38786 Federal Register / Vol. 87, No. 124 / Wednesday, June 29, 2022 / Notices 

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

2 17 CFR 240.19b–4. 

3Securities Exchange Act Release No. 93854 

(December 22, 2021), 86 FR 74122 (December 29, 

2021) (File No. SR–DTC–2021–017) (‘‘Notice’’). 

4 15 U.S.C. 78s(b)(2). 

5Securities Exchange Act Release No. 94067 

(January 26, 2022), 87 FR 5548 (February 1, 2022) 

(File No. SR–DTC–2021–017). 

6 15 U.S.C. 78s(b)(2)(B). 

7Securities Exchange Act Release No. 94495 

(March, 23, 2022), 87 FR 18451 (March, 30, 2022) 

(SR–DTC–2021–017). 

8 15 U.S.C. 78s(b)(2). 

9 15 U.S.C. 78s(b)(2)(B)(ii)(II). 

10 Id. 

11 17 CFR 200.30–3(a)(57). 

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

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4The Exchange originally filed to amend the Fee 

Schedule on May 31, 2022 (SR–NYSEArca–2022– 

33) and withdrew such filing on June 14, 2022. 

Regulatory Commission to add a 

domestic shipping services contract to 

the list of Negotiated Service 

Agreements in the Mail Classification 

Schedule’s Competitive Products List. 

DATES: Date of required notice: June 29, 

2022. 

FOR FURTHER INFORMATION CONTACT: 

Sean Robinson, 202–268–8405. 

SUPPLEMENTARY INFORMATION: The 

United States Postal Service® hereby 

gives notice that, pursuant to 39 U.S.C. 

3642 and 3632(b)(3), on June 21, 2022, 

it filed with the Postal Regulatory 

Commission a USPS Request to Add 

Priority Mail Contract 749 to 

Competitive Product List. Documents 

are available at www.prc.gov, Docket 

Nos. MC2022–74, CP2022–80. 

Sean Robinson, 

Attorney, Corporate and Postal Business Law. 

[FR Doc. 2022–13910 Filed 6–28–22; 8:45 am] 

BILLING CODE 7710–12–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–95143; File No. SR–DTC– 

2021–017] 

Self-Regulatory Organizations; The 

Depository Trust Company; Notice of 

Designation of Longer Period for 

Commission Action on Proceedings To 

Determine Whether To Approve or 

Disapprove a Proposed Rule Change 

To Enhance Capital Requirements and 

Make Other Changes 

June 23, 2022. 

On December 13, 2021, The 

Depository Trust Company (‘‘DTC’’) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’) proposed 

rule change SR–DTC–2021–017 (the 

‘‘Proposed Rule Change’’) pursuant to 

Section 19(b)(1) of the Securities 

Exchange Act of 1934 (‘‘Act’’) 1 and Rule 

19b–4 thereunder.2 The Proposed Rule 

Change was published for comment in 

the Federal Register on December 29, 

2021,3 and the Commission received no 

comment letters regarding the changes 

proposed in the Proposed Rule Change. 

On January 26, 2022, pursuant to 

Section 19(b)(2) of the Act,4 the 

Commission designated a longer period 

within which to approve, disapprove, or 

institute proceedings to determine 

whether to approve or disapprove the 

Proposed Rule Change.5 On March 23, 

2022, the Commission instituted 

proceedings, pursuant to Section 

19(b)(2)(B) of the Act,6 to determine 

whether to approve or disapprove the 

Proposed Rule Change.7

Section 19(b)(2) of the Act 8 provides 

that proceedings to determine whether 

to approve or disapprove a proposed 

rule change must be concluded within 

180 days of the date of publication of 

notice of filing of the proposed rule 

change. The time for conclusion of the 

proceedings may be extended for up to 

60 days if the Commission determines 

that a longer period is appropriate and 

publishes the reasons for such 

determination.9 The 180th day after 

publication of the Notice in the Federal 

Register is June 27, 2022. 

The Commission is extending the 

period for Commission action on the 

Proposed Rule Change. The Commission 

finds that it is appropriate to designate 

a longer period within which to take 

action on the Proposed Rule Change so 

that the Commission has sufficient time 

to consider the issues raised by the 

Proposed Rule Change and to take 

action on the Proposed Rule Change. 

Accordingly, pursuant to Section 

19(b)(2)(B)(ii)(II) of the Act,10 the 

Commission designates August 26, 

2022, as the date by which the 

Commission should either approve or 

disapprove the Proposed Rule Change 

SR–DTC–2021–017. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–13812 Filed 6–28–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–95142; No. SR–NYSEArca– 

2022–36] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Amend the NYSE Arca 

Options Fee Schedule 

June 23, 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 June 22, 

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 amend the 

NYSE Arca Options Fee Schedule (the 

‘‘Fee Schedule’’) regarding fees for 

Options Trading Permits (‘‘OTPs’’) for 

NYSE Arca Market Makers.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. 

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. 


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5See Fee Schedule, NYSE Arca GENERAL 

OPTIONS and TRADING PERMIT (OTP) FEES, 

available at: https://www.nyse.com/publicdocs/ 

nyse/markets/arca-options/NYSE_Arca_Options_

Fee_Schedule.pdf. A Market Maker may trade any 

issue on the Exchange but may only submit quotes 

in issues in its assignment. However, in accordance 

with NYSE Arca Rule 6.35–O(i), at least 75% of a 

Market Maker’s trading activity must be in the 

Market Maker’s appointment. The terms 

‘‘assignment’’ and ‘‘appointment,’’ as used in this 

filing, have the same meaning. 

6See id. 

7See NYSE American Options Fee Schedule, 

Section III.A. Monthly ATP Fees, available at: 

https://www.nyse.com/publicdocs/nyse/markets/ 

american-options/NYSE_American_Options_Fee_

Schedule.pdf. 

8The Exchange notes that the NYSE American 

Options Fee Schedule has adopted the same 

definition of ‘‘Bottom 45%’’ with respect to issues 

traded on NYSE American. See id. 

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 

restructure fees relating to OTPs for 

Market Makers. Specifically, the 

Exchange proposes to modify the 

number of option issues a Market Maker 

may quote per OTP and modify the fees 

applicable to Market Maker OTPs. 

Currently, the number of option 

issues a Market Maker may quote in 

their assignment is based on the number 

of OTPs the Market Maker holds per 

month. A Market Maker may quote up 

to 175 issues under its first OTP; up to 

350 issues with a second OTP; up to 

1,000 issues with a third OTP; and, with 

a fourth OTP, a Market Maker may 

quote in all option issues on the 

Exchange.5

The Exchange currently charges 

monthly fees for Market Maker OTPs as 

set forth in the table below, and a 

Market Maker currently would pay 

$18,000 in monthly OTP fees to quote 

in all option issues on the Exchange: 6

Monthly fee per OTP Number of option issues permitted in market maker’s assignment 

$6,000 for 1st OTP ................................................................................... Up to 175 option issues. 

$5,000 for the 2nd OTP ........................................................................... Up to 350 option issues. 

$4,000 for the 3rd OTP ............................................................................ Up to 1,000 option issues. 

$3,000 for the 4th OTP ............................................................................ All option issues traded on the Exchange. 

$1,000 for the 5th and additional OTPs ................................................... All option issues traded on the Exchange. 

$175 for Reserve OTP ............................................................................. N/A. 

The Exchange proposes to modify the 

number of option issues ‘‘covered’’ by a 

Market Maker OTP (i.e., the number of 

issues in which a Market Maker may 

quote using a given OTP) and the 

monthly fee per Market Maker OTP, as 

set forth in the table below. The 

Exchange notes that its proposed fee 

structure is identical to the structure 

used by its affiliated exchange, NYSE 

American LLC (‘‘NYSE American’’), for 

its analogous Market Maker trading 

permit, the ATP, and the proposed 

modifications to the Exchange’s Market 

Maker OTP fees would provide 

consistency between the permit fees on 

affiliated exchanges.7

Number of OTPs Monthly fee 

per OTP 

Number of issues permitted in 

a market maker’s quoting 

assignment 

1st OTP .......................................................................................................................................... $8,000 60 plus the Bottom 45%. 

2nd OTP ......................................................................................................................................... 6,000 150 plus the Bottom 45%. 

3rd OTP .......................................................................................................................................... 5,000 500 plus the Bottom 45%. 

4th OTP .......................................................................................................................................... 4,000 1,100 plus the Bottom 45%. 

5th OTP .......................................................................................................................................... 3,000 All issues. 

6th to 9th OTP ................................................................................................................................ 2,000 All issues. 

10th or more OTPs ........................................................................................................................ 500 All issues. 

Reserve Market Maker OTP .......................................................................................................... 175 N/A. 

The Exchange proposes to increase 

both the monthly fee per Market Maker 

OTP and the number of issues covered 

by each additional OTP because, among 

other reasons, the number of issues 

traded on the Exchange has increased 

significantly in recent years. At the time 

of the last revision to the number of 

issues covered by a Market Maker OTP, 

the Exchange was trading approximately 

2,372 issues. At the beginning of 2019, 

the Exchange listed 2,450 issues for 

options trading. As of October 1, 2021, 

the Exchange listed 3,846 issues for 

options trading. Thus, a fourth OTP, 

which currently permits a Market Maker 

to quote in all issues on the Exchange, 

now covers over 1,400 more issues than 

when the Exchange instituted the 

current fee structure for Market Maker 

OTPs. Accordingly, the Exchange 

proposes to modify its Market Maker 

OTP fee structure, as described in the 

above table, to reflect the greater 

number of issues traded on the 

Exchange and the resulting increase in 

trading opportunities available to 

Market Makers. 

Specifically, for the first four OTPs 

held by a Market Maker, the Exchange 

proposes to allow a Market Maker to 

quote a certain number of option issues 

(as set forth in the table above) plus the 

‘‘Bottom 45%.’’ The Exchange proposes 

to define the ‘‘Bottom 45%’’ in the Fee 

Schedule as the least actively traded 

issues on the Exchange in each calendar 

quarter, as ranked by industry volume 

reported by the OCC. Each calendar 

quarter, with a one-month lag, the 

Exchange will publish on its website a 

list of the Bottom 45% of issues traded. 

Any newly listed issues will 

automatically become part of the Bottom 

45% until the next evaluation period, at 

which time such issues will be 

evaluated for inclusion in the Bottom 

45% based on their trading volumes and 

resultant rank among all issues traded 

on the Exchange.8 As further proposed, 

with a fifth OTP (or more), a Market 

Maker would be permitted to quote in 

all issues on the Exchange. Thus, as 

proposed, a Market Maker that wishes to 

quote in all issues on the Exchange 

would incur monthly permit fees of 

$26,000. 

The Exchange believes that the 

proposed fee structure would better 

align its Market Maker OTP fees with 


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9For example, a Market Maker firm that has three 

individual Market Makers may, depending on its 

business preferences, choose to separate those 

Market Makers into three distinct trading groups. In 

that case, for each of those individual Market 

Makers to be able to submit quotes in all issues 

traded on the Exchange, the Market Maker firm 

would need to allot five OTPs to each such 

individual Market Maker (and would thus need to 

hold 15 OTPs total). 

10The Exchange has announced that it will begin 

migrating Exchange-listed options to the Pillar 

technology platform on July 11, 2022, available 

here: https://www.nyse.com/trader-update/ 

history#110000421498. See also Securities 

Exchange Act Release Nos. 93193 (September 29, 

2021), 86 FR 55926 (October 7, 2021) (SR– 

NYSEArca–2021–47) (Notice of Filing of Proposed 

Rule Change for New Rules 6.1P–O, 6.37AP–O, 

6.40P–O, 6.41P–O, 6.62P–O, 6.64P–O, 6.76P–O, and 

6.76AP–O and Amendments to Rules 1.1, 6.1–O, 

6.1A–O, 6.37–O, 6.65A–O and 6.96–O); 94637 

(April 7, 2022), 87 FR 21959 (April 13, 2022) (SR– 

NYSEArca-2021–68) (Notice of Filing of 

Amendment Nos. 1 and 2 and Order Granting 

Accelerated Approval of a Proposed Rule Change, 

as Modified by Amendment Nos. 1 and 2, to Adopt 

New Exchange Rule 6.91P–O). 

11 15 U.S.C. 78f(b). 

12 15 U.S.C. 78f(b)(4) and (5). 

13See Securities Exchange Act Release No. 51808 

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

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

14The 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. 

15Based 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 

was 10.16% for the month of March 2021 and 

13.57% for the month of March 2022. 

16See NYSE American Options Fee Schedule, 

note 7, supra; Cboe Exchange, Inc. (‘‘Cboe’’) 

Options Fee Schedule, Electronic Trading Permit 

Fees & Market-Maker EAP Appointments Sliding 

Scale, available at: https://cdn.cboe.com/resources/ 

membership/Cboe_FeeSchedule.pdf. It is the 

Exchange’s understanding that a Market Maker on 

Cboe would incur monthly fees of approximately 

$128,400 to quote in all issues. Based on the 

Exchange’s interpretation of Cboe’s fee structure 

and rules governing Market Maker appointments, a 

Cboe Market Maker would be subject to a $5,000 

fee to secure a trading permit and additional fees 

based on the Appointment Units corresponding to 

the symbol(s) in which the Market Maker wishes to 

quote. See Cboe Rule 5.50, Market-Maker 

Appointments, available at: https://cdn.cboe.com/ 

resources/regulation/rule_book/C1_Exchange_Rule_

Book.pdf (providing that a Market Maker may select 

for each of its Trading Permits any combination of 

class appointments, and that all classes are placed 

within a specific tier according to trading volume 

statistics (except for the AA tier) and assigned an 

‘‘appointment weight’’ depending upon its tier 

location, and setting forth the appointment weights 

applicable to each of its Appointment Tiers). Thus, 

by the Exchange’s calculation based on Cboe’s 

published Class Appointment Units effective as of 

February 1, 2022 (available at: https:// 

the significantly greater number of 

option issues traded on the Exchange in 

recent years and the enhanced benefits 

Market Makers derive from access to 

those issues. The Exchange also believes 

that the proposal would continue to 

incent Market Makers to quote in a 

broad range of options, including less 

liquid and active issues, by offering 

Market Makers access to the Bottom 

45% of issues (approximately 1,730 

issues, as of the end of the third quarter 

of 2021) beginning with the first OTP. 

By promoting increased Market Maker 

quoting, the proposed change would, in 

turn, encourage more liquid markets 

and quote competition, which benefits 

all market participants. 

The Exchange also proposes to charge 

the same fee for each of the sixth 

through ninth Market Maker OTPs 

($2,000) and to decrease the fee for the 

tenth Market Maker OTP or more from 

$1,000 to $500. Market Maker firms that 

sponsor multiple individual Market 

Makers may choose to purchase 

additional OTPs to allow those 

individual Market Makers to each quote 

more issues (rather than purchasing one 

set of OTPs to be shared across the 

firm).9 As a result, the Exchange 

believes that these proposed changes 

could incent Market Maker firms to 

have more individual Market Makers 

quoting on the Exchange if they so 

choose, which would in turn encourage 

liquidity and depth of markets 

(including in the less liquid issues that 

Market Makers would be able to quote 

in with the first OTP and beyond). The 

Exchange also believes that the 

proposed fees, to the extent they 

promote increased liquidity, could make 

the Exchange a more attractive venue for 

trading and increase trading 

opportunities for the benefit of all 

market participants. 

The Exchange does not propose any 

changes to the monthly fee for Reserve 

Market Maker OTPs. 

The Exchange proposes to implement 

this fee change on the first day of the 

month following the completion of its 

migration to the Pillar technology 

platform.10

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

Section 6(b) of the Act,11 in general, and 

furthers the objectives of Sections 

6(b)(4) and (5) of the Act,12 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.’’ 13

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.14

Therefore, currently no exchange 

possesses significant pricing power in 

the execution of multiply-listed equity 

and ETF options order flow. More 

specifically, in March 2022, the 

Exchange had less than 14% market 

share of executed volume of multiplylisted equity and ETF options trades.15

Accordingly, the Exchange believes 

that competitive forces constrain 

options exchange fees, including Market 

Maker permit fees. Market Makers serve 

a unique and important function on the 

Exchange (and other options exchanges) 

given the quote-driven nature of options 

markets. Because options exchanges rely 

on actively quoting Market Makers to 

facilitate a robust marketplace that 

attracts order flow, options exchanges 

must attract and retain Market Makers, 

including by setting competitive Market 

Maker permit fees. Stated otherwise, 

changes to Market Maker permit fees 

can have a direct effect on the ability of 

an exchange to compete for order flow. 

The Exchange also believes that the 

number of options exchanges on which 

Market Makers can effect option 

transactions also ensures competition in 

the marketplace and constrains the 

ability of exchanges to charge 

supracompetitive fees for access to its 

market by Market Makers. 

Accordingly, the Exchange believes 

the proposed fees for Market Maker 

OTPs are reasonably designed to enable 

the Exchange to remain competitive 

with other options exchanges because 

they are based on the Market Maker 

trading permit fees assessed by another 

options exchange and are significantly 

lower than the Market Maker trading 

permit fees assessed by at least one 

other options exchange for the ability to 

quote in all issues.16 As noted above, a 


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www.cboe.com/us/options/market_statistics/class_

appointment/), a Market Maker that wishes to quote 

in all issues on Cboe would require 39 

Appointment Units, which would result in fees of 

$123,400 in addition to the $5,000 trading permit 

fee. 

17See NYSE American Options Fee Schedule, 

note 7, supra. The Exchange notes that NYSE 

American Options’ ATP fees have been in effect 

since 2012, and, presumably, are reasonable as 

required by the Act. See Securities Exchange Act 

Release No. 67764 (August 31, 2012), 77 FR 55254 

(September 7, 2012). 

18NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. 

Cir. 2010) (internal citations omitted). 

19See U.S. Securities and Exchange Commission, 

‘‘Staff Guidance on SRO Rule Filings Relating to 

Fees’’ (May 21, 2019), available at: https://

www.sec.gov/tm/staff-guidance-sro-rule-filings-fees. 

20See, e.g., Market Maker Incentive for Penny 

Issues; Market Maker Incentive for Non-Penny 

Issues; Market Maker Incentives for SPY. 

21See note 16, supra. 

Market Maker would pay monthly OTP 

fees of $26,000 to quote in all issues 

under the Exchange’s proposal, which is 

the same amount charged by NYSE 

American for a Market Maker on the 

NYSE American Options exchange to 

quote in all issues.17

Although the Exchange’s proposed 

restructuring of Market Maker OTP fees 

would increase the monthly fee for the 

first through third OTPs, the Exchange 

believes that the increased cost to 

Market Makers is reasonable given that 

a greater number of issues would be 

covered by an OTP, as proposed. The 

Exchange also believes the proposal is 

reasonable in that it offers Market 

Makers the ability to quote issues in the 

Bottom 45% with just one OTP, which 

the Exchange believes would encourage 

increased quoting in those issues, 

thereby promoting increased quote 

competition and liquidity in a greater 

number of issues (and, in particular, less 

active issues). 

The Exchange also believes that, 

although the proposal would increase 

the fee for the fourth OTP while 

reducing the number of issues that a 

Market Maker would be permitted to 

quote with four OTPs, the increased fees 

are reasonable in the context of the 

proposed restructuring of OTP fees, as 

well as in light of the overall increase 

in issues listed on the Exchange as 

compared to when the Exchange 

implemented the current fee structure 

for OTPs. Similarly, while the proposed 

fees for the fifth through ninth OTPs 

would increase while still affording 

Market Makers the ability to quote in all 

issues on the Exchange, the Exchange 

believes that the increase is likewise 

reasonable in the context of the 

proposed restructuring of OTP fees and 

reflects the increased number of issues 

traded on the Exchange and 

corresponding enhanced opportunities 

for trading, as discussed above. 

Thus, although the fees for certain of 

the monthly Market Maker OTPs would 

increase in relation to the number of 

issues ‘‘covered’’ by such OTP, the 

Exchange believes that, on balance, the 

proposed restructuring is reasonably 

and equitably designed to align its 

Market Maker OTP fees with the current 

level of activity on the Exchange, while 

continuing to incent Market Makers to 

quote in a broad range of options, 

thereby promoting more liquid markets 

and quote competition for the benefit of 

all market participants. Specifically, the 

Exchange believes that, to the extent the 

proposed change increases the monthly 

fees per Market Maker OTP, such 

increases reasonably reflect the 

significantly greater number of issues 

traded on the Exchange since its last 

revision of the Market Maker OTP fee 

structure and the resulting enhancement 

in trading opportunities for Market 

Makers, even with the same number of 

OTPs. Moreover, with respect to the 

proposed increase in fees for the first 

through third Market Maker OTPs, the 

Exchange believes the proposed change 

is reasonable in light of the significantly 

increased number of issues that would 

be covered by those OTPs, which would 

allow a Market Maker to quote a greater 

number of issues with the same number 

of OTPs. The Exchange further believes 

that the proposed change would 

continue to incent Market Makers to 

quote in a broad range of options, 

including the less active issues in the 

Bottom 45%, thereby improving market 

quality for all market participants. 

The Exchange also believes that the 

proposed fees have been reasonably 

designed in response to significant 

competitive forces in the market for 

order flow, which constrain the 

Exchange’s pricing determinations, 

including with respect to Market Maker 

permit fees. Courts have long recognized 

that the market for order flow is 

competitive; for example, in 

NetCoalition v. SEC, the United States 

Court of Appeals for the D.C. Circuit 

noted that market participants ‘‘have a 

wide range of choices of where to route 

orders for execution’’ and that because 

‘‘no exchange possesses a monopoly, 

regulatory or otherwise, in the execution 

of order flow . . . [exchanges] must 

compete vigorously for order flow to 

maintain [their] share of trading 

volume.’’ 18 The Commission has 

historically examined competitive 

forces to evaluate whether proposed fees 

are reasonable, equitable, and not 

unfairly discriminatory, based on the 

underlying belief that ‘‘the operation of 

competitive forces ‘will work 

powerfully to constrain unreasonable or 

unfair pricing behavior, including the 

level of any fees.’ ’’ 19

Market Makers are free to choose to 

access any of the other available options 

exchanges instead of, or in addition to, 

the Exchange. A Market Maker’s 

decision to access an exchange or not 

could be based on several criteria, 

including, but not limited to, the level 

of permit fees, and Market Makers may 

take into consideration transaction fees 

and other costs and benefits associated 

with doing business on a given 

exchange when determining whether to 

access such market. For example, 

although Market Makers on the 

Exchange are subject to OTP fees that 

other market participants are not 

assessed, the Exchange’s Fee Schedule 

also offers various incentives to Market 

Makers based on the important function 

they serve on the Exchange.20

Competitive forces thus constrain the 

Exchange’s ability to set Market Maker 

OTP fees and militate against any 

exchange’s ability to charge 

supracompetitive fees for access to its 

market by Market Makers. Specifically, 

the Exchange believes that its Market 

Maker OTP fees are constrained by 

competitive considerations because 

unreasonable permit fees could 

discourage prospective Market Makers 

from choosing to access the Exchange or 

cause existing Market Makers to 

reevaluate their participation on the 

Exchange. If the Exchange were to set 

Market Maker OTP fees at a level that 

would disincentivize Market Makers 

from quoting and trading on the 

Exchange or cause Market Makers to 

disconnect from the Exchange 

altogether, such attrition would impact 

the Exchange’s ability to compete with 

other options exchanges for order flow 

and make the Exchange a less attractive 

venue for trading. 

As noted above, there are currently 16 

registered options exchanges that trade 

options; one such exchange has Market 

Maker permit fees identical to those 

proposed by the Exchange, and at least 

one other has Market Maker permit fees 

much higher than those proposed by the 

Exchange.21 Furthermore, relatively low 

barriers to entry mean that new 

exchanges may rapidly and 

inexpensively enter the market and offer 

additional substitute platforms that 

would also compete with the Exchange 

for Market Maker order flow. For 

example, four exchanges have been 

added in the U.S. options markets in the 

last five years (Cboe EDGX, Inc.; Nasdaq 

MRX, LLC; MIAX Pearl, LLC; and MIAX 

Emerald, LLC). Based on publicly 


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22See note 15, supra. 

23According to BOX, a Market Maker on BOX 

terminated its status as a Market Maker in response 

to BOX’s proposed modification of Market Maker 

trading permit fees. See Securities Exchange Act 

Release No. 94894 (May 11, 2022), 87 FR 29987 

(May 17, 2022) (SR–BOX–2022–17) (Notice of Filing 

and Immediate Effectiveness of a Proposed Rule 

Change To Amend the Fee Schedule on the BOX 

Options Market LLC Facility to Adopt Electronic 

Market Maker Trading Permit Fees). BOX noted, 

and the Exchange agrees, that this Market Maker’s 

decision demonstrates that Market Makers can, and 

do, alter their membership status if they deem 

permit fees at an exchange to be unsuitable for their 

business needs, thus demonstrating the competitive 

environment for Market Maker permit fees and the 

constraints on options exchanges when setting 

Market Maker permit fees. 

24The Exchange observed that exchanges in the 

MIAX Group introduced multiple access fee 

increases in July and August 2021. In June 2021, 

prior to these fee increases, the aggregate MIAX 

Group share of multi-list options volume was 

15.45%. In the months after the introduction of 

higher access fees, MIAX Group’s market share 

declined: by September 2021, the aggregate MIAX 

Group market share was 14.50%, and as of March 

2022, market share was 13.75%. 

25The Exchange notes that, according to BOX, of 

the 62 market making firms that are registered as 

Market Makers across Cboe, Miami International 

Securities Exchange, LLC, and BOX, 42 firms access 

only one of the three exchanges. See Securities 

Exchange Act Release No. 94894 (May 11, 2022), 87 

FR 29987 (May 17, 2022) (SR–BOX–2022–17) 

(Notice of Filing and Immediate Effectiveness of a 

Proposed Rule Change to Amend the Fee Schedule 

on the BOX Options Market LLC Facility To Adopt 

Electronic Market Maker Trading Permit Fees). The 

Exchange believes that BOX’s observation 

demonstrates that market making firms can, and do, 

select which exchanges they wish to access, and, 

accordingly, options exchanges must take 

competitive considerations into account when 

setting fees for such access. 

26The Exchange also notes that the Fee Schedule 

provides for various incentives to Market Makers 

(that are not available to other market participants). 

See note 20, supra. 

27 15 U.S.C. 78f(b)(8). 

28See Reg NMS Adopting Release, supra note 13, 

at 37499. 

available information, no single options 

exchange currently has more than 16% 

of the market share. The Exchange is 

also not aware of any evidence that has 

been offered or demonstrated that a 

market share of less than 14% provides 

the Exchange with anti-competitive 

pricing power. Moreover, the Exchange 

believes that the fact that its market 

share changes from month to month 

demonstrates that the competitive forces 

to which it is subject. As noted above, 

while the Exchange’s market share as of 

March 2022 was 13.57%, its market 

share was 10.16% in March 2021 and 

fluctuated between 9.07% and 13.99% 

in the intervening period.22

The Exchange further believes that its 

ability to set Market Maker permit fees 

is constrained by competitive forces 

based on the fact that Market Makers 

can, and have, chosen to terminate their 

status as a Market Maker if they deem 

Market Maker permit fees to be 

unreasonable or excessive. Specifically, 

the Exchange notes that a BOX 

participant modified its access to BOX 

in connection with the implementation 

of a proposed change to BOX’s Market 

Maker permit fees.23 The Exchange has 

also observed that another options 

exchange group experienced decreases 

in market share following its proposed 

modifications of its access fees 

(including Market Maker trading permit 

fees), suggesting that market 

participants (including Market Makers) 

are sensitive to changes in exchanges’ 

access fees and may respond by shifting 

their order flow elsewhere if they deem 

the fees to be unreasonable or 

excessive.24

There is no requirement, regulatory or 

otherwise, that any Market Maker 

connect to and access any (or all of) the 

available options exchanges.25 The 

Exchange also is not aware of any 

reason why a Market Maker could not 

cease being a permit holder in response 

to unreasonable price increases. The 

Exchange does not assess any 

termination fee for a Market Maker to 

drop its OTP, nor is the Exchange aware 

of any other costs that would be 

incurred by a Market Maker to do so. 

For the reasons described above, the 

Exchange believes that its ability to 

modify Market Maker OTP fees is 

constrained by competitive forces and 

that its proposed modifications to the 

Market Maker OTP fee structure are 

reasonably designed in consideration of 

the competitive environment in which 

the Exchange operates, by balancing the 

value of the enhanced benefits available 

to Market Makers due to the current 

level of activity on the Exchange with a 

fee structure that will continue to incent 

Market Makers to support increased 

liquidity, quote competition, and 

trading opportunities on the Exchange, 

for the benefit of all market participants. 

The Proposed Rule Change Is an 

Equitable Allocation of Credits and Fees 

and Is Not Unfairly Discriminatory 

The proposed change is equitable and 

not unfairly discriminatory because it 

applies to all Market Makers, all of 

whom are required to have at least one 

OTP to correlate to the options issues in 

their assignments. The Exchange further 

believes that the proposed change is not 

unfairly discriminatory to Market 

Makers because only Market Makers are 

required to submit quotes as part of 

their obligations to operate on the 

Exchange. The Exchange also believes 

that, to the extent the proposal increases 

fees that only apply to Market Makers, 

the proposed change is equitable and 

not unfairly discriminatory given both 

the benefits to Market Makers derived 

from the increased number of issues on 

the Exchange and the function that 

Market Makers fulfill on the Exchange 

(which requires the Exchange to allocate 

more supporting bandwidth and 

resources, particularly in light of the 

greater number of issues in which 

Market Makers can quote).26

The Exchange also believes that the 

proposed change is equitable and not 

unfairly discriminatory because it is 

designed to encourage Market Makers to 

quote additional issues, including less 

active issues, which would promote 

more liquid markets and quote 

competition, to the benefit all market 

participants. The Exchange further 

believes that, to the extent the proposed 

change results in increased monthly 

fees, such increases represent an 

equitable allocation of fees in the 

context of the proposed restructuring of 

Market Maker OTP fees, as well as in 

consideration of the increased number 

of issues traded on the Exchange since 

its last revision of the Market Maker 

OTP fee structure, which in turn has 

increased trading opportunities for 

Market Makers on the Exchange. 

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,27 the Exchange does not believe 

that the proposed rule change will 

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 

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.’’ 28

Intramarket Competition. The 

Exchange does not believe that the 

proposed rule change would impose an 

undue burden on competition because it 

impacts all Market Makers, all of whom 

require at least one OTP to satisfy their 

quoting obligations on the Exchange. 

The Exchange also does not believe that 

the proposed change would impose any 

burden on competition that is not 


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Federal Register / Vol. 87, No. 124 / Wednesday, June 29, 2022 / Notices 38791 

29See note 20, supra. 

30See note 16, supra. 

31 15 U.S.C. 78s(b)(3)(A). 

32 17 CFR 240.19b–4(f)(2). 

33 15 U.S.C. 78s(b)(2)(B). 34 17 CFR 200.30–3(a)(12). 

necessary or appropriate, as Market 

Makers fulfill a unique role on the 

Exchange; only Market Makers are 

required to submit quotes as part of 

their obligations to operate on the 

Exchange, and, in light of that role, are 

eligible for certain incentives that are 

not offered to other market 

participants.29 While the proposed 

change generally increases fees for 

Market Maker OTPs, the Exchange does 

not believe that it imposes any burden 

on competition that is not necessary or 

appropriate because it would align 

Market Maker OTP fees with the current 

level of activity and benefits available to 

Market Makers on the Exchange and, by 

continuing to incent Market Makers to 

quote in a broad range of options, would 

promote quote competition and trading 

opportunities on the Exchange. In 

addition, the Exchange believes that the 

proposed change, to the extent it 

expands the number of covered issues 

per Market Maker OTP, would 

encourage increased liquidity, quote 

competition, and trading opportunities 

on the Exchange, which in turn would 

benefit 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 options exchanges if they 

deem fee levels at a particular venue to 

be excessive. 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. 

Therefore, the Exchange believes that no 

exchange currently possesses significant 

pricing power in the execution of 

multiply-listed equity and ETF options 

order flow. The Exchange also believes 

that the number of options exchanges on 

which a Market Maker can transact also 

ensures competition in the marketplace 

and constrains the ability of exchanges 

to charge supracompetitive fees to 

Market Makers for access to its market. 

In such an environment, the Exchange 

must continually review, and consider 

adjusting, its fees and credits to remain 

competitive with other exchanges. 

The Exchange does not believe the 

proposed rule change would impose any 

undue burden on intermarket 

competition and instead believes that 

the proposal would promote 

competition among options exchanges. 

Specifically, the Exchange believes that 

its proposed fee structure for Market 

Maker OTPs would promote 

competition because, as discussed 

above, it would be identical to the 

Market Maker permit fees assessed by 

another options exchange and remains 

significantly lower than the Market 

Maker permit fees assessed by another 

options exchange for the ability to quote 

in all issues.30 Thus, the Exchange 

believes that the proposed change 

would not discourage Market Makers 

from continuing to quote in a broad 

range of options, thereby supporting 

increased liquidity, quote competition, 

and trading opportunities on the 

Exchange, which in turn could make the 

Exchange a more attractive venue for 

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 is effective 

upon filing pursuant to Section 

19(b)(3)(A) 31 of the Act and 

subparagraph (f)(2) of Rule 19b–4 32

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) 33 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–2022–36 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–2022–36. 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–2022–36, and 

should be submitted on or before July 

20, 2022. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.34

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–13811 Filed 6–28–22; 8:45 am] 

BILLING CODE 8011–01–P 


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