Document ID: SEC-2022-0861-0001
Agency: sec
Document Type: Notice
Title: Self-RegulatoryOrganizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2022-06-29T04:00Z

[Federal Register Volume 87, Number 124 (Wednesday, June 29, 2022)]
[Notices]
[Pages 38786-38791]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-13811]

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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.
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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 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.
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    \4\ The Exchange originally filed to amend the Fee Schedule on 
May 31, 2022 (SR-NYSEArca-2022-33) and withdrew such filing on June 
14, 2022.
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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 38787]]

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\
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    \5\ See 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.
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    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\
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    \6\ See id.

------------------------------------------------------------------------
                                             Number of option issues
          Monthly fee per OTP              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.
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    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\
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    \7\ See 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.

----------------------------------------------------------------------------------------------------------------
                                               Monthly fee      Number of issues permitted in a market maker's
               Number of OTPs                    per OTP                     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.
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    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.
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    \8\ The 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.
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    The Exchange believes that the proposed fee structure would better 
align its Market Maker OTP fees with

[[Page 38788]]

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.
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    \9\ For 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).
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    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\
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    \10\ The 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).
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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.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 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.'' \13\
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    \13\ 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.\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 multiply-listed equity 
and ETF options trades.\15\
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    \14\ 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.
    \15\ Based on a compilation of OCC data for monthly volume of 
equity-based options and monthly volume of ETF-based options, see 
id., the Exchange's market share in equity-based options was 10.16% 
for the month of March 2021 and 13.57% for the month of March 2022.
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    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

[[Page 38789]]

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\
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    \16\ See 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://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.
    \17\ See 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).
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    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\
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    \18\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) 
(internal citations omitted).
    \19\ See 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.
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    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\
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    \20\ See, e.g., Market Maker Incentive for Penny Issues; Market 
Maker Incentive for Non-Penny Issues; Market Maker Incentives for 
SPY.
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    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

[[Page 38790]]

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\
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    \21\ See note 16, supra.
    \22\ See note 15, supra.
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    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\
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    \23\ According 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.
    \24\ The 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%.
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    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.
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    \25\ The 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.
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    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\
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    \26\ The 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.
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    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\
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    \27\ 15 U.S.C. 78f(b)(8).
    \28\ See Reg NMS Adopting Release, supra note 13, at 37499.
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    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

[[Page 38791]]

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.
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    \29\ See note 20, supra.
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    Intermarket Competition. The Exchange operates in a highly 
competitive market in which market participants can readily favor one 
of the 16 competing options exchanges if they deem fee levels at a 
particular venue to be excessive. 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. 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.
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    \30\ See note 16, 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) \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.
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    \31\ 15 U.S.C. 78s(b)(3)(A).
    \32\ 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) \33\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \33\ 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-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\
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    \34\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-13811 Filed 6-28-22; 8:45 am]
BILLING CODE 8011-01-P