[Federal Register Volume 88, Number 132 (Wednesday, July 12, 2023)]
[Notices]
[Pages 44424-44427]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-14669]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97849; File No. SR-NYSEARCA-2023-45]


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

July 6, 2023.
    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 30, 2023, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``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 July 3, 2023. 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 44425]]

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 (1) delete language relating to an 
expired waiver of the Ratio Threshold Fee and (2) add an exemption to 
the Ratio Threshold Fee for the first time that such fee is assessed in 
a rolling 12-month period. The Exchange proposes to implement the rule 
change on July 3, 2023.
    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.\4\ 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 was originally due to expire on October 31, 2022. The Exchange 
previously filed to extend the Waiver until January 31, 2023, and, 
subsequently, to extend the Waiver until April 30, 2023, and again to 
June 30, 2023.\5\
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    \4\ 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).
    \5\ See Securities Exchange Act Release Nos. 96252 (November 7, 
2022), 87 FR 68210 (November 14, 2022) (SR-NYSEARCA-2022-74) 
(extension of Waiver until January 31, 2023); 96878 (February 10, 
2023), 88 FR 10156 (February 16, 2023) (SR-NYSEARCA-2023-14) 
(extension of Waiver until April 30, 2023); 97460 (May 9, 2023), 88 
FR 31087 (May 15, 2023) (SR-NYSEArca-2023-35) (extension of Waiver 
until June 30, 2023).
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    The Exchange proposes to delete language from the Fee Schedule 
providing for the Waiver following its expiration, as it would no 
longer be applicable to any OTP Holders. The Exchange also proposes to 
adopt an exemption from the Ratio Threshold Fee for the first time that 
an OTP Holder incurs such fee in a rolling 12-month period (the 
``Exemption''), similar to the exemption currently offered by the 
Exchange's affiliate, NYSE American Options.\6\ The Exchange believes 
that the Exemption could help protect OTP Holders from incurring the 
Ratio Threshold Fee when they first encounter lower than expected 
executions in a rolling 12-month period, such as when they are new to 
the 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 Ratio Threshold Fee.
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    \6\ See NYSE American Options Fee Schedule, Section II. Monthly 
Excessive Bandwidth Utilization Fees, available at: https://www.nyse.com/publicdocs/nyse/markets/american-options/NYSE_American_Options_Fee_Schedule.pdf (``The Monthly Excessive 
Bandwidth Utilization Fee will not be assessed for the first 
occurrence in a rolling 12-month period.'').
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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 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 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 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 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.\10\ Therefore, no exchange possesses significant pricing power 
in the execution of multiply-listed equity and ETF options order flow. 
More specifically, in May 2023, the Exchange had less than 13% market 
share of executed volume of multiply-listed equity and ETF options 
trades.\11\
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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 equity-based ETF options, 
see id., the Exchange's market share in equity-based options 
decreased from 13.08% for the month of May 2022 to 12.35% for the 
month of May 2023.
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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 transaction fees. Stated otherwise, 
modifications to exchange transaction fees can have a direct effect on 
the ability of an exchange to compete for order flow.
    The Exchange believes the proposed deletion of the language 
describing the Waiver is reasonable because the Waiver would no longer 
be in effect, and the deletion would thus improve the clarity of the 
Fee Schedule and reduce confusion as to the fees and credits that are 
currently in effect. The Exchange also believes that the removal of 
obsolete text from the Fee Schedule would further the protection of 
investors and the public interest by promoting clarity and transparency 
in the Fee Schedule and making the Fee Schedule easier to navigate and 
understand.
    The Exchange believes that the proposed Exemption is reasonable 
because it would offer OTP Holders an exemption from the Ratio 
Threshold Fee the first time it is incurred in a rolling 12-month 
period and is designed to potentially protect firms that are, for 
example, new to the trading platform, deploying new technologies, or 
testing different trading strategies, from incurring excess Ratio 
Threshold Fees and affording them an opportunity to assess their order 
to execution ratios. To the extent the proposed 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 effects of an ever-changing marketplace 
without affecting its competitiveness.

[[Page 44426]]

The Proposed Rule Change Is an Equitable Allocation of Credits and Fees
    The Exchange believes the proposed change is an equitable 
allocation of fees and credits. The proposed deletion of language 
relating to the expired Waiver would eliminate text from the Fee 
Schedule no longer applicable to any OTP Holders. Accordingly, the 
Exchange believes the proposal would impact all similarly situated OTP 
Holders on an equal basis. The proposed Exemption is an equitable 
allocation of fees and credits because it would be available to all OTP 
Holders; all OTP Holders would be eligible for the Exemption the first 
time they incur the Ratio Threshold Fee in a rolling 12-month period. 
In addition, to the extent the Exemption encourages OTP Holders to 
maintain their trading activity on the Exchange by mitigating the 
initial impact of the Ratio Threshold Fee, the Exchange believes the 
proposed change would promote market quality to the benefit of all 
market participants.
The Proposed Rule Change Is Not Unfairly Discriminatory
    The Exchange believes that the proposal is not unfairly 
discriminatory because it neither targets nor will it have a disparate 
impact on any category of market participant. The proposed elimination 
of text describing the expired Waiver would affect all OTP Holders on 
an equal and non-discriminatory basis, as the Waiver would no longer be 
applicable to any OTP Holders. The Exchange believes the proposed 
Exemption is not unfairly discriminatory because it would apply to all 
OTP Holders on an equal and non-discriminatory basis. The Exemption, as 
proposed, would provide all OTP Holders with an exemption from the 
Ratio Threshold Fee the first time such fee is incurred in a rolling 
12-month period. The Exchange believes that the proposed change would 
encourage OTP Holders to continue trading on the Exchange by lessening 
the initial impact of the Ratio Threshold Fee and providing OTP Holders 
with an opportunity to evaluate order to execution ratios. The proposed 
change would thus 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.'' \12\
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    \12\ See Reg NMS Adopting Release, supra note 9, at 37499.
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Intramarket Competition
    The Exchange does not believe the proposed changes would impose any 
burden on intramarket competition that is not necessary or appropriate. 
The deletion of the language relating to the 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. To the extent the 
proposed change is successful in encouraging OTP Holders to maintain 
their trading activity on the Exchange, the Exchange believes the 
proposed change could promote market quality to the benefit of all 
market participants.
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.\13\ Therefore, currently no exchange possesses 
significant pricing power in the execution of multiply-listed equity 
and ETF options order flow. More specifically, in May 2023, the 
Exchange had less than 13% market share of executed volume of multiply-
listed equity and ETF options trades.\14\
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    \13\ 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.
    \14\ 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 13.08% for the month of May 2022 to 12.35% for the 
month of May 2023.
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    The Exchange does not believe the proposed changes would impose any 
burden on intramarket competition that is not necessary or appropriate. 
Deleting text describing the Waiver would add clarity to the Fee 
Schedule by removing expired pricing and, accordingly, would not have 
any impact on intermarket competition. The proposed Exemption would not 
impose any burden on competition that is not necessary or appropriate 
because it would apply equally to all OTP Holders. All OTP Holders 
would be eligible for the Exemption the first time the Ratio Threshold 
Fee is applied in a rolling 12-month period. To the extent the 
Exemption encourages OTP Holders to continue trading on the Exchange, 
the Exchange believes the proposed change would sustain the Exchange's 
overall competitiveness and its market quality for all market 
participants.

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 has become effective upon filing pursuant 
to Section 19(b)(3)(A) \15\ of the Act and paragraph (f) thereunder. At 
any time within 60 days of the filing of the 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.
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    \15\ 15 U.S.C. 78s(b)(3)(A).

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[[Page 44427]]

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-2023-45 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-2023-45. 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-2023-45 and should 
be submitted on or before August 2, 2023.
    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-14669 Filed 7-11-23; 8:45 am]
BILLING CODE 8011-01-P


