Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the NYSE Arca Options Fee Schedule To Cap Certain Port Fees, 4095-4097 [2022-01459]
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Federal Register / Vol. 87, No. 17 / Wednesday, January 26, 2022 / Notices
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–NYSEArca–2022–02, and
should be submitted on or before
February 16, 2022.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.21
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022–01470 Filed 1–25–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–94017; No. SR–NYSEArca–
2022–03]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend the NYSE Arca
Options Fee Schedule To Cap Certain
Port Fees
khammond on DSKJM1Z7X2PROD with NOTICES
January 20, 2022.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on January
14, 2022, NYSE Arca, Inc. (‘‘NYSE
Arca’’ or the ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
21 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
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17:34 Jan 25, 2022
Jkt 256001
prepared by the self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
NYSE Arca Options Fee Schedule (the
‘‘Fee Schedule’’) to cap certain port fees
in connection with the Exchange’s
migration to a new trading platform.
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 cap certain port fees
during the Exchange’s migration of
options trading to a new electronic
trading platform.
Currently, the Exchange conducts
options trading on an electronic
platform known as ‘‘OX.’’ OX refers to
the Exchange’s electronic order
delivery, execution, and reporting
system for designated option issues
through which orders and quotes of
Users are consolidated for execution
and/or display.4
On or about February 7, 2022, the
Exchange anticipates beginning the
migration of its options trading to a new
technology platform known as Pillar.5
4 See
NYSE Arca Rule 6.1A–O(a)(13).
Exchange has announced that, pending
regulatory approval, it will begin migrating
Exchange-listed options to Pillar on February 7,
2022, available here: https://w0ww.nyse.com/
trader-update/history#110000387355. See also
Securities Exchange Act Release No. 92304 (June
30, 2021), 86 FR 36440 (July 9, 2021) (SR–
NYSEArca–2021–47) (Notice of Filing of Proposed
5 The
PO 00000
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Fmt 4703
Sfmt 4703
4095
The Exchange proposes to adopt a cap
on the monthly fees assessed for the use
of certain ports connecting to the
Exchange, which will go into effect on
the day the Exchange commences its
migration to the Pillar platform and
remain in effect until the end of the
month in which the migration is
completed (the ‘‘Migration Period’’).
Specifically, the Exchange proposes to
cap the monthly fees charged to an OTP
Holder or OTP Firm (collectively, ‘‘OTP
Holders’’) for the use of Order/Quote
Entry Ports, Quote Takedown Ports, and
Drop Copy Ports (collectively, the ‘‘Port
Fees’’) during the Migration Period (the
‘‘Migration Cap’’). The Migration Cap
will be based on the number of ports an
OTP Holder is billed for in the month
preceding the beginning of the
Exchange’s migration to the Pillar
platform, except that if an OTP Holder
reduces the number of ports used during
the Migration Period (i.e., incurs Port
Fees below the Migration Cap), the OTP
Holder would only be billed for the
actual number of ports used.
Without this proposed rule change,
the Fee Schedule provides that OTP
Holders would be charged for the use of
both legacy OX platform ports and new
Pillar platform ports, which could
significantly increase costs to OTP
Holders during the Migration Period.
Thus, the proposed Migration Cap is
intended to encourage OTP Holders to
maintain the same levels of interaction
with Exchange during the Migration
Period, as well as promptly migrate to
the more efficient Pillar technology
platform, without incurring additional
Port Fees as a result of the transition.6
The Exchange proposes to implement
this fee change on the day it commences
its migration to the Pillar technology
platform.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act,7 in general, and
furthers the objectives of Sections
Rule Change for New Rules 6.1P–O, 6.37AP–O,
6.40P–O, 6.41P–O, 6.62P–O, 6.64P–O, 6.76P–O, and
6.76AP–O and Amendments to Rules 1.1, 6.1–O,
6.1A–O, 6.37–O, 6.65A–O and 6.96–O) and
Amendment No. 2 to SR–NYSEArca–2021–47,
available here: https://www.sec.gov/comments/srnysearca-2021-47/srnysearca202147-20109876264219.pdf.
6 The Exchange notes that the NYSE Arca Equities
exchange adopted a similar fee cap in connection
with its migration to the Pillar technology platform
in 2017 so that its member organizations would not
incur additional charges during the transition
period. See Securities Exchange Act Release No.
81573 (September 11, 2017), 82 FR 43430
(September 15, 2017) (SR–NYSEArca–2017–97)
(providing for a temporary cap on monthly fees for
use of ports during Pillar transition).
7 15 U.S.C. 78f(b).
E:\FR\FM\26JAN1.SGM
26JAN1
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Federal Register / Vol. 87, No. 17 / Wednesday, January 26, 2022 / Notices
6(b)(4) and (5) of the Act,8 in particular,
because it provides for the equitable
allocation of reasonable dues, fees, and
other charges among its members,
issuers and other persons using its
facilities and does not unfairly
discriminate between customers,
issuers, brokers or dealers.
The Proposed Rule Change Is
Reasonable
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.’’ 9
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.10
Therefore, currently no exchange
possesses significant pricing power in
the execution of multiply-listed equity
and ETF options order flow. More
specifically, in November 2021, the
Exchange had less than 13% market
share of executed volume of multiplylisted equity and ETF options trades.11
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 fees,
including fees for connectivity.
The Exchange believes that the
proposed Migration Cap is reasonably
designed to continue to incent OTP
8 15
U.S.C. 78f(b)(4) and (5).
Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(S7–10–04) (‘‘Reg NMS Adopting Release’’).
10 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.
11 Based on a compilation of OCC data for
monthly volume of equity-based options and
monthly volume of ETF-based options, see id., the
Exchange’s market share in equity-based options
increased from 10.35% for the month of November
2020 to 12.99% for the month of November 2021.
khammond on DSKJM1Z7X2PROD with NOTICES
9 See
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17:34 Jan 25, 2022
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Holders to maintain sufficient active
connections to the Exchange during its
migration to a new trading platform.
Without the proposed change, OTP
Holders would be subject to fees for the
use of both legacy ports and the new
ports using Pillar technology during the
Migration Period. Accordingly, the
Exchange believes that the proposed
Migration Cap is reasonably designed to
lessen the impact of the migration on
OTP Holders and will thus encourage
OTP Holders to both promptly
transition to the more efficient Pillar
technology platform and maintain their
current level of trading activity on the
Exchange.
To the extent the proposed rule
change encourages OTP Holders to
migrate to the new Pillar technology
platform while maintaining their level
of trading activity, the Exchange
believes the proposed change would
sustain the Exchange’s overall
competitiveness and 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
mitigate the expense of the migration
without affecting its competitiveness.
The Proposed Rule Change Is an
Equitable Allocation of Credits and Fees
The Exchange believes the proposed
change is an equitable allocation of its
fees and credits because the Migration
Cap, which would apply equally to all
OTP Holders, would be calculated based
on the number of ports each OTP Holder
uses. OTP Holders can opt to adjust
their port usage, if desired, in advance
of the Migration Period, and to the
extent OTP Holders choose to use fewer
ports during the Migration Period (i.e.,
incur Port Fees below the Migration
Cap), their Port Fees would be reduced
accordingly. Thus, the Exchange
believes the proposed rule change
would facilitate a smooth transition to
the Pillar technology platform for OTP
Holders and mitigate the impact of the
migration process for all market
participants on the Exchange, thereby
sustaining market-wide quality.
The Proposed Rule Change Is Not
Unfairly Discriminatory
The Exchange believes the Migration
Cap is not unfairly discriminatory
because it would be available to all
similarly-situated market participants
on an equal and non-discriminatory
basis.
The proposed Migration Cap would
be based on an OTP Holder’s Port Fees
billed for the month preceding the
beginning of the Exchange’s migration
PO 00000
Frm 00133
Fmt 4703
Sfmt 4703
to the Pillar technology platform and
would be adjusted to the extent an OTP
Holder chooses to utilize fewer such
ports during the Migration Period. The
Exchange believes that the Migration
Cap will permit OTP Holders to
maintain the same level of interaction
with Exchange systems during the
Migration Period without incurring
additional Port Fees as a result of the
transition from OX to the Pillar
technology platform. The Exchange also
believes that the Migration Cap would
allow OTP Holders to maintain their
existing level of connectivity to the
Exchange at no additional cost during
the Migration Period, thereby
supporting continued trading
opportunities for all market
participants, which would promote just
and equitable principles of trade,
remove impediments to and perfect the
mechanism of a free and open market
and a national market system and, in
general, protect investors and the public
interest.
Finally, the Exchange believes that it
is subject to significant competitive
forces, as described below in the
Exchange’s statement regarding the
burden on competition.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
In accordance with Section 6(b)(8) of
the Act, the Exchange does not believe
that the proposed rule change would
impose any burden on competition that
is not necessary or appropriate in
furtherance of the purposes of the Act.
Instead, as discussed above, the
Exchange believes that the proposed
changes would 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.’’ 12
Intramarket Competition. The
Exchange does not believe the proposed
rule change would impose any burden
on intramarket competition that is not
necessary or appropriate because it
would apply equally to all OTP Holders.
All OTP Holders, regardless of the
number of ports they utilize, will be
eligible for the Migration Cap beginning
on the day the Exchange commences its
12 See Reg NMS Adopting Release, supra note 9,
at 37499.
E:\FR\FM\26JAN1.SGM
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Federal Register / Vol. 87, No. 17 / Wednesday, January 26, 2022 / Notices
migration to the Pillar technology
platform through the end of the
Migration Period.
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 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.13
Therefore, currently no exchange
possesses significant pricing power in
the execution of multiply-listed equity &
ETF options order flow. More
specifically, in November 2021, the
Exchange had less than 13% market
share of executed volume of multiplylisted equity and ETF options trades.14
The Exchange does not believe the
proposed rule change would impose any
burden on intermarket competition that
is not necessary or appropriate because
the Exchange operates in a highly
competitive market in which market
participants can readily choose to send
their orders to other exchanges if they
deem fee levels at those other venues to
be more favorable. The Exchange
believes that fees for connectivity are
constrained by the robust competition
for order flow among exchanges.
Accordingly, the Exchange believes that
the proposed Migration Cap would
continue to make the Exchange a
competitive venue for order execution
by enabling OTP Holders to maintain
their current levels of interaction with
the Exchange during the Migration
Period without incurring additional Port
Fees and facilitating OTP Holders’
migration to the newer, more efficient
Pillar technology platform.
khammond on DSKJM1Z7X2PROD with NOTICES
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
13 See
supra note 10.
on a compilation of OCC data for
monthly volume of equity-based options and
monthly volume of ETF-based options, see id., the
Exchange’s market share in equity-based options
increased from 10.35% for the month of November
2020 to 12.99% for the month of November 2021.
14 Based
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17:34 Jan 25, 2022
Jkt 256001
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) 15 of the Act and
subparagraph (f)(2) of Rule 19b–4 16
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) 17 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–2022–03 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090..
All submissions should refer to File
Number SR–NYSEArca–2022–03. 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
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(2).
17 15 U.S.C. 78s(b)(2)(B).
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–NYSEArca–2022–03, and
should be submitted on or before
February 16, 2022.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022–01459 Filed 1–25–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–94011; File No. SR–FINRA–
2021–030]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Designation
of Longer Period for Commission
Action on Proposed Rule Change To
Amend FINRA Rule 6730 To Require
Members To Append Modifiers To
Delayed Treasury Spot Trades and
Portfolio Trades When Reporting to
TRACE
January 20, 2022.
On November 22, 2021, the Financial
Industry Regulatory Authority, Inc.
(‘‘FINRA’’) filed with the Securities and
Exchange Commission (‘‘Commission’’),
pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a
proposed rule change to amend FINRA
Rule 6730 to require members to append
modifiers to delayed Treasury spot
trades and portfolio trades when
reporting to FINRA’s Trade Reporting
and Compliance Engine (‘‘TRACE’’).
The proposed rule change was
15 15
18 17
16 17
1 15
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4097
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
E:\FR\FM\26JAN1.SGM
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]]>Agencies
[Federal Register Volume 87, Number 17 (Wednesday, January 26, 2022)]
[Notices]
[Pages 4095-4097]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-01459]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-94017; No. SR-NYSEArca-2022-03]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend the NYSE
Arca Options Fee Schedule To Cap Certain Port Fees
January 20, 2022.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on January 14, 2022, NYSE Arca, Inc. (``NYSE Arca'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\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 amend the NYSE Arca Options Fee Schedule
(the ``Fee Schedule'') to cap certain port fees in connection with the
Exchange's migration to a new trading platform. 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 cap
certain port fees during the Exchange's migration of options trading to
a new electronic trading platform.
Currently, the Exchange conducts options trading on an electronic
platform known as ``OX.'' OX refers to the Exchange's electronic order
delivery, execution, and reporting system for designated option issues
through which orders and quotes of Users are consolidated for execution
and/or display.\4\
---------------------------------------------------------------------------
\4\ See NYSE Arca Rule 6.1A-O(a)(13).
---------------------------------------------------------------------------
On or about February 7, 2022, the Exchange anticipates beginning
the migration of its options trading to a new technology platform known
as Pillar.\5\ The Exchange proposes to adopt a cap on the monthly fees
assessed for the use of certain ports connecting to the Exchange, which
will go into effect on the day the Exchange commences its migration to
the Pillar platform and remain in effect until the end of the month in
which the migration is completed (the ``Migration Period'').
---------------------------------------------------------------------------
\5\ The Exchange has announced that, pending regulatory
approval, it will begin migrating Exchange-listed options to Pillar
on February 7, 2022, available here: https://w0ww.nyse.com/trader-update/history#110000387355. See also Securities Exchange Act
Release No. 92304 (June 30, 2021), 86 FR 36440 (July 9, 2021) (SR-
NYSEArca-2021-47) (Notice of Filing of Proposed Rule Change for New
Rules 6.1P-O, 6.37AP-O, 6.40P-O, 6.41P-O, 6.62P-O, 6.64P-O, 6.76P-O,
and 6.76AP-O and Amendments to Rules 1.1, 6.1-O, 6.1A-O, 6.37-O,
6.65A-O and 6.96-O) and Amendment No. 2 to SR-NYSEArca-2021-47,
available here: https://www.sec.gov/comments/sr-nysearca-2021-47/srnysearca202147-20109876-264219.pdf.
---------------------------------------------------------------------------
Specifically, the Exchange proposes to cap the monthly fees charged
to an OTP Holder or OTP Firm (collectively, ``OTP Holders'') for the
use of Order/Quote Entry Ports, Quote Takedown Ports, and Drop Copy
Ports (collectively, the ``Port Fees'') during the Migration Period
(the ``Migration Cap''). The Migration Cap will be based on the number
of ports an OTP Holder is billed for in the month preceding the
beginning of the Exchange's migration to the Pillar platform, except
that if an OTP Holder reduces the number of ports used during the
Migration Period (i.e., incurs Port Fees below the Migration Cap), the
OTP Holder would only be billed for the actual number of ports used.
Without this proposed rule change, the Fee Schedule provides that
OTP Holders would be charged for the use of both legacy OX platform
ports and new Pillar platform ports, which could significantly increase
costs to OTP Holders during the Migration Period. Thus, the proposed
Migration Cap is intended to encourage OTP Holders to maintain the same
levels of interaction with Exchange during the Migration Period, as
well as promptly migrate to the more efficient Pillar technology
platform, without incurring additional Port Fees as a result of the
transition.\6\
---------------------------------------------------------------------------
\6\ The Exchange notes that the NYSE Arca Equities exchange
adopted a similar fee cap in connection with its migration to the
Pillar technology platform in 2017 so that its member organizations
would not incur additional charges during the transition period. See
Securities Exchange Act Release No. 81573 (September 11, 2017), 82
FR 43430 (September 15, 2017) (SR-NYSEArca-2017-97) (providing for a
temporary cap on monthly fees for use of ports during Pillar
transition).
---------------------------------------------------------------------------
The Exchange proposes to implement this fee change on the day it
commences its migration to the Pillar technology platform.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\7\ in general, and furthers the
objectives of Sections
[[Page 4096]]
6(b)(4) and (5) of the Act,\8\ in particular, because it provides for
the equitable allocation of reasonable dues, fees, and other charges
among its members, issuers and other persons using its facilities and
does not unfairly discriminate between customers, issuers, brokers or
dealers.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(4) and (5).
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The Proposed Rule Change Is Reasonable
The Exchange operates in a highly competitive market. The
Commission has repeatedly expressed its preference for competition over
regulatory intervention in determining prices, products, and services
in the securities markets. In Regulation NMS, the Commission
highlighted the importance of market forces in determining prices and
SRO revenues and, also, recognized that current regulation of the
market system ``has been remarkably successful in promoting market
competition in its broader forms that are most important to investors
and listed companies.'' \9\
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\9\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005) (S7-10-04) (``Reg NMS
Adopting Release'').
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There are currently 16 registered options exchanges competing for
order flow. Based on publicly-available information, and excluding
index-based options, no single exchange has more than 16% of the market
share of executed volume of multiply-listed equity and ETF options
trades.\10\ Therefore, currently no exchange possesses significant
pricing power in the execution of multiply-listed equity and ETF
options order flow. More specifically, in November 2021, the Exchange
had less than 13% market share of executed volume of multiply-listed
equity and ETF options trades.\11\
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\10\ 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.
\11\ Based on a compilation of OCC data for monthly volume of
equity-based options and monthly volume of ETF-based options, see
id., the Exchange's market share in equity-based options increased
from 10.35% for the month of November 2020 to 12.99% for the month
of November 2021.
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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 fees, including fees for connectivity.
The Exchange believes that the proposed Migration Cap is reasonably
designed to continue to incent OTP Holders to maintain sufficient
active connections to the Exchange during its migration to a new
trading platform. Without the proposed change, OTP Holders would be
subject to fees for the use of both legacy ports and the new ports
using Pillar technology during the Migration Period. Accordingly, the
Exchange believes that the proposed Migration Cap is reasonably
designed to lessen the impact of the migration on OTP Holders and will
thus encourage OTP Holders to both promptly transition to the more
efficient Pillar technology platform and maintain their current level
of trading activity on the Exchange.
To the extent the proposed rule change encourages OTP Holders to
migrate to the new Pillar technology platform while maintaining their
level of trading activity, the Exchange believes the proposed change
would sustain the Exchange's overall competitiveness and 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 mitigate the expense of the
migration without affecting its competitiveness.
The Proposed Rule Change Is an Equitable Allocation of Credits and Fees
The Exchange believes the proposed change is an equitable
allocation of its fees and credits because the Migration Cap, which
would apply equally to all OTP Holders, would be calculated based on
the number of ports each OTP Holder uses. OTP Holders can opt to adjust
their port usage, if desired, in advance of the Migration Period, and
to the extent OTP Holders choose to use fewer ports during the
Migration Period (i.e., incur Port Fees below the Migration Cap), their
Port Fees would be reduced accordingly. Thus, the Exchange believes the
proposed rule change would facilitate a smooth transition to the Pillar
technology platform for OTP Holders and mitigate the impact of the
migration process for all market participants on the Exchange, thereby
sustaining market-wide quality.
The Proposed Rule Change Is Not Unfairly Discriminatory
The Exchange believes the Migration Cap is not unfairly
discriminatory because it would be available to all similarly-situated
market participants on an equal and non-discriminatory basis.
The proposed Migration Cap would be based on an OTP Holder's Port
Fees billed for the month preceding the beginning of the Exchange's
migration to the Pillar technology platform and would be adjusted to
the extent an OTP Holder chooses to utilize fewer such ports during the
Migration Period. The Exchange believes that the Migration Cap will
permit OTP Holders to maintain the same level of interaction with
Exchange systems during the Migration Period without incurring
additional Port Fees as a result of the transition from OX to the
Pillar technology platform. The Exchange also believes that the
Migration Cap would allow OTP Holders to maintain their existing level
of connectivity to the Exchange at no additional cost during the
Migration Period, thereby supporting continued trading opportunities
for all market participants, which would promote just and equitable
principles of trade, remove impediments to and perfect the mechanism of
a free and open market and a national market system and, in general,
protect investors and the public interest.
Finally, the Exchange believes that it is subject to significant
competitive forces, as described below in the Exchange's statement
regarding the burden on competition.
B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with Section 6(b)(8) of the Act, the Exchange does
not believe that the proposed rule change would impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act. Instead, as discussed above, the Exchange believes
that the proposed changes would 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.'' \12\
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\12\ See Reg NMS Adopting Release, supra note 9, at 37499.
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Intramarket Competition. The Exchange does not believe the proposed
rule change would impose any burden on intramarket competition that is
not necessary or appropriate because it would apply equally to all OTP
Holders. All OTP Holders, regardless of the number of ports they
utilize, will be eligible for the Migration Cap beginning on the day
the Exchange commences its
[[Page 4097]]
migration to the Pillar technology platform through the end of the
Migration Period.
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.\13\ Therefore, currently
no exchange possesses significant pricing power in the execution of
multiply-listed equity & ETF options order flow. More specifically, in
November 2021, the Exchange had less than 13% market share of executed
volume of multiply-listed equity and ETF options trades.\14\
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\13\ See supra note 10.
\14\ Based on a compilation of OCC data for monthly volume of
equity-based options and monthly volume of ETF-based options, see
id., the Exchange's market share in equity-based options increased
from 10.35% for the month of November 2020 to 12.99% for the month
of November 2021.
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The Exchange does not believe the proposed rule change would impose
any burden on intermarket competition that is not necessary or
appropriate because the Exchange operates in a highly competitive
market in which market participants can readily choose to send their
orders to other exchanges if they deem fee levels at those other venues
to be more favorable. The Exchange believes that fees for connectivity
are constrained by the robust competition for order flow among
exchanges. Accordingly, the Exchange believes that the proposed
Migration Cap would continue to make the Exchange a competitive venue
for order execution by enabling OTP Holders to maintain their current
levels of interaction with the Exchange during the Migration Period
without incurring additional Port Fees and facilitating OTP Holders'
migration to the newer, more efficient Pillar technology platform.
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) \15\ of the Act and subparagraph (f)(2) of Rule
19b-4 \16\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\15\ 15 U.S.C. 78s(b)(3)(A).
\16\ 17 CFR 240.19b-4(f)(2).
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At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \17\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\17\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NYSEArca-2022-03 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090..
All submissions should refer to File Number SR-NYSEArca-2022-03. 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-2022-03, and should be
submitted on or before February 16, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-01459 Filed 1-25-22; 8:45 am]
BILLING CODE 8011-01-P
