[Federal Register Volume 89, Number 119 (Thursday, June 20, 2024)]
[Notices]
[Pages 51921-51923]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-13419]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100328; File No. SR-NYSEARCA-2024-55]


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

June 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 June 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.
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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 amend the NYSE Arca Options Fee Schedule 
(``Fee Schedule'') to replace the Ratio Threshold Fee with an Excessive 
Bandwidth Utilization Fee. The Exchange proposes to implement the fee 
changes effective June 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.
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    \4\ On May 1, 2024, the Exchange originally filed to amend the 
Fee Schedule (NYSEARCA-2024-38), and, on May 16, 2024, the Exchange 
withdrew that filing and submitted NYSEARCA-2024-41. On May 30, 
2024, the Exchange withdrew NYSEARCA-2024-41 and submitted NYSEARCA-
2024-48, which latter filing the Exchange withdrew on June 12, 2024.
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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 amend the Fee Schedule to replace 
the Ratio Threshold Fee with an Excessive Bandwidth Utilization Fee to 
reflect the Exchange's migration to NYSE Pillar (``Pillar''). The 
Exchange proposes to implement the fee changes effective June 12, 2024.
    The Exchange imposes certain fees to discourage excessive message 
traffic (that do not result in executions or otherwise improve market 
quality) that could unnecessarily tax the Exchange's resources, 
bandwidth, and capacity, as no system has unlimited capacity.
    With the Exchange's migration to the Pillar trading platform, 
market participants can send both quote and order message traffic over 
a single connection. This functionality allows the Exchange to monitor 
the message traffic of each OTP Holder or OTP Firm (collectively, ``OTP 
Holders''), which in turn impacts how the Exchange calculates (and 
assess fees for) each OTP Holder's use of Exchange bandwidth and 
processing resources.
    Currently, the Exchange assesses a Ratio Threshold Fee that is 
based on the number of orders entered as compared to the number of 
executions received in a calendar month.\5\ To reflect the 
communication protocol available on Pillar, the Exchange proposes to 
replace the Ratio Threshold Fee with a ``Monthly Excessive Bandwidth 
Utilization Fee'' or ``EBUF''.\6\ Like the Ratio Threshold Fee, the 
proposed EBUF is designed to strike the right balance between deterring 
OTP Holders from submitting an excessive number of messages (that do 
not result in executions or otherwise improve market quality) without 
discouraging OTP Holders from accessing the Exchange, except that it 
will include quotes. As proposed, the EBUF will only be assessed on OTP 
Holders that send more than 50 million messages per day on average 
during a calendar month.\7\ For purposes of EBUF, ``messages'' include 
quotes, orders, order cancellations and modifications.\8\
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    \5\ See Fee Schedule, Ratio Threshold Fee. See also Endnote 12 
(regarding the ratio threshold fee).
    \6\ See proposed Fee Schedule, Monthly Excessive Bandwidth 
Utilization Fee.
    \7\ Id.
    \8\ Id.
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    The proposed EBUF would calculate an OTP Holder's ``Monthly Message 
to Execution Ratio'' (i.e., the number of messages sent versus the 
number of executions). The Exchange has determined that, on Pillar, 
setting a baseline threshold for this ``Monthly Message to Execution 
Ratio'' at 500,000 to 1 or greater should ensure the efficient use of 
the Exchange's resources, bandwidth, and capacity by OTP Holders that 
are actively trading on the Exchange. Thus, as proposed, the Exchange 
will calculate the number of messages submitted by an OTP Holder, and 
the number of executions by the OTP Holder, and will only assess the 
EBUF if the Monthly Message to Execution Ratio exceeds 500,000 to 1. 
The proposed Fee will be assessed to further encourage efficient use of 
the Exchange's resources as shown here:

------------------------------------------------------------------------
           Monthly message to execution ratio             Monthly charge
------------------------------------------------------------------------
Between 500,000 and 749,999 to 1........................          $5,000
Between 750,000 and 999,999 to 1........................          10,000
1,000,000 to 1 and greater..............................          15,000
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    Like the Ratio Threshold Fee, the higher the Messages to Executions 
Ratio (i.e., the more unexecuted message that Pillar ingests), the 
higher the proposed fee, which increase is designed to discourage 
(increasing levels of) excessive message traffic by OTP Holders. The 
Exchange notes that the proposed minimum thresholds for triggering the 
proposed EBUF are higher than the thresholds associated with the Ratio 
Threshold Fee (but the associated fees are substantially the same), 
which reflects the fact that both quotes and orders (and cancellations 
or modification thereof) are ``messages'' included in the calculation 
as well as the fact that Pillar can accommodate more message traffic 
than the Exchange's pre-Pillar system.\9\ The

[[Page 51922]]

proposed EBUF thresholds are set at levels that an OTP Holder should 
not hit or exceed in the ordinary course of trading. As such, the 
Exchange believes that the proposed EBUF thresholds and associated fees 
are set at levels reasonable designed to encourage OTP Holders to 
efficiently use message traffic as necessary.
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    \9\ For example, the current Ratio Threshold Fee has minimum 
``order to execution'' ratio thresholds of between 10,000 and 14,999 
to 1, with an accompanying fee of $5,000; between 15,000 and 19,999 
to 1, with an accompanying fee of $10,000; between 20,000 and 24,999 
to 1, with an accompanying fee of $20,000; and 25,000 to 1 and 
greater, with an accompanying fee of $35,000.
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    In addition, like the Ratio Threshold Fee, the Exchange will not 
assess the EBUF for an OTP Holder's first occurrence in a rolling 
twelve-month period (the ``Exemption'').\10\ For example, an OTP Holder 
that exceeds the minimum EBUF threshold in October 2024 will not be 
assessed the EBUF as long as that OTP Holder does not exceed the 
minimum EBUF threshold again before October 2025. If that same OTP 
Holder exceeds the minimum EBUF threshold in December 2025, it will not 
incur the EBUF if it does not exceed the minimum EBUF before December 
2026. As noted above, an OTP Holder should not exceed the EBUF in its 
normal course of trading. Therefore, the proposed Exemption acts as a 
guardrail of sorts that is designed to protect OTP Holders from 
incurring the EBUF when they first encounter lower than expected 
executions in a rolling twelve-month period, such as when they are new 
to the Pillar trading platform, deploying new technologies, or testing 
different trading strategies, thereby encouraging OTP Holders to 
maintain their trading activity on the Exchange by mitigating the 
initial impact of the EBUF.
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    \10\ Compare Endnote 12 to the Fee Schedule with the proposed 
Fee Schedule, Monthly Excessive Bandwidth Utilization Fee.
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    Further, consistent with the application of the Ratio Threshold 
Fee, the Exchange will likewise retain discretion to exclude one or 
more days of data for purposes of calculating the proposed EBUF if the 
Exchange determines, in its sole discretion, that one or more OTP 
Holders or the Exchange was experiencing a bona fide systems problem.
    In connection with the proposed EBUF (and associated removal of the 
Ratio Threshold Fee), the Exchange proposes to delete the Ratio 
Threshold Fee and the now-expired waiver of this fee.\11\
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    \11\ See proposed Fee Schedule, Monthly Excessive Bandwidth 
Utilization Fee. The Exchange notes that it proposes to delete the 
text of Endnote 12 regarding how the Ratio Threshold Fee is 
calculated and will hold Endnote 12 in Reserve. See id., Endnote 12.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\12\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\13\ 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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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed EBUF is reasonable, 
equitable, and not unfairly discriminatory because it is designed to 
strike the right balance between deterring OTP Holders from submitting 
an excessive number of messages that do not result in an execution (or 
improve market quality) without discouraging OTP Holders from accessing 
the Exchange. To the extent that the proposed EBUF results in the 
efficient use of the Exchange's finite resources, all market 
participant stand to benefit from improved market quality.
    The Exchange believes that the proposed minimum EBUF thresholds, 
which are higher than the thresholds associated with the Ratio 
Threshold Fee (but carry roughly the same incremental fees), are 
reasonable because, unlike the Ratio Threshold Fee, the proposed EBUF 
counts a broader category of ``message,'' including quotes, orders, 
order cancellations, and modifications. Therefore, the Exchange 
believes the EBUF appropriately accounts for the significantly wider 
category of ``messages'' now included and accounts for the increased 
capacity available to Exchange participants on the Pillar trading 
system. Given that the proposed EBUF is meant to operate as a guardrail 
of sorts that an OTP Holder should not ``hit'' or exceed in the 
ordinary course of trading, the Exchange proposes to set the EBUF 
thresholds at levels reasonably designed to encourage OTP Holders to 
efficiently use message traffic as necessary.
    The Exchange believes that the proposed Exemption is reasonable, 
equitable, and not unfairly discriminatory because is designed to 
protect OTP Holders from incurring the EBUF when they first encounter 
lower than expected executions in a rolling twelve-month period, such 
as when they are new to the Pillar trading platform, deploying new 
technologies, or testing different trading strategies, thereby 
encouraging OTP Holders to maintain their trading activity on the 
Exchange by mitigating the initial impact of the EBUF. The Exchange 
believes the proposed Exemption is reasonable as it is intended to 
lessen the initial impact of the EBUF while affording OTP Holders an 
opportunity to moderate or fine tune their message rates as needed 
once- every-twelve-months.
    The proposed EBUF is a reasonable, equitable, and not unfairly 
discriminatory because it neither targets nor will it have a disparate 
impact on any category of market participant. The proposed EBUF would 
impact all similarly situated OTP Holders on an equal basis; all OTP 
Holders would be eligible for the Exemption the first time they incur 
the EBUF in a rolling 12-month period.
    The Exchange believes that the removal of the obsolete text from 
the Fee Schedule (regarding the Ratio Threshold Fee and associated 
stale waiver language) would further the protection of investors and 
the public interest by promoting clarity and transparency in Fee 
Schedule thereby making the Fee Schedule easier to navigate and 
understand.

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.
    Intramarket Competition. The Exchange believes the proposed EBUF, 
including the Exemption, would not place an unfair burden on 
intramarket competition because it is designed to encourage efficient 
and rational use of the Exchange's finite resources and would apply to 
all market participants.
    The deletion of the language relating to the Ratio Threshold Fee 
Waiver would remove language from the Fee Schedule no longer applicable 
to any OTP Holders and, accordingly, would not have any impact on 
intramarket competition. The proposed Exemption would apply equally to 
all OTP Holders; all OTP Holders would be eligible for the Exemption 
for the first occurrence of the Ratio Threshold Fee in a rolling 12-
month period.
    Intermarket Competition. The Exchange believes the proposed EBUF, 
including the Exemption, would not place an unfair burden on 
intermarket competition as it is not intended to address any 
competitive issues but is instead designed solely to encourage the 
efficient use of the Exchange's

[[Page 51923]]

resources. The Exchange believes that the proposed EBUF should deter 
excessive message traffic that does not improve market quality which, 
in turn, will sustain the Exchange's overall competitiveness.
    The proposed deletion of text related to the Ratio Threshold Fee 
would add clarity to the Fee Schedule by removing obsolete pricing and, 
accordingly, would not have any impact on intermarket competition.

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.
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 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) \16\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \16\ 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-2024-55 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-2024-55. 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-2024-55 and should 
be submitted on or before July 11, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-13419 Filed 6-18-24; 8:45 am]
BILLING CODE 8011-01-P