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[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

[[Page 103902]]

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
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