[Federal Register Volume 89, Number 52 (Friday, March 15, 2024)]
[Notices]
[Pages 18976-18978]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-05490]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99708; File No. SR-NYSEARCA-2024-24]


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

March 11, 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 29, 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 fees and credits applicable to 
Lead Market Makers. The Exchange proposes to implement the fee change 
effective March 1, 2024. 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.

[[Page 18977]]

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, effective 
March 1, 2024, regarding the Lead Market Maker (``LMM'') Rights Fee and 
LMM posting credits for electronic transactions in Penny issues.
LMM Rights Fee
    The LMM Rights Fee (``Rights Fee'') is charged on a per issue basis 
to the OTP Firm acting as LMM in the issue.\4\ The Rights Fee applies 
to each issue in an LMM's allocation, where the monthly fee is based on 
the average national daily Customer contracts in such issue as follows:
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    \4\ See Fee Schedule, Lead Market Maker Rights and Endnote 2, 
available here, https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf.

------------------------------------------------------------------------
                                                                Monthly
          Average national daily customer contracts            issue fee
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0 to 100....................................................         $25
101 to 1,000................................................          35
1,001 to 2,000..............................................          75
2,001 to 5,000..............................................         200
5,001 to 15,000.............................................         750
15,001 to 100,000...........................................       1,500
Over 100,000................................................       3,000
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    Currently, the Exchange also offers opportunities for LMMs to earn 
discounts on Rights Fees for issues in the four highest activity tiers. 
The discounts are based on the amount of monthly (i) total electronic 
volume and/or (ii) total posted volume executed in the Market Maker 
range relative to other Market Makers appointed in that issue. The 
discounts are cumulative, and an LMM is eligible to achieve the 
discount for both monthly volume categories.\5\
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    \5\ For example, if an LMM was first in Total Electronic Volume 
in an issue (qualifying for a 50% discount), and third in Total 
Posting Volume in the same issue (qualifying for a 30% discount), 
the LMM would receive an 80% discount on the Rights Fee for that 
issue.
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    The Exchange also offers a 50% discount on Rights Fees to LMMs who 
achieve either (1) daily contract volume traded electronically of at 
least 0.32% total industry Customer equity and ETF option ADV 
(``TCADV), of which 0.08% TCADV is in its LMM appointment, or (2) daily 
contract volume traded manually of at least 0.75% of TCADV in all 
account types, which can include transaction volume from the OTP 
Holder's or OTP Firm's affiliates (per Endnote 8) or its Appointed OFP 
(per Endnote 15). Qualifying LMM volume is based on an average of the 
daily contract volume traded electronically by an LMM or traded 
manually by an LMM and affiliated/appointed entities each trading day 
in a calendar month.
    The Exchange proposes to eliminate both of the discounts currently 
offered on Rights Fees. To effect this change, the Exchange proposes to 
delete the text following the asterisk below the table in the Fee 
Schedule setting forth Rights Fees (as well as the asterisks in the 
table itself) describing the discounts based on monthly volume, as well 
as text in Endnote 2 describing the discount based on daily volume.
    Although the proposed change would eliminate discounts currently 
offered to LMMs on Rights Fees, the Exchange believes it would not 
discourage LMMs from seeking appointments or from continuing to direct 
order flow to the Exchange, particularly in conjunction with the 
proposed change described below to offer LMMs additional posting 
credits in Penny issues.
LMM Post Liquidity Credits
    Currently, LMMs receive a credit of $0.32 per contract for posted 
liquidity in electronic executions in Penny Issues.\6\ LMMs also 
receive an additional $0.04 per contract credit for executions in Penny 
issues in their LMM appointment, in addition to credits they qualify 
for through the Market Maker Penny and SPY Posting Credit Tiers.
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    \6\ See Fee Schedule, TRANSACTION FEE FOR ELECTRONIC 
EXECUTIONS--PER CONTRACT.
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    The Exchange proposes to increase the Post Liquidity credit for 
LMMs in all Penny issues other than SPY to $0.33 per contract. In 
addition, the Exchange proposes to increase the credit for executions 
in Penny issues in an LMM's appointment, other than SPY, to an 
additional $0.05 above the tiered credits outlined in the Market Maker 
Penny and SPY Posting Credit Tiers. The Exchange further proposes to 
clarify the Fee Schedule to provide that the post liquidity credit for 
the LMM in SPY will continue to be $0.32 per contract and that the LMM 
in SPY will continue to be eligible for an additional $0.04 per 
contract credit over the tiered credits set forth in the Market Maker 
Penny and SPY Posting Credit Tiers for eligible executions in SPY.
    Although the Exchange cannot predict with certainty whether the 
proposed change would incent LMMs to direct additional posted liquidity 
to the Exchange, the Exchange believes that the proposed change could 
encourage LMMs to increase their transactions executed on the Exchange 
to earn the increased posting credits in Penny issues other than SPY or 
to continue to achieve the existing credits available for executions in 
SPY. The Exchange notes that these credits are not volume-based and are 
available to all LMMs.
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 believes that the proposed change is reasonable 
because, although it would eliminate the volume-based discounts on the 
LMM Rights Fee, it would offer LMMs increased posting credits (which 
are not based on volume) on trades in Penny issues other than SPY. The 
Exchange further believes that the proposed change is equitable and not 
unfairly discriminatory because it would generally apply to all LMMs 
equally. The Exchange believes that it is reasonable, equitable, and 
not unfairly discriminatory to maintain the current posted liquidity 
credits for the LMM in SPY because Market Makers in SPY are already 
eligible for a higher credit through the Market Maker Penny and SPY 
Posting Credit Tiers, and the Exchange offers certain Market Maker 
incentives for SPY that are not applicable to other Penny issues.\9\ 
The Exchange also believes that offering increased credits to LMMs is 
equitable and not unfairly discriminatory to non-LMM market 
participants because of LMMs' heightened quoting obligations and 
because increased LMM posting liquidity in Penny issues would continue 
to make the Exchange a more competitive venue for, among other things, 
order execution. To the extent the proposed change encourages LMMs to 
continue or increase their liquidity posting business in Penny issues 
on the Exchange, it would encourage active quoting and improved market 
quality to the benefit of all market participants.
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    \9\ See Fee Schedule, MARKET MAKER PENNY AND SPY POSTING CREDIT 
TIERS Super Tier; Market Maker Incentives for SPY.
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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 will impose any burden on 
competition that

[[Page 18978]]

is not necessary or appropriate in furtherance of the purposes of the 
Act.
    The proposed change is designed to continue to encourage LMMs to 
increase liquidity directed to the Exchange by increasing the credits 
available to LMMs on posted liquidity in Penny issues other than SPY. 
Although the proposed change would eliminate the volume-based Rights 
Fee discounts, it would offer increased posting credits to LMMs that 
are not based on volume achieved. The proposed change would apply to 
all similarly-situated market participants and would not impose a 
disparate burden on competition. The Exchange does not believe that 
maintaining the current posted liquidity credits for the LMM in SPY 
would impose a disparate burden on competition given the unique 
incentives available to Market Makers in SPY.\10\ The Exchange further 
believes that, to the extent the proposed change results in increased 
liquidity on the Exchange, it would improve market quality for the 
benefit of all market participants.
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    \10\ See id.
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    The Exchange also does not believe that the proposed change would 
impose any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the Act; as order execution venues are 
free to modify their own fees in response to competitors' fees, the 
Exchange believes that the degree to which the proposed change could 
impose any burden on competition is limited. The Exchange further 
believes that the proposed change could promote competition between the 
Exchange and other execution venues to the extent the proposed change 
encourages increased order flow to the Exchange, thereby making the 
Exchange a more attractive venue for, among other things, order 
execution. 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.

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) \11\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \12\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 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) \13\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \13\ 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-2024-24 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-2024-24. 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-2024-24 and should 
be submitted on or before April 5, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-05490 Filed 3-14-24; 8:45 am]
BILLING CODE 8011-01-P