[Federal Register Volume 85, Number 171 (Wednesday, September 2, 2020)]
[Notices]
[Pages 54608-54610]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-19327]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89694; File No. SR-NYSEArca-2020-76]


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

August 27, 2020.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on August 26, 2020, 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, II, 
and III 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-44.
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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'') to extend the waiver of certain Floor-based fixed 
fees through September 2020. The Exchange proposes to implement the fee 
change effective August 26, 2020. 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.

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 to extend 
the waiver of certain Floor-based fixed fees through September 2020 for 
market participants that have been unable to resume their Floor 
operations to a certain capacity level, as discussed below. The 
Exchange proposes to implement the fee change effective August 26, 
2020.
    On March 18, 2020, the Exchange announced that it would temporarily 
close the Trading Floor, effective Monday, March 23, 2020, as a 
precautionary measure to prevent the potential spread of COVID-19. 
Following the temporary closure of the Trading Floor, the Exchange 
waived certain Floor-based fixed fees for April and May 2020 (the ``fee 
waiver'').\4\ Although the Trading Floor partially reopened on May 4, 
2020 and Floor-based open outcry activity is supported, certain 
participants have been unable to resume pre-Floor closure levels of 
operations. As a result, the Exchange extended the fee waiver through 
June,

[[Page 54609]]

July and August 2020, but only for Floor Broker firms that were unable 
to operate at more than 50% of their March 2020 on-Floor staffing 
levels and for Market Maker firms that have vacant or ``unmanned'' 
Podia for the entire month due to COVID-19 related considerations (the 
``Qualifying Firms'').\5\ Because the Trading Floor will continue to 
operate with reduced capacity, the Exchange proposes to extend the 
prior fee waiver for Qualifying Firms through September 2020.
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    \4\ See Securities Exchange Act Release Nos. 88596 (April 8, 
2020), 85 FR 20796 (April 14, 2020) (SR-NYSEArca-2020-29); 88812 
(May 5, 2020), 85 FR 27787 (May 11, 2020) (SR-NYSEArca-2020-38).
    \5\ See Securities Exchange Act Release Nos. 89038 (June 10, 
2020), 85 FR 36447 (June 16, 2020) (SR-NYSEArca-2020-52); 89242 
(June 7, 2020), 85 FR 42037 (July 13, 2020) (SR-NYSEArca-2020-60); 
89480 (August 5, 2020), 85 FR 48591 (August 11, 2020) (SR-NYSEArca-
2020-69). See also Fee Schedule, NYSE Arca OPTIONS: FLOOR and 
EQUIPMENT and CO-LOCATION FEES.
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    Specifically, the proposed fee waiver covers the following fixed 
fees for Qualifying Firms, which relate directly to Floor operations, 
are charged only to Floor participants and do not apply to participants 
that conduct business off-Floor:
     Floor Booths;
     Market Maker Podia;
     Options Floor Access;
     Wire Services; and
     ISP Connection.\6\
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    \6\ See proposed Fee Schedule, NYSE Arca OPTIONS: FLOOR and 
EQUIPMENT and CO-LOCATION FEES (providing that certain fees are 
waived for Qualifying Firms ``for June through September 2020'').
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    Like the previous fee waiver for Qualifying Firms, the proposed fee 
change is designed to reduce monthly costs for Qualifying Firms whose 
operations continue to be disrupted despite the fact that the Trading 
Floor has partially reopened. In reducing this monthly financial 
burden, the proposed change would allow Qualifying Firms to reallocate 
funds to assist with the cost of shifting and maintaining their prior 
fully-staffed on-Floor operations to off-Floor and recoup losses as a 
result of the partial reopening. Absent this change, such participants 
may experience an unexpected increase in the cost of doing business on 
the Exchange.\7\ The Exchange believes that all Qualifying Firms would 
benefit from this proposed fee change.
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    \7\ The Exchange will refund participants of the Floor Broker 
Prepayment Program for any prepaid September 2020 fees that are 
waived. See proposed Fee Schedule, FLOOR BROKER FIXED COST 
PREPAYMENT INCENTIVE PROGRAM (the ``FB Prepay Program'') (providing 
that ``the Exchange will refund certain of the prepaid Eligible 
Fixed costs that were waived for June through September 2020 for 
Qualifying Firms as defined, and set forth in, NYSE Arca OPTIONS: 
FLOOR and EQUIPMENT and CO-LOCATION FEES'').
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\8\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\9\ 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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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(4) and (5).
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    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.'' \10\
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    \10\ 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 16 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.\11\ Therefore, currently no exchange possesses significant 
pricing power in the execution of multiply-listed equity & ETF options 
order flow. More specifically, in June 2020, the Exchange had slightly 
over 10% market share of executed volume of multiply-listed equity & 
ETF options trades.\12\
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    \11\ 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/volume/default.jsp.
    \12\ Based on OCC data, see id., in 2019, the Exchange's market 
share in equity-based options increased from 9.51% for the month of 
June 2019 to 10.65% for the month of June 2020.
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    This proposed fee change is reasonable, equitable, and not unfairly 
discriminatory because it would reduce monthly costs for Qualifying 
Firms whose operations have been disrupted despite the fact that the 
Trading Floor has partially reopened because of the social distancing 
requirements and/or other health concerns related to resuming operation 
on the Floor. In reducing this monthly financial burden, the proposed 
change would allow Qualifying Firms to reallocate funds to assist with 
the cost of shifting and maintaining their prior fully-staffed on-Floor 
operations to off-Floor and recoup losses as a result of the partial 
reopening of the Floor. Absent this change, such participants may 
experience an unexpected increase in the cost of doing business on the 
Exchange. The Exchange believes that all Qualifying Firms would benefit 
from this proposed fee change.
    The Exchange believes the proposed rule change is an equitable 
allocation of its fees and credits as it merely continues the previous 
fee waiver for Qualifying Firms, which affects fees charged only to 
Floor participants and does not apply to participants that conduct 
business off-Floor. The Exchange believes it is an equitable allocation 
of fees and credits to extend the fee waiver for Qualifying Firms 
because such firms have either less than half of their Floor staff 
(March 2020) levels or have vacant podia--and this reduction in 
physical capacity on the Floor impacts the speed, volume and efficiency 
with which these firms can operate, which is to their detriment.
    The Exchange believes that the proposal is not unfairly 
discriminatory because the proposed continuation of the fee waiver 
would affect all similarly-situated market participants on an equal and 
non-discriminatory basis.
    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. The Exchange believes that the proposed changes 
would encourage the continued participation of Qualifying Firms, 
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.'' \13\
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    \13\ See Reg NMS Adopting Release, supra note 10, at 37499.
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    Intramarket Competition. The proposed change, which continues the 
fee waiver for Qualifying Firms, is designed to reduce monthly costs 
for those Floor participants whose

[[Page 54610]]

operations continue to be impacted despite the fact that the Trading 
Floor has partially reopened. In reducing this monthly financial 
burden, the proposed change would allow Qualifying Firms to reallocate 
funds to assist with the cost of shifting and maintaining their 
previously on-Floor operations to off-Floor. Absent this change, such 
Qualifying Firms may experience an unintended increase in the cost of 
doing business on the Exchange, given that the Floor has only reopened 
in a limited capacity. The Exchange believes that the proposed waiver 
of fees for Qualifying Firms would not impose a disparate burden on 
competition among market participants on the Exchange because off-Floor 
market participants are not subject to these Floor-based fixed fees and 
Floor-based firms that are not subject to the extent of staffing 
shortfalls as the Qualifying Firms--i.e., have at least 50% of their 
March 2020 staffing levels on the Floor and/or have no vacant Podia 
during September 2020, do not face the same operational disruption and 
potential financial impact during the partial reopening of the Floor.
    Intermarket Competition. The Exchange operates in a highly 
competitive market in which market participants can readily favor one 
of the 16 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 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 currently has more than 16% of the market share of executed 
volume of multiply-listed equity and ETF options trades.\14\ Therefore, 
currently no exchange possesses significant pricing power in the 
execution of multiply-listed equity & ETF options order flow. More 
specifically, in June 2020, the Exchange had slightly over 10% market 
share of executed volume of multiply-listed equity & ETF options 
trades.\15\
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    \14\ See supra note 11.
    \15\ Based on OCC data, supra note 12, the Exchange's market 
share in equity-based options was 9.51% for the month of June 2019 
and 10.65% for the month of June 2020.
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    The Exchange believes that the proposed rule change reflects this 
competitive environment because it waives fees for Qualifying Firms and 
is designed to reduce monthly costs for Floor participants whose 
operations continue to be disrupted despite the fact that the Trading 
Floor has partially reopened. In reducing this monthly financial 
burden, the proposed change would allow affected participants to 
reallocate funds to assist with the cost of shifting and maintaining 
their prior fully-staffed on-Floor operations to off-Floor. Absent this 
change, Qualifying Firms may experience an unintended increase in the 
cost of doing business on the Exchange, which would make the Exchange a 
less competitive venue on which to trade as compared to other options 
exchanges.

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) \16\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \17\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 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) \18\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \18\ 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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2020-76 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-2020-76. 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 (http://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 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NYSEArca-2020-76, and should be 
submitted on or before September 23, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2020-19327 Filed 9-1-20; 8:45 am]
BILLING CODE 8011-01-P


