[Federal Register Volume 89, Number 182 (Thursday, September 19, 2024)]
[Notices]
[Pages 76906-76908]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-21283]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-101019; File No. SR-NYSEARCA-2024-72]


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

September 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 August 30, 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'') regarding certain transaction fees. The Exchange 
proposes to implement the fee change effective August 30, 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 August 1, 2024, the Exchange filed to amend the Fee 
Schedule (NYSEARCA-2024-63) and withdrew such filing on August 15, 
2024 (SR-NYSEArca-2024-68), which latter filing the Exchange 
withdrew on August 30, 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 modify 
certain transaction fees. The Exchange proposes to implement the fee 
change effective August 30, 2024.
    Currently, the Exchange assesses a fee for orders executed by 
taking liquidity from the disseminated market (``Take Liquidity Fee,'' 
or ``Take Fee''). For non-Customers and Professional Customers, the 
Exchange currently charges a per contract Take Fee of $1.10 for 
executions in non-Penny issues (the ``non-Penny Take Fee'').\5\ The 
Exchange proposes to increase the non-Penny Take Fee for non-Customers 
to $1.20 per contract,\6\ which is within the range of fees charged by 
competing option exchanges.\7\ The Exchange believes that, despite this 
proposed increase, its pricing structure will remain attractive because 
the Exchange will continue to offer discounts on non-Penny Take Fees to 
non-Customers that meet certain minimum monthly volume qualifications 
in average electronic executions per day.\8\
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    \5\ For purposes of this fee filing, ``non-Customers'' include: 
Lead Market Makers, NYSE Arca Market Makers, and Firm and Broker 
Dealers. The Exchange notes that this definition of ``non-
Customers'' does not include Professional Customers.
    \6\ See proposed Fee Schedule, TRANSACTION FEE FOR ELECTRONIC 
EXECUTIONS--PER CONTRACT (increasing the non-Penny Take Fee for non-
Customer from $1.10 to $1.20). The Exchange notes that Professional 
Customers are not impacted by this proposal and will continue to be 
assessed a non-Penny Take Fee of $1.10. See id. Also not impacted by 
this proposal are the per contract Take Fees for executions in Penny 
issues (the ``Penny Take Fee''), which Penny Take Fee will continue 
to be $0.50 for both non-Customers and Professional Customers and 
$0.49 for Customers. See id.
    \7\ See, e.g., the Nasdaq Options Market LLC (``NOM'') Pricing 
Schedule at Options 7, Section 2(1), available at: https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/nasdaq-options-7 
(assessing per contract Take Fees in non-Penny issues of $1.25 for 
non-Customers and $0.85 for both Professionals and Customers); and 
Nasdaq BX, Pricing Schedule at Options 7, Section 2(1), available 
at: https://listingcenter.nasdaq.com/rulebook/bx/rules/bx-options-7 
(assessing per contract Take Fees in non-Penny issues of $1.25 for 
non-Customers, including Professionals, and $0.85 [sic] for 
Customers).
    \8\ The qualifying volume for Take Fee discounts applies to 
executions in all issues (Penny and non-Penny) of liquidity taking 
interest or a combination of liquidity taking and liquidity adding 
(i.e., posted) interest on behalf of Professional Customers and Non-
Customer execution. See, e.g., Fee Schedule, Take Fee Discount 
Qualification for Non-Penny Issues (providing a ($0.02) per contract 
Take Fee discount to OTP Holders (including non-Customers and 
Professional Customers) that execute ``[a]t least 0.65% of TCADV 
from Professional Customer and Non-Customer Liquidity Removing 
interest in all issues, plus at least 0.15% of TCADV from posted 
interest in all issues and all account types''; or ``[a]t least 
1.50% of TCADV from Professional Customer and Non-Customer Liquidity 
Removing interest in all issues''). The TCADV (or Total Industry 
Customer equity and ETF option average daily volume) includes OCC 
calculated Customer volume of all types, including Complex Order 
Transactions and QCC transactions, in equity and ETF options. See 
Fee Schedule, Endnote 8.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\9\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\10\ 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

[[Page 76907]]

discriminate between customers, issuers, brokers or dealers.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4) and (5).
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    The proposed changes to the Fee Schedule are 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.'' \11\
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    \11\ 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 17 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.\12\ Therefore, currently no exchange possesses significant 
pricing power in the execution of multiply-listed equity & ETF options 
order flow. More specifically, in June of 2024, the Exchange had 14.19% 
market share of executed volume of multiply-listed equity & ETF options 
trades.\13\ 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. As such, the proposal represents a 
reasonable attempt by the Exchange to remain competitive despite 
increasing its non-Penny Take Fee for non-Customers.
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    \12\ 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.
    \13\ 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 Exchanges market share in equity-based options 
increased from 12.23% for the month of June 2023 to 14.19% for the 
month of June 2024.
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    The Exchange believes that the proposed increase to its non-Penny 
Take Fee for non-Customers is reasonable, equitable, and not unfairly 
discriminatory because it is within the range of fees charged by 
competing option exchanges.\14\ Moreover, the proposed non-Penny Take 
Fee increase will continue to be offset by Take Fee discounts that are 
intended to improve overall market quality on the Exchange by 
incentivizing market participants to bring additional order flow and, 
in turn, provide more trading opportunities to the benefit of all 
market participants.\15\
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    \14\ See supra note 7.
    \15\ See supra note 8 (regarding the potential ($0.02) per 
contract non-Penny Take Fee discount available to non-Customers (and 
Professional Customers) that meet certain minimum volume 
thresholds).
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    The proposed fee change is equitable and not unfairly 
discriminatory because it will apply uniformly to all similarly-
situated participants. Specifically, non-Customers will be subject to 
the increased non-Penny Take Fee (from $1.10 to $1.20 per contract) 
while both Professional Customers and Customers will continue to pay 
$1.10 and $0.85 per contract, respectively. Although the proposed fee 
increase applies solely to non-Customers, the Exchange notes that 
resulting fees are in line with or below the fees charged by other 
options exchanges.\16\ As such, to the extent that the Exchange offers 
more favorable pricing on non-Customer order flow than competing 
options venues, OTP Holders may direct their order flow to the 
Exchange, which promotes competition. Furthermore, the Exchange 
believes that the increased fees would generate additional revenue to 
offset operational costs and would facilitate the provision of the 
existing volume-based rebates (described herein).\17\
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    \16\ See supra note 7.
    \17\ See supra note 8 (regarding the potential ($0.02) per 
contract non-Penny Take Fee discount available to non-Customers (and 
Professional Customers) that meet certain minimum volume 
thresholds).
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    The Exchange believes that maintaining the non-Penny Take Fee for 
Professional Customers (and Customers) at the current rate is equitable 
and not unfairly discriminatory. Professional Customers are a different 
type of market participant than non-Customers Firm, Broker Dealers and 
Market Makers. Specifically, Professional Customers are not brokers or 
dealers in securities; they are persons (or entities) that place more 
than 390 orders per day on average for their own beneficial 
account.\18\ Per the Fee Schedule, Professional Customers are treated 
as Customers unless otherwise specified.\19\ As proposed, the rate 
differential between Professional Customers and Customers remains same 
and continues to be is in line with or below the fees charged by other 
options exchanges.\20\ The Exchange believes this proposal is equitable 
because, although the non-Penny Take Fee for Professional Customers 
will be lower than for non-Customers, it will enable the Exchange to 
remain competitive while continuing to encourage OTP Holders to direct 
additional Professional Customer order flow to the Exchange.\21\
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    \18\ See Rule 1.1 (Customer and Professional Customer).
    \19\ See Fee Schedule, TRANSACTION FEE FOR ELECTRONIC 
EXECUTIONS--PER CONTRACT (per the preamble to this section, 
``[u]nless Professional Customer executions are specifically 
delineated, such executions will be treated as `Customer' executions 
for fee/credit purposes'').
    \20\ See supra note 7.
    \21\ See id.
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    Finally, the Exchange has historically provided more favorable 
pricing to Customers. Customer liquidity benefits all market 
participants by providing more trading opportunities, which attracts 
Market Makers. An increase in the activity of these market participants 
in turn facilitates tighter spreads, which may cause an additional 
corresponding increase in order flow from other market participants. As 
such, the Exchange believes that maintaining the non-Penny Take Fee for 
Customers is consistent with the Act, which rate is within the range of 
fees charged by competing option exchanges.\22\
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    \22\ See id.
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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.
    In terms of intra-market competition, as discussed herein, the 
Exchange does not believe that its proposal will place any category of 
market participant at a competitive disadvantage because it will apply 
uniformly to all similarly-situated participants (i.e., non-Customers). 
Although the fee change results in non-Customers paying a higher non-
Penny Take Fee than Professional Customers (and Customers), the 
resulting fees are commensurate with the fees assessed on these market 
participants on competing options exchanges. Professional Customers are 
a different type of market participant than non-Customers as they are 
not brokers or dealers in securities; rather they are persons (or 
entities) that place more than 390 orders per day on average for their 
own beneficial account. As such, the Exchange believes the

[[Page 76908]]

changes, taken together with existing discounts, will continue to 
encourage trading activity on the Exchange.
    In terms of inter-market competition, the Exchange notes that it 
operates in a highly competitive market in which market participants 
can readily favor competing venues if they deem fee levels at a 
particular venue to be excessive, or rebate opportunities available at 
other venues to be more favorable. In such an environment, the Exchange 
must continually adjust its fees to remain competitive with other 
exchanges. Because competitors are free to modify their own fees in 
response, and because market participants may readily adjust their 
order routing practices, the Exchange believes that the degree to which 
fee changes in this market may impose any burden on competition is 
extremely limited. As noted herein, the proposed fee change is 
competitive as it is within the range of fees charged by competing 
option exchanges.\23\ If the changes proposed herein are unattractive 
to market participants, it is likely that the Exchange will lose market 
share as a result. Accordingly, the Exchange does not believe that the 
proposed changes will impair the ability of members or competing order 
execution venues to maintain their competitive standing in the 
financial markets.
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    \23\ See id.
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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) \24\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \25\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \24\ 15 U.S.C. 78s(b)(3)(A).
    \25\ 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) \26\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \26\ 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

    <bullet> Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#7d0f081118501e1210101813090e3d0e181e531a120b"><span class="__cf_email__" data-cfemail="6d1f180108400e0200000803191e2d1e080e430a021b">[email protected]</span></a>. Please include 
file number SR-NYSEARCA-2024-72 on the subject line.

Paper Comments

    <bullet> 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-2024-72. 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-2024-72 and should 
be submitted on or before October 10, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\27\
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    \27\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-21283 Filed 9-18-24; 8:45 am]
BILLING CODE 8011-01-P


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