Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify the NYSE Arca Options Fee Schedule, 63847-63850 [2022-22736]
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Federal Register / Vol. 87, No. 202 / Thursday, October 20, 2022 / Notices
and enforce written policies and
procedures reasonably designed to
effectively identify, measure, monitor,
and manage its credit exposures to
participants and those arising from its
payment, clearing, and settlement
processes, including by maintaining
sufficient financial resources to cover its
credit exposure to each participant fully
with a high degree of confidence.
• Rule 17Ad–22(e)(6)(i) of the Act,17
which requires that a covered clearing
agency establish, implement, maintain,
and enforce written policies and
procedures reasonably designed to
cover, if the covered clearing agency
provides central counterparty services,
its credit exposures to its participants by
establishing a risk-based margin system
that, at a minimum, considers, and
produces margin levels commensurate
with, the risks and particular attributes
of each relevant product, portfolio, and
market.
• Rule 17Ad–22(e)(23)(ii) of the Act 18
which requires that a covered clearing
agency establish, implement, maintain,
and enforce written policies and
procedures reasonably designed to
provide sufficient information to enable
participants to identify and evaluate the
risks, fees, and other material costs they
incur by participating in the covered
clearing agency.
lotter on DSK11XQN23PROD with NOTICES1
IV. Procedure: Request for Written
Comments
The Commission requests that
interested persons provide written
submissions of their views, data, and
arguments with respect to the issues
identified above, as well as any other
concerns they may have with the
Proposed Rule Change. In particular, the
Commission invites the written views of
interested persons concerning whether
the Proposed Rule Change is consistent
with FR 17A(b)(3)(F) of the Act,19 and
Rules 17Ad–22(e)(4)(i), (e)(6)(i) and
(e)(23)(ii) of the Act,20 or any other
provision of the Act, or the rules and
regulations thereunder.
Interested persons are invited to
submit written data, views, and
arguments regarding whether the
Proposed Rule Change should be
approved or disapproved by November
10, 2022. Any person who wishes to file
a rebuttal to any other person’s
submission must file that rebuttal by
November 25, 2022.
The Commission asks that
commenters address the sufficiency of
17 17
CFR 240.17Ad–22(e)(6)(i).
CFR 240.17Ad–22(e)(23)(ii).
19 15 U.S.C. 78q–1(b)(3)(F).
20 17 CFR 240.17Ad–22(e)(4)(i), (e)(6)(i) and
(e)(23)(ii).
18 17
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NSCC’s statements in support of the
Proposed Rule Change, which are set
forth in the Notice,21 in addition to any
other comments they may wish to
submit about the Proposed Rule Change.
Comments may be submitted by any
of the following methods:
63847
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.22
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022–22732 Filed 10–19–22; 8:45 am]
BILLING CODE 8011–01–P
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–
NSCC–2022–005 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–NSCC–2022–009. 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 NSCC and on DTCC’s website
(https://dtcc.com/legal/sec-rulefilings.aspx). 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–NSCC–
2022–009 and should be submitted on
or before November 10, 2022. Rebuttal
comments should be submitted by
November 25, 2022.
21 See
PO 00000
Notice, supra note 3.
Frm 00088
Fmt 4703
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–96085; File No. SR–
NYSEARCA–2022–71
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Modify the NYSE Arca
Options Fee Schedule
October 14, 2022.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on October
13, 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 modify the
NYSE Arca Options Fee Schedule (‘‘Fee
Schedule’’) regarding credits for Floor
Broker Qualified Contingent Cross
(‘‘QCC’’) transactions. The Exchange
proposes to implement the fee change
effective October 13, 2022.4 The
proposed rule change is available on the
Exchange’s website at www.nyse.com, at
the principal office of the Exchange, and
at the Commission’s Public Reference
Room.
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
22 17
CFR 200.30–3(a)(31).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
4 The Exchange originally filed to amend the Fee
Schedule on October 3, 2022 (SR–NYSEArca–2022–
67) and withdrew such filing on October 13, 2022.
1 15
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Federal Register / Vol. 87, No. 202 / Thursday, October 20, 2022 / Notices
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of this filing is to amend
the Fee Schedule to modify the credits
offered to Floor Brokers for QCC
transactions.5 The Exchange proposes to
implement the rule change on October
13, 2022.
Currently, Floor Brokers earn a credit
for executed QCC orders of ($0.22) per
contract for Non-Customer vs. NonCustomer QCC transactions or ($0.11)
per contract for Customer vs. NonCustomer QCC transactions.6 QCC
executions in which a Customer is on
both sides of the QCC trade are not be
eligible for a Floor Broker credit, and
the maximum Floor Broker credit is
$375,000 per month per Floor Broker
firm.7
The Exchange now proposes to offer
an additional ($0.04) per contract credit
on all Customer vs. Non-Customer QCC
transactions to Floor Brokers that
execute at least 500,000 contracts of
credit-eligible volume in QCC orders in
a month.8
Although the Exchange cannot predict
with certainty whether the proposed
change would encourage Floor Brokers
to increase their QCC volume, the
proposed change is intended to
continue to incent additional QCC
executions by Floor Brokers by
increasing the amount of the credit
available on Customer vs. NonCustomer QCC transactions, and all
Floor Brokers are eligible to qualify for
the proposed credit.
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2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act,9 in general, and
furthers the objectives of Sections
5 A QCC Order is defined as an originating order
to buy or sell at least 1,000 contracts that is
identified as being part of a qualified contingent
trade coupled with a contra-side order or orders
totaling an equal number of contracts. See Rule
6.62P–O(g)(1)(A).
6 See Fee Schedule, Qualified Contingent Cross
(‘‘QCC’’) Transaction Fees and Credits, available at:
https://www.nyse.com/publicdocs/nyse/markets/
arca-options/NYSE_Arca_Options_Fee_
Schedule.pdf.
7 See id. at Endnote 13.
8 See proposed Fee Schedule at Endnote 13.
9 15 U.S.C. 78f(b).
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6(b)(4) and (5) of the Act,10 in particular,
because it provides for the equitable
allocation of reasonable dues, fees, and
other charges among its members,
issuers and other persons using its
facilities and does not unfairly
discriminate between customers,
issuers, brokers or dealers.
The Proposed Rule Change Is
Reasonable
The Exchange operates in a highly
competitive market. The Commission
has repeatedly expressed its preference
for competition over regulatory
intervention in determining prices,
products, and services in the securities
markets. In Regulation NMS, the
Commission highlighted the importance
of market forces in determining prices
and SRO revenues and, also, recognized
that current regulation of the market
system ‘‘has been remarkably successful
in promoting market competition in its
broader forms that are most important to
investors and listed companies.’’ 11
There are currently 16 registered
options exchanges competing for order
flow. Based on publicly-available
information, and excluding index-based
options, no single exchange has more
than 16% of the market share of
executed volume of multiply-listed
equity and ETF options trades.12
Therefore, no exchange possesses
significant pricing power in the
execution of multiply-listed equity and
ETF options order flow. More
specifically, in August 2022, the
Exchange had less than 13% market
share of executed volume of multiplylisted equity and ETF options trades.13
The Exchange believes that the evershifting market share among the
exchanges from month to month
demonstrates that market participants
can shift order flow, or discontinue or
reduce use of certain categories of
products, in response to fee changes.
Accordingly, competitive forces
constrain options exchange transaction
fees. Stated otherwise, modifications to
exchange transaction fees can have a
10 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’’).
12 The OCC publishes options and futures volume
in a variety of formats, including daily and monthly
volume by exchange, available here: https://
www.theocc.com/Market-Data/Market-DataReports/Volume-and-Open-Interest/MonthlyWeekly-Volume-Statistics.
13 Based on a compilation of OCC data for
monthly volume of equity-based options and
monthly volume of equity-based ETF options, see
id., the Exchange’s market share in equity-based
options decreased from 12.32% for the month of
August 2021 to 11.36% for the month of August
2022.
11 See
PO 00000
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Sfmt 4703
direct effect on the ability of an
exchange to compete for order flow.
To respond to this competitive
marketplace, the Exchange has
established incentives to assist Floor
Brokers in attracting more business to
the Exchange—including credits on
QCC transactions—as such participants
serve an important function in
facilitating the execution of orders on
the Exchange, thereby promoting price
discovery on the public markets.
The Exchange believes that the
proposed additional credit offered to
Floor Brokers on Customer vs. NonCustomer QCC transactions is
reasonable because it is designed to
continue to incent Floor Brokers to
increase the number of QCC
transactions sent to the Exchange. The
Exchange also believes that it is
reasonable to offer the increased credit
on Customer vs. Non-Customer QCC
transactions only, as Floor Brokers’
Non-Customer vs. Non-Customer QCC
transactions are already eligible for a
higher credit. To the extent that the
proposed change attracts more volume
to the Exchange, this increased order
flow would continue to make the
Exchange a more competitive venue for
order execution, which, in turn,
promotes just and equitable principles
of trade and removes impediments to
and perfects the mechanism of a free
and open market and a national market
system. The Exchange notes that all
market participants stand to benefit
from any increase in volume by Floor
Brokers, which could promote market
depth, facilitate tighter spreads and
enhance price discovery, to the extent
the proposed change encourages Floor
Brokers to utilize the Exchange as a
primary trading venue, and may lead to
a corresponding increase in order flow
from other market participants. In
addition, any increased liquidity on the
Exchange would result in enhanced
market quality for all participants.
Finally, to the extent the proposed
change continues to attract greater
volume and liquidity, the Exchange
believes the proposed change would
improve the Exchange’s overall
competitiveness and strengthen its
market quality for all market
participants. In the backdrop of the
competitive environment in which the
Exchange operates, the proposed rule
change is a reasonable attempt by the
Exchange to increase the depth of its
market and improve its market share
relative to its competitors. The
Exchange’s fees are constrained by
intermarket competition, as Floor
Brokers may direct their order flow to
any of the 16 options exchanges,
including those offering rebates on QCC
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Federal Register / Vol. 87, No. 202 / Thursday, October 20, 2022 / Notices
orders.14 Thus, Floor Brokers have a
choice of where they direct their order
flow, including their QCC transactions.
The proposed rule change is designed to
continue to incent Floor Brokers to
direct liquidity (and, in particular, QCC
orders) to the Exchange; to the extent
Floor Brokers are incentivized to
aggregate their trading activity at the
Exchange, that increased liquidity could
promote market depth, price discovery
and improvement, and enhanced order
execution opportunities for market
participants.
The Exchange cannot predict with
certainty whether the proposed change
would encourage Floor Brokers to
increase their QCC order flow to the
Exchange, but believes that the
proposed increased credit would
continue to incent Floor Brokers to do
so.
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The Proposed Rule Change Is an
Equitable Allocation of Credits and Fees
The Exchange believes the proposed
rule change is an equitable allocation of
its fees and credits. The proposal is
based on the amount and type of
business transacted on the Exchange,
and Floor Brokers can attempt to trade
QCC orders to earn the increased credit
or not. In addition, the proposed credit
is available to all Floor Brokers equally.
The Exchange further believes that the
proposed credit, which would apply to
Floor Brokers’ Customer vs. NonCustomer QCC transactions, is an
equitable allocation of credits in light of
the greater credit already available for
Non-Customer vs. Non-Customer QCC
transactions. The Exchange also believes
that the proposed credit is an equitable
allocation of fees and credits because it
would encourage and support Floor
Brokers’ role in facilitating the
execution of orders on the Exchange,
and to the extent the proposed credit
continues to incent Floor Brokers to
direct increased liquidity to the
Exchange, all market participants would
benefit from enhanced opportunities for
price improvement and order execution.
Moreover, the proposed credit is
designed to incent Floor Brokers to
encourage OTP Holders to aggregate
their executions—including QCC
14 See, e.g., EDGX Options Exchange Fee
Schedule, QCC Initiator/Solicitation Rebate Tiers
(applying ($0.14) per contract rebate up to 999,999
contracts for QCC transactions when only one side
of the transaction is a non-customer); BOX Options
Fee Schedule at Section IV.D.1. (QCC Rebate)
(providing for ($0.14) per contract rebate up to
1,499,999 contracts for QCC transactions when only
one side of the QCC transaction is a broker-dealer
or market maker); Nasdaq ISE, Options 7, Section
6.B. (QCC Rebate) (offering rebates on QCC
transactions of ($0.14) per contract when only one
side of the QCC transaction is a non-customer).
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16:50 Oct 19, 2022
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transactions—at the Exchange as a
primary execution venue. To the extent
that the proposed change achieves its
purpose in attracting more Floor Broker
volume to the Exchange, this increased
order flow would continue to make the
Exchange a more competitive venue for,
among other things, order execution.
Thus, the Exchange believes the
proposed rule change would improve
market quality for all market
participants on the Exchange and, as a
consequence, attract more order flow to
the Exchange, thereby improving
market-wide quality and price
discovery.
The Proposed Rule Change Is Not
Unfairly Discriminatory
The Exchange believes the proposed
change is not unfairly discriminatory
because the proposed additional credit
on Customer vs. Non-Customer QCC
orders would be available to all
similarly-situated Floor Brokers on an
equal and non-discriminatory basis. The
proposed credit is also not unfairly
discriminatory to non-Floor Brokers
because Floor Brokers serve an
important function in facilitating the
execution of orders on the Exchange
(including via open outcry), which the
Exchange wishes to encourage and
support to promote price improvement
opportunities for all market
participants.
The proposal is based on the amount
and type of business transacted on the
Exchange, and Floor Brokers are not
obligated to execute QCC orders. Rather,
the proposal is designed to encourage
Floor Brokers to utilize the Exchange as
a primary trading venue for all
transactions (if they have not done so
previously) and increase QCC volume
sent to the Exchange. To the extent that
the proposed change attracts more QCC
orders to the Exchange, this increased
order flow would continue to make the
Exchange a more competitive venue for
order execution. Thus, the Exchange
believes the proposed rule change
would improve market quality for all
market participants on the Exchange
and, as a consequence, attract more
order flow to the Exchange, thereby
improving market-wide quality and
price discovery. The resulting increased
volume and liquidity would provide
more trading opportunities and tighter
spreads to all market participants and
thus would promote just and equitable
principles of trade, remove
impediments to and perfect the
mechanism of a free and open market
and a national market system and, in
general, protect investors and the public
interest.
PO 00000
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63849
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
change 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.’’ 15
Intramarket Competition. The
proposed additional credit is designed
to attract additional order flow to the
Exchange (particularly in Floor Brokers’
QCC transactions), which could increase
the volumes of contracts traded on the
Exchange. Greater liquidity benefits all
market participants on the Exchange,
and increased QCC transactions could
increase opportunities for execution of
other trading interest. The proposed
credit would be available to all
similarly-situated Floor Brokers that
execute QCC trades, and to the extent
that there is an additional competitive
burden on non-Floor Brokers, the
Exchange believes that any such burden
would be appropriate because Floor
Brokers serve an important function in
facilitating the execution of orders and
price discovery for all market
participants.
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
15 See Reg NMS Adopting Release, supra note 11,
at 37499.
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Federal Register / Vol. 87, No. 202 / Thursday, October 20, 2022 / Notices
of executed volume of multiply-listed
equity and ETF options trades.16
Therefore, currently no exchange
possesses significant pricing power in
the execution of multiply-listed equity
and ETF options order flow. More
specifically, in August 2022, the
Exchange had less than 12% market
share of executed volume of multiplylisted equity and ETF options trades.17
The Exchange believes that the
proposed rule change reflects this
competitive environment because it
modifies the Exchange’s fees in a
manner designed to continue to incent
Floor Brokers to direct trading interest
(particularly QCC transactions) to the
Exchange, to provide liquidity and to
attract order flow. To the extent that
Floor Brokers are incentivized to utilize
the Exchange as a primary trading venue
for all transactions, all of the Exchange’s
market participants should benefit from
the improved market quality and
increased opportunities for price
improvement.
The Exchange notes that it operates in
a highly competitive market in which
market participants can readily favor
competing venues. In such an
environment, the Exchange must
continually review, and consider
adjusting, its fees and credits to remain
competitive with other exchanges. For
the reasons described above, the
Exchange believes that the proposed
rule change reflects this competitive
environment. The Exchange further
believes that the proposed change could
promote competition between the
Exchange and other execution venues,
including those that currently offer
rebates on QCC transactions, by
encouraging additional orders (and, in
particular, QCC orders) to be sent to the
Exchange for execution.18
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
lotter on DSK11XQN23PROD with NOTICES1
No written comments were solicited
or received with respect to the proposed
rule change.
16 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.
17 Based on a compilation of OCC data for
monthly volume of equity-based options and
monthly volume of equity-based ETF options, see
id., the Exchange’s market share in equity-based
options increased decreased from 12.32% for the
month of August 2021 to 11.36% for the month of
August 2022.
18 See note 14, supra.
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16:50 Oct 19, 2022
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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) 19 of the Act and
subparagraph (f)(2) of Rule 19b–4 20
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) 21 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
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–2022–71, and
should be submitted on or before
November 10, 2022.
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:
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.22
J. Matthew DeLesDernier,
Deputy Secretary.
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–2022–71 on the subject
line.
SMALL BUSINESS ADMINISTRATION
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–2022–71. 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
19 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(2).
21 15 U.S.C. 78s(b)(2)(B).
[FR Doc. 2022–22736 Filed 10–19–22; 8:45 am]
BILLING CODE 8011–01–P
[License No. 03/03–0285]
Tecum Capital Partners III, L.P.;
Conflicts of Interest Exemption
Notice is hereby given that Tecum
Capital Partners III, L.P., 8000 Brooktree
Rd., Ste 310, Wexford, PA 15090, a
Federal Licensee under the Small
Business Investment Act of 1958, as
amended (‘‘the Act’’), in connection
with the financing of a small business
concern, has sought an exemption under
Section 312 of the Act and 13 CFR
107.730, Financings which Constitute
Conflicts of Interest. Tecum Capital
Partners III, L.P. is seeking a written
exemption from the Small Business
Administration (SBA) for a proposed
financing to Primetac Corporation, 223Gates Road, 3rd Floor, Little Ferry, NJ
07643.
The financing is brought within the
purview of 13 CFR 107.730(a) because
Primetac Corporation is an Associate of
Tecum Capital Partners III, L.P. because
Associate Tecum Capital Partners II,
L.P. owns a greater than ten percent
interest in Primetac Corporation,
therefore this transaction is considered
Financing which constitute conflicts of
20 17
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E:\FR\FM\20OCN1.SGM
CFR 200.30–3(a)(12).
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]]>Agencies
[Federal Register Volume 87, Number 202 (Thursday, October 20, 2022)]
[Notices]
[Pages 63847-63850]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-22736]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-96085; File No. SR-NYSEARCA-2022-71
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Modify the NYSE
Arca Options Fee Schedule
October 14, 2022.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on October 13, 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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to modify the NYSE Arca Options Fee Schedule
(``Fee Schedule'') regarding credits for Floor Broker Qualified
Contingent Cross (``QCC'') transactions. The Exchange proposes to
implement the fee change effective October 13, 2022.\4\ The proposed
rule change is available on the Exchange's website at www.nyse.com, at
the principal office of the Exchange, and at the Commission's Public
Reference Room.
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\4\ The Exchange originally filed to amend the Fee Schedule on
October 3, 2022 (SR-NYSEArca-2022-67) and withdrew such filing on
October 13, 2022.
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II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received
[[Page 63848]]
on the proposed rule change. The text of those statements may be
examined at the places specified in Item IV below. The Exchange has
prepared summaries, set forth in sections A, B, and C below, of the
most significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of this filing is to amend the Fee Schedule to modify
the credits offered to Floor Brokers for QCC transactions.\5\ The
Exchange proposes to implement the rule change on October 13, 2022.
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\5\ A QCC Order is defined as an originating order to buy or
sell at least 1,000 contracts that is identified as being part of a
qualified contingent trade coupled with a contra-side order or
orders totaling an equal number of contracts. See Rule 6.62P-
O(g)(1)(A).
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Currently, Floor Brokers earn a credit for executed QCC orders of
($0.22) per contract for Non-Customer vs. Non-Customer QCC transactions
or ($0.11) per contract for Customer vs. Non-Customer QCC
transactions.\6\ QCC executions in which a Customer is on both sides of
the QCC trade are not be eligible for a Floor Broker credit, and the
maximum Floor Broker credit is $375,000 per month per Floor Broker
firm.\7\
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\6\ See Fee Schedule, Qualified Contingent Cross (``QCC'')
Transaction Fees and Credits, available at: https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf.
\7\ See id. at Endnote 13.
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The Exchange now proposes to offer an additional ($0.04) per
contract credit on all Customer vs. Non-Customer QCC transactions to
Floor Brokers that execute at least 500,000 contracts of credit-
eligible volume in QCC orders in a month.\8\
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\8\ See proposed Fee Schedule at Endnote 13.
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Although the Exchange cannot predict with certainty whether the
proposed change would encourage Floor Brokers to increase their QCC
volume, the proposed change is intended to continue to incent
additional QCC executions by Floor Brokers by increasing the amount of
the credit available on Customer vs. Non-Customer QCC transactions, and
all Floor Brokers are eligible to qualify for the proposed credit.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\9\ in general, and furthers the
objectives of Sections 6(b)(4) and (5) of the Act,\10\ in particular,
because it provides for the equitable allocation of reasonable dues,
fees, and other charges among its members, issuers and other persons
using its facilities and does not unfairly discriminate between
customers, issuers, brokers or dealers.
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\9\ 15 U.S.C. 78f(b).
\10\ 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.'' \11\
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\11\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005) (S7-10-04) (``Reg NMS
Adopting Release'').
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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.\12\ Therefore, no exchange possesses significant pricing power
in the execution of multiply-listed equity and ETF options order flow.
More specifically, in August 2022, the Exchange had less than 13%
market share of executed volume of multiply-listed equity and ETF
options trades.\13\
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\12\ The OCC publishes options and futures volume in a variety
of formats, including daily and monthly volume by exchange,
available here: https://www.theocc.com/Market-Data/Market-Data-Reports/Volume-and-Open-Interest/Monthly-Weekly-Volume-Statistics.
\13\ Based on a compilation of OCC data for monthly volume of
equity-based options and monthly volume of equity-based ETF options,
see id., the Exchange's market share in equity-based options
decreased from 12.32% for the month of August 2021 to 11.36% for the
month of August 2022.
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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 transaction fees. Stated otherwise,
modifications to exchange transaction fees can have a direct effect on
the ability of an exchange to compete for order flow.
To respond to this competitive marketplace, the Exchange has
established incentives to assist Floor Brokers in attracting more
business to the Exchange--including credits on QCC transactions--as
such participants serve an important function in facilitating the
execution of orders on the Exchange, thereby promoting price discovery
on the public markets.
The Exchange believes that the proposed additional credit offered
to Floor Brokers on Customer vs. Non-Customer QCC transactions is
reasonable because it is designed to continue to incent Floor Brokers
to increase the number of QCC transactions sent to the Exchange. The
Exchange also believes that it is reasonable to offer the increased
credit on Customer vs. Non-Customer QCC transactions only, as Floor
Brokers' Non-Customer vs. Non-Customer QCC transactions are already
eligible for a higher credit. To the extent that the proposed change
attracts more volume to the Exchange, this increased order flow would
continue to make the Exchange a more competitive venue for order
execution, which, in turn, promotes just and equitable principles of
trade and removes impediments to and perfects the mechanism of a free
and open market and a national market system. The Exchange notes that
all market participants stand to benefit from any increase in volume by
Floor Brokers, which could promote market depth, facilitate tighter
spreads and enhance price discovery, to the extent the proposed change
encourages Floor Brokers to utilize the Exchange as a primary trading
venue, and may lead to a corresponding increase in order flow from
other market participants. In addition, any increased liquidity on the
Exchange would result in enhanced market quality for all participants.
Finally, to the extent the proposed change continues to attract
greater volume and liquidity, the Exchange believes the proposed change
would improve the Exchange's overall competitiveness and strengthen its
market quality for all market participants. In the backdrop of the
competitive environment in which the Exchange operates, the proposed
rule change is a reasonable attempt by the Exchange to increase the
depth of its market and improve its market share relative to its
competitors. The Exchange's fees are constrained by intermarket
competition, as Floor Brokers may direct their order flow to any of the
16 options exchanges, including those offering rebates on QCC
[[Page 63849]]
orders.\14\ Thus, Floor Brokers have a choice of where they direct
their order flow, including their QCC transactions. The proposed rule
change is designed to continue to incent Floor Brokers to direct
liquidity (and, in particular, QCC orders) to the Exchange; to the
extent Floor Brokers are incentivized to aggregate their trading
activity at the Exchange, that increased liquidity could promote market
depth, price discovery and improvement, and enhanced order execution
opportunities for market participants.
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\14\ See, e.g., EDGX Options Exchange Fee Schedule, QCC
Initiator/Solicitation Rebate Tiers (applying ($0.14) per contract
rebate up to 999,999 contracts for QCC transactions when only one
side of the transaction is a non-customer); BOX Options Fee Schedule
at Section IV.D.1. (QCC Rebate) (providing for ($0.14) per contract
rebate up to 1,499,999 contracts for QCC transactions when only one
side of the QCC transaction is a broker-dealer or market maker);
Nasdaq ISE, Options 7, Section 6.B. (QCC Rebate) (offering rebates
on QCC transactions of ($0.14) per contract when only one side of
the QCC transaction is a non-customer).
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The Exchange cannot predict with certainty whether the proposed
change would encourage Floor Brokers to increase their QCC order flow
to the Exchange, but believes that the proposed increased credit would
continue to incent Floor Brokers to do so.
The Proposed Rule Change Is an Equitable Allocation of Credits and Fees
The Exchange believes the proposed rule change is an equitable
allocation of its fees and credits. The proposal is based on the amount
and type of business transacted on the Exchange, and Floor Brokers can
attempt to trade QCC orders to earn the increased credit or not. In
addition, the proposed credit is available to all Floor Brokers
equally. The Exchange further believes that the proposed credit, which
would apply to Floor Brokers' Customer vs. Non-Customer QCC
transactions, is an equitable allocation of credits in light of the
greater credit already available for Non-Customer vs. Non-Customer QCC
transactions. The Exchange also believes that the proposed credit is an
equitable allocation of fees and credits because it would encourage and
support Floor Brokers' role in facilitating the execution of orders on
the Exchange, and to the extent the proposed credit continues to incent
Floor Brokers to direct increased liquidity to the Exchange, all market
participants would benefit from enhanced opportunities for price
improvement and order execution.
Moreover, the proposed credit is designed to incent Floor Brokers
to encourage OTP Holders to aggregate their executions--including QCC
transactions--at the Exchange as a primary execution venue. To the
extent that the proposed change achieves its purpose in attracting more
Floor Broker volume to the Exchange, this increased order flow would
continue to make the Exchange a more competitive venue for, among other
things, order execution. Thus, the Exchange believes the proposed rule
change would improve market quality for all market participants on the
Exchange and, as a consequence, attract more order flow to the
Exchange, thereby improving market-wide quality and price discovery.
The Proposed Rule Change Is Not Unfairly Discriminatory
The Exchange believes the proposed change is not unfairly
discriminatory because the proposed additional credit on Customer vs.
Non-Customer QCC orders would be available to all similarly-situated
Floor Brokers on an equal and non-discriminatory basis. The proposed
credit is also not unfairly discriminatory to non-Floor Brokers because
Floor Brokers serve an important function in facilitating the execution
of orders on the Exchange (including via open outcry), which the
Exchange wishes to encourage and support to promote price improvement
opportunities for all market participants.
The proposal is based on the amount and type of business transacted
on the Exchange, and Floor Brokers are not obligated to execute QCC
orders. Rather, the proposal is designed to encourage Floor Brokers to
utilize the Exchange as a primary trading venue for all transactions
(if they have not done so previously) and increase QCC volume sent to
the Exchange. To the extent that the proposed change attracts more QCC
orders to the Exchange, this increased order flow would continue to
make the Exchange a more competitive venue for order execution. Thus,
the Exchange believes the proposed rule change would improve market
quality for all market participants on the Exchange and, as a
consequence, attract more order flow to the Exchange, thereby improving
market-wide quality and price discovery. The resulting increased volume
and liquidity would provide more trading opportunities and tighter
spreads to all market participants and thus would promote just and
equitable principles of trade, remove impediments to and perfect the
mechanism of a free and open market and a national market system and,
in general, 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 change 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.'' \15\
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\15\ See Reg NMS Adopting Release, supra note 11, at 37499.
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Intramarket Competition. The proposed additional credit is designed
to attract additional order flow to the Exchange (particularly in Floor
Brokers' QCC transactions), which could increase the volumes of
contracts traded on the Exchange. Greater liquidity benefits all market
participants on the Exchange, and increased QCC transactions could
increase opportunities for execution of other trading interest. The
proposed credit would be available to all similarly-situated Floor
Brokers that execute QCC trades, and to the extent that there is an
additional competitive burden on non-Floor Brokers, the Exchange
believes that any such burden would be appropriate because Floor
Brokers serve an important function in facilitating the execution of
orders and price discovery for all market participants.
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
[[Page 63850]]
of executed volume of multiply-listed equity and ETF options
trades.\16\ Therefore, currently no exchange possesses significant
pricing power in the execution of multiply-listed equity and ETF
options order flow. More specifically, in August 2022, the Exchange had
less than 12% market share of executed volume of multiply-listed equity
and ETF options trades.\17\
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\16\ 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.
\17\ Based on a compilation of OCC data for monthly volume of
equity-based options and monthly volume of equity-based ETF options,
see id., the Exchange's market share in equity-based options
increased decreased from 12.32% for the month of August 2021 to
11.36% for the month of August 2022.
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The Exchange believes that the proposed rule change reflects this
competitive environment because it modifies the Exchange's fees in a
manner designed to continue to incent Floor Brokers to direct trading
interest (particularly QCC transactions) to the Exchange, to provide
liquidity and to attract order flow. To the extent that Floor Brokers
are incentivized to utilize the Exchange as a primary trading venue for
all transactions, all of the Exchange's market participants should
benefit from the improved market quality and increased opportunities
for price improvement.
The Exchange notes that it operates in a highly competitive market
in which market participants can readily favor competing venues. In
such an environment, the Exchange must continually review, and consider
adjusting, its fees and credits to remain competitive with other
exchanges. For the reasons described above, the Exchange believes that
the proposed rule change reflects this competitive environment. The
Exchange further believes that the proposed change could promote
competition between the Exchange and other execution venues, including
those that currently offer rebates on QCC transactions, by encouraging
additional orders (and, in particular, QCC orders) to be sent to the
Exchange for execution.\18\
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\18\ See note 14, supra.
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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) \19\ of the Act and subparagraph (f)(2) of Rule
19b-4 \20\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\19\ 15 U.S.C. 78s(b)(3)(A).
\20\ 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) \21\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\21\ 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-2022-71 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-2022-71. 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-2022-71, and should be
submitted on or before November 10, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
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\22\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-22736 Filed 10-19-22; 8:45 am]
BILLING CODE 8011-01-P
