Document ID: SEC-2023-0124-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2023-02-02T05:00Z

[Federal Register Volume 88, Number 22 (Thursday, February 2, 2023)]
[Notices]
[Pages 7119-7125]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-02129]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96763; File No. SR-NYSEARCA-2023-09]

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

January 27, 2023.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that, on January 26, 2023, 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 Floor Broker Fixed Cost Prepayment 
Incentive Program and certain manual execution fees. The Exchange 
proposes to implement the fee change effective January 26, 2023.\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 originally filed to amend the Fee Schedule on 
December 30, 2022 (SR-NYSEARCA-2022-86), with an effective date of 
January 3, 2023, then withdrew such filing and amended the Fee 
Schedule on January 13, 2023 (SR-NYSEARCA-2023-08), which latter 
filing the Exchange withdrew on January 26, 2023.
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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.

[[Page 7120]]

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 Floor Broker Fixed Cost 
Prepayment Incentive Program (the ``FB Prepay Program'') and to modify 
certain fees relating to manual executions. The Exchange proposes to 
implement the rule change on January 26, 2023.
Professional Customer Manual Executions
    The Exchange proposes to modify the fees for Professional Customer 
manual executions (``Professional Customer Manual Fees'').\5\ The Fee 
Schedule currently provides for a $0.25 per contract fee for such 
executions, which fee the Exchange has waived for the period August 1, 
2022 to December 31, 2022.\6\ The Exchange now proposes to make the 
waiver permanent by modifying the fee for Professional Customer manual 
executions to $0.00.\7\ The Exchange also proposes to delete the 
asterisk-denoted statement regarding the period of the waiver, as the 
language would no longer be relevant in light of this proposed change 
and following the expiration of the waiver period on December 31, 2022. 
The proposed change is intended to continue to attract manually 
executed Professional Customer orders to the Exchange, and the Exchange 
believes that all market participants stand to benefit from an increase 
in such volume, which would promote market depth, facilitate tighter 
spreads and enhance price discovery, and may lead to a corresponding 
increase in order flow from other market participants as well.
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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 Securities Exchange Act Release No. 95412 (August 3, 
2022), 87 FR 48523 (August 9, 2022) (SR-NYSEARCA-2022-47) (Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change to Modify 
the NYSE Arca Options Fee Schedule) (the ``Professional Customer 
Manual Fee Filing'').
    \7\ The Professional Customer Manual Fee Filing also modified 
the Fee Schedule's description of the FB Prepay Program to provide 
that volume from Professional Customer manual executions would still 
be included in the calculation of billable volume for purposes of 
the FB Prepay Program when Professional Customer manual execution 
fees are waived. See id. The Exchange proposes to delete this 
statement further to its proposal to eliminate the fee for 
Professional Customer manual executions and consistent with the 
proposed changes to the FB Prepay Program as described below.
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Firm and Broker Dealer Monthly Fee Cap
    The Exchange also proposes to modify the Firm and Broker Dealer 
Monthly Fee Cap (the ``Monthly Fee Cap'').\8\ Currently, combined Firm 
proprietary fees and Broker Dealer fees for transactions in standard 
option contracts cleared in the customer range for manual executions 
and QCC transactions are capped at $100,000 per month. A Firm or Broker 
Dealer currently may also qualify for a decreased fee cap by achieving 
Customer Penny Posting Credit Tier levels.\9\
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    \8\ See Fee Schedule, NYSE Arca OPTIONS: TRADE-RELATED CHARGES 
FOR STANDARD OPTIONS, FIRM AND BROKER DEALER MONTHLY FEE CAP.
    \9\ See id. at CUSTOMER PENNY POSTING TIERS.
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    The Exchange proposes to raise the Monthly Fee Cap to $150,000 per 
month and to eliminate the decreased fee caps for Firms or Broker 
Dealers that achieve Customer Penny Posting Credit Tiers, such that all 
Firms and Broker Dealers would be eligible for a $150,000 monthly fee 
cap. Accordingly, the Exchange proposes to modify the Fee Schedule to 
replace $100,000 with $150,000 in the description of the Monthly Fee 
Cap and to delete the sentence and table describing decreased fee caps 
offered to Firms or Broker Dealers that achieve Customer Penny Posting 
Credit Tiers. The Exchange does not otherwise propose any changes to 
the provisions of the Monthly Fee Cap. Strategy executions, royalty 
fees, and firm trades executed via a Joint Back Office agreement will 
continue to be excluded from fees to which the Monthly Fee Cap would 
apply. The incremental service fee of $0.01 per contract for Firm or 
Broker Dealer manual transactions other than QCC transactions (for 
which there is no incremental service fee) will continue to apply once 
the Monthly Fee Cap has been reached.
    The Exchange believes that the proposed change, despite increasing 
the amount of the Monthly Fee Cap, would continue to incentivize Firms 
and Broker Dealers to direct order flow to the Exchange to achieve the 
benefits of a fee cap. The Exchange also notes that the proposed change 
would provide for a uniform fee cap amount that would be applicable to 
all Firms and Broker Dealers and sets the Monthly Fee Cap at an amount 
similar to the firm fee cap established by other options exchanges.\10\
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    \10\ See, e.g., NYSE American Options Fee Schedule, Section 
I.I., Firm Monthly Fee Cap (providing for $150,000 cap on fees 
associated with firm manual transactions); Nasdaq PHLX LLC, Options 
7 Pricing Schedule, Section 4 (providing for a ``Monthly Firm Fee 
Cap'' capping firm fees at $150,000). The Exchange believes its 
proposed fee cap is of a comparable amount to those offered by these 
other options exchanges, although the volumes considered to qualify 
for the various fee caps differ.
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FB Prepay Program
    The FB Prepay Program is a prepayment incentive program that allows 
Floor Brokers to prepay certain of their annual Eligible Fixed Costs in 
exchange for volume rebates. Currently, the FB Prepay Program offers 
participating Floor Brokers who prepay certain annual fixed costs an 
opportunity to qualify for rebates by achieving growth in billable 
manual volume by a certain percentage as measured against one of two 
benchmarks (the ``Percentage Growth Incentive'').\11\ Specifically, the 
Percentage Growth Incentive is designed to encourage Floor Brokers to 
increase their average daily volume in billable manual contract sides 
to qualify for a Tier; each Tier of the FB Prepay Program corresponds 
to an annual rebate equal to the greater of the ``Total Percentage 
Reduction of pre-paid annual Eligible Fixed Costs'' or the 
``Alternative Rebate.'' \12\ In either case, participating Floor 
Brokers receive their annual rebate amount in the following 
January.\13\ Floor Brokers that wish to participate in the FB Prepay 
Program for the following calendar year must notify the Exchange no 
later than the last business day of December in the current year.\14\
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    \11\ See Fee Schedule, FLOOR BROKER FIXED COST PREPAYMENT 
INCENTIVE PROGRAM (the ``FB Prepay Program''). ``Eligible Fixed 
Costs'' include the OTP Trading Participant Rights fee for a Floor 
Broker, Floor Broker Order Capture Device--Market Data Fees, Floor 
Booth fees, the Options Floor Access Fee, and Wire Services fees, as 
set forth in the table in the Fee Schedule.
    \12\ See id. The Percentage Growth Incentive excludes Customer 
volume, Firm Facilitation and Broker Dealer facilitating a Customer 
trades, and QCCs. Any volume calculated to achieve the Firm and 
Broker Dealer Monthly Fee Cap and the Limit of Fees on Options 
Strategy Executions (``Strategy Cap''), will likewise be excluded 
from the Percentage Growth Incentive because fees on such volume are 
already capped and therefore do not increase billable manual volume. 
See id.
    \13\ See id.
    \14\ See id.
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    The Exchange now proposes to simplify the FB Prepay Program by 
eliminating the Percentage Growth Incentive and accompanying annual 
rebates \15\ and instead providing FB

[[Page 7121]]

Prepay Program participants with monthly rebates through the Manual 
Billable Rebate Program. Specifically, all Floor Brokers that 
participate in the FB Prepay Program are eligible for a rebate on 
manual billable volume of ($0.08) per billable side. In addition, FB 
Prepay Program participants that achieve more than 500,000 billable 
sides in a month will be eligible for an additional rebate of ($0.02) 
per billable side, which would be payable back to the first billable 
side. The calculation of volume on which rebates earned through the 
Manual Billable Rebate Program would be paid is based on transactions 
including at least one side for which manual transaction fees are 
applicable and excludes QCCs.\16\ The Exchange proposes to continue to 
exclude any volume calculated to achieve the Strategy Cap, regardless 
of whether the cap is achieved, because fees on such volume are already 
capped and therefore such volume does not increase billable manual 
volume.\17\
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    \15\ To effect the proposed change to eliminate the Percentage 
Growth Incentive and related rebates, the Exchange also proposes to 
delete the last sentence of the description of the FB Prepay Program 
(which currently provides that Floor Brokers in the FB Prepay 
Program will receive their rebate in the following January), as such 
text would no longer apply to the FB Prepay Program, as modified.
    \16\ The Exchange proposes to continue to exclude volume from 
QCC transactions from the calculation of eligible volume for rebates 
paid through the Manual Billable Rebate Program, as proposed, 
because Floor Brokers would be eligible for separate credits and 
rebates for QCC transactions.
    \17\ The Exchange proposes to remove references to the exclusion 
of Customer volume and Firm Facilitation and Broker Dealer 
facilitating a Customer trades as redundant because such volume is 
not billable. The Exchange also proposes that it would no longer 
exclude volume calculated to achieve the Monthly Fee Cap from the 
Manual Billable Rebate Program and proposes conforming changes to 
reflect the deletion of references to the same. The Exchange 
proposes to include volume calculated to achieve the Monthly Fee Cap 
in calculations for the Manual Billable Rebate Program in light of 
the proposed change to the Monthly Fee Cap (as described in this 
filing), which would result in more non-facilitation Firm and Broker 
Dealer volume being subject to regular transaction fees.
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    The Exchange further proposes to provide that Submitting Broker QCC 
credits \18\ and Floor Broker rebates earned through the Manual 
Billable Rebate Program shall not combine to exceed $2,000,000 per 
month per firm.
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    \18\ See Fee Schedule, NYSE Arca OPTIONS: TRADE-RELATED CHARGES 
FOR STANDARD OPTIONS, QUALIFIED CONTINGENT CROSS (``QCC'') 
TRANSACTION FEES AND CREDITS. The Exchange provides a ($0.22) per 
contract credits to Submitting Brokers for Non-Customer vs. Non-
Customer QCC transactions and a ($0.16) per contract credit to 
Submitting Brokers for Customer vs. Non-Customer QCC transactions.
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    Finally, the Exchange proposes to modify the date it will use for 
the calculation of a Floor Broker's Eligible Fixed Costs for the 
following calendar year. The FB Prepay Program currently specifies that 
a Floor Broker that commits to the program will be invoiced in January 
for Eligible Fixed Costs, based on annualizing their Eligible Fixed 
Costs incurred in November 2020. The Exchange proposes to modify the 
Fee Schedule to specify that the annualization of Eligible Fixed Costs 
would be based on costs incurred in November 2022, which the Exchange 
believes would more accurately reflect Eligible Fixed Costs for the 
coming calendar year.
    Although the Exchange cannot predict with certainty whether the 
proposed changes to the FB Prepay Program would encourage Floor Brokers 
to participate in the program or to increase either their manual 
billable volume, the Exchange believes that the proposed changes would 
continue to incentivize Floor Brokers to participate in the FB Prepay 
Program by simplifying the structure of the program, modifying the 
qualifying criteria and rebates offered through the program to be on a 
monthly (rather than annual) basis, and offering additional rebates on 
manual billable volume through the Manual Billable Rebate Program. All 
Floor Brokers are eligible to participate in the FB Prepay Program and 
qualify for the proposed rebates, and the rebates are achievable in any 
given month without regard to volumes from any other month.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\19\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\20\ in particular, 
because it provides for the equitable allocation of reasonable dues, 
fees, and other charges among its members, issuers and other persons 
using its facilities and does not unfairly discriminate between 
customers, issuers, brokers or dealers.
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    \19\ 15 U.S.C. 78f(b).
    \20\ 15 U.S.C. 78f(b)(4) and (5).
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The Proposed Rule Change Is Reasonable
    The Exchange operates in a highly competitive market. The 
Commission has repeatedly expressed its preference for competition over 
regulatory intervention in determining prices, products, and services 
in the securities markets. In Regulation NMS, the Commission 
highlighted the importance of market forces in determining prices and 
SRO revenues and, also, recognized that current regulation of the 
market system ``has been remarkably successful in promoting market 
competition in its broader forms that are most important to investors 
and listed companies.'' \21\
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    \21\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005) (S7-10-04) (``Reg NMS 
Adopting Release'').
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    There are currently 16 registered options exchanges competing for 
order flow. Based on publicly-available information, and excluding 
index-based options, no single exchange has more than 16% of the market 
share of executed volume of multiply-listed equity and ETF options 
trades.\22\ Therefore, no exchange possesses significant pricing power 
in the execution of multiply-listed equity and ETF options order flow. 
More specifically, in November 2022, the Exchange had less than 13% 
market share of executed volume of multiply-listed equity and ETF 
options trades.\23\
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    \22\ 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.
    \23\ Based on a compilation of OCC data for monthly volume of 
equity-based options and monthly volume of equity-based ETF options, 
see id., the Exchange's market share in equity-based options 
decreased from 12.99% for the month of November 2021 to 12.31% for 
the month of November 2022.
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    The Exchange believes that the ever-shifting market share among the 
exchanges from month to month demonstrates that market participants can 
shift order flow, or discontinue or reduce use of certain categories of 
products, in response to fee changes. Accordingly, competitive forces 
constrain options exchange transaction fees. Stated otherwise, 
modifications to exchange transaction fees can have a direct effect on 
the ability of an exchange to compete for order flow.
    The Exchange believes that the proposed changes are reasonable 
because they are designed to incent OTP Holders to increase the number 
of manual transactions sent to the Exchange by offering rebates to 
Floor Brokers on manual transactions with at least one billable side 
and eliminating Professional Customer Manual Fees. The proposed 
increase to the Monthly Fee Cap is likewise reasonable because the 
Exchange believes the fee cap, although higher, would continue to 
incentivize Firms and Broker Dealers to direct order flow to the 
Exchange to receive the benefits of capped fees. Moreover, the proposed 
Monthly Fee Cap would provide for a cap amount that would be applicable 
to all Firms and Broker Dealers (regardless of their qualification for 
Customer Penny Posting Credit Tiers) and establishes a cap amount 
similar to that offered by other options exchanges.\24\ The Exchange 
also believes that the proposed maximum monthly amount that a firm 
could earn from Submitting Broker QCC credits and Floor Broker rebates 
on manual billable volume is set at an amount that would encourage OTP

[[Page 7122]]

Holders to direct QCC transactions and manual billable volume to the 
Exchange to receive the existing credits and proposed rebates.
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    \24\ See note 10, supra.
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    With respect to the FB Prepay Program, the Exchange also believes 
that the proposed changes are reasonable because participation in the 
program is optional, and Floor Brokers can elect to participate in the 
program to be eligible for the rebates offered through the Manual 
Billable Rebate Program or not. The Exchange also believes that the 
proposed modification of the FB Prepay Program is reasonable because it 
is designed to simplify the program, to continue to encourage Floor 
Brokers to participate in the FB Prepay Program, and to provide 
liquidity on the Exchange. Specifically, the Exchange believes that the 
proposed restructuring of the FB Prepay Program to offer participating 
Floor Brokers rebates on manual billable volume is reasonable because 
it would streamline both the incentives offered to Floor Brokers and 
the qualification basis for such incentives; all Floor Brokers 
participating in the FB Prepay Program would be eligible for the same 
rebate on manual billable volume and would qualify for the same 
additional rebate on manual billable volume by meeting a set volume 
threshold (which the Exchange believes is reasonable and attainable 
based on recent manual billable volume executed by Floor Brokers). The 
Exchange also believes that the proposed modification of the qualifying 
criteria for and rebates offered through the FB Prepay Program to be on 
a monthly basis is reasonable and could increase opportunities for 
participating Floor Brokers to qualify for and receive the benefit of 
the incentives offered. The Exchange further believes that the proposed 
change to focus the FB Prepay Program on manual billable volume is 
reasonable because the proposed change is intended to incentivize Floor 
Brokers to increase manual billable volume executed on the Exchange, 
and any increase in such volume would benefit all market participants. 
Finally, the Exchange believes the proposed rebate amounts are 
reasonable and comparable to rebate amounts offered by another options 
exchange to Floor Brokers on manual transactions.\25\
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    \25\ See, e.g., BOX Options Exchange Fee Schedule, Section V.C. 
(offering rebates to Floor Brokers on orders presented on the 
Trading Floor, including a $0.075 rebate for Broker Dealer and 
Market Maker orders).
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    To the extent that the proposed changes attract more volume to the 
Exchange, this increased order flow would continue to make the Exchange 
a more competitive venue for order execution, which, in turn, promotes 
just and equitable principles of trade and removes impediments to and 
perfects the mechanism of a free and open market and a national market 
system. The Exchange notes that all market participants stand to 
benefit from any increase in volume entered by Floor Brokers, which 
could promote market depth, facilitate tighter spreads and enhance 
price discovery, to the extent the proposed change encourages OTP 
Holders to utilize the Exchange as a primary trading venue, and may 
lead to a corresponding increase in order flow from other market 
participants. In addition, any increased liquidity on the Exchange 
would result in enhanced market quality for all participants.
    The Exchange also believes that the proposed change to update the 
date used for the calculation of Eligible Fixed Costs from November 
2020 to November 2022 is reasonable because it expects Floor Broker 
organizations' more recent November 2022 costs to provide a more 
accurate basis for annualizing Eligible Fixed Costs for the coming 
calendar year based on anticipated fixed costs in 2023.
    Finally, to the extent the proposed change continues to attract 
greater volume and liquidity, 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 offering Floor Broker 
rebates on manual transactions.\26\ Thus, OTP Holders have a choice of 
where they direct their order flow, including their manual 
transactions. The proposed rule changes are designed to continue to 
incent OTP Holders to direct liquidity and, in particular, manual 
transactions to the Exchange. In addition, to the extent OTP Holders 
are incentivized to aggregate their trading activity at the Exchange, 
that increased liquidity could promote market depth, price discovery 
and improvement, and enhanced order execution opportunities for market 
participants.
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    \26\ See id.
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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 because the proposal is based on the 
amount and type of business transacted on the Exchange. Professional 
Customers can opt to submit orders for trading electronically or for 
manual execution on the Trading Floor. Floor Brokers are not obligated 
to participate in the FB Prepay Program, and those who do can choose to 
execute manual billable volume to earn rebates through the Manual 
Billable Rebate Program or not. The Exchange also believes that the 
proposed modification of the qualifying criteria for and rebates 
offered through the FB Prepay Program to be on a monthly basis is 
equitable because it could provide participating Floor Brokers 
opportunities each month to qualify for and receive the benefit of the 
incentives offered through the program. In addition, the proposed 
Manual Billable Rebate Program is equally available to all Floor 
Brokers that participate in the FB Prepay Program (with the additional 
rebate available to all participating Floor Brokers that execute the 
required number of manual billable transactions), and the proposed 
monthly limit on the amount that firms could earn from Floor Broker 
manual billable rebates and Submitting Broker QCC credits combined 
would apply to all firms equally. The proposed elimination of 
Professional Customer Manual Fees would likewise equally impact all 
Professional Customers executing manual transactions. The Exchange also 
believes that the proposed modification of the Monthly Fee Cap is 
equitable because it would apply to all Firms and Broker Dealers 
equally and, by eliminating the decreased caps available to Firms and 
Broker Dealers that achieve Customer Penny Posting Credit Tiers, would 
provide for the same fee cap amount for all Firms and Broker Dealers. 
To the extent the proposed changes continue to encourage increased 
liquidity to the Exchange, all market participants would benefit from 
enhanced opportunities for price improvement and order execution.
    The Exchange also notes that the proposed changes are designed to 
encourage Floor Brokers that have previously enrolled in the FB Prepay 
Program to reenroll for the upcoming year, as well as to attract Floor 
Brokers that have not yet participated in the program. Moreover, the 
Exchange believes that the proposed modifications to the FB Prepay 
Program are an equitable allocation of fees and credits

[[Page 7123]]

because they would apply to participating Floor Brokers equally and are 
intended to encourage the role performed by Floor Brokers in 
facilitating the execution of orders via open outcry, a function which 
the Exchange wishes to support for the benefit of all market 
participants. The Exchange further believes that the proposed change 
with respect to the calculation of Eligible Fixed Costs is equitable 
because it would continue to be based on each Floor Broker 
organization's annualized costs and because the November 2022 basis for 
annualizing costs would provide a more accurate reflection of Eligible 
Fixed Costs for the coming calendar year based on anticipated fixed 
costs in 2023.
    Moreover, the proposed changes are designed to continue to incent 
Floor Brokers to encourage OTP Holders to aggregate their executions at 
the Exchange as a primary execution venue. To the extent that the 
proposed change achieves its purpose in attracting more volume 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 
market-wide quality and price discovery.
The Proposed Rule Change Is Not Unfairly Discriminatory
    The Exchange believes the proposed change is not unfairly 
discriminatory because it is based on the amount and type of business 
transacted on the Exchange. Floor Brokers are not obligated to execute 
manual billable transactions or participate in the FB Prepay Program, 
and the proposed rebates offered through the Manual Billable Rebate 
Program are available to all Floor Brokers that participate in the FB 
Prepay Program on a non-discriminatory basis. The proposed changes are 
designed to streamline the structure of the FB Prepay Program by 
offering all participating Floor Brokers the same rebate on manual 
billable volume (and, for qualifying Floor Brokers, the same additional 
rebate on such volume) and to encourage Floor Brokers to utilize the 
Exchange as a primary trading venue for all transactions (if they have 
not done so previously) and increase manual billable volume sent to the 
Exchange.
    The Exchange believes that the proposed change to Professional 
Customer Manual Fees is not unfairly discriminatory because it would 
apply to all manually executed Professional Customer orders on an equal 
and non-discriminatory basis. The proposed change is also not unfairly 
discriminatory to other market participants because Professional 
Customers are an important source of order flow to the Exchange for 
execution via open outcry, which promotes price discovery, and the 
Exchange thus believes that it is appropriate to continue to encourage 
manually executed Professional Customer orders by eliminating the fee 
charged for such orders, which would apply to all similarly situated 
Professional Customers on an equal and non-discriminatory basis.
    The Exchange also believes that the proposed changes to the Monthly 
Fee Cap are not unfairly discriminatory because the fee cap, as 
proposed, would be available to all similarly situated Firms and Broker 
Dealers, any of which could continue to be incentivized to direct order 
flow to the Exchange to qualify for the fee cap. Moreover, the proposed 
change to the Monthly Fee Cap is not unfairly discriminatory because it 
would apply the same fee cap amount to all Firms and Broker Dealers, 
regardless of whether they achieve Customer Penny Posting Credit Tiers. 
Similarly, the proposed monthly maximum amount of Submitting Broker 
credits paid for QCC trades and rebates paid through the Manual 
Billable Rebate Program is not unfairly discriminatory because it would 
apply to all Firms and Broker Dealers equally. The Exchange notes that 
offering the Monthly Fee Cap to Firms and Broker Dealers but not other 
market participants is not unfairly discriminatory because the Monthly 
Fee Cap would not be meaningful for Customers or Professional Customers 
because neither Customers nor Professional Customers pay transaction 
charges for manual transactions (as proposed) or QCC transactions and 
is not unfairly discriminatory towards Market Makers, as Market Makers 
are generally charged a lower fee for manual executions and have 
alternative avenues to reduce transaction fees.\27\
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    \27\ See generally Fee Schedule (various incentives available to 
Market Makers for posted monthly volume, including on executions in 
penny issues, non-penny issues, and SPY).
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    The Exchange further believes that the proposed change with respect 
to the calculation of Eligible Fixed Costs is not unfairly 
discriminatory because it would continue to be based on each Floor 
Broker organization's annualized costs and because the Exchange expects 
that using November 2022 as the basis for annualizing costs would 
provide a more accurate reflection of Eligible Fixed Costs for the 
coming calendar year.
    To the extent that the proposed change attracts more manual 
transactions to the Exchange, this increased order flow would continue 
to make the Exchange a more competitive venue for 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 
market-wide 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.

B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act, the Exchange does 
not believe that the proposed rule change would impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. Instead, as discussed above, the Exchange believes 
that the proposed change would encourage the submission of additional 
liquidity to a public exchange, thereby promoting market depth, price 
discovery and transparency and enhancing order execution opportunities 
for all market participants. As a result, the Exchange believes that 
the proposed change furthers the Commission's goal in adopting 
Regulation NMS of fostering integrated competition among orders, which 
promotes ``more efficient pricing of individual stocks for all types of 
orders, large and small.'' \28\
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    \28\ See Reg NMS Adopting Release, supra note 21, at 37499.
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    Intramarket Competition. The proposed rebates on manual billable 
volume and the proposed modification of Professional Customer Manual 
Fees are designed to attract additional order flow to the Exchange 
(particularly in manual billable transactions), which could increase 
the volumes of contracts traded on the Exchange. The proposed

[[Page 7124]]

modification of the FB Prepay Program is likewise intended to incent 
Floor Brokers specifically to direct manual billable transactions to 
the Exchange, as well as encourage Floor Brokers to participate in the 
program. The proposed rebates would be available to all similarly 
situated Floor Brokers that participate in the FB Prepay Program. 
Greater liquidity benefits all market participants on the Exchange, and 
increased manual transactions could increase opportunities for 
execution of other trading interest. The modification of the monthly 
maximum Submitting Broker credits paid for QCC trades and rebates paid 
through the Manual Billable Rebate Program, would likewise apply 
equally to all similarly situated Floor Brokers, as would the 
elimination of Professional Customer Manual Fees impact all 
Professional Customers equally.
    With respect to the modification of the Monthly Fee Cap, the 
Exchange believes that the proposed change (even though it would raise 
the amount of the fee cap) would continue to incentivize Firms and 
Broker Dealers to direct order flow to the Exchange to be eligible for 
the benefits of capped fees on Manual transactions, thereby promoting 
liquidity on the Exchange to the benefit of all market participants
    To the extent that the proposed changes impose an additional 
competitive burden on non-Floor Brokers or, with respect to the 
proposed elimination of Professional Customer Manual Fees, on market 
participants other than Professional Customers, the Exchange believes 
that any such burden would be appropriate because Floor Brokers serve 
an important function in facilitating the execution of orders and price 
discovery for all market participants and, to the extent the proposed 
change encourages Professional Customers to submit additional orders to 
the Exchange to be executed via open outcry, such increase in manually 
executed Professional Customer orders would also benefit all market 
participants by promoting opportunities for price discovery.
    Intermarket Competition. The Exchange operates in a highly 
competitive market in which market participants can readily favor one 
of the 16 competing option exchanges if they deem fee levels at a 
particular venue to be excessive. In such an environment, the Exchange 
must continually adjust its fees to remain competitive with other 
exchanges and to attract order flow to the Exchange. Based on publicly-
available information, and excluding index-based options, no single 
exchange has more than 16% of the market share of executed volume of 
multiply-listed equity and ETF options trades.\29\ Therefore, currently 
no exchange possesses significant pricing power in the execution of 
multiply-listed equity and ETF options order flow. More specifically, 
in November 2022, the Exchange had less than 13% market share of 
executed volume of multiply-listed equity and ETF options trades.\30\
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    \29\ 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.
    \30\ Based on a compilation of OCC data for monthly volume of 
equity-based options and monthly volume of equity-based ETF options, 
see id., the Exchange's market share in equity-based options 
decreased from 12.99% for the month of November 2021 to 12.31% for 
the month of November 2022.
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    The Exchange believes that the proposed changes reflect this 
competitive environment because they modify the Exchange's fees and 
rebates in a manner designed to continue to incent OTP Holders to 
direct trading interest (particularly manual transactions) to the 
Exchange, to provide liquidity and to attract order flow. To the extent 
that Floor Brokers are encouraged to participate in the FB Prepay 
Program and/or incentivized to utilize the Exchange as a primary 
trading venue for all transactions, all of the Exchange's market 
participants should benefit from the improved market quality and 
increased opportunities for price improvement. The Exchange similarly 
believes that the proposed change relating to Professional Customer 
Manual Fees would continue to encourage Professional Customers to 
direct manual orders to the Exchange, which in turn 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 trading 
opportunities.
    The Exchange further believes that the proposed change could 
promote competition between the Exchange and other execution venues, 
including those that currently offer rebates on manual transactions and 
similar firm fee caps, by encouraging additional orders to be sent to 
the Exchange for execution.\31\
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    \31\ See notes 10 & 25, 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) \32\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \33\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \32\ 15 U.S.C. 78s(b)(3)(A).
    \33\ 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) \34\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \34\ 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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NYSEARCA-2023-09 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEARCA-2023-09. 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

[[Page 7125]]

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-2023-09, and should 
be submitted on or before February 23, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\35\
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    \35\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-02129 Filed 2-1-23; 8:45 am]
BILLING CODE 8011-01-P