[Federal Register Volume 89, Number 244 (Thursday, December 19, 2024)]
[Notices]
[Pages 103900-103902]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-30165]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-101910; File No. SR-NYSEARCA-2024-111]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Modify the NYSE
Arca Options Fee Schedule
December 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 December 11, 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 the charges applicable to Manual
executions by NYSE Arca Market Makers. The Exchange proposes to
implement the fee change effective December 11, 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\ The Exchange previously filed to amend the Fee Schedule on
November 29, 2024 (SR-NYSEARCA-2024-105), for December 2, 2024
effectiveness, and withdrew such filing on December 11, 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 modify the Fee Schedule regarding
the fee for Manual executions by NYSE Arca Market Makers (``Market
Makers''). Currently, Market Makers are charged $0.35 per contract for
Manual executions.\5\ The Exchange proposes to increase the fee for
Market Makers' Manual executions to $0.50 per contract. The proposed
change is intended to more closely align the Exchange's fee for Manual
transactions by Market Makers with fees charged by at least one other
competing exchange.\6\ Although the proposed change would increase the
fee for Manual transactions for Market Makers, the Exchange believes
Market Makers will continue to quote actively to participate in
transactions on the Trading Floor as they do today, thereby promoting
trading opportunities and competition on the Trading Floor to the
benefit of all market participants.
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\5\ See Fee Schedule, NYSE Arca OPTIONS: TRADE-RELATED CHARGES
FOR STANDARD OPTIONS, TRANSACTION FEE FOR MANUAL EXECUTIONS--PER
CONTRACT.
\6\ See Nasdaq PHLX, Options 7 Pricing Schedule, Section 4
(providing for $0.50 per contract fee for Market Maker manual
transactions).
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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
[[Page 103901]]
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 proposed change is reasonable, equitable, and not unfairly
discriminatory. As a threshold matter, the Exchange is subject to
significant competitive forces in the market for options securities
transaction services that constrain its pricing determinations in that
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.'' \9\
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\9\ 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 18 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.\10\ Therefore, currently no exchange possesses significant
pricing power in the execution of multiply-listed equity & ETF options
order flow. More specifically, in October 2024, the Exchange had 12.55%
market share of executed volume of multiply-listed equity and ETF
options trades.\11\ In such a low-concentrated and highly competitive
market, no single options exchange possesses significant pricing power
in the execution of option order flow. Within this environment, market
participants can freely and often do shift their order flow among the
Exchange and competing venues in response to changes in their
respective pricing schedules.
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\10\ 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.
\11\ Based on a compilation of OCC data for monthly volume of
equity-based options and monthly volume of ETF-based options, see
id., the Exchange's market share in multiply-listed equity and ETF
options increased slightly from 12.19% for the month of October 2023
to 12.55% for the month of October 2024.
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The Exchange believes the proposed change is reasonable because,
although it would increase the fee for Market Maker Manual executions,
it is designed to bring the Exchange's fee closer into alignment with a
similar fee charged on at least one other competing exchange with a
trading floor.\12\ In addition, although Market Makers would continue
to be subject to a Manual transaction fee greater than those charged to
other market participants, the proposed fee is reasonable, on balance,
given various other incentives available only to Market Makers.\13\ The
Exchange also believes the proposed change, although it would increase
the fee applicable to Market Makers' Manual transactions, would not
discourage Market Makers from conducting Manual executions on the
Exchange, thereby continuing to attract volume and liquidity to the
Exchange generally and to the benefit all market participants
(including those that do not participate in Manual executions) through
increased opportunities to trade.
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\12\ See note 6, supra.
\13\ See, e.g., Fee Schedule, Market Maker Incentives for SPY
and MARKET MAKER PENNY AND SPY POSTING CREDIT TIERS.
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The Exchange believes the proposed rule change is an equitable
allocation of its fees and credits and is not unfairly discriminatory,
as it applies equally to all similarly-situated market participants on
an equal and non-discriminatory basis. The proposal is based on the
type of business transacted on the Exchange, and Market Makers are not
obligated to engage in Manual transactions. Market Makers benefit from
having access to interact with orders that are made available in open
outcry on the Trading Floor, and the Exchange believes that the
proposed increased fee for Market Makers' Manual transactions is
designed to balance the need to attract both Market Makers' and other
market participants' orders to the Trading Floor. Although the proposed
change would increase the fee for Market Makers' Manual transactions,
the Exchange believes Market Makers would continue to quote actively so
that they may participate in Manual transactions as they do today,
thereby promoting competition and maintaining market quality for all
market participants. The Exchange also believes that increasing fees
for Manual executions by Market Makers, but not for other market
participants, represents an equitable, non-discriminatory allocation of
fees on balance because Market Makers continue to be entitled to
various incentives not available to other market participants.\14\
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\14\ See id.
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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 be consistent with charges for similar
business on at least one other market. 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.'' \15\
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\15\ See Reg NMS Adopting Release, supra note 9, at 37499.
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Intramarket Competition. The proposed change is designed to
continue to promote the use of the Exchange as a primary trading venue,
and, specifically, to encourage competition on the Trading Floor. The
proposed change is designed to balance the need to attract both Market
Makers' and other market participants' orders to the Trading Floor. The
Exchange believes that the proposed change to the fee applicable to
Manual executions by Market Makers would not discourage them from
continuing to conduct Manual executions on the Exchange because
interacting with orders that are made available in open outcry on the
Trading Floor promotes additional opportunities for quality executions.
To the extent that this purpose is achieved, all of the Exchange's
market participants should benefit from the continued market liquidity.
Enhanced market quality and increased transaction volume that results
from the increase in order flow directed to the Exchange will benefit
all market participants and improve competition on the Exchange. The
Exchange also believes that increasing fees for Manual transactions by
Market Makers relative to other market participants does not impose an
undue burden on competition because, as noted above, Market Makers have
access to other incentives in the Fee Schedule not available to other
market participants.\16\
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\16\ See note 13, supra.
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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
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deem fee levels at a particular venue to be excessive. 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, no exchange currently possesses significant pricing power in
the execution of multiply-listed equity and ETF options order flow.
More specifically, in October 2024, the Exchange had 12.55% market
share of executed volume of multiply-listed equity and ETF options
trades.\18\
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\17\ See note 10, supra.
\18\ See note 11, supra.
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The Exchange believes that the proposed rule change reflects this
competitive environment because it modifies the Exchange's fees to be
more closely aligned with fees charged by at least one other market
with a Trading Floor for similar transactions.\19\ The Exchange also
believes that the proposed change would continue to promote competition
between the Exchange and other execution venues because continued
Market Maker activity on the Trading Floor would encourage liquidity,
thereby maintaining market quality on the Exchange and encouraging
orders to be sent to the Exchange for execution. To the extent that
this purpose is achieved, all the Exchange's market participants should
benefit from the improved market quality and increased opportunities
for price improvement.
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\19\ See note 6, 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) \20\ of the Act and subparagraph (f)(2) of Rule
19b-4 \21\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\20\ 15 U.S.C. 78s(b)(3)(A).
\21\ 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) \22\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\22\ 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-2024-111 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-2024-111. 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-2024-111 and should
be submitted on or before January 9, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
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\23\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-30165 Filed 12-18-24; 8:45 am]
BILLING CODE 8011-01-P