strategy Execution volumes by 
executing (often smaller) strategies that are not necessarily 
economically viable on a per symbol basis, but which may be profitable 
when fees on Strategy Executions--regardless of symbol--are capped for 
the trading day. To the extent that the proposed change attracts more 
Strategy Executions, this increased order flow may make the Exchange a 
more competitive venue for order execution. In addition, the Exchange 
notes that all market participants stand to benefit from increased 
volume, which promotes market depth, facilitates tighter spreads, and 
enhances price discovery, and may lead to a corresponding increase in 
order flow from other market participants.
    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 differently, 
changes to exchange transaction fees can have a direct effect on the 
ability of an exchange to compete for order flow. The Exchange believes 
the proposed change is a reasonable attempt to effectively compete for 
Strategy Executions. The Exchange believes that the proposed change may 
encourage OTP Holders to conduct Strategy Executions on the Exchange 
and, in turn, may increase the depth of the market to the benefit of 
all market participants. The Exchange notes that OTP Holders may avail 
themselves of the Exchange's proposed Strategy Cap or they can opt for 
similar offerings at another exchange.\12\
---------------------------------------------------------------------------

    \12\ See, e.g., supra note 8 (describing similar fee caps 
available on Cboe, PHLX, and BOX).
---------------------------------------------------------------------------

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 proposed change is designed to attract additional order flow to 
the Exchange, particularly Strategy Executions. In particular, the 
Exchange believes that the proposed change could further incentivize 
market participants to direct their Strategy Executions to the 
Exchange. As noted herein, the proposed Strategy Cap would be 
applicable to all similarly-situated market participants, and, as such, 
the proposed change would not impose a disparate burden on competition 
among OTP Holders. The Exchange believes that the proposed change may 
continue to encourage OTP Holders to conduct Strategy Executions on the 
Exchange, which increased liquidity and quote competition on the 
Exchange benefits all market participants.
    The Exchange also does not believe that the proposed Strategy Cap 
will impose any burden on intermarket competition that is not necessary 
or appropriate in furtherance of the Act because, as noted above, other 
competing options exchanges currently has [sic] a similar fee cap in 
place in connection with strategy orders.\13\ Because competitors are 
free to modify their own fees or fee caps in response to competing 
exchanges, the Exchange believes that the degree to which changes in 
this market may impose any burden on competition is limited. Further, 
the Exchange believes that the proposed change could promote 
competition between the Exchange and other execution venues, including 
those that currently offer similar strategy order fees or fee caps. 
Finally, the Exchange notes that it operates in a highly competitive 
market in which market participants can readily favor competing venues. 
In such an environment, the Exchange must continually review, and 
consider adjusting, its fees and credits to remain competitive with 
other exchanges. For the reasons described above, the Exchange believes 
that the proposed rule change reflects this competitive environment.
---------------------------------------------------------------------------

    \13\ Id.
---------------------------------------------------------------------------

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) \14\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \15\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    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) \16\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing,

[[Page 12919]]

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-2024-15 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-2024-15. 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-2024-15 and should 
be submitted on or before March 12, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
---------------------------------------------------------------------------

    \17\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-03337 Filed 2-16-24; 8:45 am]
BILLING CODE 8011-01-P