Federal Register / Vol. 87, No. 95 / Tuesday, May 17, 2022 / Notices 29911 

108 15 U.S.C. 78s(b)(3)(C). 

109 17 CFR 200.30–3(a)(12), (57) and (58). 

1 15 U.S.C. 78s(b)(1). 

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4See Fee Schedule, NYSE Arca Options: Trade– 

Related Charges for Standard Options, Customer 

Penny Posting Credit Tiers. 

5For purposes of this filing, activity in the NYSE 

Arca Equity Market is referred to as ‘‘cross asset 

activity.’’ 

6 15 U.S.C. 78f(b). 

7 15 U.S.C. 78f(b)(4) and (5). 

8See Securities Exchange Act Release No. 51808 

(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005) 

(S7–10–04) (‘‘Reg NMS Adopting Release’’). 

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 No. 

SR–PEARL–2022–18 and should be 

submitted on or before June 7, 2022. 

Rebuttal comments should be submitted 

by June 21, 2022. 

VI. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(3)(C) of the Act,108 that 

File No. SR–PEARL–2022–18 be, and 

hereby is, temporarily suspended. In 

addition, the Commission is instituting 

proceedings to determine whether the 

proposed rule change should be 

approved or disapproved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.109

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–10514 Filed 5–16–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–94895; No. SR–NYSEArca2022–26] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Modify the NYSE Arca 

Options Fee Schedule 

May 11, 2022. 

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 April 29, 

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. 

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 Customer 

Penny Posting Tiers. The Exchange 

proposes to implement the fee change 

effective May 2, 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 modify the 

Customer Penny Posting Credit Tiers. 

Currently, the Fee Schedule provides 

that OTP Holders and OTP Firms 

(collectively, ‘‘OTP Holders’’) can 

qualify for tiered credits applied to 

electronic executions of Customer 

posted interest in Penny issues by 

meeting specified increasing volume 

levels in Customer Penny Posting Credit 

Tiers 1 through 6.4 Currently, an OTP 

Holder that achieves 0.10% of TCADV 

from Customer posted interest in all 

issues will qualify for Customer Penny 

Posting Credit Tier 1 (‘‘Tier 1’’) and earn 

a credit of $0.27 per contract applied to 

electronic executions of Customer 

posted interest in Penny issues. 

The Exchange now proposes to 

modify the qualification basis for Tier 1 

and increase the credit offered to OTP 

Holders that achieve Tier 1. 

Specifically, the Exchange proposes that 

an OTP Holder would qualify for Tier 1 

by executing at least 0.20% of TCADV 

from Customer posted interest, plus 

executed ADV of 0.30% of U.S. equity 

market share posted and executed on 

the NYSE Arca Equity Market,5 and 

such qualifying OTP Holder would earn 

a $0.36 per contract credit applied to 

electronic executions of Customer 

posted interest in Penny issues. 

The Exchange notes that the credit 

currently offered in Tier 1 has not 

sufficiently encouraged OTP Holders to 

increase their Customer posting interest. 

Thus, although the proposed 

modifications to the qualifying criteria 

for Tier 1 would increase the volume 

requirement and add a cross asset 

activity component, the Exchange 

believes that the proposed change 

would encourage OTP Holders to 

execute Customer posted interest on the 

Exchange and also incent OTP Holders 

to use the Exchange as a primary 

destination for both options and equity 

order flow in order to earn the 

significantly increased credit that would 

be available in Tier 1. 

The Exchange proposes to implement 

the rule change on May 2, 2022. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

Section 6(b) of the Act,6 in general, and 

furthers the objectives of Sections 

6(b)(4) and (5) of the Act,7 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. 

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.’’ 8

There are currently 16 registered 

options exchanges competing for order 


khammond on DSKJM1Z7X2PROD with NOTICES
29912 Federal Register / Vol. 87, No. 95 / Tuesday, May 17, 2022 / Notices 

9The 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-DataReports/Volume-and-Open-Interest/MonthlyWeekly-Volume-Statistics. 

10Based 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 equity-based options 

increased from 10.16% for the month of March 

2021 to 13.57% for the month of March 2022. 

11See Cboe BZX Options Exchange Fee Schedule, 

available at: https://www.cboe.com/us/options/ 

membership/fee_schedule/bzx/ (offering similarly 

structured credits on customer volume in Penny 

issues, based on qualifying volume). 

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.9

Therefore, currently no exchange 

possesses significant pricing power in 

the execution of multiply-listed equity & 

ETF options order flow. More 

specifically, in March 2022, the 

Exchange had less than 14% market 

share of executed volume of multiplylisted equity & ETF options trades.10

The Exchange believes that the evershifting 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, changes to 

exchange transaction fees can have a 

direct effect on the ability of an 

exchange to compete for order flow. 

While the Exchange cannot predict 

with certainty whether any OTP Holders 

would seek to qualify for Tier 1, as 

modified, the Exchange believes that the 

new qualifying criteria for Tier 1 are 

attainable and that the increased credit 

that OTP Holders would earn in Tier 1 

would encourage OTP Holders to 

increase both Customer posted volume 

on the Exchange and their activity on 

the NYSE Arca Equity Market. The 

Exchange further believes that 

modifying the qualification basis for 

Tier 1 to include both a Customer 

posted interest volume requirement and 

a cross asset activity component would 

incent OTP Holders to direct more 

Customer options order flow and equity 

order flow to the Exchange, which 

would bring increased liquidity and 

order flow for the benefit of all market 

participants. 

Finally, to the extent the proposed 

change continues to attract greater 

volume and liquidity to the Exchange, 

and, in particular, encourages OTP 

Holders to increase Customer volume 

and cross asset activity to qualify for the 

increased credit available in Tier 1, the 

Exchange believes the proposed change 

would improve the Exchange’s overall 

competitiveness and strengthen 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 increase the depth of its 

market and improve its market share 

relative to its competitors. 

The Exchange’s fees are constrained 

by intermarket competition, as OTP 

Holders may direct their order flow to 

any of the 16 options exchanges, 

including an exchange with a similarly 

structured customer posting credit 

program.11 Thus, OTP Holders have a 

choice of where they direct their order 

flow, including their Customer posting 

interest and equity posted interest. The 

proposed rule change is designed to 

incent OTP Holders to direct liquidity to 

the Exchange and, in particular, to 

increase their Customer posting interest 

and cross asset activity, thereby 

promoting market depth, price 

discovery and improvement, and 

enhanced order execution opportunities 

for market participants. 

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 proposal is 

based on the amount and type of 

business transacted on the Exchange, 

and OTP Holders can opt to try to 

qualify for the credit or not. The 

proposal is designed to incent OTP 

Holders to aggregate Customer posting 

interest at the Exchange as a primary 

execution venue and to attract more 

posting interest on the NYSE Arca 

Equity Market. To the extent that these 

purposes are achieved, this increased 

order flow would continue to make the 

Exchange a more competitive venue for, 

among other things, order execution on 

both options and equities. Thus, the 

Exchange believes the proposed rule 

change would improve market quality 

for all market participants on the 

Exchange and, as a consequence, attract 

more order flow to the Exchange thereby 

improving market-wide quality and 

price discovery. 

The Proposed Rule Change Is Not 

Unfairly Discriminatory 

The Exchange believes the proposed 

rule change is not unfairly 

discriminatory because the credit 

offered in Tier 1, as modified, would be 

available to all similarly-situated market 

participants on an equal and nondiscriminatory basis. 

The proposal is based on the amount 

and type of business transacted on the 

Exchange, and OTP Holders are not 

obligated to try to achieve the enhanced 

qualifications for Tier 1, nor are they 

obligated to execute Customer posted 

interest or cross asset activity. Rather, 

the proposal is designed to encourage 

OTP Holders to utilize the Exchange as 

a primary trading venue for Customer 

posted interest (if they have not done so 

previously) and to increase cross asset 

activity, and all OTP Holders that meet 

the qualifications for Tier 1 would be 

eligible for the corresponding credit on 

electronic executions of Customer 

posted interest in Penny issues. To the 

extent that the proposed change attracts 

more Customer interest, including 

posted interest, to the Exchange, this 

increased order flow would continue to 

make the Exchange a more competitive 

venue for, among other things, order 

execution. Thus, the Exchange believes 

the proposed rule change would 

improve market quality for all market 

participants on the Exchange and, as a 

consequence, attract more order flow to 

the Exchange thereby improving marketwide quality and price discovery. The 

resulting increased volume and 

liquidity would provide more trading 

opportunities and tighter spreads to all 

market participants and thus would 

promote just and equitable principles of 

trade, remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system and, in general, protect 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. 

For the foregoing reasons, the 

Exchange believes that the proposal is 

consistent with the Act. 

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 

changes 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 


khammond on DSKJM1Z7X2PROD with NOTICES
Federal Register / Vol. 87, No. 95 / Tuesday, May 17, 2022 / Notices 29913 

12See Reg NMS Adopting Release, supra note 8, 

at 37499. 

13See note 9, supra. 

14Based on OCC data for monthly volume of 

equity-based options and monthly volume of ETFbased options, see id., the Exchange’s market share 

in equity-based options increased from 10.16% for 

the month of March 2021 to 13.57% for the month 

of March 2022. 

15See note 11, supra. 

16 15 U.S.C. 78s(b)(3)(A). 

17 17 CFR 240.19b–4(f)(2). 

18 15 U.S.C. 78s(b)(2)(B). 19 17 CFR 200.30–3(a)(12). 

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

Intramarket Competition. The 

proposed change is designed to attract 

additional order flow (particularly 

Customer posted interest and cross asset 

activity) to the Exchange. The Exchange 

believes that the proposed modification 

to Tier 1 would incent OTP Holders to 

direct their Customer order flow and 

cross asset activity to the Exchange. 

Greater liquidity benefits all market 

participants on the Exchange, and 

increased Customer order flow and 

posted equity order flow would increase 

opportunities for execution of other 

trading interest. The proposed 

modification to Tier 1 would be 

available to all similarly-situated market 

participants that execute Customer 

posted interest, and, as such, the 

Exchange does not believe that the 

proposed change would not impose a 

disparate burden on competition among 

market participants on the Exchange. 

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 publiclyavailable 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 & 

ETF options order flow. More 

specifically, in March 2022, the 

Exchange had less than 14% market 

share of executed volume of multiplylisted equity & ETF options trades.14

The Exchange believes that the 

proposed rule change reflects this 

competitive environment because it 

modifies the Exchange’s fees in a 

manner designed to continue to incent 

OTP Holders to direct trading interest 

(particularly Customer posted interest 

and cross asset activity) to the 

Exchange, which would provide 

liquidity and attract order flow to the 

Exchange. 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. 

The Exchange also believes that the 

proposed change could promote 

competition between the Exchange and 

other execution venues, including an 

exchange that currently offers similarly 

structured customer posting credits,15

by encouraging additional orders to be 

sent to the Exchange for execution. 

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. 

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. 

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–2022–26 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–2022–26. 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-2022–26, and 

should be submitted on or before June 

7, 2022. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.19

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–10515 Filed 5–16–22; 8:45 am] 

BILLING CODE 8011–01–P 


khammond on DSKJM1Z7X2PROD with NOTICES