Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the NYSE Arca Options Fee Schedule, 6910-6913 [2022-02428]

Download as PDF 6910 Federal Register / Vol. 87, No. 25 / Monday, February 7, 2022 / Notices 100 F Street NE, Washington, DC 20549–1090. SECURITIES AND EXCHANGE COMMISSION All submissions should refer to File Number SR–MRX–2022–02. 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–MRX–2022–02 and should be submitted on or before February 28, 2022. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.16 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2022–02432 Filed 2–4–22; 8:45 am] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the NYSE Arca Options Fee Schedule February 1, 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 25, 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. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend the NYSE Arca Options Fee Schedule (the ‘‘Fee Schedule’’) regarding eligibility for certain tiers, incentives, and discounts during the Exchange’s migration to a new trading platform. The Exchange proposes to implement the fee change effective January 25, 2022. 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. BILLING CODE 8011–01–P jspears on DSK121TN23PROD with NOTICES1 [Release No. 34–94125; No. SR–NYSEArca– 2022–05] 1 15 U.S.C. 78s(b)(1). U.S.C. 78a. 3 17 CFR 240.19b–4. 2 15 16 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 17:36 Feb 04, 2022 Jkt 256001 PO 00000 Frm 00072 Fmt 4703 Sfmt 4703 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 provide OTP Holders and OTP Firms (collectively, ‘‘OTP Holders’’) with certainty regarding their eligibility for certain tiers, incentives, and discounts during the Exchange’s migration to a new electronic trading platform, as an effort to mitigate fees during this transition period. 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 The Exchange currently offers various volume- and performance-based incentives and discounts to encourage OTP Holders to use the Exchange as their primary venue for order routing and execution and for market making activity. Many of these incentive and discount programs include multiple tiers, which are intended to encourage greater participation in the programs and to incent OTP Holders to continually grow their business on the Exchange in order to qualify for the benefits offered in a higher tier. In advance of the Exchange’s migration to the Pillar platform, the Exchange has noted concern among OTP Holders regarding their ability to achieve various volume qualifications and thresholds during the migration. Specifically, because OTP Holders may choose to moderate their order flow and quotation sizes to reduce risk as they familiarize themselves with the new trading platform, they may not achieve the tier(s), incentive(s), and discount(s) 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://www.nyse.com/traderupdate/history#110000322291. 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. 4 to SR– NYSEArca–2021–47, available here: https:// www.sec.gov/comments/sr-nysearca-2021-47/ srnysearca202147-20112491-265389.pdf. 5 The E:\FR\FM\07FEN1.SGM 07FEN1 jspears on DSK121TN23PROD with NOTICES1 Federal Register / Vol. 87, No. 25 / Monday, February 7, 2022 / Notices they qualified for pre-migration. Accordingly, the Exchange believes that providing OTP Holders with certainty with respect to certain pricing they would receive during the transition to Pillar would provide OTP Holders with an opportunity to adjust to new functionality and new order handling mechanisms without taking on an additional financial burden. To this end, the Exchange proposes to amend Endnote 8 of the Fee Schedule to provide that for the month during which the Exchange commences its migration to the Pillar platform (the ‘‘Migration Month’’), OTP Holders will receive the tier(s), incentive(s), and discount(s) they achieved in the month prior to the Migration Month or the tier(s), incentive(s), and discount(s) achieved during the Migration Month, whichever are better. Specifically, the Exchange will compare an OTP Holder’s performance in each of the programs set forth below during the Migration Month and during the month prior (currently anticipated to be January 2022) and will bill the OTP Holder for the Migration Month at the most favorable rates based on each qualification level achieved. The following tiers, incentives, and discount programs would be covered by the proposed change: • Customer Penny Posting Credit Tiers • Firm and Broker Dealer Penny Posting Credit Tiers • Firm and Broker Dealer Incentive Program • Non-Customer, Non-Penny Posting Credit Tiers • Customer Incentive Program • Customer Posting Credit Tiers in NonPenny Issues • Discount in Take Liquidity Fees for Professional Customer and NonCustomer Liquidity Removing Interest • Market Maker Incentive For Penny Issues • Market Maker Incentive For NonPenny Issues • Market Maker Incentives for SPY • Market Maker Penny and SPY Posting Credit Tiers • LMM Rights Fee Discount The Exchange believes that, to the extent OTP Holders choose to modify their trading activity during the Migration Month, the proposed change would mitigate the impact of potential pricing disruption by providing OTP Holders with certainty regarding the tier(s), incentive(s), and discount(s) they would be eligible for in the Migration Month, which would in turn encourage OTP Holders to continue to send orders and quotes to the Exchange during the transition to Pillar. In addition, by offering OTP Holders the better pricing of the month before VerDate Sep<11>2014 17:36 Feb 04, 2022 Jkt 256001 the Migration Month or the Migration Month, the Exchange believes OTP Holders will be incented to take full advantage of new Pillar functionality and possibly even increase their volume and participation during the migration. The Exchange is not proposing any changes to the underlying tiers, incentives, or discounts covered by the proposed change described above. The Exchange proposes to implement this change effective January 25, 2022. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,6 in general, and furthers the objectives of Sections 6(b)(4) and (5) of the Act,7 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.’’ 8 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.9 Therefore, currently no exchange possesses significant pricing power in the execution of multiply-listed equity & ETF options order flow. More specifically, in December 2021, the Exchange had less than 14% market 6 15 U.S.C. 78f(b). U.S.C. 78f(b)(4) and (5). 8 See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005) (S7–10–04) (‘‘Reg NMS Adopting Release’’). 9 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. 7 15 PO 00000 Frm 00073 Fmt 4703 Sfmt 4703 6911 share of executed volume of multiplylisted equity & ETF options trades.10 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. The Exchange believes that the proposed change is reasonably designed to continue to incent OTP Holders to maintain active participation on the Exchange during the Pillar migration by offering OTP Holders pricing at each of the tier(s), incentive(s), and discount(s) they qualify for during either the Migration Month or in the month prior to the Migration Month, whichever is more favorable to the OTP Holder. The Exchange further believes that the proposed change would lessen the impact of the migration on OTP Holders by enabling them to adapt their trading activity as needed to transition to Pillar functionality during the Migration Month and would thus encourage OTP Holders to promptly transition to the more efficient Pillar platform. To the extent the proposed rule change encourages OTP Holders to migrate to the new 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 rule change is an equitable allocation of its fees and credits because it would be available to all OTP Holders. In addition, the proposal is based on each OTP Holder’s activity levels before and during the Migration Month and would afford OTP Holders the flexibility to moderate their activity as needed during the Migration Month and still receive the more favorable rates between the tier(s), incentive(s), and discount(s) they achieve in the Migration Month or in 10 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 9.65% for the month of December 2020 to 13.21% for the month of December 2021. E:\FR\FM\07FEN1.SGM 07FEN1 6912 Federal Register / Vol. 87, No. 25 / Monday, February 7, 2022 / Notices the month prior. Thus, the Exchange believes the proposed rule change would facilitate a smooth transition to the Pillar technology platform for all market participants on the Exchange by encouraging OTP Holders to send orders and quotes to the Exchange during the transition period, thereby improving market-wide quality. jspears on DSK121TN23PROD with NOTICES1 The Proposed Rule Change Is Not Unfairly Discriminatory The Exchange believes the proposed rule change is not unfairly discriminatory because it would be available to all similarly-situated market participants on an equal and nondiscriminatory basis. The proposal is based on an OTP Holder’s achievement of tiers, incentives, and discounts prior to and during the Migration Month and would provide all OTP Holders with certainty that they would at least qualify for the same tier(s), incentive(s), and discount(s) as in the month prior to the Migration Month. The proposed change would thus allow OTP Holders to adjust their interactions with Exchange systems during the Migration Month as needed and take advantage of the new functionality offered by Pillar by mitigating the impact of potential pricing disruptions. Thus, to the extent the proposal encourages OTP Holders to maintain or increase their current level of activity on the Exchange, such activity would result in trading opportunities for all market participants and thus would promote just and equitable principles of trade, remove impediments to and perfect the mechanism of a free and open market and a national market system and, in general, protect investors and the public interest. Finally, the Exchange believes that it is subject to significant competitive forces, as described below in the Exchange’s statement regarding the burden on competition. B. Self-Regulatory Organization’s Statement on Burden on Competition In accordance with Section 6(b)(8) of the Act, the Exchange does not believe that the proposed rule change would impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. Instead, as discussed above, the Exchange believes that the proposed changes would 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 VerDate Sep<11>2014 17:36 Feb 04, 2022 Jkt 256001 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.’’ 11 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 that submit orders and quotes electronically to the Exchange. All OTP Holders would be eligible to receive the rates under each of the tier(s), incentive(s), and discount(s) they achieved in the Migration Month or in the month prior to the Migration Month, whichever are better. 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.12 Therefore, currently no exchange possesses significant pricing power in the execution of multiply-listed equity & ETF options order flow. More specifically, in December 2021, the Exchange had less than 14% market share of executed volume of multiplylisted equity & ETF options trades.13 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 its fees are constrained by the robust competition for order flow among exchanges and thus believes that the proposed change is reasonably designed to encourage OTP Holders to transition to the Pillar platform while mitigating the risk of a significant change to the fees they would be subject to during the Migration Month. Accordingly, the Exchange believes that the proposed change 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 (or make adjustments as needed) during the Migration Month, thus encouraging prompt migration to the newer, more efficient Pillar technology platform and sustained activity on the Exchange during the Pillar transition. 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) 14 of the Act and subparagraph (f)(2) of Rule 19b–4 15 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) 16 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 11 See Reg NMS Adopting Release, supra note 8, at 37499. 12 See supra note 9. 13 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 9.65% for the month of December 2020 to 13.21% for the month of December 2021. PO 00000 Frm 00074 Fmt 4703 Sfmt 4703 • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or 14 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(2). 16 15 U.S.C. 78s(b)(2)(B). 15 17 E:\FR\FM\07FEN1.SGM 07FEN1 Federal Register / Vol. 87, No. 25 / Monday, February 7, 2022 / Notices • Send an email to rule-comments@ sec.gov. Please include File Number SR– NYSEArca–2022–05 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–2022–05. 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–2022–05, and should be submitted on or before February 28, 2022. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.17 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2022–02428 Filed 2–4–22; 8:45 am] jspears on DSK121TN23PROD with NOTICES1 BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–94116; File No. SR– NASDAQ–2022–010] Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Update the Obvious Error Rule February 1, 2022. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’), and Rule 19b–4 thereunder, notice is hereby given that on January 26, 2022, The Nasdaq Stock Market LLC (‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II, and III, below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Options 3, Section 20 (Nullification and Adjustment of Options Transactions including Obvious Errors). The text of the proposed rule change is available on the Exchange’s website at https://listingcenter.nasdaq.com/ rulebook/nasdaq/rules, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose 17 17 The purpose of this proposed rule change is to amend Options 3, Section 20 (Nullification and Adjustment of Options Transactions including Obvious Errors) to improve the operation of the CFR 200.30–3(a)(12). VerDate Sep<11>2014 17:36 Feb 04, 2022 Jkt 256001 PO 00000 Frm 00075 Fmt 4703 Sfmt 4703 6913 Rule. Following discussions with other exchanges and a cross-section of industry participants and in coordination with the Listed Options Market Structure Working Group (‘‘LOMSWG’’) (collectively, the ‘‘Industry Working Group’’), the Exchange proposes: (1) To amend section (b)(3) of the Rule to permit the Exchange to determine the Theoretical Price of a Customer option transaction in a wide market so long as a narrow market exists at any point during the 10second period after an opening or reopening; and (2) to amend section (c)(4)(B) of the Rule to adjust, rather than nullify, Customer transactions in Obvious Error situations, provided the adjustment does not violate the limit price. The foregoing changes are based on the recently amended rules of NYSE Arca, Inc. (‘‘Arca’’).1 Further, the Exchange proposes to make nonsubstantive, corrective changes. Each change is discussed in detail below. Proposed Change to Section (b)(3) Options 3, Section 20 has been part of various harmonization efforts by the Industry Working Group.2 These efforts have often centered around the Theoretical Price for which an options transaction should be compared to determine whether an Obvious Error has occurred. For instance, all options exchanges have adopted language comparable to Supplementary Material .03,3 which explains how an exchange is to determine Theoretical Price at the open, when there are no valid quotes, and when there is a wide quote. This includes at times the use of a singular third-party vendor, known as a TP Provider (currently CBOE Livevol, LLC). Similarly, section (b)(3) of Options 3, Section 20 was previously harmonized across all options exchanges to handle situations where executions occur in markets that are wide (as set forth in the rule).4 Under that section, the Exchange determines the Theoretical Price if the NBBO for the subject series is wide immediately before execution and a narrow market (as set forth in the rule) existed ‘‘during the 10 seconds prior to the transaction.’’ The rule goes on to 1 See Arca Rule 6.87–O. See also Securities Exchange Act Release No. 93818 (December 17, 2021), 86 FR 73009 (December 23, 2021) (SR– NYSEArca–2021–91) (Order Approving a Proposed Rule Change to Amend Rule 6.87–O). 2 See, e.g., Securities Exchange Act Release No. 74915 (May 8, 2015), 80 FR 27801 (May 14, 2015) (SR–NASDAQ–2015–054). 3 See, e.g., Securities Exchange Act Release No. 81323 (August 7, 2017), 82 FR 37639 (August 11, 2017) (SR–NASDAQ–2017–078). 4 See, e.g., Securities Exchange Act Release No. 74915 (May 8, 2015), 80 FR 27801 (May 14, 2015) (SR–NASDAQ–2015–054). E:\FR\FM\07FEN1.SGM 07FEN1

Agencies

[Federal Register Volume 87, Number 25 (Monday, February 7, 2022)]
[Notices]
[Pages 6910-6913]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-02428]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94125; No. SR-NYSEArca-2022-05]


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

February 1, 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 25, 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'') regarding eligibility for certain tiers, 
incentives, and discounts during the Exchange's migration to a new 
trading platform. The Exchange proposes to implement the fee change 
effective January 25, 2022. 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 provide 
OTP Holders and OTP Firms (collectively, ``OTP Holders'') with 
certainty regarding their eligibility for certain tiers, incentives, 
and discounts during the Exchange's migration to a new electronic 
trading platform, as an effort to mitigate fees during this transition 
period.
    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).
    \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://www.nyse.com/trader-update/history#110000322291. 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. 4 to SR-NYSEArca-2021-47, 
available here: https://www.sec.gov/comments/sr-nysearca-2021-47/srnysearca202147-20112491-265389.pdf.
---------------------------------------------------------------------------

    The Exchange currently offers various volume- and performance-based 
incentives and discounts to encourage OTP Holders to use the Exchange 
as their primary venue for order routing and execution and for market 
making activity. Many of these incentive and discount programs include 
multiple tiers, which are intended to encourage greater participation 
in the programs and to incent OTP Holders to continually grow their 
business on the Exchange in order to qualify for the benefits offered 
in a higher tier.
    In advance of the Exchange's migration to the Pillar platform, the 
Exchange has noted concern among OTP Holders regarding their ability to 
achieve various volume qualifications and thresholds during the 
migration. Specifically, because OTP Holders may choose to moderate 
their order flow and quotation sizes to reduce risk as they familiarize 
themselves with the new trading platform, they may not achieve the 
tier(s), incentive(s), and discount(s)

[[Page 6911]]

they qualified for pre-migration. Accordingly, the Exchange believes 
that providing OTP Holders with certainty with respect to certain 
pricing they would receive during the transition to Pillar would 
provide OTP Holders with an opportunity to adjust to new functionality 
and new order handling mechanisms without taking on an additional 
financial burden.
    To this end, the Exchange proposes to amend Endnote 8 of the Fee 
Schedule to provide that for the month during which the Exchange 
commences its migration to the Pillar platform (the ``Migration 
Month''), OTP Holders will receive the tier(s), incentive(s), and 
discount(s) they achieved in the month prior to the Migration Month or 
the tier(s), incentive(s), and discount(s) achieved during the 
Migration Month, whichever are better. Specifically, the Exchange will 
compare an OTP Holder's performance in each of the programs set forth 
below during the Migration Month and during the month prior (currently 
anticipated to be January 2022) and will bill the OTP Holder for the 
Migration Month at the most favorable rates based on each qualification 
level achieved.
    The following tiers, incentives, and discount programs would be 
covered by the proposed change:

 Customer Penny Posting Credit Tiers
 Firm and Broker Dealer Penny Posting Credit Tiers
 Firm and Broker Dealer Incentive Program
 Non-Customer, Non-Penny Posting Credit Tiers
 Customer Incentive Program
 Customer Posting Credit Tiers in Non-Penny Issues
 Discount in Take Liquidity Fees for Professional Customer and 
Non-Customer Liquidity Removing Interest
 Market Maker Incentive For Penny Issues
 Market Maker Incentive For Non-Penny Issues
 Market Maker Incentives for SPY
 Market Maker Penny and SPY Posting Credit Tiers
 LMM Rights Fee Discount

    The Exchange believes that, to the extent OTP Holders choose to 
modify their trading activity during the Migration Month, the proposed 
change would mitigate the impact of potential pricing disruption by 
providing OTP Holders with certainty regarding the tier(s), 
incentive(s), and discount(s) they would be eligible for in the 
Migration Month, which would in turn encourage OTP Holders to continue 
to send orders and quotes to the Exchange during the transition to 
Pillar.
    In addition, by offering OTP Holders the better pricing of the 
month before the Migration Month or the Migration Month, the Exchange 
believes OTP Holders will be incented to take full advantage of new 
Pillar functionality and possibly even increase their volume and 
participation during the migration.
    The Exchange is not proposing any changes to the underlying tiers, 
incentives, or discounts covered by the proposed change described 
above.
    The Exchange proposes to implement this change effective January 
25, 2022.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\6\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\7\ 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.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78f(b).
    \7\ 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.'' \8\
---------------------------------------------------------------------------

    \8\ 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.\9\ Therefore, currently no exchange possesses significant 
pricing power in the execution of multiply-listed equity & ETF options 
order flow. More specifically, in December 2021, the Exchange had less 
than 14% market share of executed volume of multiply-listed equity & 
ETF options trades.\10\
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    \9\ 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.
    \10\ 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 9.65% for the month of December 2020 to 13.21% for the month of 
December 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.
    The Exchange believes that the proposed change is reasonably 
designed to continue to incent OTP Holders to maintain active 
participation on the Exchange during the Pillar migration by offering 
OTP Holders pricing at each of the tier(s), incentive(s), and 
discount(s) they qualify for during either the Migration Month or in 
the month prior to the Migration Month, whichever is more favorable to 
the OTP Holder. The Exchange further believes that the proposed change 
would lessen the impact of the migration on OTP Holders by enabling 
them to adapt their trading activity as needed to transition to Pillar 
functionality during the Migration Month and would thus encourage OTP 
Holders to promptly transition to the more efficient Pillar platform.
    To the extent the proposed rule change encourages OTP Holders to 
migrate to the new 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 rule change is an equitable 
allocation of its fees and credits because it would be available to all 
OTP Holders. In addition, the proposal is based on each OTP Holder's 
activity levels before and during the Migration Month and would afford 
OTP Holders the flexibility to moderate their activity as needed during 
the Migration Month and still receive the more favorable rates between 
the tier(s), incentive(s), and discount(s) they achieve in the 
Migration Month or in

[[Page 6912]]

the month prior. Thus, the Exchange believes the proposed rule change 
would facilitate a smooth transition to the Pillar technology platform 
for all market participants on the Exchange by encouraging OTP Holders 
to send orders and quotes to the Exchange during the transition period, 
thereby improving market-wide quality.
The Proposed Rule Change Is Not Unfairly Discriminatory
    The Exchange believes the proposed rule change is not unfairly 
discriminatory because it would be available to all similarly-situated 
market participants on an equal and non-discriminatory basis.
    The proposal is based on an OTP Holder's achievement of tiers, 
incentives, and discounts prior to and during the Migration Month and 
would provide all OTP Holders with certainty that they would at least 
qualify for the same tier(s), incentive(s), and discount(s) as in the 
month prior to the Migration Month. The proposed change would thus 
allow OTP Holders to adjust their interactions with Exchange systems 
during the Migration Month as needed and take advantage of the new 
functionality offered by Pillar by mitigating the impact of potential 
pricing disruptions. Thus, to the extent the proposal encourages OTP 
Holders to maintain or increase their current level of activity on the 
Exchange, such activity would result in trading opportunities for all 
market participants and thus would promote just and equitable 
principles of trade, remove impediments to and perfect the mechanism of 
a free and open market and a national market system and, in general, 
protect investors and the public interest.
    Finally, the Exchange believes that it is subject to significant 
competitive forces, as described below in the Exchange's statement 
regarding the burden on competition.

B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act, the Exchange does 
not believe that the proposed rule change would impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. Instead, as discussed above, the Exchange believes 
that the proposed changes would 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.'' \11\
---------------------------------------------------------------------------

    \11\ See Reg NMS Adopting Release, supra note 8, at 37499.
---------------------------------------------------------------------------

    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 that submit orders and quotes electronically to the Exchange. 
All OTP Holders would be eligible to receive the rates under each of 
the tier(s), incentive(s), and discount(s) they achieved in the 
Migration Month or in the month prior to the Migration Month, whichever 
are better.
    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.\12\ Therefore, currently 
no exchange possesses significant pricing power in the execution of 
multiply-listed equity & ETF options order flow. More specifically, in 
December 2021, the Exchange had less than 14% market share of executed 
volume of multiply-listed equity & ETF options trades.\13\
---------------------------------------------------------------------------

    \12\ See supra note 9.
    \13\ 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 9.65% for the month of December 2020 to 13.21% for the month of 
December 2021.
---------------------------------------------------------------------------

    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 its fees are 
constrained by the robust competition for order flow among exchanges 
and thus believes that the proposed change is reasonably designed to 
encourage OTP Holders to transition to the Pillar platform while 
mitigating the risk of a significant change to the fees they would be 
subject to during the Migration Month. Accordingly, the Exchange 
believes that the proposed change 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 (or make 
adjustments as needed) during the Migration Month, thus encouraging 
prompt migration to the newer, more efficient Pillar technology 
platform and sustained activity on the Exchange during the Pillar 
transition.

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) \14\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \15\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 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) \16\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \16\ 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

[[Page 6913]]

     Send an email to [email protected]. Please include 
File Number SR-NYSEArca-2022-05 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-2022-05. 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-2022-05, and should be 
submitted on or before February 28, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-02428 Filed 2-4-22; 8:45 am]
BILLING CODE 8011-01-P
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