Document ID: SEC-2023-0387-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2023-04-06T04:00Z

[Federal Register Volume 88, Number 66 (Thursday, April 6, 2023)]
[Notices]
[Pages 20589-20594]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-07142]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97234; File No. SR-NYSEARCA-2023-28]

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

March 31, 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 March 24, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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 (1) credits for Qualified Contingent Cross 
(``QCC'') transactions, (2) fees applicable to routed orders, and (3) 
certain Market Maker incentives. The Exchange proposes to implement the 
fee changes effective March 24, 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.
---------------------------------------------------------------------------

    \4\ The Exchange originally filed to amend the Fee Schedule on 
March 1, 2023 (SR-NYSEARCA-2023-22), then withdrew such filing and 
amended the Fee Schedule on March 15, 2023 (SR-NYSEARCA-2023-25), 
which latter filing the Exchange withdrew on March 24, 2023.
---------------------------------------------------------------------------

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 (1) 
provide for additional credits to qualifying Submitting Brokers for QCC 
transactions \5\ and clarify the cap applicable to QCC credits and 
Floor Broker rebates earned through the Manual Billable Rebate Program 
(``FB Rebates''), (2) modify the Routing Fees applicable to routed 
orders, and (3) eliminate the Market Maker Incentive For Penny Issues 
and the Market Maker Incentive For Non-Penny Issues (collectively, the 
``Market Maker Incentives''). The Exchange proposes to implement the 
rule change on March 24, 2023.
---------------------------------------------------------------------------

    \5\ A QCC Order is defined as an originating order to buy or 
sell at least 1,000 contracts that is identified as being part of a 
qualified contingent trade coupled with a contra-side order or 
orders totaling an equal number of contracts. See Rule 6.62P-
O(g)(1)(A).
---------------------------------------------------------------------------

QCC Transaction Credits
    Currently, the Exchange offers Submitting Brokers a credit of 
($0.22) per contract for Non-Customer vs. Non-Customer QCC transactions 
or ($0.16) per contract for Customer vs. Non-Customer QCC 
transactions.\6\ QCC executions in which a Customer is on both sides of 
the QCC trade are not eligible for a credit.\7\
---------------------------------------------------------------------------

    \6\ See Fee Schedule, QUALIFIED CONTINGENT CROSS (``QCC'') 
TRANSACTION FEES AND CREDITS.
    \7\ See id.
---------------------------------------------------------------------------

    The Exchange proposes to offer additional credits on QCC 
transactions to Submitting Brokers that meet certain monthly volume 
thresholds. Submitting Brokers who achieve 1.5 million QCC contracts in 
a month will receive an additional ($0.01) credit on Customer vs. Non-
Customer QCC transactions, and an additional ($0.03) credit on Non-
Customer vs. Non-Customer QCC transactions. Submitting Brokers who 
achieve 3 million QCC contracts in a month will receive an additional 
($0.02) credit on Customer vs. Non-Customer QCC transactions, and an 
additional ($0.06) credit on Non-Customer vs. Non-Customer QCC 
transactions. The proposed additional credits would be applicable back 
to the first QCC contract executed by a Submitting Broker in a month, 
but would not be cumulative across tiers (e.g., a Submitting Broker who 
transacts 3.1 million QCC contracts in a month would be eligible for an 
additional ($0.02) credit on Customer vs. Non-Customer QCC transactions 
or an additional ($0.06) credit on Non-Customer vs. Non-Customer QCC 
transactions, but would not also earn the additional credits offered to 
Submitting Brokers that achieve 1.5 million QCC contracts in a month). 
Although the Exchange cannot predict with certainty whether the 
proposed change would encourage Submitting Brokers to increase their 
QCC volume, the proposed change is intended to continue to incentivize 
additional QCC executions by Submitting Brokers by increasing the 
credits available on such orders.
    Endnote 13 of the Fee Schedule currently provides that QCC 
executions in which a Customer is on both sides of the QCC trade will 
not be eligible for the Submitting Broker credit and that there is a 
$375,000 maximum monthly credit per firm on QCC transactions by a 
Submitting Broker.\8\ The Exchange recently modified the Fee Schedule 
to

[[Page 20590]]

provide that Submitting Broker QCC credits and Floor Broker rebates 
earned through the Manual Billable Rebate Program may not combine to 
exceed $2,000,000 per month per firm (the ``Monthly Credit and Rebate 
Cap'').\9\ To improve the clarity of the Fee Schedule and obviate 
potential confusion regarding the applicability of the Monthly Credit 
and Rebate Cap, the Exchange proposes to delete the second sentence of 
Endnote 13 (which describes the $375,000 maximum monthly credit on QCC 
transactions by a Submitting Broker), add new Endnote 17, and modify 
the table setting forth Submitting Broker QCC credits to reference 
Endnote 17. Endnote 17 would contain the same text already reflected in 
the Fee Schedule describing the Monthly Credit and Rebate Cap.\10\ The 
Exchange believes that Endnote 17 would add clarity to the Fee Schedule 
regarding the maximum amount that a firm could earn per month from 
Submitting Broker QCC credits and FB Rebates combined.
---------------------------------------------------------------------------

    \8\ See Fee Schedule, Endnote 13.
    \9\ See Fee Schedule, FLOOR BROKER FIXED COST PREPAYMENT 
INCENTIVE PROGRAM (the ``FB Prepay Program'').
    \10\ The Exchange also proposes a conforming change to delete 
the text describing the Monthly Credit and Rebate Cap in the section 
of the Fee Schedule setting forth the Floor Broker Fixed Cost 
Prepayment Incentive Program and add a reference to Endnote 17, as 
proposed.
---------------------------------------------------------------------------

Routing Fees
    The Exchange currently charges an $0.11 per contract fee on orders 
routed and executed on another exchange, plus (i) any transaction fees 
assessed by the away exchange (calculated on an order-by-order basis 
since different away exchanges charge different amounts) or (ii) if the 
actual transaction fees assessed by the away exchange(s) cannot be 
determined prior to the execution, the highest per contract charge 
assessed by the away exchange(s) for the relevant option class and type 
of market participant (e.g., Customer, Firm, Broker/Dealer, 
Professional Customer or Market Maker).\11\ The Exchange applies the 
Routing Fees in addition to any customary execution fees applicable to 
the order.
---------------------------------------------------------------------------

    \11\ See Fee Schedule, ROUTING FEES.
---------------------------------------------------------------------------

    The Exchange now proposes to modify the Routing Fees to be based on 
whether the routed order is in a Penny or non-Penny issue and to 
establish a single fee that would be applicable to all routed orders in 
Penny issues, and a single fee for routed orders in non-Penny issues. 
Specifically, the Exchange proposes that the fee for routed orders 
would be set at a fixed amount intended to counterbalance the internal 
resources required to support the handling of orders routed away from 
the Exchange. The Exchange proposes to implement a flat fee structure 
for routing fees, which the Exchange believes would streamline the 
process of calculating fees applied to orders routed away from the 
Exchange because it would, among other things, reduce the 
administrative burden of recalibrating routing fees each time an away 
exchange modifies its relevant transaction fees. Accordingly, the 
Exchange proposes a Routing Fee of $0.61 in Penny issues, and $1.21 in 
non-Penny issues. The Exchange believes that having a single published 
rate for all routed orders in Penny issues and single published rate 
for all routed orders in non-Penny issues would also reduce potential 
confusion relating to the amount of the Routing Fee for a given order 
(particularly in light of the variability in transaction fees across 
other options markets) and would permit market participants to 
determine execution costs at the time of order entry, thereby promoting 
clarity and transparency in the Fee Schedule. The Exchange believes the 
proposed routing fee structure is not novel, as at least one other 
options exchange similarly applies fixed routing fees based on whether 
the routed order is in a Penny or non-Penny issue, and that the 
proposed amounts of the fees are within the range of fees applied by 
other markets to routed orders.\12\
---------------------------------------------------------------------------

    \12\ See, e.g., BOX Options Exchange Fee Schedule, available at: 
https://boxexchange.com/assets/BOX-Fee-Schedule-as-of-March-6-2023.pdf (providing for fixed routing fees of $0.60 per contract fee 
for customer orders in Penny classes and $0.85 per contract fee for 
customer orders in non-Penny class); Cboe Exchange, Inc. Options Fee 
Schedule, available at: https://cdn.cboe.com/resources/membership/Cboe_FeeSchedule.pdf (providing, for example, Customer routing fees 
of $0.75 for orders in Penny issues or $1.25 for orders in non-Penny 
issues routed to certain away markets and Non-Customer routing fees 
of $1.17 for all orders in Penny issues or $1.45 for all orders in 
non-Penny issues routed away).
---------------------------------------------------------------------------

Market Maker Incentives
    The Exchange currently offers a Market Maker Incentive For Penny 
Issues, which provides an enhanced posting credit of $0.41 applied to 
electronic executions of Market Maker posted interest in Penny issues 
to Market Makers that achieve the volume requirement of at least 0.75% 
TCADV from Customer posted interest in all issues and an ADV from 
Market Maker posted interest in all issues other than SPY equal to 
0.40% of TCADV.
    The Exchange also offers a similar Market Maker Incentive For Non-
Penny Issues. Market Makers that meet the volume requirement of either 
(1) at least 0.55% of TCADV from Market Maker posted interest in all 
issues, or (2) at least 1.60% of TCADV from all interest in all issues, 
all account types, with at least 0.15% of TCADV from Market Maker 
posted interest in all issues qualify for a $0.55 credit applied to 
electronic executions of Market Maker posted interest in non-Penny 
issues.
    The Exchange now proposes to eliminate the Market Maker Incentives 
because they have not been as effective in encouraging Market Maker 
posted interest as other similar incentive programs. Market Makers are 
entitled to the highest credit on posted interest they achieve, and 
because the Market Maker Incentives have similar qualifying criteria 
but offer lower credit amounts than other volume incentive programs 
available to Market Makers (such as the Market Maker Penny and SPY 
Posting Credit Tiers or the Non-Customer, Non-Penny Posting Credit 
Tiers),\13\ Market Makers have availed themselves of the Market Maker 
Incentives less frequently. Accordingly, the Exchange believes that 
Market Markers would not be significantly impacted by the elimination 
of the Market Maker Incentives, as the programs generally provided 
benefits that were superseded by the incentives available through 
other, more utilized volume incentive programs (which would continue to 
be available to Market Makers).
---------------------------------------------------------------------------

    \13\ See Fee Schedule, MARKET MAKER PENNY AND SPY POSTING CREDIT 
TIERS & NON-CUSTOMER, NON-PENNY POSTING CREDIT TIERS.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\14\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\15\ 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.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

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

[[Page 20591]]

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.'' \16\
---------------------------------------------------------------------------

    \16\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005) (S7-10-04) (``Reg NMS 
Adopting Release'').
---------------------------------------------------------------------------

    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.\17\ Therefore, no exchange possesses significant pricing power 
in the execution of multiply-listed equity and ETF options order flow. 
More specifically, in January 2023, the Exchange had less than 13% 
market share of executed volume of multiply-listed equity and ETF 
options trades.\18\
---------------------------------------------------------------------------

    \17\ 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.
    \18\ 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 13.06% for the month of January 2022 to 12.58% for 
the month of January 2023.
---------------------------------------------------------------------------

    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 additional QCC credits are 
reasonable because they are designed to incent OTP Holders to increase 
the number of QCC transactions sent to the Exchange by offering 
increased credits on QCC transactions for Submitting Brokers that meet 
the qualifying volume thresholds. In addition, the Exchange believes it 
is reasonable to offer a higher additional credit on Non-Customer vs. 
Non-Customer QCC transactions than on Customer vs. Non-Customer QCC 
transactions because Non-Customer vs. Non-Customer QCC transactions are 
billable on both sides, whereas Customer vs. Non-Customer QCC 
transactions are billable on one side only. The Exchange also believes 
that modifying the Fee Schedule regarding the Monthly Credit and Rebate 
Cap is reasonable because it would add clarity to the Fee Schedule 
regarding the maximum monthly amount that firms may earn from 
Submitting Broker QCC credits and FB Rebates combined. To the extent 
that the proposed change attracts 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 Submitting 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 believes the proposed change to Routing Fees is 
reasonable because it would establish a single fee that would be 
applicable to all routed orders in Penny issues and a single fee that 
would be applicable to all routed orders in non-Penny issues, and such 
fees would be applicable to all market participants equally. In 
addition, the Exchange believes the proposed change is reasonable 
because it would provide for routing fees that would counterbalance the 
internal resources required to support the handling of orders routed 
away from the Exchange and would streamline the process of calculating 
routing fees by obviating the need to recalibrate fees based on 
individual away market fees (which are variable and subject to frequent 
change) and eliminating any potential confusion as to routing fees 
applicable to a given order. The Exchange also notes that a fixed fee 
structure for routing fees is not novel and that the amounts of the 
proposed Routing Fees are within the range of routing fees currently 
charged by other options exchanges.\19\
---------------------------------------------------------------------------

    \19\ See note 12, supra.
---------------------------------------------------------------------------

    The Exchange believes that eliminating the Market Maker Incentives 
is reasonable because the programs have been underutilized in favor of 
incentive programs offering higher credits on posted interest, and the 
Exchange will continue to offer alternative incentives for Market 
Makers with similar qualifying bases and credits (including the Market 
Maker Penny and SPY Posting Credit Tiers or the Non-Customer, Non-Penny 
Posting Credit Tiers). Accordingly, although Market Makers would no 
longer be able to qualify for credits through the Market Maker 
Incentives, they would still benefit from the availability of other 
similar incentive programs that have, to date, more successfully 
incentivized Market Maker posted interest.
    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 those offering rebates on QCC 
transactions.\20\ Thus, OTP Holders have a choice of where they direct 
their order flow, including their QCC transactions. The proposed rule 
change is designed to continue to incent OTP Holders to direct 
liquidity and, in particular, QCC 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.
---------------------------------------------------------------------------

    \20\ See, e.g., EDGX Options Exchange Fee Schedule, QCC 
Initiator/Solicitation Rebate Tiers (applying ($0.14) per contract 
rebate up to 999,999 contracts for QCC transactions when only one 
side of the transaction is a non-customer or ($0.22) per contract 
rebate up to 999,999 contracts for QCC transactions with non-
customers on both sides); BOX Options Fee Schedule at Section 
IV.D.1. (QCC Rebate) (providing for ($0.14) per contract rebate up 
to 1,499,999 contracts for QCC transactions when only one side of 
the QCC transaction is a broker-dealer or market maker or ($0.22) 
per contract rebate up to 1,499,999 contracts for QCC transactions 
when both parties are a broker-dealer or market maker); Nasdaq ISE, 
Options 7, Section 6.B. (QCC Rebate) (offering rebates on QCC 
transactions of ($0.14) per contract when only one side of the QCC 
transaction is a non-customer or ($0.22) per contract when both 
sides of the QCC transaction are non-customers).
---------------------------------------------------------------------------

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 proposed QCC credits are based 
on the amount and type of business transacted on the

[[Page 20592]]

Exchange, and Submitting Brokers can attempt to submit QCC transactions 
to earn the credits or not. In addition, the proposed credits are 
equally available to all qualifying Submitting Brokers. The Exchange 
also believes the proposed changes regarding the Monthly Credit and 
Rebate Cap are equitable because they would add clarity and 
transparency to the Fee Schedule regarding the current maximum monthly 
amount that a firm could earn from combined Submitting Broker QCC 
credits and FB Rebates, thereby obviating potential confusion regarding 
the applicability of the Monthly Credit and Rebate Cap. To the extent 
the proposed changes continue to incent Submitting Brokers to direct 
increased liquidity to the Exchange, all market participants would 
benefit from enhanced opportunities for price improvement and order 
execution. Moreover, the proposed credits are designed to incent 
Submitting Brokers to encourage OTP Holders to aggregate their 
executions--including QCC transactions--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 Exchange also believes the proposed change to the Routing Fees 
is equitable because the proposed single fee for all routed orders in 
Penny issues and single fee for all routed orders in non-Penny issues 
would apply to all market participants equally and the proposed amounts 
are designed to offset internal resources necessary to support the 
handling of orders routed away from the Exchange. The proposed change 
would also streamline the process of calculating routing fees for all 
market participants and provide increased clarity regarding execution 
costs at the time of order entry.
    The Exchange believes that the elimination of the Market Maker 
Incentives is equitable because these incentives, which did not achieve 
their intended purpose of encouraging Market Maker posted interest, 
would no longer be available to any Market Makers, and, moreover, the 
Exchange offers Market Makers alternative methods to achieve credits of 
an equal or higher amount.
The Proposed Rule Change Is Not Unfairly Discriminatory
    The Exchange believes the proposed change is not unfairly 
discriminatory because the proposed credits on QCC transactions would 
be available to all qualifying Submitting Brokers on an equal and non-
discriminatory basis. The proposed change is based on the amount and 
type of business transacted on the Exchange, and Submitting Brokers are 
not obligated to execute QCC transactions. Rather, the proposal is 
designed to encourage Submitting Brokers to increase QCC volume sent to 
the Exchange and to utilize the Exchange as a primary trading venue for 
all transactions (if they have not done so previously). To the extent 
that the proposed change attracts more QCC 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.
    The Exchange also believes that the proposed change to eliminate 
the Market Maker Incentives is also not unfairly discriminatory because 
the incentives, which were underutilized by Market Makers, would be 
eliminated in their entirety and would no longer be available to any 
Market Makers. In addition, Market Makers would continue to be eligible 
for alternative incentives currently available to them with similar 
credits and qualifying criteria. The Exchange also believes that the 
proposed changes to the Routing Fees are not unfairly discriminatory 
because the proposed fees are intended to assess streamlined routing 
fees in amounts that would appropriately account for the internal 
resources necessary to support orders routed away from the Exchange and 
would apply equally to all market participants' routed orders, based on 
whether such order is in a Penny or non-Penny issue. The proposed 
change would simplify the calculation of routing fees for all market 
participants and add clarity and transparency to the Fee Schedule 
regarding the fees applicable to routed orders.
    Thus, the Exchange believes that, to the extent the proposed rule 
change would continue to improve market quality for all market 
participants on the Exchange by promoting clarity and transparency in 
the Fee Schedule and 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.'' \21\
---------------------------------------------------------------------------

    \21\ See Reg NMS Adopting Release, supra note 16, at 37499.
---------------------------------------------------------------------------

    Intramarket Competition. The proposed change with respect to QCC 
credits is designed to attract additional order flow to the Exchange 
(particularly in QCC transactions), which could increase the volumes of 
contracts traded on the Exchange. Greater liquidity benefits all market 
participants on the Exchange, and increased QCC transactions could 
increase opportunities for execution of other trading interest. The 
proposed credit would be available to all similarly-situated Submitting 
Brokers that execute

[[Page 20593]]

QCC trades and achieve the volume thresholds for the additional 
credits. The Exchange does not believe that the proposed changes 
regarding Routing Fees or the Monthly Credit and Rebate Cap would 
impose any burden on competition that is not necessary or appropriate, 
as they are intended to add clarity and transparency to the Fee 
Schedule with respect to fees for orders routed away from the Exchange 
and the monthly cap on combined Submitting Broker QCC credits and FB 
Rebates earned by a firm. The Exchange also does not believe that the 
proposed changes to the Market Maker Incentives would impose any burden 
on intramarket competition that is not necessary or appropriate because 
the incentives would be eliminated for all Market Makers.
    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.\22\ Therefore, currently 
no exchange possesses significant pricing power in the execution of 
multiply-listed equity and ETF options order flow. More specifically, 
in January 2023, the Exchange had less than 13% market share of 
executed volume of multiply-listed equity and ETF options trades.\23\
---------------------------------------------------------------------------

    \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 13.06% for the month of January 2022 to 12.58% for 
the month of January 2023.
---------------------------------------------------------------------------

    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 QCC transactions) to the Exchange, to provide 
liquidity and to attract order flow. To the extent that Submitting 
Brokers are 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 does not believe that the proposed changes regarding 
Routing Fees or the Monthly Credit and Rebate Cap would impose any 
burden on competition that is not necessary or appropriate, as they are 
intended to improve the clarity and transparency of the Fee Schedule 
with respect to fees for orders routed away from the Exchange and the 
maximum monthly amount that a firm could earn from Submitting Broker 
QCC credits and FB Rebates combined. The Exchange also does not believe 
that the proposed elimination of the Market Maker Incentives would 
impose any burden on competition that is not necessary or appropriate 
because the incentives would no longer be available to any Market 
Makers, and the Exchange would continue to offer Market Makers similar, 
alternative incentives.
    The Exchange notes that it operates in a highly competitive market 
in which market participants can readily favor competing venues. In 
such an environment, the Exchange must continually review, and consider 
adjusting, its fees and credits to remain competitive with other 
exchanges. For the reasons described above, the Exchange believes that 
the proposed rule change reflects this competitive environment. The 
Exchange further believes that the proposed changes could promote 
competition between the Exchange and other execution venues, including 
those that currently offer similarly structured routing charges or that 
currently offer credits on QCC transactions, by encouraging additional 
orders (and, in particular, QCC transactions) to be sent to the 
Exchange for execution.\24\
---------------------------------------------------------------------------

    \24\ See notes 12 & 20, supra.
---------------------------------------------------------------------------

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) \25\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \26\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
---------------------------------------------------------------------------

    \25\ 15 U.S.C. 78s(b)(3)(A).
    \26\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    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) \27\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \27\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NYSEARCA-2023-28 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-2023-28. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for website viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE, 
Washington, DC 20549 on official business days between the hours of

[[Page 20594]]

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-2023-28, and should 
be submitted on or before April 27, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\28\
---------------------------------------------------------------------------

    \28\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-07142 Filed 4-5-23; 8:45 am]
BILLING CODE 8011-01-P