Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the NYSE Arca Options Fee Schedule Concerning the Options Regulatory Fee, 73372-73376 [2022-25945]
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–96374; File No. SR–
NYSEARCA–2022–78]
1. Purpose
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend the NYSE Arca
Options Fee Schedule Concerning the
Options Regulatory Fee
November 22, 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
November 14, 2022, NYSE Arca, Inc.
(‘‘NYSE Arca’’ or the ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the selfregulatory 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 (‘‘Fee
Schedule’’) regarding the Options
Regulatory Fee (‘‘ORF’’), effective
November 14, 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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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.
1 15
U.S.C.78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
4 The Exchange previously filed to amend the Fee
Schedule on September 28, 2022 (SR–NYSEARCA–
2022–65) and withdrew such filing on November
14, 2022.
2 15
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The Exchange proposes to amend the
Fee Schedule to (1) waive the ORF for
the period November 1, 2022 through
January 31, 2023; (2) eliminate the
requirement that the Exchange may only
modify the ORF semi-annually; and (3)
delete outdated language relating to the
ORF for August 30, 2019 (the ‘‘August
2019 ORF’’).
Background
As a general matter, the Exchange
may only use regulatory funds such as
the ORF ‘‘to fund the legal, regulatory,
and surveillance operations’’ of the
Exchange.5 More specifically, the ORF
is designed to recover a material
portion, but not all, of the Exchange’s
costs for the supervision and regulation
of OTP Holders and OTP Firms
(collectively, ‘‘OTP Holders’’), including
the Exchange’s regulatory program and
legal expenses associated with options,
such as the costs related to in-house
staff, third-party service providers, and
technology that facilitate surveillance,
investigation, examinations and
enforcement (collectively, the ‘‘ORF
Costs’’). ORF funds may also be used for
indirect expenses such as human
resources and other administrative
costs. The Exchange monitors the
amount of revenue collected from the
ORF to ensure that this revenue, in
combination with other regulatory fees
and fines, does not exceed regulatory
costs.
The ORF is assessed on OTP Holders
for options transactions that are cleared
by the OTP Holder through the Options
Clearing Corporation (‘‘OCC’’) in the
Customer range regardless of the
exchange on which the transaction
occurs.6 All options transactions must
clear via a clearing firm and such
clearing firms can then choose to pass
through all, a portion, or none of the
cost of the ORF to its customers, i.e., the
entering firms. Because the ORF is
collected from OTP Holder clearing
firms by the OCC on behalf of NYSE
5 The Exchange considers surveillance operations
part of regulatory operations. The limitation on the
use of regulatory funds also provides that they shall
not be distributed. See Bylaws of NYSE Arca, Inc.,
Art. II, Sec. 2.06.
6 See Fee Schedule, NYSE Arca GENERAL
OPTIONS and TRADING PERMIT (OTP) FEES,
Regulatory Fees, Options Regulatory Fee (‘‘ORF’’),
available here, https://www.nyse.com/publicdocs/
nyse/markets/arca-options/NYSE_Arca_Options_
Fee_Schedule.pdf.
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Arca,7 the Exchange believes that using
options transactions in the Customer
range serves as a proxy for how to
apportion regulatory costs among such
OTP Holders. In addition, the Exchange
notes that the costs relating to
monitoring OTP Holders with respect to
Customer trading activity are generally
higher than the costs associated with
monitoring OTP Holders that do not
engage in Customer trading activity,
which tends to be more automated and
less labor-intensive. By contrast,
regulating OTP Holders that engage in
Customer trading activity is generally
more labor intensive and requires a
greater expenditure of human and
technical resources as the Exchange
needs to review not only the trading
activity on behalf of Customers, but also
the OTP Holder’s relationship with its
Customers via more labor-intensive
exam-based programs.8 As a result, the
costs associated with administering the
customer component of the Exchange’s
overall regulatory program are
materially higher than the costs
associated with administering the noncustomer component (e.g., OTP Holder
proprietary transactions) of its
regulatory program.
ORF Collections and Monitoring of ORF
Exchange rules establish that the
Exchange may only increase or decrease
the ORF semi-annually, that any such
fee change will be effective on the first
business day of February or August, and
that market participants must be
notified of any such change via Trader
Update at least 30 calendar days prior
to the effective date of the change.9
Because the ORF is based on options
transactions volume, the amount of ORF
collected is variable. For example, if
options transactions reported to OCC in
a given month increase, the ORF
collected from OTP Holders will likely
increase as well. Similarly, if options
7 See id. The Exchange uses reports from OCC
when assessing and collecting the ORF. The ORF
is not assessed on outbound linkage trades. An OTP
Holder is not assessed the fee until it has satisfied
applicable technological requirements necessary to
commence operations on NYSE Arca. See id.
8 The Exchange notes that many of the Exchange’s
market surveillance programs require the Exchange
to look at and evaluate activity across all options
markets, such as surveillance for position limit
violations, manipulation, front-running and
contrary exercise advice violations/expiring
exercise declarations. The Exchange and other
options SROs are parties to a 17d–2 agreement
allocating among the SROs regulatory
responsibilities relating to compliance by the
common members with rules for expiring exercise
declarations, position limits, OCC trade
adjustments, and Large Option Position Report
reviews. See, e.g., Securities Exchange Act Release
No. 85097 (February 11, 2019), 84 FR 4871
(February 19, 2019).
9 See Fee Schedule, supra note 6.
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transactions reported to OCC in a given
month decrease, the ORF collected from
OTP Holders will likely decrease as
well. Accordingly, the Exchange
monitors the amount of ORF collected
to ensure that it does not exceed the
ORF Costs. If the Exchange determines
the amount of ORF collected exceeds
costs over an extended period, the
Exchange may adjust the ORF by
submitting a fee change filing to the
Securities and Exchange Commission
(the ‘‘Commission’’).
Temporary ORF Waiver
Based on the Exchange’s recent
review of regulatory costs and ORF
collections, the Exchange proposes to
waive the ORF from November 1, 2022
through January 31, 2023 in order to
help ensure that the amount collected
from the ORF, in combination with
other regulatory fees and fines, does not
exceed the Exchange’s total regulatory
costs. The Exchange proposes to resume
assessing the ORF on February 1, 2023
at the current rate of $0.0055 per
contract. The Exchange notified OTP
Holders of the proposed change to the
ORF via Trader Update on September
29, 2022 (which was at least 30 calendar
days prior to the proposed operative
date of the waiver, November 1, 2022)
so that market participants have an
opportunity to configure their systems
to account for the waiver of the ORF.
The Exchange’s proposal to waive the
ORF for the month of January 2023
would similarly provide OTP Holders
with additional time in the new year to
make any necessary adjustments or
2019
2020
2021
2022
Customer ADV .................................................................................................
15,234,198
25,598,023
34,730,276
33,939,560
Total ADV .................................................................................................
35,083,673
55,369,993
74,339,870
75,497,647
In addition, the below industry data
from OCC demonstrates the high
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preparations for the resumption of the
ORF effective February 1, 2023.
The proposed waiver is based on
recent options volumes. The options
industry has continued to experience
extremely high options trading volumes
and volatility, and options volume in
2022 remains high, particularly when
compared to options volume in 2019
and 2020. The persisting increased
options volumes have, in turn, impacted
the Exchange’s ORF collection.
For example, total average daily
volume in 2022, to date, is 115% higher
than total average daily volume in 2019,
and customer average daily volume in
2022, to date, is 123% higher than
customer average daily volume in 2019.
Below is industry data from OCC 10
illustrating the significant increase in
options volume between 2019 and 2022:
options trading volumes (especially
when compared to 2019 and 2020) and
volatility that the industry has
continued to experience in 2022:
April 2022
May 2022
June 2022
July 2022
Customer ADV .......................................................
33,266,801
34,202,077
31,469,858
Total ADV .......................................................
73,140,597
76,254,734
70,628,926
during that timeframe. The Exchange
proposes to resume assessing the
current ORF rate of $0.0055 per contract
side as of February 1, 2023.
Because of the sustained impact of the
unprecedented trading volumes that
have persisted through 2021 and 2022,
along with the difficulty of predicting
when volumes may return to more
normal levels, the Exchange proposes to
waive the ORF from November 1, 2022
through January 31, 2023 to help ensure
that ORF collection will not exceed ORF
Costs for 2022. The Exchange cannot
predict whether options volume will
remain at these levels going forward and
projections for future regulatory costs
are estimated, preliminary, and may
change. However, the Exchange believes
that the proposed waiver of the ORF
would allow the Exchange to continue
to monitor the amount collected from
the ORF to help ensure that ORF
collection, in combination with other
regulatory fees and fines, does not
exceed regulatory costs without the
need to account for any ORF collection
As noted above, the Fee Schedule
currently specifies that the Exchange
may only increase or decrease the ORF
semi-annually and that any such fee
change will be effective on the first
business day of February or August.11
NYSE Arca proposes to eliminate this
requirement to afford the Exchange
increased flexibility in amending the
ORF.12 Although the Exchange proposes
to eliminate the requirement to adjust
the ORF only semi-annually, it would
continue to submit a proposed rule
change for each modification of the ORF
and notify OTP Holders of any planned
change to the ORF by Trader Update at
least 30 calendar days prior to the
10 The OCC publishes options and futures volume
in a variety of formats, including daily and monthly
volume by exchange, available here: https://
www.theocc.com/Market-Data/Market-DataReports/Volume-and-Open-Interest/MonthlyWeekly-Volume-Statistics. The volume discussed in
this filing is based on a compilation of OCC data
for monthly volume of equity-based options and
monthly volume of ETF-based options, in contract
sides.
11 See Fee Schedule, supra note 6.
12 The Exchange notes that at least one other
options exchange has previously removed this
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Semi-Annual Changes to ORF
PO 00000
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August 2022
September 2022
30,506,706
33,013,156
34,149,000
68,535,963
73,487,342
77,134,470
effective date of such change. The
Exchange believes that the prior
notification to OTP Holders will provide
guidance on the timing of any changes
to the ORF and ensure that OTP Holders
are prepared to configure their systems
to properly account for the ORF. The
Exchange will also issue a Trader
Update informing OTP Holders of the
ORF adjustment proposed in this filing,
as described below, at least 30 calendar
days prior to the proposed effective
date.
August 2019 ORF
The Exchange proposes to delete
language in the Fee Schedule pertaining
to the August 2019 ORF, which was
relevant only for the August 30, 2019
trading day and thus no longer reflects
a fee currently assessed by the
Exchange. The Exchange believes this
change would improve the clarity of the
requirement with respect to adjusting the ORF. See,
e.g., Securities Exchange Act Release No. 76950
(January 21, 2016), 81 FR 4687 (January 27, 2016)
(SR–NASDAQ–2016–003) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change
To Amend the Options Regulatory Fee).
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Fee Schedule by removing obsolete
language.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the provisions of Section 6(b) 13 of the
Act, in general, and Section 6(b)(4) and
(5) 14 of the Act, in particular, in that it
is designed to provide for the equitable
allocation of reasonable dues, fees, and
other charges among its members and
other persons using its facilities and
does not unfairly discriminate between
customers, issuers, brokers, or dealers.
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The Proposal Is Reasonable
The Exchange believes the proposed
temporary waiver of the ORF is
reasonable because it would help ensure
that collections from the ORF do not
exceed a material portion of the
Exchange’s ORF Costs. As noted above,
the Exchange may only use regulatory
funds such as ORF ‘‘to fund the legal,
regulatory, and surveillance operations’’
of the Exchange.15 In this regard, the
ORF is designed to recover a material
portion, but not all, of the Exchange’s
ORF Costs.
Although there can be no assurance
that the Exchange’s final costs for 2022
will not differ materially from its
expectations and prior practice, nor can
the Exchange predict with certainty
whether options volume will remain at
the current level going forward, the
Exchange believes that the amount
collected based on the current ORF rate,
when combined with regulatory fees
and fines, may result in collections in
excess of the estimated ORF Costs for
the year. Particularly, as noted above,
the options market has continued to
experience unanticipated and elevated
volumes in 2022, particularly as
compared to 2019 and 2020, due in
large part to the continued extreme
volatility in the marketplace as a result
of the COVID–19 pandemic. This
unprecedented spike in volatility,
which has persisted through 2021 and
2022, resulted in significantly higher
volume than was originally projected by
the Exchange, thereby resulting in
substantially higher ORF collections
than projected (particularly as compared
to ORF Costs, which had been projected
to decrease in 2022). The Exchange
therefore believes that it would be
reasonable to waive ORF from
November 1, 2022 through January 31,
2023 to help ensure that ORF collection
does not exceed the ORF Costs for
13 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4) and (5).
15 See note 5, supra.
14 15
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16:29 Nov 28, 2022
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2022.16 Particularly, the Exchange
believes that waiving the ORF from
November 1, 2022 to January 31, 2023
and taking into account all of the
Exchange’s other regulatory fees and
fines would allow the Exchange to
continue covering a material portion of
ORF Costs, while lessening the potential
for generating excess funds that may
otherwise occur using the current rate.
The Exchange would resume assessing
its current ORF ($0.0055 per contract) as
of February 1, 2023. The Exchange also
believes that resumption of the ORF at
the current rate on February 1, 2023
(unless the Exchange determines it
necessary to adjust the ORF rate to help
ensure that ORF collections do not
exceed ORF Costs) is reasonable because
it would permit the Exchange to resume
collecting an ORF that is designed to
recover a material portion, but not all,
of the Exchange’s projected ORF Costs.
The Exchange would continue
monitoring in advance of the
resumption of the ORF and when ORF
collection resumes on February 1, 2023
and, if the Exchange determines that, in
light of projected volumes and ORF
Costs, the ORF rate should be modified
to help ensure that ORF collections
would not exceed ORF Costs, adjust the
ORF by submitting a filing a proposed
rule change and notifying OTP Holders
of such change by Trader Update.
The Exchange believes that the
proposed elimination of language
specifying that the Exchange may only
increase or decrease the ORF semiannually and that any such fee change
must be effective on the first business
day of February or August is reasonable
because it is designed to afford the
Exchange increased flexibility in
making necessary adjustments to the
ORF, as the Exchange is required to
monitor the amount collected from the
ORF to ensure that it, in combination
with its other regulatory fees and fines,
does not exceed ORF Costs. The
Exchange also believes the proposed
change is reasonable because the
Exchange will continue to provide
market participants with 30 days
advance notice of changes to the ORF,
thereby providing OTP Holders with
adequate time to make any necessary
adjustments to accommodate the
change.
The Exchange also believes that the
proposed deletion of language relating
to the August 2019 ORF is reasonable
because it would remove obsolete
16 The Exchange’s proposal to also waive the ORF
for the month of January 2023 would provide OTP
Holders with additional time in the new year to
make any necessary adjustments or preparations for
the resumption of the ORF effective February 1,
2023.
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language and thus improve the clarity of
the Fee Schedule.
The Proposal Is an Equitable Allocation
of Fees
The Exchange believes its proposal is
an equitable allocation of fees among its
market participants. The Exchange
believes that the proposed waiver would
not place certain market participants at
an unfair disadvantage because all
options transactions must clear via a
clearing firm. Such clearing firms can
then choose to pass through all, a
portion, or none of the cost of the ORF
to its customers, i.e., the entering firms.
Because the ORF is collected from OTP
Holder clearing firms by the OCC on
behalf of NYSE Arca, the Exchange
believes that using options transactions
in the Customer range serves as a proxy
for how to apportion ORF Costs among
such OTP Holders. In addition, the
Exchange notes that the costs relating to
monitoring OTP Holders with respect to
Customer trading activity are generally
higher than the costs associated with
monitoring OTP Holders that do not
engage in Customer trading activity,
which tends to be more automated and
less labor-intensive. By contrast,
regulating OTP Holders that engage in
Customer trading activity is generally
more labor intensive and requires a
greater expenditure of human and
technical resources as the Exchange
needs to review not only the trading
activity on behalf of Customers, but also
the OTP Holder’s relationship with its
Customers via more labor-intensive
exam-based programs. As a result, the
costs associated with administering the
customer component of the Exchange’s
overall regulatory program are
materially higher than the costs
associated with administering the noncustomer component (e.g., OTP Holder
proprietary transactions) of its
regulatory program. Thus, the Exchange
believes that a temporary waiver of the
ORF is an equitable allocation of fees
because it would apply equally to all
OTP Holders on all their transactions
that clear in the Customer range at the
OCC. The Exchange also believes that
recommencing the ORF on February 1,
2023 at the current rate, unless the
Exchange determines it necessary to
adjust the ORF to ensure that ORF
collections do not exceed ORF Costs, is
equitable because the Exchange would
resume assessing an ORF designed to
recover a material portion, but not all,
of the Exchange’s projected ORF Costs,
and the ORF would likewise resume
applying equally to all OTP Holders on
options transactions in the Customer
range.
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The Exchange also believes that the
proposed change to eliminate the
requirement that the Exchange modify
the ORF only semi-annually in February
or August is equitable because the
change would impact all OTP Holders
subject to the ORF uniformly, and all
OTP Holders would continue to receive
at least 30 days’ advance notice of
changes to the ORF. The proposed
change to remove language relating to
the August 2019 ORF is also equitable
because it would eliminate language
from the Fee Schedule that is no longer
applicable to any OTP Holders.
The Proposed Fee Is Not Unfairly
Discriminatory
The Exchange believes that the
proposal is not unfairly discriminatory.
The Exchange believes that the
proposed waiver of the ORF would not
place certain market participants at an
unfair disadvantage because all options
transactions must clear via a clearing
firm. Such clearing firms can then
choose to pass through all, a portion, or
none of the cost of the ORF to its
customers, i.e., the entering firms.
Because the ORF is collected from OTP
Holder clearing firms by the OCC on
behalf of NYSE Arca, the Exchange
believes that using options transactions
in the Customer range serves as a proxy
for how to apportion regulatory costs
among such OTP Holders. In addition,
the Exchange notes that the costs
relating to monitoring OTP Holders with
respect to Customer trading activity are
generally higher than the costs
associated with monitoring OTP
Holders that do not engage in Customer
trading activity, which tends to be more
automated and less labor-intensive. By
contrast, regulating OTP Holders that
engage in Customer trading activity is
generally more labor intensive and
requires a greater expenditure of human
and technical resources as the Exchange
needs to review not only the trading
activity on behalf of Customers, but also
the OTP Holder’s relationship with its
Customers via more labor-intensive
exam-based programs. As a result, the
costs associated with administering the
customer component of the Exchange’s
overall regulatory program are
materially higher than the costs
associated with administering the noncustomer component (e.g., OTP Holder
proprietary transactions) of its
regulatory program. Thus, the Exchange
believes the temporary waiver of the
ORF and the proposed modification of
language relating to the Exchange’s
ability to modify the ORF are not
unfairly discriminatory because the
changes would apply to all OTP Holders
subject to the ORF and the Exchange
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would provide all such OTP Holders
with 30 days’ advance notice of planned
changes to the ORF. The Exchange also
believes that recommencing the ORF on
February 1, 2023 at the current rate,
unless the Exchange determines it
necessary to adjust the ORF to ensure
that ORF collections do not exceed ORF
Costs, is not unfairly discriminatory
because the Exchange would resume
assessing an ORF designed to recover a
material portion, but not all, of the
Exchange’s projected ORF Costs, and
the ORF would resume applying equally
to all OTP Holders based on their
transactions that clear in the Customer
range at the OCC.
The Exchange believes that the
proposed change to eliminate the semiannual change requirement is not
unfairly discriminatory because the
change would apply to all OTP Holders
subject to the ORF. Furthermore, all
OTP Holders would continue to be
notified of changes to the ORF at least
30 days prior to the effectiveness of any
such change. The proposed change to
remove language relating to the August
2019 ORF is also not unfairly
discriminatory because it would
eliminate language from the Fee
Schedule describing a fee that was
effective only for August 30, 2019 and
thus no longer impacts any OTP
Holders.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
Intramarket Competition. The
Exchange believes the proposed change
would not impose an undue burden on
competition because the ORF is charged
to all OTP Holders on all their
transactions that clear in the Customer
range at the OCC; thus, the amount of
ORF imposed is based on the amount of
Customer volume transacted. The
Exchange believes that the proposed
temporary waiver of the ORF would not
place certain market participants at an
unfair disadvantage because all options
transactions must clear via a clearing
firm. Such clearing firms can then
choose to pass through all, a portion, or
none of the cost of the ORF to its
customers, i.e., the entering firms. In
addition, because the ORF is collected
from OTP Holder clearing firms by the
OCC on behalf of NYSE Arca, the
Exchange believes that using options
transactions in the Customer range
serves as a proxy for how to apportion
regulatory costs among such OTP
Holders. The Exchange also believes
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73375
recommencing the ORF on February 1,
2023 at the current rate (unless the
Exchange determines it necessary at that
time to adjust the ORF to ensure that
ORF collections do not exceed ORF
Costs) would not impose an undue
burden on competition because it would
permit the Exchange to resume
collecting an ORF that is designed to
recover a material portion, but not all,
of the Exchange’s projected ORF Costs
and the ORF would, as currently, apply
to all OTP Holders on their options
transactions that clear in the Customer
range at the OCC. The Exchange further
believes that the proposed change to
remove the semi-annual requirement
would not impose any burden on
competition because the change would
impact all OTP Holders subject to the
ORF, and the Exchange will continue to
provide advance notice of changes to
the ORF to all OTP Holders via Trader
Update. The Exchange also believes that
the proposed change to eliminate
language relating to the August 2019
ORF would not impact intramarket
competition because it would simply
add clarity to the Fee Schedule by
removing text describing a fee that is no
longer effective.
Intermarket Competition. The
proposed fee change is not designed to
address any competitive issues. Rather,
the proposed change is designed to help
the Exchange adequately fund its
regulatory activities while seeking to
ensure that total collections from
regulatory fees do not exceed total
regulatory costs and to promote clarity
in the Fee Schedule by deleting obsolete
text.
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) 17 of the Act and
subparagraph (f)(2) of Rule 19b–4 18
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
17 15
18 17
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U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(2).
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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) 19 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
khammond on DSKJM1Z7X2PROD with NOTICES
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File No. SR–
NYSEARCA–2022–78 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 No.
SR–NYSEARCA–2022–78. 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
19 15
U.S.C. 78s(b)(2)(B).
VerDate Sep<11>2014
16:29 Nov 28, 2022
Jkt 259001
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File No.
SR–NYSEARCA–2022–78, and should
be submitted on or before December 20,
2022.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022–25945 Filed 11–28–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–96373; File No. SR–
NYSEAMER–2022–52]
Self-Regulatory Organizations; NYSE
American LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Change To Amend the NYSE American
Options Fee Schedule Concerning the
Options Regulatory Fee
November 22, 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
November 14, 2022, NYSE American
LLC (‘‘NYSE American’’ 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 American Options Fee Schedule
(‘‘Fee Schedule’’) regarding the Options
Regulatory Fee (‘‘ORF’’), effective
November 14, 2022.4 The proposed
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.
20 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
4 The Exchange previously filed to amend the Fee
Schedule on September 28, 2022 (SR–NYSEAMER–
2022–45) and withdrew such filing on November
14, 2022.
1 15
PO 00000
Frm 00098
Fmt 4703
Sfmt 4703
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 Exchange proposes to amend the
Fee Schedule to (1) waive the ORF for
the period November 1, 2022 through
January 31, 2023; (2) eliminate the
requirement that the Exchange may only
modify the ORF semi-annually; and (3)
delete outdated language relating to the
ORF for August 30, 2019 (the ‘‘August
2019 ORF’’).
Background
As a general matter, the Exchange
may only use regulatory funds such as
the ORF ‘‘to fund the legal, regulatory,
and surveillance operations’’ of the
Exchange.5 More specifically, the ORF
is designed to recover a material
portion, but not all, of the Exchange’s
costs for the supervision and regulation
of ATP Holders, including the
Exchange’s regulatory program and legal
expenses associated with options, such
as the costs related to in-house staff,
third-party service providers, and
technology that facilitate surveillance,
investigation, examinations and
enforcement (collectively, the ‘‘ORF
Costs’’). ORF funds may also be used for
indirect expenses such as human
resources and other administrative
costs. The Exchange monitors the
amount of revenue collected from the
ORF to ensure that this revenue, in
combination with other regulatory fees
and fines, does not exceed regulatory
costs.
The ORF is assessed on ATP Holders
for options transactions that are cleared
5 The Exchange considers surveillance operations
part of regulatory operations. The limitation on the
use of regulatory funds also provides that they shall
not be distributed. See Thirteenth Amended and
Restated Operating Agreement of NYSE American
LLC, Article IV, Section 4.05 and Securities
Exchange Act Release No. 87993 (January 16, 2020),
85 FR 4050 (January 23, 2020) (SR–NYSEAMER–
2020–04).
E:\FR\FM\29NON1.SGM
29NON1
]]>Agencies
[Federal Register Volume 87, Number 228 (Tuesday, November 29, 2022)]
[Notices]
[Pages 73372-73376]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-25945]
[[Page 73372]]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-96374; File No. SR-NYSEARCA-2022-78]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend the NYSE
Arca Options Fee Schedule Concerning the Options Regulatory Fee
November 22, 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 November 14, 2022, NYSE Arca, Inc. (``NYSE Arca'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C.78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend the NYSE Arca Options Fee Schedule
(``Fee Schedule'') regarding the Options Regulatory Fee (``ORF''),
effective November 14, 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.
---------------------------------------------------------------------------
\4\ The Exchange previously filed to amend the Fee Schedule on
September 28, 2022 (SR-NYSEARCA-2022-65) and withdrew such filing on
November 14, 2022.
---------------------------------------------------------------------------
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 Exchange proposes to amend the Fee Schedule to (1) waive the
ORF for the period November 1, 2022 through January 31, 2023; (2)
eliminate the requirement that the Exchange may only modify the ORF
semi-annually; and (3) delete outdated language relating to the ORF for
August 30, 2019 (the ``August 2019 ORF'').
Background
As a general matter, the Exchange may only use regulatory funds
such as the ORF ``to fund the legal, regulatory, and surveillance
operations'' of the Exchange.\5\ More specifically, the ORF is designed
to recover a material portion, but not all, of the Exchange's costs for
the supervision and regulation of OTP Holders and OTP Firms
(collectively, ``OTP Holders''), including the Exchange's regulatory
program and legal expenses associated with options, such as the costs
related to in-house staff, third-party service providers, and
technology that facilitate surveillance, investigation, examinations
and enforcement (collectively, the ``ORF Costs''). ORF funds may also
be used for indirect expenses such as human resources and other
administrative costs. The Exchange monitors the amount of revenue
collected from the ORF to ensure that this revenue, in combination with
other regulatory fees and fines, does not exceed regulatory costs.
---------------------------------------------------------------------------
\5\ The Exchange considers surveillance operations part of
regulatory operations. The limitation on the use of regulatory funds
also provides that they shall not be distributed. See Bylaws of NYSE
Arca, Inc., Art. II, Sec. 2.06.
---------------------------------------------------------------------------
The ORF is assessed on OTP Holders for options transactions that
are cleared by the OTP Holder through the Options Clearing Corporation
(``OCC'') in the Customer range regardless of the exchange on which the
transaction occurs.\6\ All options transactions must clear via a
clearing firm and such clearing firms can then choose to pass through
all, a portion, or none of the cost of the ORF to its customers, i.e.,
the entering firms. Because the ORF is collected from OTP Holder
clearing firms by the OCC on behalf of NYSE Arca,\7\ the Exchange
believes that using options transactions in the Customer range serves
as a proxy for how to apportion regulatory costs among such OTP
Holders. In addition, the Exchange notes that the costs relating to
monitoring OTP Holders with respect to Customer trading activity are
generally higher than the costs associated with monitoring OTP Holders
that do not engage in Customer trading activity, which tends to be more
automated and less labor-intensive. By contrast, regulating OTP Holders
that engage in Customer trading activity is generally more labor
intensive and requires a greater expenditure of human and technical
resources as the Exchange needs to review not only the trading activity
on behalf of Customers, but also the OTP Holder's relationship with its
Customers via more labor-intensive exam-based programs.\8\ As a result,
the costs associated with administering the customer component of the
Exchange's overall regulatory program are materially higher than the
costs associated with administering the non-customer component (e.g.,
OTP Holder proprietary transactions) of its regulatory program.
---------------------------------------------------------------------------
\6\ See Fee Schedule, NYSE Arca GENERAL OPTIONS and TRADING
PERMIT (OTP) FEES, Regulatory Fees, Options Regulatory Fee
(``ORF''), available here, https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf.
\7\ See id. The Exchange uses reports from OCC when assessing
and collecting the ORF. The ORF is not assessed on outbound linkage
trades. An OTP Holder is not assessed the fee until it has satisfied
applicable technological requirements necessary to commence
operations on NYSE Arca. See id.
\8\ The Exchange notes that many of the Exchange's market
surveillance programs require the Exchange to look at and evaluate
activity across all options markets, such as surveillance for
position limit violations, manipulation, front-running and contrary
exercise advice violations/expiring exercise declarations. The
Exchange and other options SROs are parties to a 17d-2 agreement
allocating among the SROs regulatory responsibilities relating to
compliance by the common members with rules for expiring exercise
declarations, position limits, OCC trade adjustments, and Large
Option Position Report reviews. See, e.g., Securities Exchange Act
Release No. 85097 (February 11, 2019), 84 FR 4871 (February 19,
2019).
---------------------------------------------------------------------------
ORF Collections and Monitoring of ORF
Exchange rules establish that the Exchange may only increase or
decrease the ORF semi-annually, that any such fee change will be
effective on the first business day of February or August, and that
market participants must be notified of any such change via Trader
Update at least 30 calendar days prior to the effective date of the
change.\9\
---------------------------------------------------------------------------
\9\ See Fee Schedule, supra note 6.
---------------------------------------------------------------------------
Because the ORF is based on options transactions volume, the amount
of ORF collected is variable. For example, if options transactions
reported to OCC in a given month increase, the ORF collected from OTP
Holders will likely increase as well. Similarly, if options
[[Page 73373]]
transactions reported to OCC in a given month decrease, the ORF
collected from OTP Holders will likely decrease as well. Accordingly,
the Exchange monitors the amount of ORF collected to ensure that it
does not exceed the ORF Costs. If the Exchange determines the amount of
ORF collected exceeds costs over an extended period, the Exchange may
adjust the ORF by submitting a fee change filing to the Securities and
Exchange Commission (the ``Commission'').
Temporary ORF Waiver
Based on the Exchange's recent review of regulatory costs and ORF
collections, the Exchange proposes to waive the ORF from November 1,
2022 through January 31, 2023 in order to help ensure that the amount
collected from the ORF, in combination with other regulatory fees and
fines, does not exceed the Exchange's total regulatory costs. The
Exchange proposes to resume assessing the ORF on February 1, 2023 at
the current rate of $0.0055 per contract. The Exchange notified OTP
Holders of the proposed change to the ORF via Trader Update on
September 29, 2022 (which was at least 30 calendar days prior to the
proposed operative date of the waiver, November 1, 2022) so that market
participants have an opportunity to configure their systems to account
for the waiver of the ORF. The Exchange's proposal to waive the ORF for
the month of January 2023 would similarly provide OTP Holders with
additional time in the new year to make any necessary adjustments or
preparations for the resumption of the ORF effective February 1, 2023.
The proposed waiver is based on recent options volumes. The options
industry has continued to experience extremely high options trading
volumes and volatility, and options volume in 2022 remains high,
particularly when compared to options volume in 2019 and 2020. The
persisting increased options volumes have, in turn, impacted the
Exchange's ORF collection.
For example, total average daily volume in 2022, to date, is 115%
higher than total average daily volume in 2019, and customer average
daily volume in 2022, to date, is 123% higher than customer average
daily volume in 2019. Below is industry data from OCC \10\ illustrating
the significant increase in options volume between 2019 and 2022:
---------------------------------------------------------------------------
\10\ The OCC publishes options and futures volume in a variety
of formats, including daily and monthly volume by exchange,
available here: https://www.theocc.com/Market-Data/Market-Data-Reports/Volume-and-Open-Interest/Monthly-Weekly-Volume-Statistics.
The volume discussed in this filing is based on a compilation of OCC
data for monthly volume of equity-based options and monthly volume
of ETF-based options, in contract sides.
----------------------------------------------------------------------------------------------------------------
2019 2020 2021 2022
----------------------------------------------------------------------------------------------------------------
Customer ADV.................................... 15,234,198 25,598,023 34,730,276 33,939,560
---------------------------------------------------------------
Total ADV................................... 35,083,673 55,369,993 74,339,870 75,497,647
----------------------------------------------------------------------------------------------------------------
In addition, the below industry data from OCC demonstrates the high
options trading volumes (especially when compared to 2019 and 2020) and
volatility that the industry has continued to experience in 2022:
----------------------------------------------------------------------------------------------------------------
April 2022 May 2022 June 2022 July 2022 August 2022 September 2022
----------------------------------------------------------------------------------------------------------------
Customer ADV................ 33,266,801 34,202,077 31,469,858 30,506,706 33,013,156 34,149,000
-----------------------------------------------------------------------------------
Total ADV............... 73,140,597 76,254,734 70,628,926 68,535,963 73,487,342 77,134,470
----------------------------------------------------------------------------------------------------------------
Because of the sustained impact of the unprecedented trading
volumes that have persisted through 2021 and 2022, along with the
difficulty of predicting when volumes may return to more normal levels,
the Exchange proposes to waive the ORF from November 1, 2022 through
January 31, 2023 to help ensure that ORF collection will not exceed ORF
Costs for 2022. The Exchange cannot predict whether options volume will
remain at these levels going forward and projections for future
regulatory costs are estimated, preliminary, and may change. However,
the Exchange believes that the proposed waiver of the ORF would allow
the Exchange to continue to monitor the amount collected from the ORF
to help ensure that ORF collection, in combination with other
regulatory fees and fines, does not exceed regulatory costs without the
need to account for any ORF collection during that timeframe. The
Exchange proposes to resume assessing the current ORF rate of $0.0055
per contract side as of February 1, 2023.
Semi-Annual Changes to ORF
As noted above, the Fee Schedule currently specifies that the
Exchange may only increase or decrease the ORF semi-annually and that
any such fee change will be effective on the first business day of
February or August.\11\ NYSE Arca proposes to eliminate this
requirement to afford the Exchange increased flexibility in amending
the ORF.\12\ Although the Exchange proposes to eliminate the
requirement to adjust the ORF only semi-annually, it would continue to
submit a proposed rule change for each modification of the ORF and
notify OTP Holders of any planned change to the ORF by Trader Update at
least 30 calendar days prior to the effective date of such change. The
Exchange believes that the prior notification to OTP Holders will
provide guidance on the timing of any changes to the ORF and ensure
that OTP Holders are prepared to configure their systems to properly
account for the ORF. The Exchange will also issue a Trader Update
informing OTP Holders of the ORF adjustment proposed in this filing, as
described below, at least 30 calendar days prior to the proposed
effective date.
---------------------------------------------------------------------------
\11\ See Fee Schedule, supra note 6.
\12\ The Exchange notes that at least one other options exchange
has previously removed this requirement with respect to adjusting
the ORF. See, e.g., Securities Exchange Act Release No. 76950
(January 21, 2016), 81 FR 4687 (January 27, 2016) (SR-NASDAQ-2016-
003) (Notice of Filing and Immediate Effectiveness of Proposed Rule
Change To Amend the Options Regulatory Fee).
---------------------------------------------------------------------------
August 2019 ORF
The Exchange proposes to delete language in the Fee Schedule
pertaining to the August 2019 ORF, which was relevant only for the
August 30, 2019 trading day and thus no longer reflects a fee currently
assessed by the Exchange. The Exchange believes this change would
improve the clarity of the
[[Page 73374]]
Fee Schedule by removing obsolete language.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6(b) \13\ of the Act, in general, and
Section 6(b)(4) and (5) \14\ of the Act, in particular, in that it is
designed to provide for the equitable allocation of reasonable dues,
fees, and other charges among its members and other persons using its
facilities and does not unfairly discriminate between customers,
issuers, brokers, or dealers.
---------------------------------------------------------------------------
\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
The Proposal Is Reasonable
The Exchange believes the proposed temporary waiver of the ORF is
reasonable because it would help ensure that collections from the ORF
do not exceed a material portion of the Exchange's ORF Costs. As noted
above, the Exchange may only use regulatory funds such as ORF ``to fund
the legal, regulatory, and surveillance operations'' of the
Exchange.\15\ In this regard, the ORF is designed to recover a material
portion, but not all, of the Exchange's ORF Costs.
---------------------------------------------------------------------------
\15\ See note 5, supra.
---------------------------------------------------------------------------
Although there can be no assurance that the Exchange's final costs
for 2022 will not differ materially from its expectations and prior
practice, nor can the Exchange predict with certainty whether options
volume will remain at the current level going forward, the Exchange
believes that the amount collected based on the current ORF rate, when
combined with regulatory fees and fines, may result in collections in
excess of the estimated ORF Costs for the year. Particularly, as noted
above, the options market has continued to experience unanticipated and
elevated volumes in 2022, particularly as compared to 2019 and 2020,
due in large part to the continued extreme volatility in the
marketplace as a result of the COVID-19 pandemic. This unprecedented
spike in volatility, which has persisted through 2021 and 2022,
resulted in significantly higher volume than was originally projected
by the Exchange, thereby resulting in substantially higher ORF
collections than projected (particularly as compared to ORF Costs,
which had been projected to decrease in 2022). The Exchange therefore
believes that it would be reasonable to waive ORF from November 1, 2022
through January 31, 2023 to help ensure that ORF collection does not
exceed the ORF Costs for 2022.\16\ Particularly, the Exchange believes
that waiving the ORF from November 1, 2022 to January 31, 2023 and
taking into account all of the Exchange's other regulatory fees and
fines would allow the Exchange to continue covering a material portion
of ORF Costs, while lessening the potential for generating excess funds
that may otherwise occur using the current rate. The Exchange would
resume assessing its current ORF ($0.0055 per contract) as of February
1, 2023. The Exchange also believes that resumption of the ORF at the
current rate on February 1, 2023 (unless the Exchange determines it
necessary to adjust the ORF rate to help ensure that ORF collections do
not exceed ORF Costs) is reasonable because it would permit the
Exchange to resume collecting an ORF that is designed to recover a
material portion, but not all, of the Exchange's projected ORF Costs.
The Exchange would continue monitoring in advance of the resumption of
the ORF and when ORF collection resumes on February 1, 2023 and, if the
Exchange determines that, in light of projected volumes and ORF Costs,
the ORF rate should be modified to help ensure that ORF collections
would not exceed ORF Costs, adjust the ORF by submitting a filing a
proposed rule change and notifying OTP Holders of such change by Trader
Update.
---------------------------------------------------------------------------
\16\ The Exchange's proposal to also waive the ORF for the month
of January 2023 would provide OTP Holders with additional time in
the new year to make any necessary adjustments or preparations for
the resumption of the ORF effective February 1, 2023.
---------------------------------------------------------------------------
The Exchange believes that the proposed elimination of language
specifying that the Exchange may only increase or decrease the ORF
semi-annually and that any such fee change must be effective on the
first business day of February or August is reasonable because it is
designed to afford the Exchange increased flexibility in making
necessary adjustments to the ORF, as the Exchange is required to
monitor the amount collected from the ORF to ensure that it, in
combination with its other regulatory fees and fines, does not exceed
ORF Costs. The Exchange also believes the proposed change is reasonable
because the Exchange will continue to provide market participants with
30 days advance notice of changes to the ORF, thereby providing OTP
Holders with adequate time to make any necessary adjustments to
accommodate the change.
The Exchange also believes that the proposed deletion of language
relating to the August 2019 ORF is reasonable because it would remove
obsolete language and thus improve the clarity of the Fee Schedule.
The Proposal Is an Equitable Allocation of Fees
The Exchange believes its proposal is an equitable allocation of
fees among its market participants. The Exchange believes that the
proposed waiver would not place certain market participants at an
unfair disadvantage because all options transactions must clear via a
clearing firm. Such clearing firms can then choose to pass through all,
a portion, or none of the cost of the ORF to its customers, i.e., the
entering firms. Because the ORF is collected from OTP Holder clearing
firms by the OCC on behalf of NYSE Arca, the Exchange believes that
using options transactions in the Customer range serves as a proxy for
how to apportion ORF Costs among such OTP Holders. In addition, the
Exchange notes that the costs relating to monitoring OTP Holders with
respect to Customer trading activity are generally higher than the
costs associated with monitoring OTP Holders that do not engage in
Customer trading activity, which tends to be more automated and less
labor-intensive. By contrast, regulating OTP Holders that engage in
Customer trading activity is generally more labor intensive and
requires a greater expenditure of human and technical resources as the
Exchange needs to review not only the trading activity on behalf of
Customers, but also the OTP Holder's relationship with its Customers
via more labor-intensive exam-based programs. As a result, the costs
associated with administering the customer component of the Exchange's
overall regulatory program are materially higher than the costs
associated with administering the non-customer component (e.g., OTP
Holder proprietary transactions) of its regulatory program. Thus, the
Exchange believes that a temporary waiver of the ORF is an equitable
allocation of fees because it would apply equally to all OTP Holders on
all their transactions that clear in the Customer range at the OCC. The
Exchange also believes that recommencing the ORF on February 1, 2023 at
the current rate, unless the Exchange determines it necessary to adjust
the ORF to ensure that ORF collections do not exceed ORF Costs, is
equitable because the Exchange would resume assessing an ORF designed
to recover a material portion, but not all, of the Exchange's projected
ORF Costs, and the ORF would likewise resume applying equally to all
OTP Holders on options transactions in the Customer range.
[[Page 73375]]
The Exchange also believes that the proposed change to eliminate
the requirement that the Exchange modify the ORF only semi-annually in
February or August is equitable because the change would impact all OTP
Holders subject to the ORF uniformly, and all OTP Holders would
continue to receive at least 30 days' advance notice of changes to the
ORF. The proposed change to remove language relating to the August 2019
ORF is also equitable because it would eliminate language from the Fee
Schedule that is no longer applicable to any OTP Holders.
The Proposed Fee Is Not Unfairly Discriminatory
The Exchange believes that the proposal is not unfairly
discriminatory. The Exchange believes that the proposed waiver of the
ORF would not place certain market participants at an unfair
disadvantage because all options transactions must clear via a clearing
firm. Such clearing firms can then choose to pass through all, a
portion, or none of the cost of the ORF to its customers, i.e., the
entering firms. Because the ORF is collected from OTP Holder clearing
firms by the OCC on behalf of NYSE Arca, the Exchange believes that
using options transactions in the Customer range serves as a proxy for
how to apportion regulatory costs among such OTP Holders. In addition,
the Exchange notes that the costs relating to monitoring OTP Holders
with respect to Customer trading activity are generally higher than the
costs associated with monitoring OTP Holders that do not engage in
Customer trading activity, which tends to be more automated and less
labor-intensive. By contrast, regulating OTP Holders that engage in
Customer trading activity is generally more labor intensive and
requires a greater expenditure of human and technical resources as the
Exchange needs to review not only the trading activity on behalf of
Customers, but also the OTP Holder's relationship with its Customers
via more labor-intensive exam-based programs. As a result, the costs
associated with administering the customer component of the Exchange's
overall regulatory program are materially higher than the costs
associated with administering the non-customer component (e.g., OTP
Holder proprietary transactions) of its regulatory program. Thus, the
Exchange believes the temporary waiver of the ORF and the proposed
modification of language relating to the Exchange's ability to modify
the ORF are not unfairly discriminatory because the changes would apply
to all OTP Holders subject to the ORF and the Exchange would provide
all such OTP Holders with 30 days' advance notice of planned changes to
the ORF. The Exchange also believes that recommencing the ORF on
February 1, 2023 at the current rate, unless the Exchange determines it
necessary to adjust the ORF to ensure that ORF collections do not
exceed ORF Costs, is not unfairly discriminatory because the Exchange
would resume assessing an ORF designed to recover a material portion,
but not all, of the Exchange's projected ORF Costs, and the ORF would
resume applying equally to all OTP Holders based on their transactions
that clear in the Customer range at the OCC.
The Exchange believes that the proposed change to eliminate the
semi-annual change requirement is not unfairly discriminatory because
the change would apply to all OTP Holders subject to the ORF.
Furthermore, all OTP Holders would continue to be notified of changes
to the ORF at least 30 days prior to the effectiveness of any such
change. The proposed change to remove language relating to the August
2019 ORF is also not unfairly discriminatory because it would eliminate
language from the Fee Schedule describing a fee that was effective only
for August 30, 2019 and thus no longer impacts any OTP Holders.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
Intramarket Competition. The Exchange believes the proposed change
would not impose an undue burden on competition because the ORF is
charged to all OTP Holders on all their transactions that clear in the
Customer range at the OCC; thus, the amount of ORF imposed is based on
the amount of Customer volume transacted. The Exchange believes that
the proposed temporary waiver of the ORF would not place certain market
participants at an unfair disadvantage because all options transactions
must clear via a clearing firm. Such clearing firms can then choose to
pass through all, a portion, or none of the cost of the ORF to its
customers, i.e., the entering firms. In addition, because the ORF is
collected from OTP Holder clearing firms by the OCC on behalf of NYSE
Arca, the Exchange believes that using options transactions in the
Customer range serves as a proxy for how to apportion regulatory costs
among such OTP Holders. The Exchange also believes recommencing the ORF
on February 1, 2023 at the current rate (unless the Exchange determines
it necessary at that time to adjust the ORF to ensure that ORF
collections do not exceed ORF Costs) would not impose an undue burden
on competition because it would permit the Exchange to resume
collecting an ORF that is designed to recover a material portion, but
not all, of the Exchange's projected ORF Costs and the ORF would, as
currently, apply to all OTP Holders on their options transactions that
clear in the Customer range at the OCC. The Exchange further believes
that the proposed change to remove the semi-annual requirement would
not impose any burden on competition because the change would impact
all OTP Holders subject to the ORF, and the Exchange will continue to
provide advance notice of changes to the ORF to all OTP Holders via
Trader Update. The Exchange also believes that the proposed change to
eliminate language relating to the August 2019 ORF would not impact
intramarket competition because it would simply add clarity to the Fee
Schedule by removing text describing a fee that is no longer effective.
Intermarket Competition. The proposed fee change is not designed to
address any competitive issues. Rather, the proposed change is designed
to help the Exchange adequately fund its regulatory activities while
seeking to ensure that total collections from regulatory fees do not
exceed total regulatory costs and to promote clarity in the Fee
Schedule by deleting obsolete text.
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) \17\ of the Act and subparagraph (f)(2) of Rule
19b-4 \18\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\17\ 15 U.S.C. 78s(b)(3)(A).
\18\ 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
[[Page 73376]]
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) \19\ of the Act to
determine whether the proposed rule change should be approved or
disapproved.
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\19\ 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 No. SR-NYSEARCA-2022-78 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 No. SR-NYSEARCA-2022-78. 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 No. SR-NYSEARCA-2022-78, and should be submitted
on or before December 20, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022-25945 Filed 11-28-22; 8:45 am]
BILLING CODE 8011-01-P
