[Federal Register Volume 87, Number 218 (Monday, November 14, 2022)]
[Notices]
[Pages 68210-68212]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-24653]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96252; File No. SR-NYSEARCA-2022-74]


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

November 7, 2022.
    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 October 31, 2022, 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-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 Ratio Threshold Fee. The Exchange 
proposes to implement the fee change effective November 1, 2022. 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 amend the Fee Schedule to extend 
the waiver of the Ratio Threshold Fee that was implemented in 
connection with the Exchange's migration to the Pillar platform.\4\ The 
Exchange proposes to implement the rule change on November 1, 2022.
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    \4\ See Securities Exchange Act Release No. 94095 (January 28, 
2022), 87 FR 6216 (February 3, 2022) (SR-NYSEArca-2022-04) (Notice 
of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend the NYSE Arca Options Fee Schedule).
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    The Ratio Threshold Fee is based on the number of orders entered as 
compared to the number of executions received in a calendar month and 
is intended to deter OTP Holders from submitting an excessive number of 
orders that are not executed.\5\ Because order to execution ratios of 
10,000 to 1 or greater have the potential residual effect of exhausting 
system resources, bandwidth, and capacity, such ratios may create 
latency and impact other OTP Holders' ability to receive timely 
executions.\6\ In connection with the Exchange's migration to the 
Pillar platform, the Exchange implemented a waiver of the Ratio 
Threshold Fee (the ``Waiver'') that took effect beginning in the month 
in which the Exchange began its migration to the Pillar platform and 
would remain in effect for the three months following the month during 
which the Exchange completed its migration to the Pillar platform. As 
the Exchange completed the migration in July 2022, the Waiver is 
currently due to expire on October 31, 2022.
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    \5\ See Fee Schedule, RATIO THRESHOLD FEE; see also Securities 
Exchange Act Release No. 60102 (June 11, 2009), 74 FR 29251 (June 
19, 2009) (SR-NYSEArca-2009-50).
    \6\ See id.
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    The Exchange now proposes to extend the Waiver for an additional 
three months. The Exchange believes that extending the Waiver would 
allow the Exchange additional time to continue to work with OTP Holders 
to monitor traffic rates and order to execution ratios, without 
imposing a financial burden on OTP Holders based on their order to 
execution ratios. The extension of the Waiver would also allow the 
Exchange to continue to evaluate system performance as OTP Holders 
continue to adapt to trading on the Pillar platform. The Exchange thus 
proposes to modify the Fee Schedule to provide that the Waiver would 
extend for the six months following the month in which the Exchange 
completed its migration to the Pillar platform (i.e., until January 31, 
2023).\7\
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    \7\ See proposed Fee Schedule, RATIO THRESHOLD FEE.
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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 Proposed Rule Change Is Reasonable
    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

[[Page 68211]]

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, no exchange possesses significant pricing power 
in the execution of multiply-listed equity and ETF options order flow. 
More specifically, in September 2022, the Exchange had less than 11% 
market share of executed volume of multiply-listed equity and 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/Market-Data-Reports/Volume-and-Open-Interest/Monthly-Weekly-Volume-Statistics.
    \12\ Based on a compilation of OCC data for monthly volume of 
equity-based options and monthly volume of equity-based ETF options, 
see id., the Exchange's market share in equity-based options 
decreased from 12.43% for the month of September 2021 to 10.84% for 
the month of September 2022.
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    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 fees. In response to this competitive 
environment and to adapt to extenuating circumstances, the Exchange has 
previously waived fees on a temporary basis.\13\
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    \13\ See, e.g., Securities Exchange Act Release No. 88596 (April 
8, 2020), 85 FR 20796 (April 14, 2020) (SR-NYSEArca-2020-29) 
(waiving Floor related fees in connection with COVID-19 
precautionary measures).
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    The Exchange believes that the proposed extension of the Waiver is 
reasonable because it is designed to lessen the impact of the migration 
on OTP Holders and would allow OTP Holders to continue to adjust to 
trading on the Pillar platform without incurring excess Ratio Threshold 
Fees while the Exchange continues to evaluate Pillar system 
performance. To the extent the proposed rule change encourages OTP 
Holders to maintain their trading activity on the Exchange, the 
Exchange believes the proposed change would sustain the Exchange's 
overall competitiveness and its market quality for all market 
participants. In the backdrop of the competitive environment in which 
the Exchange operates, the proposed rule change is a reasonable attempt 
by the Exchange to mitigate the impacts of the Pillar migration without 
affecting its competitiveness.
The Proposed Rule Change Is an Equitable Allocation of Credits and Fees
    The Exchange believes the proposed rule change is an equitable 
allocation of its fees and credits. The proposed extension of the 
Waiver is an equitable allocation of fees and credits because the 
Waiver would continue to apply to all OTP Holders. All OTP Holders 
would thus have the opportunity to continue adjusting to the Pillar 
platform without incurring Ratio Threshold Fees, while the Exchange 
continues to evaluate post-migration system performance. Thus, the 
Exchange believes the proposed rule change would continue to mitigate 
the impact of the migration process for all market participants on the 
Exchange, thereby sustaining market-wide quality.
The Proposed Rule Change Is Not Unfairly Discriminatory
    The Exchange believes the proposed extension of the Waiver is not 
unfairly discriminatory because it would apply to all OTP Holders on an 
equal and non-discriminatory basis. The Waiver, as proposed, would 
permit all OTP Holders to continue adapting to the Pillar platform, 
without incurring additional fees based on their monthly order to 
execution ratios, while the Exchange continues to evaluate post-
migration system performance. The Exchange thus believes that the 
proposed change would support continued trading opportunities for all 
market participants, thereby promoting just and equitable principles of 
trade, removing impediments to and perfecting the mechanism of a free 
and open market and a national market system and, in general, 
protecting investors and the public interest.
    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 encourage the submission of additional 
liquidity to a public exchange, 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.'' \14\
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    \14\ See Reg NMS Adopting Release, supra note 10, at 37499.
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    Intramarket Competition. The Exchange does not believe the proposed 
extension of the Waiver would impose any burden on intramarket 
competition that is not necessary or appropriate because it would apply 
equally to all OTP Holders. All OTP Holders would continue to be 
eligible for the Waiver for an additional three months while the 
Exchange continues to assess system performance following the migration 
to Pillar.
    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 has more than 16% of the market share of executed volume of 
multiply-listed equity and ETF options trades.\15\ Therefore, currently 
no exchange possesses significant pricing power in the execution of 
multiply-listed equity and ETF options order flow. More specifically, 
in September 2022, the Exchange had less than 11% market share of 
executed volume of multiply-listed equity and ETF options trades.\16\
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    \15\ 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.
    \16\ Based on a compilation of OCC data for monthly volume of 
equity-based options and monthly volume of equity-based ETF options, 
see id., the Exchange's market share in equity-based options 
increased decreased from 12.43% for the month of September 2021 to 
10.84% for the month of September 2022.

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[[Page 68212]]

    The Exchange does not believe the proposed rule change would impose 
any burden on intermarket competition that is not necessary or 
appropriate because the Exchange operates in a highly competitive 
market in which market participants can readily choose to send their 
orders to other exchanges if they deem fee levels at those other venues 
to be more favorable. The Exchange believes that fees to prevent 
excessive use of Exchange systems are constrained by the robust 
competition for order flow among exchanges. The Exchange believes that 
the proposed extension of the Waiver would continue to make the 
Exchange a competitive venue for order execution by enabling OTP 
Holders to maintain trading activity without incurring fees based on 
their monthly order to execution ratios, thus facilitating OTP Holders' 
continued adjustment to the Pillar platform and permitting the Exchange 
additional time to evaluate post-migration system performance.

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) \17\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \18\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 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) \19\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \19\ 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 [email protected]. Please include 
File Number SR-NYSEARCA-2022-74 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-2022-74. 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-2022-74, and should be 
submitted on or before December 5, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-24653 Filed 11-10-22; 8:45 am]
BILLING CODE 8011-01-P


