Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify the NYSE Arca Options Fee Schedule, 51398-51402 [2021-19862]

Download as PDF khammond on DSKJM1Z7X2PROD with NOTICES 51398 Federal Register / Vol. 86, No. 176 / Wednesday, September 15, 2021 / Notices Branch Chief, at (202) 551–6825 (Division of Investment Management, Chief Counsel’s Office). SUPPLEMENTARY INFORMATION: The following is a summary of the application. The complete application may be obtained via the Commission’s website by searching for the file number, or for an applicant using the Company name box, at https:// www.sec.gov/search/search.htm, or by calling (202) 551–8090. Summary of the Application: 1. Section 19(b) of the Act generally makes it unlawful for any registered investment company to make long-term capital gains distributions more than once every twelve months. Rule 19b–1 under the Act limits to one the number of capital gain dividends, as defined in section 852(b)(3)(C) of the Internal Revenue Code of 1986 (‘‘Code,’’ and such dividends, ‘‘distributions’’), that a registered investment company may make with respect to any one taxable year, plus a supplemental distribution made pursuant to section 855 of the Code not exceeding 10% of the total amount distributed for the year, plus one additional capital gain dividend made in whole or in part to avoid the excise tax under section 4982 of the Code. 2. Applicant believes that investors in certain closed-end funds may prefer an investment vehicle that provides regular current income through a fixed distribution policy (‘‘Distribution Policy’’). Applicant proposes that the Fund be permitted to adopt a Distribution Policy, pursuant to which the Fund would distribute periodically to its shareholders a fixed percentage of the market price of the Fund’s common shares at a particular point in time or a fixed percentage of net asset value (‘‘NAV’’) at a particular time or a fixed amount per share of common shares, any of which may be adjusted from time to time. 3. Applicant requests an order under section 6(c) of the Act granting an exemption from section 19(b) of the Act and rule 19b–1 to permit a Fund to distribute periodic capital gain dividends (as defined in section 852(b)(3)(C) of the Code) as frequently as twelve times in any one taxable year in respect of its common shares (and as often as specified by, or determined in accordance with the terms of, any preferred shares issued by the Fund).2 Section 6(c) of the Act provides, in relevant part, that the Commission may exempt any person or transaction from 2 Although the Fund does not currently intend to issue preferred shares, the board may authorize the issuance of preferred shares in the future. VerDate Sep<11>2014 17:08 Sep 14, 2021 Jkt 253001 any provision of the Act to the extent that such exemption is necessary or appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of the Act. 4. Applicant states that any order granting the requested relief will be subject to the terms and conditions stated in the application, which generally are designed to address the concerns underlying section 19(b) and rule 19b–1, including concerns about proper disclosures and shareholders’ understanding of the source(s) of a Fund’s distributions and concerns about improper sales practices. Among other things, such terms and conditions require that (1) the board of trustees of the Fund (the ‘‘Board’’) request and evaluate, and the Fund will furnish, such information as may be reasonably necessary to make an informed determination of whether to adopt the proposed Distribution Policy and that the Board periodically review the amount of the distributions in light of the investment experience of the Fund, and (2) that the Fund’s shareholders receive appropriate disclosures concerning the distributions. For the Commission, by the Division of Investment Management, under delegated authority. J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2021–19820 Filed 9–14–21; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–92917; No. SR–NYSEArca– 2021–79] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify the NYSE Arca Options Fee Schedule September 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 September 1, 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 selfregulatory organization. The 1 15 U.S.C. 78s(b)(1). U.S.C. 78a. 3 17 CFR 240.19b–4. 2 15 PO 00000 Frm 00061 Fmt 4703 Sfmt 4703 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 certain pricing incentives. The Exchange proposes to implement the fee change effective September 1, 2021. 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. 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 modify certain pricing incentives. Specifically, the Exchange proposes to modify the ‘‘Discount in Take Liquidity Fees for Professional Customer and NonCustomer Liquidity Removing Interest,’’ the ‘‘Market Maker Penny and SPY Posting Credit Tiers,’’ and the ‘‘Market Maker Incentive For Non-Penny Issues,’’ as described below. The Exchange proposes to implement the fee change effective September 1, 2021. Discount in Take Liquidity Fees for Professional Customers and NonCustomer Liquidity Removing Interest (the ‘‘Take Fee Discount’’) If an OTP Holder or OTP Firm (collectively ‘‘OTP Holders’’) executes a transaction that removes or ‘‘takes’’ liquidity on the Exchange, the OTP Holder is charged a ‘‘Take Liquidity’’ fee (referred to herein as ‘‘Take Fees’’) and such liquidity may be referred to as ‘‘Liquidity Removing’’ or liquidity E:\FR\FM\15SEN1.SGM 15SEN1 Federal Register / Vol. 86, No. 176 / Wednesday, September 15, 2021 / Notices khammond on DSKJM1Z7X2PROD with NOTICES taking.4 To offset such costs and to encourage market participants to direct order flow to the Exchange, the Exchange offers, among other incentives, the Take Fee Discounts for executions in Penny Issues. The Exchange proposes to modify one of the Take Fee Discounts. Under the current Fee Schedule, OTP Holders that execute at least 0.80% of Total Industry Customer equity and ETF option average daily volume (‘‘TCADV’’) 5 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, may qualify for a $0.04 per contract Take Fee Discount on liquidity-taking executions by Professional Customers or Non-Customers in Penny Issues. The Exchange proposes that this $0.04 Take Fee Discount would apply only if the executing buyer and seller in the qualifying transaction are either the same OTP Holder or an Affiliated or Appointed OFP or Appointed MM of the OTP Holder (collectively referred to as ‘‘Affiliates’’ herein), otherwise, the Take Fee Discount would be $0.03 (instead of $0.04). In other words, when an OTP Holder or its Affiliate trades against itself (e.g., Firm 1 MM trades against Firm 1 Customer or Firm 1 MM trades against Customer of an Affiliate of Firm 1), the $0.04 Take Fee Discount would apply. If, however, the OTP Holder trades against another OTP Holder (e.g., Firm 1 MM trades against Firm 2 Customer), the $0.03 Take Fee Discount would apply. The Exchange proposes to add language to the Fee Schedule that adds this provision. The Exchange believes the proposed fee change is reasonable because the Exchange already offers certain transaction fee discounts to OTP Holders and their Affiliates that aggregate their order flow on these types of transactions.6 The Exchange also notes that this proposed change is being made for business and competitive 4 See Fee Schedule, NYSE Arca OPTIONS: TRADE-RELATED CHARGES FOR STANDARD OPTIONS, TRANSACTION FEE FOR ELECTRONIC EXECUTIONS—PER CONTRACT (setting forth a per contract Take Fee of $0.50 for such Penny executions in Professional Customer, Firm, Broker Dealer, and Market Maker range as compared to a per contract take fee of $0.49 for such Penny executions in the Customer range). 5 See Fee Schedule, Endnote 8 (providing that TCADV ‘‘includes OCC calculated Customer volume of all types, including Complex Order Transactions and QCC transactions, in equity and ETF options’’). 6 See, e.g., Fee Schedule, CUSTOMER PENNY POSTING CREDIT TIERS and Endnote 15 (providing per contract credits to OTP Holders and Affiliates that meet certain minimum volume thresholds) and MARKET MAKER PENNY AND SPY POSTING CREDIT TIERS (same). VerDate Sep<11>2014 17:08 Sep 14, 2021 Jkt 253001 reasons to align Exchange fee incentives with those charged by other options exchanges.7 The Exchange believes that it will still remain highly competitive and that its Take Fees Discounts, as modified, would continue to attract order flow to the Exchange. Market Maker Incentive for Non-Penny Issues and Market Maker Penny and SPY Posting Credit Tiers (the ‘‘Market Maker Posting Tiers’’) The Exchange also proposes to modify the criteria for Market Makers to qualify for enhanced posting credits in Penny Issues and SPY (i.e., the ‘‘Market Maker Posting Tiers’’). Specifically, to encourage Market Makers and Lead Market Makers (collectively, ‘‘Market Makers’’) to direct orders and quotes to the Exchange, this proposed rule change would modify one of the alternative qualification bases for achieving the Super Tier by lowering the minimum volume threshold and limiting which interest can qualify for that threshold. Currently, to qualify for the Super Tier, OTP Holders must execute at least 1.60% of TCADV from all interest in all issues, all account types, with at least 0.80% TCADV from posted interest in all issues. The Exchange proposes to modify this qualification bases such that to qualify, an OTP Holder would have to execute least 1.60% of TCADV from all interest in all issues, all account types (which would be unchanged), with at least 0.15% TCADV from Market Maker posted interest in all issues. The per contract credit for OTP Holders that achieve the Super Tier remains unchanged (i.e., $0.37, and $0.39 per contract credit, respectively, for electronic executions of Market Maker Posted Interest in Penny Issues excluding SPY and for such executions in SPY). 7 See, e.g., MIAX Pearl Options Fee Schedule, available at https://www.miaxoptions.com/sites/ default/files/fee_schedule-files/MIAX_Pearl_ Options_Fee_Schedule_08122021.pdf (providing a lower ‘‘take rate’’ for ‘‘executed MIAX Pearl Market Maker Orders when the executing buyer and seller are the same Member or Affiliates’’ and, a higher ‘‘take rate’’ for ‘‘executed MIAX Pearl Market Maker Orders when the executing buyer and seller are not the same Member or Affiliates’’) (emphasis added); Nasdaq Options 7 Pricing Schedule, Section 2 Nasdaq Options Market—Fees and Rebates, available at https://listingcenter.nasdaq.com/ rulebook/nasdaq/rules/nasdaq-options-7 (providing that Nasdaq participants that add 1.30% of Customer, Professional, Firm, Broker-Dealer or NonNOM Market Maker liquidity in Penny Symbols and/or Non-Penny Symbols of TCADV per day in a month will pay ‘‘a $0.48 per contract Penny Symbols Fee for Removing Liquidity when the Participant is (i) both the buyer and the seller or (ii) the Participant removes liquidity from another Participant under Common Ownership’’, otherwise such participants pay $0.50 per contract on such interest). PO 00000 Frm 00062 Fmt 4703 Sfmt 4703 51399 The Exchange believes that the proposed change would continue to attract order flow to the Exchange because the limitation on the qualifying interest (from all posted interest to Market Maker posted interest) would be offset by the significantly reduced volume requirement (from 0.80% to 0.15%). In addition, notwithstanding the proposed modification to the Super Tier, OTP Holders are still eligible to qualify for the existing alternative (and unchanged) Super Tier qualification basis for executions in Penny Issues and SPY.8 By continuing to provide such alternative methods to qualify for Take Fee Discounts, the Exchange believes the opportunities to qualify for credits is increased, which benefits all participants through increased volume to the Exchange. Market Maker Incentive for Non-Penny Issues (the ‘‘Market Maker Non-Penny Incentive’’) To mirror the proposed change to the Super Tier (of the Market Maker Posting Tiers) the Exchange also proposes to modify one of the alternative qualification bases to achieve the Market Maker Non-Penny Incentive. Specifically, under the current Fee Schedule, OTP Holders must execute at least 1.60% of TCADV from all orders in all issues, all account types, with at least 0.80% TCADV from posted interest in all issues. First, the Exchange proposes to replace reference to ‘‘TCADV from all orders’’ with ‘‘TCADV from all interest’’ to make clear that liquidity may include orders or quotes. Next, the Exchange proposes to modify this qualification bases such that (identical to the proposed change to the Super Tier), to qualify, an OTP Holder would have to execute least 1.60% of TCADV from all interest in all issues, all account types, with at least 0.15% TCADV from Market Maker posted interest in all issues. The $0.55 per contract credit for OTP Holders that achieve the minimum volume threshold remains unchanged. The Exchange believes that the proposed change would continue to attract order flow to the Exchange because the limitation on the qualifying interest (from all posted interest to Market Maker posted interest) is offset by the significantly reduced volume requirement (from 0.80% to 0.15%). In addition, notwithstanding this proposed modification, OTP Holders are still eligible to qualify for the existing alternative (and unchanged) Market 8 OTP Holder may (still) qualify for the Super Tier by executing at least 0.55% of TCADV from Market Maker posted interest in all issues. E:\FR\FM\15SEN1.SGM 15SEN1 51400 Federal Register / Vol. 86, No. 176 / Wednesday, September 15, 2021 / Notices 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.13 Therefore, currently no exchange possesses significant pricing power in the execution of multiply-listed equity & ETF options order flow. More specifically, in July of 2021, the Exchange had less than 13% market share of executed volume of multiplylisted equity & ETF options trades.14 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. In response to this competitive environment, the Exchange has established incentives, such as the Take Fee Discount, Market Maker Non-Penny 2. Statutory Basis Incentive, and Market Maker Posting The Exchange believes that the Tiers. proposed rule change is consistent with Finally, the Exchange believes the Section 6(b) of the Act,10 in general, and proposed non-substantive change to the furthers the objectives of Sections Fee Schedule (i.e., replacing reference to 6(b)(4) and (5) of the Act,11 in particular, ‘‘orders’’ with ‘‘interest’’ in the Market because it provides for the equitable Maker Non-Penny Incentive) is allocation of reasonable dues, fees, and reasonable, equitable, and not unfairly other charges among its members, discriminatory because the change issuers and other persons using its would add clarity, transparency and facilities and does not unfairly internal consistency to the Fee Schedule discriminate between customers, making it easier to navigate and issuers, brokers, or dealers. comprehend, which would benefit all market participants. The Proposed Rule Change Is Reasonable The Take Fee Discount The Exchange operates in a highly The Exchange believes that the competitive market. The Commission proposed modification to the Take Fee has repeatedly expressed its preference Discount to encourage OTP Holders to for competition over regulatory send both sides of a transaction to the intervention in determining prices, Exchange is reasonably designed to products, and services in the securities continue to incent OTP Holders to markets. In Regulation NMS, the Commission highlighted the importance increase the amount of interest sent to the Exchange, especially liquidityof market forces in determining prices and SRO revenues and, also, recognized taking interest. The Exchange believes the proposed fee change is reasonable that current regulation of the market system ‘‘has been remarkably successful because the Exchange already offers certain transaction fee discounts to OTP in promoting market competition in its broader forms that are most important to Holders and their Affiliates that aggregate their order flow on these types investors and listed companies.’’ 12 There are currently 16 registered 13 The OCC publishes options and futures volume options exchanges competing for order khammond on DSKJM1Z7X2PROD with NOTICES Maker Non-Penny Incentive qualification basis for executions in Non-Penny Issues.9 By continuing to provide such alternative methods to qualify for Take Fee Discounts, the Exchange believes the opportunities to qualify for credits is increased, which benefits all participants through increased volume to the Exchange. The Exchange cannot predict with certainty whether any OTP Holders will avail themselves of the proposed changes to the Take Fee Discount, the Market Maker Posting Tiers, or Market Maker Non-Penny Incentive. 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 (including those acting as Market Makers) would be encouraged to increase volume to take advantage of the available credits and discounts. 9 OTP Holder may (still) qualify for the Market Maker Posting Incentive by executing at least 0.55% of TCADV from Market Maker posted interest in all issues. 10 15 U.S.C. 78f(b). 11 15 U.S.C. 78f(b)(4) and (5). 12 See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005) (S7–10–04) (‘‘Reg NMS Adopting Release’’). VerDate Sep<11>2014 17:08 Sep 14, 2021 Jkt 253001 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. 14 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 10.71% for the month of July 2020 to 12.15% for the month of July 2021. PO 00000 Frm 00063 Fmt 4703 Sfmt 4703 of transactions.15 The Exchange also notes that this proposed change is being made for business and competitive reasons to align Exchange fee incentives with those charged by other options exchanges.16 The Exchange believes that, notwithstanding the proposed change, it will still remain highly competitive and would continue to attract order flow to the Exchange. The Market Maker Posting Tiers and Market Maker Non-Penny Incentive The Exchange believes that the proposed (identical) change to the Market Maker Posting Tiers and Market Maker Non-Penny Incentive would continue to attract order flow to the Exchange because the limitation on the qualifying interest (from all posted interest to Market Maker posted interest) is offset by the significantly reduced volume requirement (from 0.80% to 0.15%). In addition, notwithstanding this proposed modification, the Exchange notes that OTP Holders are still eligible to qualify for the existing alternative (and unchanged) qualification basis in each of the Market Maker Posting Tiers and Market Maker Non-Penny Incentive for eligible executions.17 By continuing to provide such alternative methods to qualify for the Market Maker Posting Tiers and Market Maker Non-Penny Incentive, the Exchange believes the opportunities to qualify for credits is increased, which benefits all participants through increased volume to the Exchange. Finally, the proposed modification to the Market Maker Posting Tiers and Market Maker Non-Penny Incentive is designed to incent OTP Holders to transact more Market Maker volume on the Exchange, which may result in an increase of volume and liquidity for 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. 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 volume on the Exchange in an effort to achieve higher 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 changes are a reasonable attempt by 15 See supra note 6. supra note 7. 17 See supra notes 8 and 9. 16 See E:\FR\FM\15SEN1.SGM 15SEN1 Federal Register / Vol. 86, No. 176 / Wednesday, September 15, 2021 / Notices the Exchange to increase the depth of its market and improve its market share relative to its competitors. khammond on DSKJM1Z7X2PROD with NOTICES 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 and discounts or not. Moreover, the proposal is designed to incent OTP Holders to aggregate all liquidity-taking interest at the Exchange as a primary execution venue and to continue to attract Market Maker posting interest on the Exchange. To the extent that the proposed change attracts more opportunities for execution of Customer and Market Maker posted interest on the Exchange, this increased order flow would continue to make the Exchange a more competitive venue for order execution. Thus, the Exchange believes the proposed rule change would improve market quality for all market participants on the Exchange and, as a consequence, attract more order flow to the Exchange thereby improving marketwide quality and price discovery. The Proposed Rule Change Is Not Unfairly Discriminatory The Exchange believes it is not unfairly discriminatory to modify the Take Fee Discount because the proposed modification would align Exchange fees with similar fees on other options markets 18 and would be available to all similarly-situated market participants on an equal and non-discriminatory basis. The Exchange believes the proposed changes are not unfairly discriminatory because the discounts and credits are available to all similarlysituated market participants on an equal and non-discriminatory basis. The proposals are 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 liquidity-taking interest or posted interest. To the extent that the proposed change attracts more interest, including liquidity-taking and Market Maker posting interest, to the Exchange, this increased order flow would continue to make the Exchange a more competitive venue for order execution. Thus, the Exchange believes the proposed rule change would improve market quality for all market participants on the Exchange and, as a 18 See 17:08 Sep 14, 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 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.’’ 19 Intramarket Competition. The proposed change is designed to attract additional order flow to the Exchange, including take-liquidity interest and Market Maker posting interest. The Exchange believes that the proposed modifications would incent OTP Holders to direct their liquidity-taking and Market Maker order flow to the Exchange. Greater liquidity benefits all market participants on the Exchange and increased liquidity-taking order flow and posted Market Maker interest would increase opportunities for execution of other trading interest. The proposed modifications would be available to all similarly-situated market participants 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 19 See Reg NMS Adopting Release, supra note 12, at 37499. supra note 7. VerDate Sep<11>2014 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 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. Jkt 253001 PO 00000 Frm 00064 Fmt 4703 Sfmt 4703 51401 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 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.20 Therefore, currently no exchange possesses significant pricing power in the execution of multiply-listed equity & ETF options order flow. More specifically, in July 2021, the Exchange had less than 13% market share of executed volume of multiply-listed equity & ETF options trades.21 The Exchange believes that the proposed rule change reflects this competitive environment because it modifies the Exchange’s fees in a manner designed to incent OTP Holders to direct trading interest (particularly both sides of a transaction and Market Maker interest) to the Exchange, to provide liquidity and to attract order flow, which would align Exchange fee incentives with those charged by other options exchanges.22 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 discounts for sending both sides of a transaction, by encouraging additional orders to be sent to the Exchange for execution. 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 20 See supra note 13. 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 10.71% for the month of July 2020 to 12.15% for the month of July 2021. 22 See supra note 7. 21 Based E:\FR\FM\15SEN1.SGM 15SEN1 51402 Federal Register / Vol. 86, No. 176 / Wednesday, September 15, 2021 / Notices 19(b)(3)(A) 23 of the Act and subparagraph (f)(2) of Rule 19b–4 24 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) 25 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: 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– NYSEArca–2021–79 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–2021–79. 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–2021–79, and should be submitted on or before October 6, 2021. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.26 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2021–19862 Filed 9–14–21; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–92914; File No. SR– CboeEDGX–2021–037] Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend EDGX Rule 11.1(a)(1) To Begin Accepting Orders at 2:30 a.m. Eastern Time September 9, 2021. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on August 31, 2021, Cboe EDGX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘EDGX’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Exchange filed the proposal as a ‘‘noncontroversial’’ proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 3 and Rule 19b–4(f)(6) thereunder.4 The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 26 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(iii). 4 17 CFR 240.19b–4(f)(6). 1 15 23 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(2). 25 15 U.S.C. 78s(b)(2)(B). 24 17 VerDate Sep<11>2014 17:08 Sep 14, 2021 Jkt 253001 PO 00000 Frm 00065 Fmt 4703 Sfmt 4703 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change Cboe EDGX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘EDGX’’) proposes to amend EDGX Rule 11.1(a)(1) to begin accepting orders at 2:30 a.m. Eastern Time. The text of the proposed rule change is provided in Exhibit 5. The text of the proposed rule change is also available on the Exchange’s website (https://markets.cboe.com/us/ options/regulation/rule_filings/edgx/), at the Exchange’s Office of the Secretary, 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 Exchange proposes to amend EDGX Rule 11.1 (Hours of Trading and Trading Days) to begin accepting orders at 2:30 a.m. Eastern Time rather than 3:30 a.m. Eastern Time. The proposal is substantially similar to NYSE Arca, LLC (‘‘Arca’’) Rule 7.34–E(a)(1) that provides Arca may accept orders 90 minutes before its early trading session begins.5 Currently EDGX Rule 11.1(a)(1) provides that orders may be entered into the System from 3:30 a.m. until 8:00 p.m. Eastern Time. The rule provides that orders entered between 3:30 a.m. and 4:00 a.m. Eastern Time are not eligible for execution until the start of the Early Trading Session,6 Pre-Opening Session 7 or Regular Trading Hours,8 depending on the time in force selected 5 The Arca early trading session begins at 4:00 a.m. Eastern Time. 6 The term ‘‘Early Trading Session’’ shall mean the time between 4:00 a.m. and 8:00 a.m. Eastern Time. See EDGX Rule 1.5(ii). 7 The term ‘‘Pre-Opening Session’’ shall mean the time between 8:00 a.m. and 9:30 a.m. Eastern Time. See EDGX Rule 1.5(s). 8 The term ‘‘Regular Trading Hours’’ shall mean the time between 9:30 a.m. and 4:00 p.m. Eastern Time. See EDGX Rule 1.5(y). E:\FR\FM\15SEN1.SGM 15SEN1

Agencies

[Federal Register Volume 86, Number 176 (Wednesday, September 15, 2021)]
[Notices]
[Pages 51398-51402]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-19862]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92917; No. SR-NYSEArca-2021-79]


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

September 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 September 1, 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 certain pricing incentives. The Exchange 
proposes to implement the fee change effective September 1, 2021. 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.

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 modify 
certain pricing incentives. Specifically, the Exchange proposes to 
modify the ``Discount in Take Liquidity Fees for Professional Customer 
and Non-Customer Liquidity Removing Interest,'' the ``Market Maker 
Penny and SPY Posting Credit Tiers,'' and the ``Market Maker Incentive 
For Non-Penny Issues,'' as described below. The Exchange proposes to 
implement the fee change effective September 1, 2021.
Discount in Take Liquidity Fees for Professional Customers and Non-
Customer Liquidity Removing Interest (the ``Take Fee Discount'')
    If an OTP Holder or OTP Firm (collectively ``OTP Holders'') 
executes a transaction that removes or ``takes'' liquidity on the 
Exchange, the OTP Holder is charged a ``Take Liquidity'' fee (referred 
to herein as ``Take Fees'') and such liquidity may be referred to as 
``Liquidity Removing'' or liquidity

[[Page 51399]]

taking.\4\ To offset such costs and to encourage market participants to 
direct order flow to the Exchange, the Exchange offers, among other 
incentives, the Take Fee Discounts for executions in Penny Issues.
---------------------------------------------------------------------------

    \4\ See Fee Schedule, NYSE Arca OPTIONS: TRADE-RELATED CHARGES 
FOR STANDARD OPTIONS, TRANSACTION FEE FOR ELECTRONIC EXECUTIONS--PER 
CONTRACT (setting forth a per contract Take Fee of $0.50 for such 
Penny executions in Professional Customer, Firm, Broker Dealer, and 
Market Maker range as compared to a per contract take fee of $0.49 
for such Penny executions in the Customer range).
---------------------------------------------------------------------------

    The Exchange proposes to modify one of the Take Fee Discounts. 
Under the current Fee Schedule, OTP Holders that execute at least 0.80% 
of Total Industry Customer equity and ETF option average daily volume 
(``TCADV'') \5\ 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, may qualify for a $0.04 per 
contract Take Fee Discount on liquidity-taking executions by 
Professional Customers or Non-Customers in Penny Issues.
---------------------------------------------------------------------------

    \5\ See Fee Schedule, Endnote 8 (providing that TCADV ``includes 
OCC calculated Customer volume of all types, including Complex Order 
Transactions and QCC transactions, in equity and ETF options'').
---------------------------------------------------------------------------

    The Exchange proposes that this $0.04 Take Fee Discount would apply 
only if the executing buyer and seller in the qualifying transaction 
are either the same OTP Holder or an Affiliated or Appointed OFP or 
Appointed MM of the OTP Holder (collectively referred to as 
``Affiliates'' herein), otherwise, the Take Fee Discount would be $0.03 
(instead of $0.04). In other words, when an OTP Holder or its Affiliate 
trades against itself (e.g., Firm 1 MM trades against Firm 1 Customer 
or Firm 1 MM trades against Customer of an Affiliate of Firm 1), the 
$0.04 Take Fee Discount would apply. If, however, the OTP Holder trades 
against another OTP Holder (e.g., Firm 1 MM trades against Firm 2 
Customer), the $0.03 Take Fee Discount would apply. The Exchange 
proposes to add language to the Fee Schedule that adds this provision.
    The Exchange believes the proposed fee change is reasonable because 
the Exchange already offers certain transaction fee discounts to OTP 
Holders and their Affiliates that aggregate their order flow on these 
types of transactions.\6\ The Exchange also notes that this proposed 
change is being made for business and competitive reasons to align 
Exchange fee incentives with those charged by other options 
exchanges.\7\ The Exchange believes that it will still remain highly 
competitive and that its Take Fees Discounts, as modified, would 
continue to attract order flow to the Exchange.
---------------------------------------------------------------------------

    \6\ See, e.g., Fee Schedule, CUSTOMER PENNY POSTING CREDIT TIERS 
and Endnote 15 (providing per contract credits to OTP Holders and 
Affiliates that meet certain minimum volume thresholds) and MARKET 
MAKER PENNY AND SPY POSTING CREDIT TIERS (same).
    \7\ See, e.g., MIAX Pearl Options Fee Schedule, available at 
https://www.miaxoptions.com/sites/default/files/fee_schedule-files/MIAX_Pearl_Options_Fee_Schedule_08122021.pdf (providing a lower 
``take rate'' for ``executed MIAX Pearl Market Maker Orders when the 
executing buyer and seller are the same Member or Affiliates'' and, 
a higher ``take rate'' for ``executed MIAX Pearl Market Maker Orders 
when the executing buyer and seller are not the same Member or 
Affiliates'') (emphasis added); Nasdaq Options 7 Pricing Schedule, 
Section 2 Nasdaq Options Market--Fees and Rebates, available at 
https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/nasdaq-options-7 (providing that Nasdaq participants that add 1.30% of 
Customer, Professional, Firm, Broker-Dealer or Non-NOM Market Maker 
liquidity in Penny Symbols and/or Non-Penny Symbols of TCADV per day 
in a month will pay ``a $0.48 per contract Penny Symbols Fee for 
Removing Liquidity when the Participant is (i) both the buyer and 
the seller or (ii) the Participant removes liquidity from another 
Participant under Common Ownership'', otherwise such participants 
pay $0.50 per contract on such interest).
---------------------------------------------------------------------------

Market Maker Incentive for Non-Penny Issues and Market Maker Penny and 
SPY Posting Credit Tiers (the ``Market Maker Posting Tiers'')
    The Exchange also proposes to modify the criteria for Market Makers 
to qualify for enhanced posting credits in Penny Issues and SPY (i.e., 
the ``Market Maker Posting Tiers''). Specifically, to encourage Market 
Makers and Lead Market Makers (collectively, ``Market Makers'') to 
direct orders and quotes to the Exchange, this proposed rule change 
would modify one of the alternative qualification bases for achieving 
the Super Tier by lowering the minimum volume threshold and limiting 
which interest can qualify for that threshold. Currently, to qualify 
for the Super Tier, OTP Holders must execute at least 1.60% of TCADV 
from all interest in all issues, all account types, with at least 0.80% 
TCADV from posted interest in all issues. The Exchange proposes to 
modify this qualification bases such that to qualify, an OTP Holder 
would have to execute least 1.60% of TCADV from all interest in all 
issues, all account types (which would be unchanged), with at least 
0.15% TCADV from Market Maker posted interest in all issues. The per 
contract credit for OTP Holders that achieve the Super Tier remains 
unchanged (i.e., $0.37, and $0.39 per contract credit, respectively, 
for electronic executions of Market Maker Posted Interest in Penny 
Issues excluding SPY and for such executions in SPY).
    The Exchange believes that the proposed change would continue to 
attract order flow to the Exchange because the limitation on the 
qualifying interest (from all posted interest to Market Maker posted 
interest) would be offset by the significantly reduced volume 
requirement (from 0.80% to 0.15%). In addition, notwithstanding the 
proposed modification to the Super Tier, OTP Holders are still eligible 
to qualify for the existing alternative (and unchanged) Super Tier 
qualification basis for executions in Penny Issues and SPY.\8\ By 
continuing to provide such alternative methods to qualify for Take Fee 
Discounts, the Exchange believes the opportunities to qualify for 
credits is increased, which benefits all participants through increased 
volume to the Exchange.
---------------------------------------------------------------------------

    \8\ OTP Holder may (still) qualify for the Super Tier by 
executing at least 0.55% of TCADV from Market Maker posted interest 
in all issues.
---------------------------------------------------------------------------

Market Maker Incentive for Non-Penny Issues (the ``Market Maker Non-
Penny Incentive'')
    To mirror the proposed change to the Super Tier (of the Market 
Maker Posting Tiers) the Exchange also proposes to modify one of the 
alternative qualification bases to achieve the Market Maker Non-Penny 
Incentive. Specifically, under the current Fee Schedule, OTP Holders 
must execute at least 1.60% of TCADV from all orders in all issues, all 
account types, with at least 0.80% TCADV from posted interest in all 
issues. First, the Exchange proposes to replace reference to ``TCADV 
from all orders'' with ``TCADV from all interest'' to make clear that 
liquidity may include orders or quotes. Next, the Exchange proposes to 
modify this qualification bases such that (identical to the proposed 
change to the Super Tier), to qualify, an OTP Holder would have to 
execute least 1.60% of TCADV from all interest in all issues, all 
account types, with at least 0.15% TCADV from Market Maker posted 
interest in all issues. The $0.55 per contract credit for OTP Holders 
that achieve the minimum volume threshold remains unchanged.
    The Exchange believes that the proposed change would continue to 
attract order flow to the Exchange because the limitation on the 
qualifying interest (from all posted interest to Market Maker posted 
interest) is offset by the significantly reduced volume requirement 
(from 0.80% to 0.15%). In addition, notwithstanding this proposed 
modification, OTP Holders are still eligible to qualify for the 
existing alternative (and unchanged) Market

[[Page 51400]]

Maker Non-Penny Incentive qualification basis for executions in Non-
Penny Issues.\9\ By continuing to provide such alternative methods to 
qualify for Take Fee Discounts, the Exchange believes the opportunities 
to qualify for credits is increased, which benefits all participants 
through increased volume to the Exchange.
---------------------------------------------------------------------------

    \9\ OTP Holder may (still) qualify for the Market Maker Posting 
Incentive by executing at least 0.55% of TCADV from Market Maker 
posted interest in all issues.
---------------------------------------------------------------------------

    The Exchange cannot predict with certainty whether any OTP Holders 
will avail themselves of the proposed changes to the Take Fee Discount, 
the Market Maker Posting Tiers, or Market Maker Non-Penny Incentive. 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 (including 
those acting as Market Makers) would be encouraged to increase volume 
to take advantage of the available credits and discounts.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\10\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\11\ 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.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78f(b).
    \11\ 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.'' \12\
---------------------------------------------------------------------------

    \12\ 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.\13\ Therefore, currently no exchange possesses significant 
pricing power in the execution of multiply-listed equity & ETF options 
order flow. More specifically, in July of 2021, the Exchange had less 
than 13% market share of executed volume of multiply-listed equity & 
ETF options trades.\14\
---------------------------------------------------------------------------

    \13\ 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.
    \14\ 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 
10.71% for the month of July 2020 to 12.15% for the month of July 
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 Take Fee Discount, Market Maker Non-Penny Incentive, and Market 
Maker Posting Tiers.
    Finally, the Exchange believes the proposed non-substantive change 
to the Fee Schedule (i.e., replacing reference to ``orders'' with 
``interest'' in the Market Maker Non-Penny Incentive) is reasonable, 
equitable, and not unfairly discriminatory because the change would add 
clarity, transparency and internal consistency to the Fee Schedule 
making it easier to navigate and comprehend, which would benefit all 
market participants.
The Take Fee Discount
    The Exchange believes that the proposed modification to the Take 
Fee Discount to encourage OTP Holders to send both sides of a 
transaction to the Exchange is reasonably designed to continue to 
incent OTP Holders to increase the amount of interest sent to the 
Exchange, especially liquidity-taking interest. The Exchange believes 
the proposed fee change is reasonable because the Exchange already 
offers certain transaction fee discounts to OTP Holders and their 
Affiliates that aggregate their order flow on these types of 
transactions.\15\ The Exchange also notes that this proposed change is 
being made for business and competitive reasons to align Exchange fee 
incentives with those charged by other options exchanges.\16\ The 
Exchange believes that, notwithstanding the proposed change, it will 
still remain highly competitive and would continue to attract order 
flow to the Exchange.
---------------------------------------------------------------------------

    \15\ See supra note 6.
    \16\ See supra note 7.
---------------------------------------------------------------------------

The Market Maker Posting Tiers and Market Maker Non-Penny Incentive
    The Exchange believes that the proposed (identical) change to the 
Market Maker Posting Tiers and Market Maker Non-Penny Incentive would 
continue to attract order flow to the Exchange because the limitation 
on the qualifying interest (from all posted interest to Market Maker 
posted interest) is offset by the significantly reduced volume 
requirement (from 0.80% to 0.15%). In addition, notwithstanding this 
proposed modification, the Exchange notes that OTP Holders are still 
eligible to qualify for the existing alternative (and unchanged) 
qualification basis in each of the Market Maker Posting Tiers and 
Market Maker Non-Penny Incentive for eligible executions.\17\ By 
continuing to provide such alternative methods to qualify for the 
Market Maker Posting Tiers and Market Maker Non-Penny Incentive, the 
Exchange believes the opportunities to qualify for credits is 
increased, which benefits all participants through increased volume to 
the Exchange.
---------------------------------------------------------------------------

    \17\ See supra notes 8 and 9.
---------------------------------------------------------------------------

    Finally, the proposed modification to the Market Maker Posting 
Tiers and Market Maker Non-Penny Incentive is designed to incent OTP 
Holders to transact more Market Maker volume on the Exchange, which may 
result in an increase of volume and liquidity for 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.
    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 volume on the Exchange in an effort to 
achieve higher 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 changes are a reasonable attempt by

[[Page 51401]]

the Exchange to increase the depth of its market and improve its market 
share relative to its competitors.
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 and discounts or not. Moreover, the 
proposal is designed to incent OTP Holders to aggregate all liquidity-
taking interest at the Exchange as a primary execution venue and to 
continue to attract Market Maker posting interest on the Exchange. To 
the extent that the proposed change attracts more opportunities for 
execution of Customer and Market Maker posted interest on the Exchange, 
this increased order flow would continue to make the Exchange a more 
competitive venue for order execution. Thus, the Exchange believes the 
proposed rule change would improve market quality for all market 
participants on the Exchange and, as a consequence, attract more order 
flow to the Exchange thereby improving market-wide quality and price 
discovery.
The Proposed Rule Change Is Not Unfairly Discriminatory
    The Exchange believes it is not unfairly discriminatory to modify 
the Take Fee Discount because the proposed modification would align 
Exchange fees with similar fees on other options markets \18\ and would 
be available to all similarly-situated market participants on an equal 
and non-discriminatory basis. The Exchange believes the proposed 
changes are not unfairly discriminatory because the discounts and 
credits are available to all similarly-situated market participants on 
an equal and non-discriminatory basis.
---------------------------------------------------------------------------

    \18\ See supra note 7.
---------------------------------------------------------------------------

    The proposals are 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 
liquidity-taking interest or posted interest. To the extent that the 
proposed change attracts more interest, including liquidity-taking and 
Market Maker posting interest, to the Exchange, this increased order 
flow would continue to make the Exchange a more competitive venue for 
order execution. Thus, the Exchange believes the proposed rule change 
would improve market quality for all market participants on the 
Exchange and, as a consequence, attract more order flow to the Exchange 
thereby improving market-wide quality and price discovery. The 
resulting increased volume and liquidity would provide more trading 
opportunities and tighter spreads to all market participants and thus 
would promote just and equitable principles of trade, remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system and, in general, 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.'' \19\
---------------------------------------------------------------------------

    \19\ See Reg NMS Adopting Release, supra note 12, at 37499.
---------------------------------------------------------------------------

    Intramarket Competition. The proposed change is designed to attract 
additional order flow to the Exchange, including take-liquidity 
interest and Market Maker posting interest. The Exchange believes that 
the proposed modifications would incent OTP Holders to direct their 
liquidity-taking and Market Maker order flow to the Exchange. Greater 
liquidity benefits all market participants on the Exchange and 
increased liquidity-taking order flow and posted Market Maker interest 
would increase opportunities for execution of other trading interest. 
The proposed modifications would be available to all similarly-situated 
market participants 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.\20\ Therefore, currently 
no exchange possesses significant pricing power in the execution of 
multiply-listed equity & ETF options order flow. More specifically, in 
July 2021, the Exchange had less than 13% market share of executed 
volume of multiply-listed equity & ETF options trades.\21\
---------------------------------------------------------------------------

    \20\ See supra note 13.
    \21\ 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 
10.71% for the month of July 2020 to 12.15% for the month of July 
2021.
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change reflects this 
competitive environment because it modifies the Exchange's fees in a 
manner designed to incent OTP Holders to direct trading interest 
(particularly both sides of a transaction and Market Maker interest) to 
the Exchange, to provide liquidity and to attract order flow, which 
would align Exchange fee incentives with those charged by other options 
exchanges.\22\ 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.
---------------------------------------------------------------------------

    \22\ See supra note 7.
---------------------------------------------------------------------------

    The Exchange believes that the proposed change could promote 
competition between the Exchange and other execution venues, including 
those that currently offer similar discounts for sending both sides of 
a transaction, by encouraging additional orders to be sent to the 
Exchange for execution.

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

[[Page 51402]]

19(b)(3)(A) \23\ of the Act and subparagraph (f)(2) of Rule 19b-4 \24\ 
thereunder, because it establishes a due, fee, or other charge imposed 
by the Exchange.
---------------------------------------------------------------------------

    \23\ 15 U.S.C. 78s(b)(3)(A).
    \24\ 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) \25\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \25\ 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-2021-79 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-2021-79. 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-2021-79, and should be 
submitted on or before October 6, 2021.
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    \26\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-19862 Filed 9-14-21; 8:45 am]
BILLING CODE 8011-01-P
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