Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Modifying the NYSE Arca Options Fee Schedule, 31754-31759 [2021-12473]
Download as PDF
<![CDATA[
31754
Federal Register / Vol. 86, No. 113 / Tuesday, June 15, 2021 / Notices
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act,20 and Rule
19b–4(f)(2) 21 thereunder. At any time
within 60 days of the filing of the
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 to determine
whether the proposed rule 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:
khammond on DSKJM1Z7X2PROD 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–
MIAX–2021–23 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–MIAX–2021–23. 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–MIAX–2021–23 and should
be submitted on or before July 6, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.22
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–12476 Filed 6–14–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–92132; No. SR–NYSEArca–
2021–51]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Modifying the NYSE Arca
Options Fee Schedule
June 9, 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 4,
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.
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
U.S.C. 78s(b)(3)(A)(ii).
21 17 CFR 240.19b–4(f)(2).
VerDate Sep<11>2014
17:02 Jun 14, 2021
Jkt 253001
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of this filing is to amend
the Fee Schedule to make modifications
to the Customer Penny Posting Credit
Tiers, Customer Incentive Program, and
Customer Posting Credit Tiers in NonPenny Issues.
Currently, the Fee Schedule provides
that OTP Holders and Firms (‘‘OTP
Holders’’) can qualify for per contract
credits applied to options transactions
based on meeting certain minimum
volume thresholds from Customer
posting interest in Penny issues and
Non-Penny issues and also qualify for
an additional credit by meeting
specified incentive volume levels. The
Exchange proposes to make
modifications to certain of its incentive
programs as set forth below.
The Exchange proposes to implement
the fee change effective June 4, 2021.
Customer Penny Posting Credit Tiers
(the ‘‘Penny Tiers’’)
The Exchange proposes to make the
following modifications to the Penny
Tiers, which provide per contract
22 17
1 15
20 15
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 Customer
Posting Credit Tiers and the Customer
Incentive Program. The Exchange
proposes to implement the fee change
effective June 4, 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.
PO 00000
Frm 00062
Fmt 4703
Sfmt 4703
4 The Exchange originally filed to amend the Fee
Schedule on June 1, 2021 (SR–NYSEArca–2021–48)
and withdrew such filing on June 4, 2021.
E:\FR\FM\15JNN1.SGM
15JNN1
khammond on DSKJM1Z7X2PROD with NOTICES
Federal Register / Vol. 86, No. 113 / Tuesday, June 15, 2021 / Notices
credits on executions of Customer
posted interest in Penny Issues. First,
the Exchange proposes to modify one of
the alternative minimum volume
thresholds to achieve Penny Tier 4,
eliminate Penny Tier 5, and modify both
alternative minimum volume thresholds
to achieve Penny Tier 7 (which will also
be renumbered to Tier 6). One of the
two alternative means of achieving
current Penny Tier 4 is for OTP Holders
to execute at least 0.85% of TCADV
from posted interest in Penny Issues, all
account types. The Exchange is
proposing to modify this alternative
threshold to require at least 0.30% of
TCADV from Customer posted interest
in all issues, not including Professional
Customer interest, plus executed ADV
of 0.60% of U.S. Equity Market Share
Posted and Executed on NYSE Arca
Equity Market. The Exchange is not
proposing to modify the Penny Tier 4
per contract credit of ($0.47).
The Exchange’s proposed changes to
Penny Tier 4 would modify the
qualification threshold for options order
flow such that the qualifying volume
would be restricted to posted Customer
interest (not including Professional
Customer interest) but would apply to
posted Customer volume in all issues
(not just Penny Issues). The proposed
change excludes Professional Customer
interest and is designed to attract
Customer order flow, which provides
benefits distinct from Professional
Customer volume. Customer liquidity
benefits all market participants by
providing more trading opportunities,
which attracts Market Makers. An
increase in the activity of these market
participants in turn facilitates tighter
spreads, which may cause an additional
corresponding increase in order flow
from other market participants. The
Exchange believes this proposed change
would still encourage OTP Holders to
achieve Tier 4 albeit with increased
Customer posted interest. The
Exchange’s proposed change to Penny
Tier 4 to add a cross-asset component is
designed to incentivize OTP Holders to
execute volume on the Exchange’s
equities platform which would make the
Exchange a more attractive execution
venue.
Notwithstanding the proposed change
to Penny Tier 4, the Exchange notes that
OTP Holders are still eligible to qualify
for the Penny Tier 4 per contract credit
of per contract credit [sic] of ($0.47)
under the alternative (and unchanged)
threshold, which requires that an OTP
Holder execute at least 0.75% of TCADV
from Customer posted interest in all
issues. By continuing to provide such
alternative methods to qualify for a
Penny Tier, the Exchange believes the
VerDate Sep<11>2014
17:02 Jun 14, 2021
Jkt 253001
opportunities to qualify for credits is
increased, which benefits all
participants through increased volume
to the Exchange.
In connection with the proposed
change to Penny Tier 4, the Exchange
proposes to eliminate current Penny
Tier 5, which provides a ($0.48) per
contract credit to OTP Holders that
execute at least 0.22% of TCADV from
Customer posted interest in all Issues,
plus Executed ADV of 0.90% of U.S.
Equity Market Share Posted and
Executed on NYSE Arca Equity Market,
or at least 0.75% of TCADV from
Customer posted interest in all issues,
plus at least 0.45% of TCADV from
Market Maker Total Electronic Volume.
The Exchange is eliminating Tier 5
because OTP Holders failed to
consistently achieve this Tier and thus
the incentive did not operate as
intended. The Exchange notes that the
proposed changes to Penny Tier 4
incorporates a cross-asset pricing
component similar to the one being
eliminated with existing Tier 5.
The Exchange proposes to modify
current Penny Tier 7 by increasing both
of the minimum alternative volume
thresholds to achieve the same ($0.50)
per contract credit. First, the Exchange
is proposing to require that OTP Holders
execute at least 1.30% (up from 1.00%)
of TCADV from Customer posted
interest in all issues, or execute at least
1.00% (up from 0.80%) of TCADV from
Customer posted interest in all issues,
plus executed ADV of 0.30% of U.S.
Equity Market Share Posted and
Executed on NYSE Arca Equity Market.5
The Exchange believes the proposed
change to Penny Tier 7, which increases
the minimum volume required, would
not discourage OTP Holders from
directing volume to the Exchange
because the Penny Tier 7 per contract
credit of ($0.50) is competitive with
other options exchanges.6
The Exchange proposes to renumber
current Penny Tiers 6 and 7 as new
Penny Tiers 5 and 6, respectively.
Customer Incentive Program (the
‘‘Incentive Credits’’)
The Exchange also proposes
modifications to the Incentive Credits,
which enables OTP Holders to achieve
one additional credit (to the Customer
Posting Credits Tiers in Penny and Non5 Regarding this alternative minimum threshold,
the Exchange also proposes to make a nonsubstantive correction of a typographical error to
eliminate an extraneous ‘‘ADV,’’ which would add
clarity and transparency to the Fee Schedule.
6 See, e.g., BZX Options Fee Schedule, available
at, https://markets.cboe.com/us/options/
membership/fee_schedule/bzx/ (providing a $0.52
per contract credit to members that achieve Tier 4
of the Customer Penny Add Volume Tiers).
PO 00000
Frm 00063
Fmt 4703
Sfmt 4703
31755
Penny Issues) if certain volume criteria
and thresholds are met. The Exchange
proposes to eliminate three of the
existing Incentive Credits because such
incentives failed to consistently incent
OTP Holders to direct order flow to the
Exchange. The Incentives Credits to be
eliminated are:
• The additional ($0.01) per contract
credit for OTP Holders that executed at
least 0.50% of TCADV from Customer
posted interest in all issues, plus, an
ADV from Market Maker posted interest
in Penny Issues equal to at least 0.30%
of TCADV; and
• The additional ($0.03) per contract
credit for OTP Holders that executed
ADV of 0.90% of U.S. Equity Market
Share Posted and Executed on NYSE
Arca Equity Market; and
• The additional ($0.03) per contract
credit for OTP Holders that executed at
least 1.50% of TCADV from Customer
posted interest in both Penny and nonPenny Issues, plus Executed ADV of
0.10% of U.S. Equity Market Share
Posted and Executed on NYSE Arca
Equity Market.
The Exchange also proposes to add a
new Incentive Credit which would
provide an additional ($0.03) per
contract credit for OTP Holders that
executed at least 0.30% of TCADV from
Customer posted interest in all issues,
not including Professional Customer
interest, plus executed ADV of 0.60% of
U.S. Equity Market Share Posted and
Executed on NYSE Arca Equity Market.
The proposed new Incentive Credit
excludes Professional Customer interest
and is designed to attract Customer
order flow, which provides benefits
distinct from Professional Customer
volume. Customer liquidity benefits all
market participants by providing more
trading opportunities, which attracts
Market Makers. An increase in the
activity of these market participants in
turn facilitates tighter spreads, which
may cause an additional corresponding
increase in order flow from other market
participants. The Exchange believes this
proposed Incentive Credit would
encourage OTP Holders to achieve this
additional credit albeit with increased
Customer posted interest. The
Exchange’s proposed inclusion of a
cross-asset component is designed to
incentivize OTP Holders to execute
volume on the Exchange’s equities
platform (in addition to the options
platform) which would make the
Exchange a more attractive execution
venue.
Customer Posting Credit Tiers in NonPenny Issues (the ‘‘Non-Penny Tiers’’)
The Exchange proposes to modify the
Non-Penny Tiers, which provide per
E:\FR\FM\15JNN1.SGM
15JNN1
khammond on DSKJM1Z7X2PROD with NOTICES
31756
Federal Register / Vol. 86, No. 113 / Tuesday, June 15, 2021 / Notices
contract credits on executions of
Customer posted interest in Non-Penny
Issues, in several ways. First, the
Exchange proposes to eliminate Tier B
of the Non-Penny Tiers and the
associated ($0.94) per contract credit,
which Tier includes the same minimum
volume requirement as the to-beeliminated Penny Tier 5 (i.e., that an
OTP Holder achieve at least 0.75% of
TCADV from Customer posted interest
in all issues, plus an ADV from Market
Maker Total Electronic Volume equal to
0.45% of TCADV. [sic] Like the
elimination of Penny Tier 5, the
Exchange believes this change would
remove an incentive that failed to
consistently incent OTP Holders to
direct order flow to the Exchange. In
connection with this change, the
Exchange proposes to rename the
current Tier C as new Tier B and to offer
a new Tier C.
Proposed Tier C of the Non-Penny
Tiers would offer a ($0.97) per contract
credit to OTP Holders that execute at
least 0.30% of TCADV from Customer
posted interest in all issues, not
including Professional Customer
interest, plus executed ADV of 0.60% of
U.S. Equity Market Share Posted and
Executed on NYSE Arca Equity Market.
Proposed Tier C, which excludes
Professional Customer interest, is
designed to attract Customer order flow,
which provides benefits distinct from
Professional Customer volume.
Customer liquidity benefits all market
participants by providing more trading
opportunities, which attracts Market
Makers. An increase in the activity of
these market participants in turn
facilitates tighter spreads, which may
cause an additional corresponding
increase in order flow from other market
participants. The Exchange’s proposed
inclusion of a cross-asset component is
designed to incentivize OTP Holders to
execute volume on the Exchange’s
equities platform. The Exchange
believes this proposed Tier C would
encourage OTP Holders to achieve this
Tier albeit with increased Customer
posted interest and would also
encourage increased equities trading,
which would make the Exchange a more
attractive execution venue.
The Exchange also proposes to modify
the minimum volume threshold
required to achieve Tier F of the NonPenny Tiers by offering a ($1.02) per
contract credit to OTP Holders that
execute at least 1.00%(up from 0.80%)
of TCADV from Customer posted
interest in all issues, plus executed ADV
of 0.30% ADV of U.S. Equity Market
Share Posted and Executed on NYSE
VerDate Sep<11>2014
17:02 Jun 14, 2021
Jkt 253001
Arca Equity Market.7 The Exchange
believes the proposed change to NonPenny Tier F, which increases the
minimum volume required, would not
discourage OTP Holders from directing
volume to the Exchange because the
Non-Penny Tier F per contract credit of
($1.02) is competitive with other
options exchanges.8
The Exchange notes that an OTP
Holder that qualifies for the new
alternative volume threshold under
Penny Tier 4 would also qualify for new
Non-Penny Tier C as well as the new
Incentive Credit as all three programs
have the same minimum volume
threshold. The Exchange notes that new
Incentive Credit, which is a credit that
is achieved in addition to credits
associated with the Penny and NonPenny Tiers, is designed to encourage
OTP Holders that may already qualify
based on the minimum options volume
thresholds to also post and execute a
certain amount of volume on the
Exchange’s equities trading platform,
which would make the Exchange a more
attractive execution venue for both
options and equities.
The Exchange cannot predict with
certainty whether any OTP Holders will
avail themselves of the proposed
changes to the Penny Tiers, Incentive
Credits or Non-Penny Tiers. At present,
whether or when an OTP Holder would
qualify for the enhanced credit varies
month-to-month. Thus, the Exchange
cannot predict with any certainty the
number of OTP Holders that may
qualify for the proposed new
qualifications, but believes that OTP
Holders would be encouraged to
increase volume to take advantage of the
credit tiers, and also to increase
participation through posted interest on
the NYSE Arca Equity Market.
issuers and other persons using its
facilities and does not unfairly
discriminate between customers,
issuers, brokers or dealers.
The Proposed Rule Change Is
Reasonable
The Exchange operates in a highly
competitive market. The Commission
has repeatedly expressed its preference
for competition over regulatory
intervention in determining prices,
products, and services in the securities
markets. In Regulation NMS, the
Commission highlighted the importance
of market forces in determining prices
and SRO revenues and, also, recognized
that current regulation of the market
system ‘‘has been remarkably successful
in promoting market competition in its
broader forms that are most important to
investors and listed companies.’’ 11
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.12
Therefore, currently no exchange
possesses significant pricing power in
the execution of multiply-listed equity &
ETF options order flow. More
specifically, in April 2021, the Exchange
had less than 10% market share of
executed volume of multiply-listed
equity & ETF options trades.13
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
2. Statutory Basis
fees. In response to this competitive
The Exchange believes that the
environment, the Exchange has
proposed rule change is consistent with established incentives, such as the
Section 6(b) of the Act,9 in general, and
Penny Tiers, the Incentive Credits, and
furthers the objectives of Sections
the Non-Penny Tiers.
6(b)(4) and (5) of the Act,10 in particular,
The Exchange believes that the
because it provides for the equitable
proposed modification to the Penny
allocation of reasonable dues, fees, and
Tiers, including eliminating Penny Tier
other charges among its members,
7 Regarding
proposed Tier F, the Exchange also
proposes to make a non-substantive correction of a
typographical error to eliminate an extraneous
‘‘ADV, which would add clarity and transparency
to the Fee Schedule. The Exchange also proposes
a non-substantive change to Non-Penny Tier D to
remove an extraneous comma, which would add
clarity and transparency to the Fee Schedule.
8 See, e.g., BZX Options Fee Schedule, supra note
6 (providing a $1.00 per contract credit to members
that achieve Tier 2 of the Customer Non-Penny Add
Volume Tiers).
9 15 U.S.C. 78f(b).
10 15 U.S.C. 78f(b)(4) and (5).
PO 00000
Frm 00064
Fmt 4703
Sfmt 4703
11 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(S7–10–04) (‘‘Reg NMS Adopting Release’’).
12 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.
13 Based on OCC data for monthly volume of
equity-based options and monthly volume of ETFbased options, see id., the Exchange’s market share
in equity-based options increased from 7.46% for
the month of April 2020 to 9.28% for the month
of April 2021.
E:\FR\FM\15JNN1.SGM
15JNN1
khammond on DSKJM1Z7X2PROD with NOTICES
Federal Register / Vol. 86, No. 113 / Tuesday, June 15, 2021 / Notices
5 and modifying the minimum volume
thresholds and qualifying criteria for
Penny Tier 4 and current Penny Tier 7
(new Tier 6) are reasonably designed to
continue to incent OTP Holders to
increase the amount of Customer
interest sent to the Exchange, especially
posted interest. The proposed changes
to the Penny Tiers exclude Professional
Customer interest and are reasonably
designed to attract Customer order flow,
which is unique and provides benefits
distinct from Professional Customer
volume. An increase in Customer
volume would create more trading
opportunities, which, in turn attracts
Market Makers. A resulting increase in
Market-Maker activity may facilitate
tighter spreads, which may lead to an
additional increase of order flow from
other market participants, further
contributing to a deeper, more liquid
market to the benefit of all market
participants by creating a more robust
and well-balanced market ecosystem.
As noted above, OTP Holders are still
eligible to qualify for Penny Credit Tier
4 under the existing alternative
(unchanged) qualification basis. By
continuing to provide such alternative
methods to qualify for a Penny Tier, the
Exchange believes the opportunities to
qualify for credits is increased, which
benefits all participants through
increased volume to the Exchange.
The proposed addition of the crossasset component to Penny Tier 4 is
designed to incent OTP Holders (and
their affiliates) to transact more options
and equities volume on the Exchange,
which may result in an increase of
volume and liquidity on both its options
and equites platforms, which would
benefit all market participants by
providing more trading opportunities
and tighter spreads, and may lead to a
corresponding increase in order flow
from other market participants.
The proposed changes to eliminate
certain Incentive Credits and NonPenny Tier B are reasonably designed to
eliminate from the Fee Schedule
incentives that did not consistently
encourage OTP Holders to direct order
flow to the Exchange. The proposed
new Incentive Credit and new NonPenny Tier C, which each include a
cross-asset component, are reasonably
designed to encourage OTP Holders
(and their affiliates) to transact more
options and equities volume on the
Exchange, which would benefit all
market participants by providing more
trading opportunities and tighter
spreads, and may lead to a
corresponding increase in order flow
from other market participants.
The Exchange believes that the
proposed modification to the Non-
VerDate Sep<11>2014
17:02 Jun 14, 2021
Jkt 253001
Penny Tier F is reasonably designed to
continue to incent OTP Holders to
increase the amount and type of
Customer interest sent to the Exchange,
especially posted interest. As noted
above, an increase in posted Customer
interest benefits all market participants.
The proposed new Incentive Credit
has a minimum volume threshold
identical to proposed Penny Tier 4 and
Non-Penny Tier C and similarly
excludes Professional Customer interest.
This proposed Incentive Credit is
reasonably designed to attract Customer
order flow, which provides benefits
distinct from Professional Customer
volume. Customer liquidity benefits all
market participants by providing more
trading opportunities, which attracts
Market Makers. An increase in the
activity of these market participants in
turn facilitates tighter spreads, which
may cause an additional corresponding
increase in order flow from other market
participants. The Exchange believes that
this proposed Incentive Credit would
encourage OTP Holders to achieve this
additional credit albeit with increased
Customer posted interest. The
Exchange’s proposed inclusion of a
cross-asset component in the new
Incentive Credit is designed to
incentivize OTP Holders to execute
volume on the Exchange’s equities
platform (in addition to the options
platform) which would make the
Exchange a more attractive execution
venue.
To the extent the proposed rule
change continues to attract greater
volume and liquidity by encouraging
OTP Holders (and their affiliates) to
increase their options and equities
volume on the Exchange in an effort to
achieve higher credits through the
Penny and Non-Penny Tiers (as well as
one of the additional Incentive Credits),
the Exchange believes the proposed
change would improve the Exchange’s
overall competitiveness and strengthen
its market quality for all market
participants. In the backdrop of the
competitive environment in which the
Exchange operates, the proposed rule
change is a reasonable attempt by the
Exchange to increase the depth of its
market and improve its market share
relative to its competitors.
The proposed non-substantive
changes (see supra notes 5 and 7) are
reasonably designed to add clarity and
transparency to the Fee Schedule
making it easier to navigate and
comprehend.
The Proposed Rule Change is an
Equitable Allocation of Credits and Fees
The Exchange believes the proposed
rule change is an equitable allocation of
PO 00000
Frm 00065
Fmt 4703
Sfmt 4703
31757
its fees and credits. The proposal is
based on the amount and type of
business transacted on the Exchange
and OTP Holders can opt to avail
themselves of the credits or not.
Moreover, the proposal is designed to
incent OTP Holders to aggregate all
Customer posting interest at the
Exchange as a primary execution venue
and to attract more posting interest on
the NYSE Arca Equity Market. To the
extent that the proposed change attracts
more Customer posting interest to the
Exchange and more posting interest on
the NYSE Arca Equity Market, this
increased order flow would continue to
make the Exchange a more competitive
venue for, among other things, order
execution on both options and cash
equities. Thus, the Exchange believes
the proposed rule change would
improve market quality for all market
participants on the Exchange and, as a
consequence, attract more order flow to
the Exchange thereby improving marketwide quality and price discovery.
The Proposed Rule Change Is Not
Unfairly Discriminatory
The Exchange believes it is not
unfairly discriminatory to modify the
Penny Tiers, the Incentive Credits, and
the Non-Penny Tiers because the
proposed modifications would be
available to all similarly-situated market
participants on an equal and nondiscriminatory basis.
The proposal is based on the amount
and type of business transacted on the
Exchange and OTP Holders are not
obligated to try to achieve the enhanced
qualifications, nor are they obligated to
execute posted interest. Rather, the
proposal is designed to encourage OTP
Holders to utilize the Exchange as a
primary trading venue for Customer
posted interest (if they have not done so
previously) and more posting interest on
the NYSE Arca Equity Market. To the
extent that the proposed change attracts
more Customer interest, including
posted interest, to the Exchange, this
increased order flow would continue to
make the Exchange a more competitive
venue for, among other things, order
execution. Thus, the Exchange believes
the proposed rule change would
improve market quality for all market
participants on the Exchange and, as a
consequence, attract more order flow to
the Exchange thereby improving marketwide quality and price discovery. The
resulting increased volume and
liquidity would provide more trading
opportunities and tighter spreads to all
market participants and thus would
promote just and equitable principles of
trade, remove impediments to and
perfect the mechanism of a free and
E:\FR\FM\15JNN1.SGM
15JNN1
31758
Federal Register / Vol. 86, No. 113 / Tuesday, June 15, 2021 / Notices
khammond on DSKJM1Z7X2PROD with NOTICES
open market and a national market
system and, in general, to 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 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.’’ 14
Intramarket Competition. The
proposed change is designed to attract
additional order flow (particularly
Customer posted interest and posted
equity interest) to the Exchange. The
Exchange believes that the proposed
modification to the Penny Tiers, the
Incentive Credits, and the Non-Penny
Tiers would incent OTP Holders to
direct their Customer order flow and
their posted equity order flow to the
Exchange. Greater liquidity benefits all
market participants on the Exchange
and increased Customer order flow and
posted equity order flow would increase
opportunities for execution of other
trading interest. The proposed
modifications to the Penny Tiers, the
Incentive Credits, and the Non-Penny
Tiers would be available to all similarlysituated market participants that
execute Customer posted interest
(excluding Professional Customer
interest), and, as such, the proposed
change would not impose a disparate
burden on competition among market
participants 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
14 See
Reg NMS Adopting Release, supra note 11,
at 37499.
VerDate Sep<11>2014
17:02 Jun 14, 2021
Jkt 253001
be excessive. In such an environment,
the Exchange must continually adjust its
fees to remain competitive with other
exchanges and to attract order flow to
the Exchange. Based on publiclyavailable information, and excluding
index-based options, no single exchange
has more than 16% of the market share
of executed volume of multiply-listed
equity and ETF options trades.15
Therefore, currently no exchange
possesses significant pricing power in
the execution of multiply-listed equity &
ETF options order flow. More
specifically, in April 2021, the Exchange
had less than 10% market share of
executed volume of multiply-listed
equity & ETF options trades.16
The Exchange believes that the
proposed rule change reflects this
competitive environment because it
modifies the Exchange’s fees and credits
in a manner that is competitive and
designed to incent OTP Holders to
direct trading interest (particularly
Customer posted interest and posted
equity interest) to the Exchange, to
provide liquidity and to attract order
flow.17 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.
The Exchange believes that the
proposed change could promote
competition between the Exchange and
other execution venues, including those
that currently offer similar Customer
posting credits, by encouraging
additional orders to be sent to the
Exchange for execution. The Exchange
also believes that the proposed change
is designed to provide the public and
investors with a Fee Schedule that is
clear and consistent, thereby reducing
burdens on the marketplace and
facilitating investor protection.
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
15 See
supra note 12.
on OCC data for monthly volume of
equity-based options and monthly volume of ETFbased options, see id., the Exchange’s market share
in equity-based options increased from 7.46% for
the month of April 2020 to 9.28% for the month
of April 2021.
17 See supra notes 6 and 8.
16 Based
PO 00000
Frm 00066
Fmt 4703
Sfmt 4703
19(b)(3)(A) 18 of the Act and
subparagraph (f)(2) of Rule 19b–4 19
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) 20 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSEArca–2021–51 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–2021–51. 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
18 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(2).
20 15 U.S.C. 78s(b)(2)(B).
19 17
E:\FR\FM\15JNN1.SGM
15JNN1
Federal Register / Vol. 86, No. 113 / Tuesday, June 15, 2021 / Notices
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–2021–51, and
should be submitted on or before July 6,
2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.21
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–12473 Filed 6–14–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–92134; File No. SR–
NASDAQ–2021–046]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend the
Exchange’s Pricing Schedule at Equity
7, Section 114(f)
June 9, 2021.
khammond on DSKJM1Z7X2PROD with NOTICES
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on May 27,
2021, The Nasdaq Stock Market LLC
(‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
Exchange’s Pricing Schedule at Equity
7, Section 114(f) (‘‘Pricing Schedule’’).
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
21 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
VerDate Sep<11>2014
17:02 Jun 14, 2021
Jkt 253001
rulebook/nasdaq/rules, at the principal
office of the Exchange, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange 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 these
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 aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of the proposed rule
change is to amend the Exchange’s
Pricing Schedule at Equity 7, Section
114(f) applicable to the Designated
Liquidity Provider (‘‘DLP’’) 3 Program.
The Exchange proposes to amend the
rebates applicable for DLPs in Nasdaqlisted securities with monthly
incentives that are directly tied to
meeting market quality metrics
(‘‘MQMs’’). Specifically, the Exchange
proposes to (1) add Exchange Traded
Fund Shares listed on Nasdaq pursuant
to Nasdaq Rule 5704, Proxy Portfolio
Shares listed on Nasdaq pursuant to
Nasdaq Rule 5750, and Managed
Portfolio Shares listed on Nasdaq
pursuant to Nasdaq Rule 5760 to the list
of securities that may be designated as
a Qualified Security, as long as it has at
least one DLP; (2) amend Equity 7,
Section 114(f)(4) to revise the monthly
performance criteria related to the
specific rebates provided under Equity
7, Section 114(f)(5), as well as to address
secondary DLPs (‘‘Secondary DLPs’’); (3)
change the current schedule under
Equity 7, Section 114(f)(5) from three
tiers to five tiers, establish both standard
3 Equity 7, Section 114(f)(2) defines a ‘‘Designated
Liquidity Provider’’ or ‘‘DLP’’ as a registered
Nasdaq market maker for a Qualified Security
(defined below) that has committed to maintain
minimum performance standards. A DLP will be
selected by Nasdaq based on factors including, but
not limited to, experience with making markets in
exchange-traded products, adequacy of capital,
willingness to promote Nasdaq as a marketplace,
issuer preference, operational capacity, support
personnel, and history of adherence to Nasdaq rules
and securities laws. Nasdaq may limit the number
of DLPs in a security, or modify a previously
established limit, upon prior written notice to
members.
PO 00000
Frm 00067
Fmt 4703
Sfmt 4703
31759
rebates (‘‘Standard Rebate’’) and
enhanced rebates (‘‘Enhanced Rebate’’),
as well as address Secondary DLPs; and
(4) change the existing Additional Tape
C ETP Incentives in Equity 7, Section
114(f)(5)(B), as well as add a new tier to
the schedule.
Description of the Changes
The proposal amends the rebates
applicable for DLPs in Nasdaq-listed
securities with monthly incentives that
are directly tied to meeting MQMs.4 The
Exchange believes that these changes
will encourage DLPs to maintain better
market quality in Nasdaq-listed
securities, and, in particular, in lower
volume securities where transactionbased compensation (i.e., rebates) may
not be sufficient. The Exchange
currently offers a DLP Program, which
applies to transactions in a Qualified
Security 5 by one of its DLPs associated
with its DLP Program market participant
identifier (‘‘MPID’’).
Add Exchange Traded Fund Shares,
Proxy Portfolio Shares and Managed
Portfolio Shares To List That May Be
Designated as a Qualified Security
The Exchange proposes to amend
Equity 7, Section 114(f)(1)(A) to add
Exchange Traded Fund Shares listed on
Nasdaq pursuant to Nasdaq Rule 5704,6
Proxy Portfolio Shares listed on Nasdaq
pursuant to Nasdaq Rule 5750 and
Managed Portfolio Shares listed on
Nasdaq pursuant to Nasdaq Rule 5760 to
the list of securities that may be
designated as a Qualified Security, as
long as it has at least one DLP. Nasdaq
Rule 5704 (Exchange Traded Fund
Shares), Nasdaq Rule 5750 (Proxy
Portfolio Shares) and Nasdaq Rule 5760
(Managed Portfolio Shares) were all
fairly recently adopted and should be
added to the existing list that already
includes: Nasdaq Rule 5705—Exchange
Traded Funds: Portfolio Depository
Receipts and Index Fund Shares;
Nasdaq Rule 5710—Securities Linked to
the Performance of Indexes and
Commodities (Including Currencies);
Nasdaq Rule 5720—Trust Issued
Receipts; Nasdaq Rule 5735—Managed
Fund Shares; and Nasdaq Rule 5745—
4 The Exchange is also making a technical change
in the second sentence of Equity 7, Section
114(f)(5)(B) to change ‘‘Rebate’’ to ‘‘rebate’’.
5 Equity 7, Section 114(f)(1) says a security may
be designated as a ‘‘Qualified Security’’ if: (a) It is
an exchange-traded product listed on Nasdaq
pursuant to Nasdaq Rules 5705, 5710, 5720, 5735,
or 5745; and (b) it has at least one DLP.
6 The inclusion of Nasdaq Rule 5704 to the list
of securities that may be designated as a Qualified
Security is not a substantive change, but being
added as a clarification because the securities listed
under Nasdaq Rule 5704 are already covered by
Nasdaq Rules 5705 and 5735.
E:\FR\FM\15JNN1.SGM
15JNN1
]]>Agencies
[Federal Register Volume 86, Number 113 (Tuesday, June 15, 2021)]
[Notices]
[Pages 31754-31759]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-12473]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-92132; No. SR-NYSEArca-2021-51]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Modifying the NYSE
Arca Options Fee Schedule
June 9, 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 4, 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to modify the NYSE Arca Options Fee Schedule
(``Fee Schedule'') regarding the Customer Posting Credit Tiers and the
Customer Incentive Program. The Exchange proposes to implement the fee
change effective June 4, 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.
---------------------------------------------------------------------------
\4\ The Exchange originally filed to amend the Fee Schedule on
June 1, 2021 (SR-NYSEArca-2021-48) and withdrew such filing on June
4, 2021.
---------------------------------------------------------------------------
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of this filing is to amend the Fee Schedule to make
modifications to the Customer Penny Posting Credit Tiers, Customer
Incentive Program, and Customer Posting Credit Tiers in Non-Penny
Issues.
Currently, the Fee Schedule provides that OTP Holders and Firms
(``OTP Holders'') can qualify for per contract credits applied to
options transactions based on meeting certain minimum volume thresholds
from Customer posting interest in Penny issues and Non-Penny issues and
also qualify for an additional credit by meeting specified incentive
volume levels. The Exchange proposes to make modifications to certain
of its incentive programs as set forth below.
The Exchange proposes to implement the fee change effective June 4,
2021.
Customer Penny Posting Credit Tiers (the ``Penny Tiers'')
The Exchange proposes to make the following modifications to the
Penny Tiers, which provide per contract
[[Page 31755]]
credits on executions of Customer posted interest in Penny Issues.
First, the Exchange proposes to modify one of the alternative minimum
volume thresholds to achieve Penny Tier 4, eliminate Penny Tier 5, and
modify both alternative minimum volume thresholds to achieve Penny Tier
7 (which will also be renumbered to Tier 6). One of the two alternative
means of achieving current Penny Tier 4 is for OTP Holders to execute
at least 0.85% of TCADV from posted interest in Penny Issues, all
account types. The Exchange is proposing to modify this alternative
threshold to require at least 0.30% of TCADV from Customer posted
interest in all issues, not including Professional Customer interest,
plus executed ADV of 0.60% of U.S. Equity Market Share Posted and
Executed on NYSE Arca Equity Market. The Exchange is not proposing to
modify the Penny Tier 4 per contract credit of ($0.47).
The Exchange's proposed changes to Penny Tier 4 would modify the
qualification threshold for options order flow such that the qualifying
volume would be restricted to posted Customer interest (not including
Professional Customer interest) but would apply to posted Customer
volume in all issues (not just Penny Issues). The proposed change
excludes Professional Customer interest and is designed to attract
Customer order flow, which provides benefits distinct from Professional
Customer volume. Customer liquidity benefits all market participants by
providing more trading opportunities, which attracts Market Makers. An
increase in the activity of these market participants in turn
facilitates tighter spreads, which may cause an additional
corresponding increase in order flow from other market participants.
The Exchange believes this proposed change would still encourage OTP
Holders to achieve Tier 4 albeit with increased Customer posted
interest. The Exchange's proposed change to Penny Tier 4 to add a
cross-asset component is designed to incentivize OTP Holders to execute
volume on the Exchange's equities platform which would make the
Exchange a more attractive execution venue.
Notwithstanding the proposed change to Penny Tier 4, the Exchange
notes that OTP Holders are still eligible to qualify for the Penny Tier
4 per contract credit of per contract credit [sic] of ($0.47) under the
alternative (and unchanged) threshold, which requires that an OTP
Holder execute at least 0.75% of TCADV from Customer posted interest in
all issues. By continuing to provide such alternative methods to
qualify for a Penny Tier, the Exchange believes the opportunities to
qualify for credits is increased, which benefits all participants
through increased volume to the Exchange.
In connection with the proposed change to Penny Tier 4, the
Exchange proposes to eliminate current Penny Tier 5, which provides a
($0.48) per contract credit to OTP Holders that execute at least 0.22%
of TCADV from Customer posted interest in all Issues, plus Executed ADV
of 0.90% of U.S. Equity Market Share Posted and Executed on NYSE Arca
Equity Market, or at least 0.75% of TCADV from Customer posted interest
in all issues, plus at least 0.45% of TCADV from Market Maker Total
Electronic Volume. The Exchange is eliminating Tier 5 because OTP
Holders failed to consistently achieve this Tier and thus the incentive
did not operate as intended. The Exchange notes that the proposed
changes to Penny Tier 4 incorporates a cross-asset pricing component
similar to the one being eliminated with existing Tier 5.
The Exchange proposes to modify current Penny Tier 7 by increasing
both of the minimum alternative volume thresholds to achieve the same
($0.50) per contract credit. First, the Exchange is proposing to
require that OTP Holders execute at least 1.30% (up from 1.00%) of
TCADV from Customer posted interest in all issues, or execute at least
1.00% (up from 0.80%) of TCADV from Customer posted interest in all
issues, plus executed ADV of 0.30% of U.S. Equity Market Share Posted
and Executed on NYSE Arca Equity Market.\5\
---------------------------------------------------------------------------
\5\ Regarding this alternative minimum threshold, the Exchange
also proposes to make a non-substantive correction of a
typographical error to eliminate an extraneous ``ADV,'' which would
add clarity and transparency to the Fee Schedule.
---------------------------------------------------------------------------
The Exchange believes the proposed change to Penny Tier 7, which
increases the minimum volume required, would not discourage OTP Holders
from directing volume to the Exchange because the Penny Tier 7 per
contract credit of ($0.50) is competitive with other options
exchanges.\6\
---------------------------------------------------------------------------
\6\ See, e.g., BZX Options Fee Schedule, available at, https://markets.cboe.com/us/options/membership/fee_schedule/bzx/ (providing
a $0.52 per contract credit to members that achieve Tier 4 of the
Customer Penny Add Volume Tiers).
---------------------------------------------------------------------------
The Exchange proposes to renumber current Penny Tiers 6 and 7 as
new Penny Tiers 5 and 6, respectively.
Customer Incentive Program (the ``Incentive Credits'')
The Exchange also proposes modifications to the Incentive Credits,
which enables OTP Holders to achieve one additional credit (to the
Customer Posting Credits Tiers in Penny and Non-Penny Issues) if
certain volume criteria and thresholds are met. The Exchange proposes
to eliminate three of the existing Incentive Credits because such
incentives failed to consistently incent OTP Holders to direct order
flow to the Exchange. The Incentives Credits to be eliminated are:
The additional ($0.01) per contract credit for OTP Holders
that executed at least 0.50% of TCADV from Customer posted interest in
all issues, plus, an ADV from Market Maker posted interest in Penny
Issues equal to at least 0.30% of TCADV; and
The additional ($0.03) per contract credit for OTP Holders
that executed ADV of 0.90% of U.S. Equity Market Share Posted and
Executed on NYSE Arca Equity Market; and
The additional ($0.03) per contract credit for OTP Holders
that executed at least 1.50% of TCADV from Customer posted interest in
both Penny and non-Penny Issues, plus Executed ADV of 0.10% of U.S.
Equity Market Share Posted and Executed on NYSE Arca Equity Market.
The Exchange also proposes to add a new Incentive Credit which
would provide an additional ($0.03) per contract credit for OTP Holders
that executed at least 0.30% of TCADV from Customer posted interest in
all issues, not including Professional Customer interest, plus executed
ADV of 0.60% of U.S. Equity Market Share Posted and Executed on NYSE
Arca Equity Market. The proposed new Incentive Credit excludes
Professional Customer interest and is designed to attract Customer
order flow, which provides benefits distinct from Professional Customer
volume. Customer liquidity benefits all market participants by
providing more trading opportunities, which attracts Market Makers. An
increase in the activity of these market participants in turn
facilitates tighter spreads, which may cause an additional
corresponding increase in order flow from other market participants.
The Exchange believes this proposed Incentive Credit would encourage
OTP Holders to achieve this additional credit albeit with increased
Customer posted interest. The Exchange's proposed inclusion of a cross-
asset component is designed to incentivize OTP Holders to execute
volume on the Exchange's equities platform (in addition to the options
platform) which would make the Exchange a more attractive execution
venue.
Customer Posting Credit Tiers in Non-Penny Issues (the ``Non-Penny
Tiers'')
The Exchange proposes to modify the Non-Penny Tiers, which provide
per
[[Page 31756]]
contract credits on executions of Customer posted interest in Non-Penny
Issues, in several ways. First, the Exchange proposes to eliminate Tier
B of the Non-Penny Tiers and the associated ($0.94) per contract
credit, which Tier includes the same minimum volume requirement as the
to-be-eliminated Penny Tier 5 (i.e., that an OTP Holder achieve at
least 0.75% of TCADV from Customer posted interest in all issues, plus
an ADV from Market Maker Total Electronic Volume equal to 0.45% of
TCADV. [sic] Like the elimination of Penny Tier 5, the Exchange
believes this change would remove an incentive that failed to
consistently incent OTP Holders to direct order flow to the Exchange.
In connection with this change, the Exchange proposes to rename the
current Tier C as new Tier B and to offer a new Tier C.
Proposed Tier C of the Non-Penny Tiers would offer a ($0.97) per
contract credit to OTP Holders that execute at least 0.30% of TCADV
from Customer posted interest in all issues, not including Professional
Customer interest, plus executed ADV of 0.60% of U.S. Equity Market
Share Posted and Executed on NYSE Arca Equity Market. Proposed Tier C,
which excludes Professional Customer interest, is designed to attract
Customer order flow, which provides benefits distinct from Professional
Customer volume. Customer liquidity benefits all market participants by
providing more trading opportunities, which attracts Market Makers. An
increase in the activity of these market participants in turn
facilitates tighter spreads, which may cause an additional
corresponding increase in order flow from other market participants.
The Exchange's proposed inclusion of a cross-asset component is
designed to incentivize OTP Holders to execute volume on the Exchange's
equities platform. The Exchange believes this proposed Tier C would
encourage OTP Holders to achieve this Tier albeit with increased
Customer posted interest and would also encourage increased equities
trading, which would make the Exchange a more attractive execution
venue.
The Exchange also proposes to modify the minimum volume threshold
required to achieve Tier F of the Non-Penny Tiers by offering a ($1.02)
per contract credit to OTP Holders that execute at least 1.00%(up from
0.80%) of TCADV from Customer posted interest in all issues, plus
executed ADV of 0.30% ADV of U.S. Equity Market Share Posted and
Executed on NYSE Arca Equity Market.\7\ The Exchange believes the
proposed change to Non-Penny Tier F, which increases the minimum volume
required, would not discourage OTP Holders from directing volume to the
Exchange because the Non-Penny Tier F per contract credit of ($1.02) is
competitive with other options exchanges.\8\
---------------------------------------------------------------------------
\7\ Regarding proposed Tier F, the Exchange also proposes to
make a non-substantive correction of a typographical error to
eliminate an extraneous ``ADV, which would add clarity and
transparency to the Fee Schedule. The Exchange also proposes a non-
substantive change to Non-Penny Tier D to remove an extraneous
comma, which would add clarity and transparency to the Fee Schedule.
\8\ See, e.g., BZX Options Fee Schedule, supra note 6 (providing
a $1.00 per contract credit to members that achieve Tier 2 of the
Customer Non-Penny Add Volume Tiers).
---------------------------------------------------------------------------
The Exchange notes that an OTP Holder that qualifies for the new
alternative volume threshold under Penny Tier 4 would also qualify for
new Non-Penny Tier C as well as the new Incentive Credit as all three
programs have the same minimum volume threshold. The Exchange notes
that new Incentive Credit, which is a credit that is achieved in
addition to credits associated with the Penny and Non-Penny Tiers, is
designed to encourage OTP Holders that may already qualify based on the
minimum options volume thresholds to also post and execute a certain
amount of volume on the Exchange's equities trading platform, which
would make the Exchange a more attractive execution venue for both
options and equities.
The Exchange cannot predict with certainty whether any OTP Holders
will avail themselves of the proposed changes to the Penny Tiers,
Incentive Credits or Non-Penny Tiers. At present, whether or when an
OTP Holder would qualify for the enhanced credit varies month-to-month.
Thus, the Exchange cannot predict with any certainty the number of OTP
Holders that may qualify for the proposed new qualifications, but
believes that OTP Holders would be encouraged to increase volume to
take advantage of the credit tiers, and also to increase participation
through posted interest on the NYSE Arca Equity Market.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\9\ in general, and furthers the
objectives of Sections 6(b)(4) and (5) of the Act,\10\ 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.
---------------------------------------------------------------------------
\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
The Proposed Rule Change Is Reasonable
The Exchange operates in a highly competitive market. The
Commission has repeatedly expressed its preference for competition over
regulatory intervention in determining prices, products, and services
in the securities markets. In Regulation NMS, the Commission
highlighted the importance of market forces in determining prices and
SRO revenues and, also, recognized 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.'' \11\
---------------------------------------------------------------------------
\11\ 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.\12\ Therefore, currently no exchange possesses significant
pricing power in the execution of multiply-listed equity & ETF options
order flow. More specifically, in April 2021, the Exchange had less
than 10% market share of executed volume of multiply-listed equity &
ETF options trades.\13\
---------------------------------------------------------------------------
\12\ 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.
\13\ Based on 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 increased from 7.46%
for the month of April 2020 to 9.28% for the month of April 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. In response to this
competitive environment, the Exchange has established incentives, such
as the Penny Tiers, the Incentive Credits, and the Non-Penny Tiers.
The Exchange believes that the proposed modification to the Penny
Tiers, including eliminating Penny Tier
[[Page 31757]]
5 and modifying the minimum volume thresholds and qualifying criteria
for Penny Tier 4 and current Penny Tier 7 (new Tier 6) are reasonably
designed to continue to incent OTP Holders to increase the amount of
Customer interest sent to the Exchange, especially posted interest. The
proposed changes to the Penny Tiers exclude Professional Customer
interest and are reasonably designed to attract Customer order flow,
which is unique and provides benefits distinct from Professional
Customer volume. An increase in Customer volume would create more
trading opportunities, which, in turn attracts Market Makers. A
resulting increase in Market-Maker activity may facilitate tighter
spreads, which may lead to an additional increase of order flow from
other market participants, further contributing to a deeper, more
liquid market to the benefit of all market participants by creating a
more robust and well-balanced market ecosystem.
As noted above, OTP Holders are still eligible to qualify for Penny
Credit Tier 4 under the existing alternative (unchanged) qualification
basis. By continuing to provide such alternative methods to qualify for
a Penny Tier, the Exchange believes the opportunities to qualify for
credits is increased, which benefits all participants through increased
volume to the Exchange.
The proposed addition of the cross-asset component to Penny Tier 4
is designed to incent OTP Holders (and their affiliates) to transact
more options and equities volume on the Exchange, which may result in
an increase of volume and liquidity on both its options and equites
platforms, which would benefit all market participants by providing
more trading opportunities and tighter spreads, and may lead to a
corresponding increase in order flow from other market participants.
The proposed changes to eliminate certain Incentive Credits and
Non-Penny Tier B are reasonably designed to eliminate from the Fee
Schedule incentives that did not consistently encourage OTP Holders to
direct order flow to the Exchange. The proposed new Incentive Credit
and new Non-Penny Tier C, which each include a cross-asset component,
are reasonably designed to encourage OTP Holders (and their affiliates)
to transact more options and equities volume on the Exchange, which
would benefit all market participants by providing more trading
opportunities and tighter spreads, and may lead to a corresponding
increase in order flow from other market participants.
The Exchange believes that the proposed modification to the Non-
Penny Tier F is reasonably designed to continue to incent OTP Holders
to increase the amount and type of Customer interest sent to the
Exchange, especially posted interest. As noted above, an increase in
posted Customer interest benefits all market participants.
The proposed new Incentive Credit has a minimum volume threshold
identical to proposed Penny Tier 4 and Non-Penny Tier C and similarly
excludes Professional Customer interest. This proposed Incentive Credit
is reasonably designed to attract Customer order flow, which provides
benefits distinct from Professional Customer volume. Customer liquidity
benefits all market participants by providing more trading
opportunities, which attracts Market Makers. An increase in the
activity of these market participants in turn facilitates tighter
spreads, which may cause an additional corresponding increase in order
flow from other market participants. The Exchange believes that this
proposed Incentive Credit would encourage OTP Holders to achieve this
additional credit albeit with increased Customer posted interest. The
Exchange's proposed inclusion of a cross-asset component in the new
Incentive Credit is designed to incentivize OTP Holders to execute
volume on the Exchange's equities platform (in addition to the options
platform) which would make the Exchange a more attractive execution
venue.
To the extent the proposed rule change continues to attract greater
volume and liquidity by encouraging OTP Holders (and their affiliates)
to increase their options and equities volume on the Exchange in an
effort to achieve higher credits through the Penny and Non-Penny Tiers
(as well as one of the additional Incentive Credits), the Exchange
believes the proposed change would improve the Exchange's overall
competitiveness and strengthen its market quality for all market
participants. In the backdrop of the competitive environment in which
the Exchange operates, the proposed rule change is a reasonable attempt
by the Exchange to increase the depth of its market and improve its
market share relative to its competitors.
The proposed non-substantive changes (see supra notes 5 and 7) are
reasonably designed to add clarity and transparency to the Fee Schedule
making it easier to navigate and comprehend.
The Proposed Rule Change is an Equitable Allocation of Credits and Fees
The Exchange believes the proposed rule change is an equitable
allocation of its fees and credits. The proposal is based on the amount
and type of business transacted on the Exchange and OTP Holders can opt
to avail themselves of the credits or not. Moreover, the proposal is
designed to incent OTP Holders to aggregate all Customer posting
interest at the Exchange as a primary execution venue and to attract
more posting interest on the NYSE Arca Equity Market. To the extent
that the proposed change attracts more Customer posting interest to the
Exchange and more posting interest on the NYSE Arca Equity Market, this
increased order flow would continue to make the Exchange a more
competitive venue for, among other things, order execution on both
options and cash equities. Thus, the Exchange believes the proposed
rule change would improve market quality for all market participants on
the Exchange and, as a consequence, attract more order flow to the
Exchange thereby improving market-wide quality and price discovery.
The Proposed Rule Change Is Not Unfairly Discriminatory
The Exchange believes it is not unfairly discriminatory to modify
the Penny Tiers, the Incentive Credits, and the Non-Penny Tiers because
the proposed modifications would be available to all similarly-situated
market participants on an equal and non-discriminatory basis.
The proposal is based on the amount and type of business transacted
on the Exchange and OTP Holders are not obligated to try to achieve the
enhanced qualifications, nor are they obligated to execute posted
interest. Rather, the proposal is designed to encourage OTP Holders to
utilize the Exchange as a primary trading venue for Customer posted
interest (if they have not done so previously) and more posting
interest on the NYSE Arca Equity Market. To the extent that the
proposed change attracts more Customer interest, including posted
interest, to the Exchange, this increased order flow would continue to
make the Exchange a more competitive venue for, among other things,
order execution. Thus, the Exchange believes the proposed rule change
would improve market quality for all market participants on the
Exchange and, as a consequence, attract more order flow to the Exchange
thereby improving market-wide quality and price discovery. The
resulting increased volume and liquidity would provide more trading
opportunities and tighter spreads to all market participants and thus
would promote just and equitable principles of trade, remove
impediments to and perfect the mechanism of a free and
[[Page 31758]]
open market and a national market system and, in general, to 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 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.'' \14\
---------------------------------------------------------------------------
\14\ See Reg NMS Adopting Release, supra note 11, at 37499.
---------------------------------------------------------------------------
Intramarket Competition. The proposed change is designed to attract
additional order flow (particularly Customer posted interest and posted
equity interest) to the Exchange. The Exchange believes that the
proposed modification to the Penny Tiers, the Incentive Credits, and
the Non-Penny Tiers would incent OTP Holders to direct their Customer
order flow and their posted equity order flow to the Exchange. Greater
liquidity benefits all market participants on the Exchange and
increased Customer order flow and posted equity order flow would
increase opportunities for execution of other trading interest. The
proposed modifications to the Penny Tiers, the Incentive Credits, and
the Non-Penny Tiers would be available to all similarly-situated market
participants that execute Customer posted interest (excluding
Professional Customer interest), and, as such, the proposed change
would not impose a disparate burden on competition among market
participants 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 fees to remain competitive with other
exchanges and to attract order flow to the Exchange. Based on publicly-
available information, and excluding index-based options, no single
exchange has more than 16% of the market share of executed volume of
multiply-listed equity and ETF options trades.\15\ Therefore, currently
no exchange possesses significant pricing power in the execution of
multiply-listed equity & ETF options order flow. More specifically, in
April 2021, the Exchange had less than 10% market share of executed
volume of multiply-listed equity & ETF options trades.\16\
---------------------------------------------------------------------------
\15\ See supra note 12.
\16\ Based on 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 increased from 7.46%
for the month of April 2020 to 9.28% for the month of April 2021.
---------------------------------------------------------------------------
The Exchange believes that the proposed rule change reflects this
competitive environment because it modifies the Exchange's fees and
credits in a manner that is competitive and designed to incent OTP
Holders to direct trading interest (particularly Customer posted
interest and posted equity interest) to the Exchange, to provide
liquidity and to attract order flow.\17\ 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.
---------------------------------------------------------------------------
\17\ See supra notes 6 and 8.
---------------------------------------------------------------------------
The Exchange believes that the proposed change could promote
competition between the Exchange and other execution venues, including
those that currently offer similar Customer posting credits, by
encouraging additional orders to be sent to the Exchange for execution.
The Exchange also believes that the proposed change is designed to
provide the public and investors with a Fee Schedule that is clear and
consistent, thereby reducing burdens on the marketplace and
facilitating investor protection.
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) \18\ of the Act and subparagraph (f)(2) of Rule
19b-4 \19\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
---------------------------------------------------------------------------
\18\ 15 U.S.C. 78s(b)(3)(A).
\19\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------
At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \20\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
---------------------------------------------------------------------------
\20\ 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-2021-51 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-2021-51. 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
[[Page 31759]]
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-2021-51, and should
be submitted on or before July 6, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
---------------------------------------------------------------------------
\21\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-12473 Filed 6-14-21; 8:45 am]
BILLING CODE 8011-01-P
