Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify the NYSE Arca Options Fee Schedule, 31363-31366 [2021-12250]

Download as PDF Federal Register / Vol. 86, No. 111 / Friday, June 11, 2021 / Notices 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 to determine whether the proposed rule change should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: jbell on DSKJLSW7X2PROD with NOTICES Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– CBOE–2021–036 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–CBOE–2021–036. 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 20549–1090, 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 VerDate Sep<11>2014 19:14 Jun 10, 2021 Jkt 253001 Number SR–CBOE–2021–036, and should be submitted on or before July 2, 2021. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.17 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2021–12243 Filed 6–10–21; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–92123; No. SR–NYSEArca– 2021–50] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify the NYSE Arca Options Fee Schedule June 7, 2021. 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 2, 2021, NYSE Arca, Inc. (‘‘NYSE Arca’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to modify the NYSE Arca Options Fee Schedule (‘‘Fee Schedule’’) regarding the charges applicable to Manual transactions by NYSE Arca Market Makers and Lead Market Makers. The Exchange proposes to implement the fee change effective June 2, 2021.4 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. 17 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 4 The Exchange originally filed to amend the Fee Schedule on May 3, 2021 (SR–NYSEArca–2021–34), then withdrew and refiled on May 12, 2021 (SR– NYSEArca–2021–42) and May 21, 2021 (SR– NYSEArca–2021–45), which latter filing the Exchange withdrew on June 2, 2021. 1 15 PO 00000 Frm 00099 Fmt 4703 Sfmt 4703 31363 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 modify the Fee Schedule regarding the charges for Manual executions by NYSE Arca Market Makers (‘‘Market Makers’’) and Lead Market Makers (‘‘LMMs’’). Currently, Market Makers are charged $0.25 per contract for Manual executions, and LMMs are charged $0.18 per contract for Manual executions.5 The Exchange proposes to modify the rates charged for Manual executions to $0.35 per contract for Market Makers and $0.30 per contract for LMMs. The proposed rate for Market Makers is competitive and intended to align the Exchange’s fees for Manual transactions by Market Makers with those charged by other markets.6 The proposed rate for LMMs would reduce the existing disparity between rates charged to LMMs and Market Makers from seven cents ($0.07) to five ($0.05), which disparity the Exchange believes continues to be justified given the heightened obligations and additional fees imposed on LMMs.7 5 See Fee Schedule, NYSE Arca OPTIONS: TRADE-RELATED CHARGES FOR STANDARD OPTIONS, TRANSACTION FEE FOR MANUAL EXECUTIONS—PER CONTRACT. 6 See, e.g., Nasdaq PHLX LLC (‘‘Phlx’’) Pricing Schedule, available at: https:// listingcenter.nasdaq.com/rulebook/phlx/rules/ Phlx%20Options%207 (providing $0.35 per contract rate for manual transactions by market makers); Cboe Exchange, Inc. (‘‘Cboe’’) Fee Schedule, available at: https://cdn.cboe.com/ resources/membership/Cboe_FeeSchedule.pdf (providing $0.35 per contract rate for manual transactions by market makers). 7 See Rules 6.37A–O(b) (setting forth the continuous quoting obligations of LMMs to provide two-sided quotations in its appointed issues for 90% of the time the Exchange is open for trading in each issue) and 6.82–O(c) (regarding additional obligations specific to LMMs, including that LMMs that operate on the Trading Floor are required to be E:\FR\FM\11JNN1.SGM Continued 11JNN1 31364 Federal Register / Vol. 86, No. 111 / Friday, June 11, 2021 / Notices 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,8 in general, and furthers the objectives of Sections 6(b)(4) and (5) of the Act,9 in particular, because it provides for the equitable allocation of reasonable dues, fees, and other charges among its members, issuers and other persons using its facilities and does not unfairly discriminate between customers, issuers, brokers or dealers. The Proposed Rule Change Is Reasonable jbell on DSKJLSW7X2PROD with NOTICES 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.’’ 10 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.11 Therefore, currently no exchange possesses significant pricing power in the execution of multiply-listed equity & ETF options order flow. More specifically, in March 2021, the Exchange had less than 11% market share of executed volume of multiplylisted equity and ETF options trades.12 present every day). See Fee Schedule, NYSE Arca General Options and Trading Permit (OTP) Fee, Lead Market Maker Rights (setting forth the Rights Fee assessed on each issue in an LMM’s allocation, with rates based on the Average National Daily Customer Contracts). 8 15 U.S.C. 78f(b). 9 15 U.S.C. 78f(b)(4) and (5). 10 See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005) (S7–10–04) (‘‘Reg NMS Adopting Release’’). 11 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-DataReports/Volume-and-Open-Interest/MonthlyWeekly-Volume-Statistics. 12 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 multiply-listed equity and ETF options decreased slightly from 11.10% for the month of March 2020 to 10.16% for the month of March 2021. VerDate Sep<11>2014 19:14 Jun 10, 2021 Jkt 253001 The Exchange believes that the evershifting market share among the exchanges from month to month demonstrates that market participants can shift order flow, or discontinue or reduce use of certain categories of products, in response to fee changes. Accordingly, competitive forces constrain options exchange transaction fees. Stated otherwise, changes to exchange transaction fees and rebates can have a direct effect on the ability of an exchange to compete for order flow. The proposed rule change is designed to bring the Exchange’s fees for Market Maker Manual executions into alignment with those charged on other markets with Trading Floors. The Exchange believes it is reasonable to increase certain fees, similar to fees assessed by competing options exchanges for similar transactions, and notes that LMMs will continue to be charged lower fees than those assessed by competing options exchanges for similar transactions.13 The Exchange also believes that it is reasonable to continue to offer LMMs lower fees than Market Makers for Manual transactions given that LMMs are subject to heightened obligations and additional monthly Rights Fees.14 The Exchange believes that the proposed increased charge for Manual executions by Market Makers and LMMs but not for other market participants is reasonable because the resulting disparity would align the Exchange’s fees for Manual executions with the fees charged on other exchanges.15 In addition, the Exchange believes that other pricing incentives offered by the Exchange would continue to encourage Market Makers and LMMs to conduct Manual transactions on the Exchange.16 13 See supra note 6. supra note 7. 15 The Exchange does not impose any fee on Manual transactions by Customers but does charge $0.25 per contract for Manual transactions by Firms, Broker-Dealers and Professional Customers, which rates are consistent with fees charged these market participants on other exchanges. See, e.g., supra note 6, PHLX Pricing Schedule and Cboe Fee Schedule (both exchanges imposing no charge for manual transactions by customers and imposing a $0.25 per contract rate for manual transactions by firms, broker-dealers and professional customers). 16 See e.g., Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Modify the NYSE Arca Options Fee Schedule Regarding the Limits on Fees for Options Strategy Executions, Securities Exchange Act Release No. 90949 (January 19, 2021), 86 FR 7152 (January 26, 2021) (SR– NYSEArca–2021–06) (reducing the cap on strategy executions from $1,000 to $200 for OTP Holders that execute at least 25,000 monthly billable contract sides in Strategy Executions) and Fee Schedule, Limit of Fees on Options Strategy Executions. While the reduction to the cap on Strategy Executions is available to all OTP Holders, the Exchange notes that Maker Makers and LMMs have a time and place advantage by virtue of their 14 See PO 00000 Frm 00100 Fmt 4703 Sfmt 4703 The Exchange thus believes the proposed changes, even though they are increased fees, would not discourage Market Makers and LMMs from continuing to conduct Manual executions on the Exchange and would continue to attract volume and liquidity to the Exchange generally and would therefore benefit all market participants (including those that do not participate in Manual executions) through increased opportunities to trade. Finally, to the extent the proposed fees do not discourage Market Makers and LMMs from continuing to conduct Manual executions on the Exchange, the Exchange believes the proposed changes would continue to 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 maintain its market share relative to its competitors. The Proposed Rule Change Is an Equitable Allocation of Fees and Rebates The Exchange believes the proposed rule change is an equitable allocation of its fees and credits. The proposal is based on the type of business transacted on the Exchange, and Market Makers and LMMs can opt to participate in Manual executions or not. The Exchange notes that the increased fees for Manual executions by Market Makers and LMMs, but not for other market participants, represents an equitable allocation of fees given that the proposed fees (and resulting disparity) are consistent with fees charged for Manual executions by market makers on other exchanges.17 The Exchange also believes that continuing to offer LMMs lower fees than Market Makers is an equitable allocation of fees given that LMMs are subject to heightened obligations and additional fees set forth in the Exchange’s Fee Schedule.18 Moreover, even though the proposed changes increase the fees applicable to Manual executions by Market Makers and LMMs, the Exchange does not believe they will discourage such executions on the Exchange or the aggregation of such executions at the Exchange as a primary execution venue, including because of other pricing incentives available to such participants presence on the Trading Floor to participate in such executions and therefore benefit from the reduced cap. 17 See supra notes 6 and 15. 18 See supra note 7. E:\FR\FM\11JNN1.SGM 11JNN1 Federal Register / Vol. 86, No. 111 / Friday, June 11, 2021 / Notices jbell on DSKJLSW7X2PROD with NOTICES on the Exchange.19 To the extent that the proposed changes continue to attract Manual executions to the Exchange, this 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 continue to improve market quality for all market participants on the Exchange and, as a consequence, continue to 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 that the proposal is not unfairly discriminatory because the proposed modifications would apply to all Market Makers and LMMs conduct Manual executions on the Exchange on an equal and nondiscriminatory basis. The proposal is based on the amount and type of business transacted on the Exchange, and Market Makers and LMMs are not obligated to participate in Manual executions on the Exchange. Rather, the proposal is designed to continue to encourage the use of the Exchange as a primary trading venue (if they have not done so previously) by maintaining the Trading Floor for Manual executions. The Exchange also believes that increasing fees for Manual executions by Market Makers, but not other market participants, is not unfairly discriminatory given that the proposed rates (and resulting disparity) are a competitive response to rates charged on competing options exchanges for manual executions by market makers and because these participants may available themselves of other reduced fees and incentives offered by the Exchange.20 The Exchange also believes that it is not unfairly discriminatory to continue to offer LMMs lower fees than Market Makers given that LMMs are subject to heightened obligations and additional fees set forth in the Exchange’s Fee Schedule.21 To the extent that the proposed change assists the Exchange in continuing to attract Manual executions to the Trading Floor, this order flow would continue to make the Exchange a more competitive venue for order execution. Thus, the Exchange believes the proposed rule change would contribute to market quality for all market participants on the Exchange and, as a consequence, attract more 19 See supra note 16. supra notes 6, 15 and 16. 21 See supra note 7. 19:14 Jun 10, 2021 B. Self-Regulatory Organization’s Statement on Burden on Competition In accordance with Section 6(b)(8) of the Act, the Exchange does not believe that the proposed rule change would impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. Instead, as discussed above, the Exchange believes that the proposed changes would be consistent with charges for similar business at other markets. As a result, the Exchange believes that the proposed changes further 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.’’ 22 Intramarket Competition. The proposed change is designed to continue to promote the use of the Exchange as a primary trading venue by maintaining the Trading Floor for Manual executions, which would enhance the quality of quoting and may increase the volumes of contracts traded on the Exchange. The Exchange believes that the proposed increased fees for Manual executions by Market Makers and LMMs but not for other market participants would not impose any burden on intermarket competition that is not necessary or appropriate because the proposed fees (and resulting disparity) are consistent with fees charged for Manual executions by market makers on other exchanges and because these participants may available themselves of other reduced fees and incentives offered by the Exchange.23 The Exchange believes that the proposed modifications to the rates applicable to Manual executions by Market Makers and LMMs will not 22 See Reg NMS Adopting Release, supra note 10, at 37499. 23 See supra notes 6, 15 and 16. 20 See VerDate Sep<11>2014 order flow to the Exchange, thereby improving market-wide quality and price discovery. The resulting volume and liquidity would continue to 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. Jkt 253001 PO 00000 Frm 00101 Fmt 4703 Sfmt 4703 31365 discourage those market participants from continuing to conduct Manual executions on the Exchange (including because LMMs will continue to receive lower fees than those assessed by competing options exchanges for similar transactions). To the extent that this purpose is achieved, all of the Exchange’s market participants should benefit from the continued market liquidity. Enhanced market quality and increased transaction volume that results from the increase in order flow directed to the Exchange will benefit all market participants and improve competition on the Exchange. Intermarket Competition. The Exchange operates in a highly competitive market in which market participants can readily favor one of the 16 competing option exchanges if they deem fee levels at a particular venue to be excessive. In such an environment, the Exchange must continually adjust its mechanisms and 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 currently has more than 16% of the market share of executed volume of multiply-listed equity and ETF options trades.24 Therefore, no exchange currently possesses significant pricing power in the execution of multiply-listed equity & ETF options order flow. More specifically, in March 2021, the Exchange had less than 11% market share of executed volume of multiplylisted equity and ETF options trades.25 The Exchange believes that the proposed rule change reflects this competitive environment because it modifies the Exchange’s fees to be more closely aligned with fees charged by other markets with Trading Floors for similar transactions.26 The Exchange also believes that the proposed changes would continue to promote competition between the Exchange and other execution venues by encouraging orders to be sent to the Exchange for execution. To the extent that this purpose is achieved, all the Exchange’s market participants should benefit from the improved market quality and increased opportunities for price improvement. 24 See supra note 11. 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 multiply-listed equity and ETF options decreased slightly from 11.10% for the month of March 2020 to 10.16% for the month of March 2021. 26 See supra notes 6 and 15. 25 Based E:\FR\FM\11JNN1.SGM 11JNN1 31366 Federal Register / Vol. 86, No. 111 / Friday, June 11, 2021 / Notices 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) 27 of the Act and subparagraph (f)(2) of Rule 19b–4 28 thereunder, because it establishes a due, fee, or other charge imposed by the Exchange. At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings under Section 19(b)(2)(B) 29 of the Act to determine whether the proposed rule change should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: jbell on DSKJLSW7X2PROD with NOTICES Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NYSEArca–2021–50 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–2021–50. 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/ 27 15 U.S.C. 78s(b)(3)(A). CFR 240.19 b–4(f)(2). 29 15 U.S.C. 78s(b)(2)(B). 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–2021–50, and should be submitted on or before July 2, 2021. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.30 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2021–12250 Filed 6–10–21; 8:45 am] BILLING CODE 8011–01–P DEPARTMENT OF STATE [Public Notice: 11428] 60-Day Notice of Proposed Information Collection: Statement Regarding a Lost or Stolen U.S. Passport Book and/ or Card Notice of request for public comment. ACTION: The Department of State is seeking Office of Management and Budget (OMB) approval for the information collection described below. In accordance with the Paperwork Reduction Act of 1995, we are requesting comments on this collection from all interested individuals and organizations. The purpose of this notice is to allow 60 days for public comment preceding submission of the collection to OMB. SUMMARY: 28 17 VerDate Sep<11>2014 19:14 Jun 10, 2021 30 17 Jkt 253001 PO 00000 CFR 200.30–3(a)(12). Frm 00102 Fmt 4703 Sfmt 4703 The Department will accept comments from the public up to August 10, 2021. ADDRESSES: You may submit comments by any of the following methods: • Web: Persons with access to the internet may comment on this notice by going to www.Regulations.gov. You can search for the document by entering ‘‘Docket Number: DOS–2021–0012 in the Search field. Then click the ‘‘Comment Now’’ button and complete the comment form. • Email: PPTFormsOfficer@state.gov. • Regular Mail: Send written comments to: Passport Forms Officer, U.S. Department of State, CA/PPT/S/ PMO, 44132 Mercure Cir., P.O. Box 1199, Sterling, VA 20166–1199. You must include the DS form number (if applicable), information collection title, and the OMB control number in any correspondence. Contact: Direct requests for additional information regarding the collection listed in this notice, including requests for copies of the proposed collection instrument and supporting documents, to Kim Makle, Program Manager, U.S. Department of State, CA/PPT/S/PMO, 44132 Mercure Cir., P.O. Box 1199, Sterling, VA 20166–1199, who may be reached at PPTFormsOfficer@state.gov. SUPPLEMENTARY INFORMATION: • Title of Information Collection: Statement Regarding a Lost or Stolen U.S. Passport Book and/or Card. • OMB Control Number: 1405–0014. • Type of Request: Revision of a Currently Approved Collection. • Originating Office: Bureau of Consular Affairs, Passport Services, Office of Program Management and Operational Support (CA/PPT/S/PMO). • Form Number: DS–64. • Respondents: Individuals or Households. • Estimated Number of Respondents: 529,122. • Estimated Number of Responses: 529,122. • Average Time per Response: 5 minutes. • Total Estimated Burden Time: 44,094 hours. • Frequency: On occasion. • Obligation to Respond: Required to Obtain or Retain a Benefit. We are soliciting public comments to permit the Department to: • Evaluate whether the proposed information collection is necessary for the proper functions of the Department. • Evaluate the accuracy of our estimate of the time and cost burden for this proposed collection, including the validity of the methodology and assumptions used. DATES: E:\FR\FM\11JNN1.SGM 11JNN1

Agencies

[Federal Register Volume 86, Number 111 (Friday, June 11, 2021)]
[Notices]
[Pages 31363-31366]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-12250]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92123; No. SR-NYSEArca-2021-50]


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

June 7, 2021.
    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 2, 2021, 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 modify the NYSE Arca Options Fee Schedule 
(``Fee Schedule'') regarding the charges applicable to Manual 
transactions by NYSE Arca Market Makers and Lead Market Makers. The 
Exchange proposes to implement the fee change effective June 2, 
2021.\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 3, 2021 (SR-NYSEArca-2021-34), then withdrew and refiled on May 
12, 2021 (SR-NYSEArca-2021-42) and May 21, 2021 (SR-NYSEArca-2021-
45), which latter filing the Exchange withdrew on June 2, 2021.
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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.

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 Fee Schedule regarding 
the charges for Manual executions by NYSE Arca Market Makers (``Market 
Makers'') and Lead Market Makers (``LMMs''). Currently, Market Makers 
are charged $0.25 per contract for Manual executions, and LMMs are 
charged $0.18 per contract for Manual executions.\5\
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    \5\ See Fee Schedule, NYSE Arca OPTIONS: TRADE-RELATED CHARGES 
FOR STANDARD OPTIONS, TRANSACTION FEE FOR MANUAL EXECUTIONS--PER 
CONTRACT.
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    The Exchange proposes to modify the rates charged for Manual 
executions to $0.35 per contract for Market Makers and $0.30 per 
contract for LMMs. The proposed rate for Market Makers is competitive 
and intended to align the Exchange's fees for Manual transactions by 
Market Makers with those charged by other markets.\6\ The proposed rate 
for LMMs would reduce the existing disparity between rates charged to 
LMMs and Market Makers from seven cents ($0.07) to five ($0.05), which 
disparity the Exchange believes continues to be justified given the 
heightened obligations and additional fees imposed on LMMs.\7\
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    \6\ See, e.g., Nasdaq PHLX LLC (``Phlx'') Pricing Schedule, 
available at: https://listingcenter.nasdaq.com/rulebook/phlx/rules/Phlx%20Options%207 (providing $0.35 per contract rate for manual 
transactions by market makers); Cboe Exchange, Inc. (``Cboe'') Fee 
Schedule, available at: https://cdn.cboe.com/resources/membership/Cboe_FeeSchedule.pdf (providing $0.35 per contract rate for manual 
transactions by market makers).
    \7\ See Rules 6.37A-O(b) (setting forth the continuous quoting 
obligations of LMMs to provide two-sided quotations in its appointed 
issues for 90% of the time the Exchange is open for trading in each 
issue) and 6.82-O(c) (regarding additional obligations specific to 
LMMs, including that LMMs that operate on the Trading Floor are 
required to be present every day). See Fee Schedule, NYSE Arca 
General Options and Trading Permit (OTP) Fee, Lead Market Maker 
Rights (setting forth the Rights Fee assessed on each issue in an 
LMM's allocation, with rates based on the Average National Daily 
Customer Contracts).

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[[Page 31364]]

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\8\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\9\ 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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    \8\ 15 U.S.C. 78f(b).
    \9\ 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.'' \10\
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    \10\ 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.\11\ Therefore, currently no exchange possesses significant 
pricing power in the execution of multiply-listed equity & ETF options 
order flow. More specifically, in March 2021, the Exchange had less 
than 11% market share of executed volume of multiply-listed equity and 
ETF options trades.\12\
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    \11\ 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.
    \12\ 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 multiply-listed equity and ETF 
options decreased slightly from 11.10% for the month of March 2020 
to 10.16% for the month of March 2021.
---------------------------------------------------------------------------

    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, changes 
to exchange transaction fees and rebates can have a direct effect on 
the ability of an exchange to compete for order flow.
    The proposed rule change is designed to bring the Exchange's fees 
for Market Maker Manual executions into alignment with those charged on 
other markets with Trading Floors. The Exchange believes it is 
reasonable to increase certain fees, similar to fees assessed by 
competing options exchanges for similar transactions, and notes that 
LMMs will continue to be charged lower fees than those assessed by 
competing options exchanges for similar transactions.\13\ The Exchange 
also believes that it is reasonable to continue to offer LMMs lower 
fees than Market Makers for Manual transactions given that LMMs are 
subject to heightened obligations and additional monthly Rights 
Fees.\14\
---------------------------------------------------------------------------

    \13\ See supra note 6.
    \14\ See supra note 7.
---------------------------------------------------------------------------

    The Exchange believes that the proposed increased charge for Manual 
executions by Market Makers and LMMs but not for other market 
participants is reasonable because the resulting disparity would align 
the Exchange's fees for Manual executions with the fees charged on 
other exchanges.\15\ In addition, the Exchange believes that other 
pricing incentives offered by the Exchange would continue to encourage 
Market Makers and LMMs to conduct Manual transactions on the 
Exchange.\16\ The Exchange thus believes the proposed changes, even 
though they are increased fees, would not discourage Market Makers and 
LMMs from continuing to conduct Manual executions on the Exchange and 
would continue to attract volume and liquidity to the Exchange 
generally and would therefore benefit all market participants 
(including those that do not participate in Manual executions) through 
increased opportunities to trade.
---------------------------------------------------------------------------

    \15\ The Exchange does not impose any fee on Manual transactions 
by Customers but does charge $0.25 per contract for Manual 
transactions by Firms, Broker-Dealers and Professional Customers, 
which rates are consistent with fees charged these market 
participants on other exchanges. See, e.g., supra note 6, PHLX 
Pricing Schedule and Cboe Fee Schedule (both exchanges imposing no 
charge for manual transactions by customers and imposing a $0.25 per 
contract rate for manual transactions by firms, broker-dealers and 
professional customers).
    \16\ See e.g., Notice of Filing and Immediate Effectiveness of 
Proposed Rule Change to Modify the NYSE Arca Options Fee Schedule 
Regarding the Limits on Fees for Options Strategy Executions, 
Securities Exchange Act Release No. 90949 (January 19, 2021), 86 FR 
7152 (January 26, 2021) (SR-NYSEArca-2021-06) (reducing the cap on 
strategy executions from $1,000 to $200 for OTP Holders that execute 
at least 25,000 monthly billable contract sides in Strategy 
Executions) and Fee Schedule, Limit of Fees on Options Strategy 
Executions. While the reduction to the cap on Strategy Executions is 
available to all OTP Holders, the Exchange notes that Maker Makers 
and LMMs have a time and place advantage by virtue of their presence 
on the Trading Floor to participate in such executions and therefore 
benefit from the reduced cap.
---------------------------------------------------------------------------

    Finally, to the extent the proposed fees do not discourage Market 
Makers and LMMs from continuing to conduct Manual executions on the 
Exchange, the Exchange believes the proposed changes would continue to 
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 maintain its 
market share relative to its competitors.
The Proposed Rule Change Is an Equitable Allocation of Fees and Rebates
    The Exchange believes the proposed rule change is an equitable 
allocation of its fees and credits. The proposal is based on the type 
of business transacted on the Exchange, and Market Makers and LMMs can 
opt to participate in Manual executions or not. The Exchange notes that 
the increased fees for Manual executions by Market Makers and LMMs, but 
not for other market participants, represents an equitable allocation 
of fees given that the proposed fees (and resulting disparity) are 
consistent with fees charged for Manual executions by market makers on 
other exchanges.\17\ The Exchange also believes that continuing to 
offer LMMs lower fees than Market Makers is an equitable allocation of 
fees given that LMMs are subject to heightened obligations and 
additional fees set forth in the Exchange's Fee Schedule.\18\
---------------------------------------------------------------------------

    \17\ See supra notes 6 and 15.
    \18\ See supra note 7.
---------------------------------------------------------------------------

    Moreover, even though the proposed changes increase the fees 
applicable to Manual executions by Market Makers and LMMs, the Exchange 
does not believe they will discourage such executions on the Exchange 
or the aggregation of such executions at the Exchange as a primary 
execution venue, including because of other pricing incentives 
available to such participants

[[Page 31365]]

on the Exchange.\19\ To the extent that the proposed changes continue 
to attract Manual executions to the Exchange, this 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 continue to improve market quality for all market 
participants on the Exchange and, as a consequence, continue to attract 
more order flow to the Exchange, thereby improving market-wide quality 
and price discovery.
---------------------------------------------------------------------------

    \19\ See supra note 16.
---------------------------------------------------------------------------

The Proposed Rule Change Is Not Unfairly Discriminatory
    The Exchange believes that the proposal is not unfairly 
discriminatory because the proposed modifications would apply to all 
Market Makers and LMMs conduct Manual executions on the Exchange on an 
equal and non-discriminatory basis.
    The proposal is based on the amount and type of business transacted 
on the Exchange, and Market Makers and LMMs are not obligated to 
participate in Manual executions on the Exchange. Rather, the proposal 
is designed to continue to encourage the use of the Exchange as a 
primary trading venue (if they have not done so previously) by 
maintaining the Trading Floor for Manual executions.
    The Exchange also believes that increasing fees for Manual 
executions by Market Makers, but not other market participants, is not 
unfairly discriminatory given that the proposed rates (and resulting 
disparity) are a competitive response to rates charged on competing 
options exchanges for manual executions by market makers and because 
these participants may available themselves of other reduced fees and 
incentives offered by the Exchange.\20\ The Exchange also believes that 
it is not unfairly discriminatory to continue to offer LMMs lower fees 
than Market Makers given that LMMs are subject to heightened 
obligations and additional fees set forth in the Exchange's Fee 
Schedule.\21\
---------------------------------------------------------------------------

    \20\ See supra notes 6, 15 and 16.
    \21\ See supra note 7.
---------------------------------------------------------------------------

    To the extent that the proposed change assists the Exchange in 
continuing to attract Manual executions to the Trading Floor, this 
order flow would continue to make the Exchange a more competitive venue 
for order execution. Thus, the Exchange believes the proposed rule 
change would contribute to 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 volume and liquidity would continue to 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 changes would be consistent with charges for similar 
business at other markets. As a result, the Exchange believes that the 
proposed changes further 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.'' \22\
---------------------------------------------------------------------------

    \22\ See Reg NMS Adopting Release, supra note 10, at 37499.
---------------------------------------------------------------------------

    Intramarket Competition. The proposed change is designed to 
continue to promote the use of the Exchange as a primary trading venue 
by maintaining the Trading Floor for Manual executions, which would 
enhance the quality of quoting and may increase the volumes of 
contracts traded on the Exchange. The Exchange believes that the 
proposed increased fees for Manual executions by Market Makers and LMMs 
but not for other market participants would not impose any burden on 
intermarket competition that is not necessary or appropriate because 
the proposed fees (and resulting disparity) are consistent with fees 
charged for Manual executions by market makers on other exchanges and 
because these participants may available themselves of other reduced 
fees and incentives offered by the Exchange.\23\ The Exchange believes 
that the proposed modifications to the rates applicable to Manual 
executions by Market Makers and LMMs will not discourage those market 
participants from continuing to conduct Manual executions on the 
Exchange (including because LMMs will continue to receive lower fees 
than those assessed by competing options exchanges for similar 
transactions). To the extent that this purpose is achieved, all of the 
Exchange's market participants should benefit from the continued market 
liquidity. Enhanced market quality and increased transaction volume 
that results from the increase in order flow directed to the Exchange 
will benefit all market participants and improve competition on the 
Exchange.
---------------------------------------------------------------------------

    \23\ See supra notes 6, 15 and 16.
---------------------------------------------------------------------------

    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 mechanisms and 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 currently has more than 16% of the market share of 
executed volume of multiply-listed equity and ETF options trades.\24\ 
Therefore, no exchange currently possesses significant pricing power in 
the execution of multiply-listed equity & ETF options order flow. More 
specifically, in March 2021, the Exchange had less than 11% market 
share of executed volume of multiply-listed equity and ETF options 
trades.\25\
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    \24\ See supra note 11.
    \25\ 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 multiply-listed equity and ETF 
options decreased slightly from 11.10% for the month of March 2020 
to 10.16% for the month of March 2021.
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change reflects this 
competitive environment because it modifies the Exchange's fees to be 
more closely aligned with fees charged by other markets with Trading 
Floors for similar transactions.\26\ The Exchange also believes that 
the proposed changes would continue to promote competition between the 
Exchange and other execution venues by encouraging orders to be sent to 
the Exchange for execution. To the extent that this purpose is 
achieved, all the Exchange's market participants should benefit from 
the improved market quality and increased opportunities for price 
improvement.
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    \26\ See supra notes 6 and 15.

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[[Page 31366]]

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) \27\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \28\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
---------------------------------------------------------------------------

    \27\ 15 U.S.C. 78s(b)(3)(A).
    \28\ 17 CFR 240.19 b-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) \29\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \29\ 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-2021-50 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-2021-50. 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 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-2021-50, and should be 
submitted on or before July 2, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\30\
---------------------------------------------------------------------------

    \30\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-12250 Filed 6-10-21; 8:45 am]
BILLING CODE 8011-01-P
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