Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify the NYSE Arca Options Fee Schedule, 20589-20594 [2023-07142]
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Federal Register / Vol. 88, No. 66 / Thursday, April 6, 2023 / Notices
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–NYSEAMER–2023–
22 and should be submitted on or before
April 27, 2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–07140 Filed 4–5–23; 8:45 am]
BILLING CODE 8011–01–P
[Release No. 34–97234; File No. SR–
NYSEARCA–2023–28]
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March 31, 2023.
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 March
24, 2023, 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 and II
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.
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
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implement the rule change on March 24,
2023.
The Exchange proposes to modify the
NYSE Arca Options Fee Schedule (‘‘Fee
Schedule’’) regarding (1) credits for
Qualified Contingent Cross (‘‘QCC’’)
transactions, (2) fees applicable to
routed orders, and (3) certain Market
Maker incentives. The Exchange
proposes to implement the fee changes
effective March 24, 2023.4 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.
Currently, the Exchange offers
Submitting Brokers a credit of ($0.22)
per contract for Non-Customer vs. NonCustomer QCC transactions or ($0.16)
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
eligible for a credit.7
The Exchange proposes to offer
additional credits on QCC transactions
to Submitting Brokers that meet certain
monthly volume thresholds. Submitting
Brokers who achieve 1.5 million QCC
contracts in a month will receive an
additional ($0.01) credit on Customer
vs. Non-Customer QCC transactions,
and an additional ($0.03) credit on NonCustomer vs. Non-Customer QCC
transactions. Submitting Brokers who
achieve 3 million QCC contracts in a
month will receive an additional ($0.02)
credit on Customer vs. Non-Customer
QCC transactions, and an additional
($0.06) credit on Non-Customer vs. NonCustomer QCC transactions. The
proposed additional credits would be
applicable back to the first QCC contract
executed by a Submitting Broker in a
month, but would not be cumulative
across tiers (e.g., a Submitting Broker
who transacts 3.1 million QCC contracts
in a month would be eligible for an
additional ($0.02) credit on Customer
vs. Non-Customer QCC transactions or
an additional ($0.06) credit on NonCustomer vs. Non-Customer QCC
transactions, but would not also earn
the additional credits offered to
Submitting Brokers that achieve 1.5
million QCC contracts in a month).
Although the Exchange cannot predict
with certainty whether the proposed
change would encourage Submitting
Brokers to increase their QCC volume,
the proposed change is intended to
continue to incentivize additional QCC
executions by Submitting Brokers by
increasing the credits available on such
orders.
Endnote 13 of the Fee Schedule
currently provides that QCC executions
in which a Customer is on both sides of
the QCC trade will not be eligible for the
Submitting Broker credit and that there
is a $375,000 maximum monthly credit
per firm on QCC transactions by a
Submitting Broker.8 The Exchange
recently modified the Fee Schedule to
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. Purpose
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Modify the NYSE Arca
Options Fee Schedule
15 17
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
SECURITIES AND EXCHANGE
COMMISSION
20589
The purpose of this filing is to amend
the Fee Schedule to (1) provide for
additional credits to qualifying
Submitting Brokers for QCC
transactions 5 and clarify the cap
applicable to QCC credits and Floor
Broker rebates earned through the
Manual Billable Rebate Program (‘‘FB
Rebates’’), (2) modify the Routing Fees
applicable to routed orders, and (3)
eliminate the Market Maker Incentive
For Penny Issues and the Market Maker
Incentive For Non-Penny Issues
(collectively, the ‘‘Market Maker
Incentives’’). The Exchange proposes to
4 The Exchange originally filed to amend the Fee
Schedule on March 1, 2023 (SR–NYSEARCA–2023–
22), then withdrew such filing and amended the
Fee Schedule on March 15, 2023 (SR–NYSEARCA–
2023–25), which latter filing the Exchange
withdrew on March 24, 2023.
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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Frm 00124
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QCC Transaction Credits
6 See Fee Schedule, QUALIFIED CONTINGENT
CROSS (‘‘QCC’’) TRANSACTION FEES AND
CREDITS.
7 See id.
8 See Fee Schedule, Endnote 13.
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Federal Register / Vol. 88, No. 66 / Thursday, April 6, 2023 / Notices
provide that Submitting Broker QCC
credits and Floor Broker rebates earned
through the Manual Billable Rebate
Program may not combine to exceed
$2,000,000 per month per firm (the
‘‘Monthly Credit and Rebate Cap’’).9 To
improve the clarity of the Fee Schedule
and obviate potential confusion
regarding the applicability of the
Monthly Credit and Rebate Cap, the
Exchange proposes to delete the second
sentence of Endnote 13 (which
describes the $375,000 maximum
monthly credit on QCC transactions by
a Submitting Broker), add new Endnote
17, and modify the table setting forth
Submitting Broker QCC credits to
reference Endnote 17. Endnote 17
would contain the same text already
reflected in the Fee Schedule describing
the Monthly Credit and Rebate Cap.10
The Exchange believes that Endnote 17
would add clarity to the Fee Schedule
regarding the maximum amount that a
firm could earn per month from
Submitting Broker QCC credits and FB
Rebates combined.
Routing Fees
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The Exchange currently charges an
$0.11 per contract fee on orders routed
and executed on another exchange, plus
(i) any transaction fees assessed by the
away exchange (calculated on an orderby-order basis since different away
exchanges charge different amounts) or
(ii) if the actual transaction fees assessed
by the away exchange(s) cannot be
determined prior to the execution, the
highest per contract charge assessed by
the away exchange(s) for the relevant
option class and type of market
participant (e.g., Customer, Firm,
Broker/Dealer, Professional Customer or
Market Maker).11 The Exchange applies
the Routing Fees in addition to any
customary execution fees applicable to
the order.
The Exchange now proposes to
modify the Routing Fees to be based on
whether the routed order is in a Penny
or non-Penny issue and to establish a
single fee that would be applicable to all
routed orders in Penny issues, and a
single fee for routed orders in nonPenny issues. Specifically, the Exchange
proposes that the fee for routed orders
would be set at a fixed amount intended
to counterbalance the internal resources
9 See Fee Schedule, FLOOR BROKER FIXED
COST PREPAYMENT INCENTIVE PROGRAM (the
‘‘FB Prepay Program’’).
10 The Exchange also proposes a conforming
change to delete the text describing the Monthly
Credit and Rebate Cap in the section of the Fee
Schedule setting forth the Floor Broker Fixed Cost
Prepayment Incentive Program and add a reference
to Endnote 17, as proposed.
11 See Fee Schedule, ROUTING FEES.
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required to support the handling of
orders routed away from the Exchange.
The Exchange proposes to implement a
flat fee structure for routing fees, which
the Exchange believes would streamline
the process of calculating fees applied to
orders routed away from the Exchange
because it would, among other things,
reduce the administrative burden of
recalibrating routing fees each time an
away exchange modifies its relevant
transaction fees. Accordingly, the
Exchange proposes a Routing Fee of
$0.61 in Penny issues, and $1.21 in nonPenny issues. The Exchange believes
that having a single published rate for
all routed orders in Penny issues and
single published rate for all routed
orders in non-Penny issues would also
reduce potential confusion relating to
the amount of the Routing Fee for a
given order (particularly in light of the
variability in transaction fees across
other options markets) and would
permit market participants to determine
execution costs at the time of order
entry, thereby promoting clarity and
transparency in the Fee Schedule. The
Exchange believes the proposed routing
fee structure is not novel, as at least one
other options exchange similarly applies
fixed routing fees based on whether the
routed order is in a Penny or non-Penny
issue, and that the proposed amounts of
the fees are within the range of fees
applied by other markets to routed
orders.12
Market Maker Incentives
The Exchange currently offers a
Market Maker Incentive For Penny
Issues, which provides an enhanced
posting credit of $0.41 applied to
electronic executions of Market Maker
posted interest in Penny issues to
Market Makers that achieve the volume
requirement of at least 0.75% TCADV
from Customer posted interest in all
issues and an ADV from Market Maker
posted interest in all issues other than
SPY equal to 0.40% of TCADV.
The Exchange also offers a similar
Market Maker Incentive For Non-Penny
Issues. Market Makers that meet the
volume requirement of either (1) at least
0.55% of TCADV from Market Maker
12 See, e.g., BOX Options Exchange Fee Schedule,
available at: https://boxexchange.com/assets/BOXFee-Schedule-as-of-March-6-2023.pdf (providing for
fixed routing fees of $0.60 per contract fee for
customer orders in Penny classes and $0.85 per
contract fee for customer orders in non-Penny
class); Cboe Exchange, Inc. Options Fee Schedule,
available at: https://cdn.cboe.com/resources/
membership/Cboe_FeeSchedule.pdf (providing, for
example, Customer routing fees of $0.75 for orders
in Penny issues or $1.25 for orders in non-Penny
issues routed to certain away markets and NonCustomer routing fees of $1.17 for all orders in
Penny issues or $1.45 for all orders in non-Penny
issues routed away).
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posted interest in all issues, or (2) at
least 1.60% of TCADV from all interest
in all issues, all account types, with at
least 0.15% of TCADV from Market
Maker posted interest in all issues
qualify for a $0.55 credit applied to
electronic executions of Market Maker
posted interest in non-Penny issues.
The Exchange now proposes to
eliminate the Market Maker Incentives
because they have not been as effective
in encouraging Market Maker posted
interest as other similar incentive
programs. Market Makers are entitled to
the highest credit on posted interest
they achieve, and because the Market
Maker Incentives have similar
qualifying criteria but offer lower credit
amounts than other volume incentive
programs available to Market Makers
(such as the Market Maker Penny and
SPY Posting Credit Tiers or the NonCustomer, Non-Penny Posting Credit
Tiers),13 Market Makers have availed
themselves of the Market Maker
Incentives less frequently. Accordingly,
the Exchange believes that Market
Markers would not be significantly
impacted by the elimination of the
Market Maker Incentives, as the
programs generally provided benefits
that were superseded by the incentives
available through other, more utilized
volume incentive programs (which
would continue to be available to
Market Makers).
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act,14 in general, and
furthers the objectives of Sections
6(b)(4) and (5) of the Act,15 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
13 See Fee Schedule, MARKET MAKER PENNY
AND SPY POSTING CREDIT TIERS & NON–
CUSTOMER, NON–PENNY POSTING CREDIT
TIERS.
14 15 U.S.C. 78f(b).
15 15 U.S.C. 78f(b)(4) and (5).
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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.’’ 16
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.17
Therefore, no exchange possesses
significant pricing power in the
execution of multiply-listed equity and
ETF options order flow. More
specifically, in January 2023, the
Exchange had less than 13% market
share of executed volume of multiplylisted equity and ETF options trades.18
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
direct effect on the ability of an
exchange to compete for order flow.
The Exchange believes that the
proposed additional QCC credits are
reasonable because they are designed to
incent OTP Holders to increase the
number of QCC transactions sent to the
Exchange by offering increased credits
on QCC transactions for Submitting
Brokers that meet the qualifying volume
thresholds. In addition, the Exchange
believes it is reasonable to offer a higher
additional credit on Non-Customer vs.
Non-Customer QCC transactions than on
Customer vs. Non-Customer QCC
transactions because Non-Customer vs.
Non-Customer QCC transactions are
billable on both sides, whereas
Customer vs. Non-Customer QCC
transactions are billable on one side
only. The Exchange also believes that
modifying the Fee Schedule regarding
the Monthly Credit and Rebate Cap is
16 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(S7–10–04) (‘‘Reg NMS Adopting Release’’).
17 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.
18 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 13.06% for the month of
January 2022 to 12.58% for the month of January
2023.
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reasonable because it would add clarity
to the Fee Schedule regarding the
maximum monthly amount that firms
may earn from Submitting Broker QCC
credits and FB Rebates combined. 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 entered by
Submitting Brokers, which could
promote market depth, facilitate tighter
spreads and enhance price discovery, to
the extent the proposed change
encourages OTP Holders 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.
The Exchange believes the proposed
change to Routing Fees is reasonable
because it would establish a single fee
that would be applicable to all routed
orders in Penny issues and a single fee
that would be applicable to all routed
orders in non-Penny issues, and such
fees would be applicable to all market
participants equally. In addition, the
Exchange believes the proposed change
is reasonable because it would provide
for routing fees that would
counterbalance the internal resources
required to support the handling of
orders routed away from the Exchange
and would streamline the process of
calculating routing fees by obviating the
need to recalibrate fees based on
individual away market fees (which are
variable and subject to frequent change)
and eliminating any potential confusion
as to routing fees applicable to a given
order. The Exchange also notes that a
fixed fee structure for routing fees is not
novel and that the amounts of the
proposed Routing Fees are within the
range of routing fees currently charged
by other options exchanges.19
The Exchange believes that
eliminating the Market Maker Incentives
is reasonable because the programs have
been underutilized in favor of incentive
programs offering higher credits on
posted interest, and the Exchange will
continue to offer alternative incentives
for Market Makers with similar
qualifying bases and credits (including
19 See
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20591
the Market Maker Penny and SPY
Posting Credit Tiers or the NonCustomer, Non-Penny Posting Credit
Tiers). Accordingly, although Market
Makers would no longer be able to
qualify for credits through the Market
Maker Incentives, they would still
benefit from the availability of other
similar incentive programs that have, to
date, more successfully incentivized
Market Maker posted interest.
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 OTP
Holders may direct their order flow to
any of the 16 options exchanges,
including those offering rebates on QCC
transactions.20 Thus, OTP Holders have
a choice of where they direct their order
flow, including their QCC transactions.
The proposed rule change is designed to
continue to incent OTP Holders to
direct liquidity and, in particular, QCC
transactions to the Exchange. In
addition, to the extent OTP Holders 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 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 proposed QCC
credits are based on the amount and
type of business transacted on the
20 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 or ($0.22) per
contract rebate up to 999,999 contracts for QCC
transactions with non-customers on both sides);
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 brokerdealer or market maker or ($0.22) per contract
rebate up to 1,499,999 contracts for QCC
transactions when both parties are 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 or
($0.22) per contract when both sides of the QCC
transaction are non-customers).
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Exchange, and Submitting Brokers can
attempt to submit QCC transactions to
earn the credits or not. In addition, the
proposed credits are equally available to
all qualifying Submitting Brokers. The
Exchange also believes the proposed
changes regarding the Monthly Credit
and Rebate Cap are equitable because
they would add clarity and transparency
to the Fee Schedule regarding the
current maximum monthly amount that
a firm could earn from combined
Submitting Broker QCC credits and FB
Rebates, thereby obviating potential
confusion regarding the applicability of
the Monthly Credit and Rebate Cap. To
the extent the proposed changes
continue to incent Submitting 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 credits are
designed to incent Submitting 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 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 Exchange also believes the
proposed change to the Routing Fees is
equitable because the proposed single
fee for all routed orders in Penny issues
and single fee for all routed orders in
non-Penny issues would apply to all
market participants equally and the
proposed amounts are designed to offset
internal resources necessary to support
the handling of orders routed away from
the Exchange. The proposed change
would also streamline the process of
calculating routing fees for all market
participants and provide increased
clarity regarding execution costs at the
time of order entry.
The Exchange believes that the
elimination of the Market Maker
Incentives is equitable because these
incentives, which did not achieve their
intended purpose of encouraging Market
Maker posted interest, would no longer
be available to any Market Makers, and,
moreover, the Exchange offers Market
Makers alternative methods to achieve
credits of an equal or higher amount.
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The Proposed Rule Change Is Not
Unfairly Discriminatory
The Exchange believes the proposed
change is not unfairly discriminatory
because the proposed credits on QCC
transactions would be available to all
qualifying Submitting Brokers on an
equal and non-discriminatory basis. The
proposed change is based on the amount
and type of business transacted on the
Exchange, and Submitting Brokers are
not obligated to execute QCC
transactions. Rather, the proposal is
designed to encourage Submitting
Brokers to increase QCC volume sent to
the Exchange and to utilize the
Exchange as a primary trading venue for
all transactions (if they have not done so
previously). To the extent that the
proposed change attracts more QCC
transactions 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.
The Exchange also believes that the
proposed change to eliminate the
Market Maker Incentives is also not
unfairly discriminatory because the
incentives, which were underutilized by
Market Makers, would be eliminated in
their entirety and would no longer be
available to any Market Makers. In
addition, Market Makers would
continue to be eligible for alternative
incentives currently available to them
with similar credits and qualifying
criteria. The Exchange also believes that
the proposed changes to the Routing
Fees are not unfairly discriminatory
because the proposed fees are intended
to assess streamlined routing fees in
amounts that would appropriately
account for the internal resources
necessary to support orders routed away
from the Exchange and would apply
equally to all market participants’
routed orders, based on whether such
order is in a Penny or non-Penny issue.
The proposed change would simplify
the calculation of routing fees for all
market participants and add clarity and
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transparency to the Fee Schedule
regarding the fees applicable to routed
orders.
Thus, the Exchange believes that, to
the extent the proposed rule change
would continue to improve market
quality for all market participants on the
Exchange by promoting clarity and
transparency in the Fee Schedule and
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.’’ 21
Intramarket Competition. The
proposed change with respect to QCC
credits is designed to attract additional
order flow to the Exchange (particularly
in 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 similarlysituated Submitting Brokers that execute
21 See Reg NMS Adopting Release, supra note 16,
at 37499.
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06APN1
Federal Register / Vol. 88, No. 66 / Thursday, April 6, 2023 / Notices
QCC trades and achieve the volume
thresholds for the additional credits.
The Exchange does not believe that the
proposed changes regarding Routing
Fees or the Monthly Credit and Rebate
Cap would impose any burden on
competition that is not necessary or
appropriate, as they are intended to add
clarity and transparency to the Fee
Schedule with respect to fees for orders
routed away from the Exchange and the
monthly cap on combined Submitting
Broker QCC credits and FB Rebates
earned by a firm. The Exchange also
does not believe that the proposed
changes to the Market Maker Incentives
would impose any burden on
intramarket competition that is not
necessary or appropriate because the
incentives would be eliminated for all
Market Makers.
Intermarket Competition. The
Exchange operates in a highly
competitive market in which market
participants can readily favor one of the
16 competing option exchanges if they
deem fee levels at a particular venue to
be excessive. In such an environment,
the Exchange must continually adjust its
fees to remain competitive with other
exchanges and to attract order flow to
the Exchange. Based on publiclyavailable information, and excluding
index-based options, no single exchange
has more than 16% of the market share
of executed volume of multiply-listed
equity and ETF options trades.22
Therefore, currently no exchange
possesses significant pricing power in
the execution of multiply-listed equity
and ETF options order flow. More
specifically, in January 2023, the
Exchange had less than 13% market
share of executed volume of multiplylisted equity and ETF options trades.23
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
OTP Holders to direct trading interest
(particularly QCC transactions) to the
Exchange, to provide liquidity and to
attract order flow. To the extent that
Submitting Brokers are incentivized to
utilize the Exchange as a primary
trading venue for all transactions, all of
ddrumheller on DSK120RN23PROD with NOTICES1
22 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.
23 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 13.06% for the month of
January 2022 to 12.58% for the month of January
2023.
VerDate Sep<11>2014
21:13 Apr 05, 2023
Jkt 259001
the Exchange’s market participants
should benefit from the improved
market quality and increased
opportunities for price improvement.
The Exchange does not believe that
the proposed changes regarding Routing
Fees or the Monthly Credit and Rebate
Cap would impose any burden on
competition that is not necessary or
appropriate, as they are intended to
improve the clarity and transparency of
the Fee Schedule with respect to fees for
orders routed away from the Exchange
and the maximum monthly amount that
a firm could earn from Submitting
Broker QCC credits and FB Rebates
combined. The Exchange also does not
believe that the proposed elimination of
the Market Maker Incentives would
impose any burden on competition that
is not necessary or appropriate because
the incentives would no longer be
available to any Market Makers, and the
Exchange would continue to offer
Market Makers similar, alternative
incentives.
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 changes
could promote competition between the
Exchange and other execution venues,
including those that currently offer
similarly structured routing charges or
that currently offer credits on QCC
transactions, by encouraging additional
orders (and, in particular, QCC
transactions) to be sent to the Exchange
for execution.24
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) 25 of the Act and
subparagraph (f)(2) of Rule 19b–4 26
thereunder, because it establishes a due,
24 See
notes 12 & 20, supra.
U.S.C. 78s(b)(3)(A).
26 17 CFR 240.19b–4(f)(2).
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) 27 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSEARCA–2023–28 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–2023–28. 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
25 15
PO 00000
Frm 00128
Fmt 4703
Sfmt 4703
20593
27 15
E:\FR\FM\06APN1.SGM
U.S.C. 78s(b)(2)(B).
06APN1
20594
Federal Register / Vol. 88, No. 66 / Thursday, April 6, 2023 / Notices
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–2023–28, and
should be submitted on or before April
27, 2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.28
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–07142 Filed 4–5–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
34873]
Deregistration Under Section 8(f) of the
Investment Company Act of 1940
March 31, 2023.
Securities and Exchange
Commission (‘‘Commission’’ or ‘‘SEC’’)
ACTION: Notice of applications for
deregistration under Section 8(f) of the
Investment Company Act of 1940.
ddrumheller on DSK120RN23PROD with NOTICES1
AGENCY:
The following is a notice of
applications for deregistration under
section 8(f) of the Investment Company
Act of 1940 for the month of March
2023. A copy of each application may be
obtained via the Commission’s website
by searching for the applicable file
number listed below, or for an applicant
using the Company name search field,
on the SEC’s EDGAR system. The SEC’s
EDGAR system may be searched at
https://www.sec.gov/edgar/searchedgar/
legacy/companysearch.html. You may
also call the SEC’s Public Reference
Room at (202) 551–8090. An order
granting each application will be issued
unless the SEC orders a hearing.
Interested persons may request a
hearing on any application by emailing
the SEC’s Secretary at SecretarysOffice@sec.gov and serving the relevant
applicant with a copy of the request by
email, if an email address is listed for
the relevant applicant below, or
personally or by mail, if a physical
address is listed for the relevant
applicant below. Hearing requests
should be received by the SEC by 5:30
28 17
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
21:13 Apr 05, 2023
Jkt 259001
p.m. on April 25, 2023, and should be
accompanied by proof of service on
applicants, in the form of an affidavit or,
for lawyers, a certificate of service.
Pursuant to Rule 0–5 under the Act,
hearing requests should state the nature
of the writer’s interest, any facts bearing
upon the desirability of a hearing on the
matter, the reason for the request, and
the issues contested. Persons who wish
to be notified of a hearing may request
notification by writing to the
Commission’s Secretary at SecretarysOffice@sec.gov.
ADDRESSES: The Commission:
Secretarys-Office@sec.gov.
FOR FURTHER INFORMATION CONTACT:
Shawn Davis, Assistant Director, at
(202) 551–6413 or Chief Counsel’s
Office at (202) 551–6821; SEC, Division
of Investment Management, Chief
Counsel’s Office, 100 F Street NE,
Washington, DC 20549–8010.
Destra Targeted Income Unit
Investment Trust [File No. 811–22757]
Summary: Applicant, a unit
investment trust, seeks an order
declaring that it has ceased to be an
investment company. On December 31,
2015, and April 15, 2022, applicant
made liquidating distributions to its
shareholders, based on net asset value.
Expenses of $75,000.00 incurred in
connection with the liquidation were
paid by the applicant. Applicant also
has retained $75,000 for the purpose of
paying outstanding liabilities.
Filing Date: The application was filed
on February 21, 2023.
Applicant’s Address: 901 Warrenville
Road, Suite 15, Lisle, Illinois 60532.
FEG Absolute Access Fund I LLC [File
No. 811–22527]
Summary: Applicant, a closed-end
investment company, seeks an order
declaring that it has ceased to be an
investment company. On December 31,
2020, February 28, 2021, September 1,
2021, and January 3, 2023, applicant
made liquidating distributions to its
shareholders based on net asset value.
Expenses of $3,000 incurred in
connection with the liquidation were
paid by the applicant.
Filing Date: The application was filed
on March 7, 2023.
Applicant’s Address:
Joshua.deringer@faegredrinker.com.
FEG Absolute Access Fund LLC [File
No. 811–22454]
Summary: Applicant, a closed-end
investment company, seeks an order
declaring that it has ceased to be an
investment company. Applicant
currently has fewer than 100 beneficial
owners, is not presently making an
PO 00000
Frm 00129
Fmt 4703
Sfmt 4703
offering of securities and does not
propose to make any offering of
securities. Applicant will continue to
operate as a private investment fund in
reliance on Section 3(c)(1) of the Act.
Filing Date: The application was filed
on March 7, 2023.
Applicant’s Address:
Joshua.deringer@faegredrinker.com.
Lord Asset Management Trust [File No.
811–08348]
Summary: Applicant seeks an order
declaring that it has ceased to be an
investment company. On December 15,
2022, applicant made a liquidating
distribution to its shareholders based on
net asset value. Expenses of $115,463.67
incurred in connection with the
liquidation were paid by the applicant.
Filing Date: The application was filed
on March 10, 2023.
Applicant’s Address: 425 South
Financial Place, Suite 3900, Chicago,
Illinois 60605.
Transamerica Asset Allocation
Variable Funds [File No. 811–07717]
Summary: Applicant seeks an order
declaring that it has ceased to be an
investment company. On October 28,
2022, applicant made a liquidating
distribution to its shareholders based on
net asset value. Expenses of $58,697.01
incurred in connection with the
liquidation were paid by the issuer and
depositor of the applicant.
Filing Dates: The application was
filed on December 16, 2022, and
amended on March 17, 2023.
Applicant’s Address: 1801 California
Street, Suite 5200, Denver, Colorado
80202.
UBS Relationship Funds [File No. 811–
09036]
Summary: Applicant seeks an order
declaring that it has ceased to be an
investment company. Expenses of
$5,500 incurred in connection with the
liquidation were paid by the applicant.
Filing Dates: March 10, 2023.
Applicant’s Address: c/o UBS Asset
Management (Americas) Inc., One North
Wacker Drive, Chicago, Illinois 60606.
Zell Capital [File No. 811–23563]
Summary: Applicant, a closed-end
investment company, seeks an order
declaring that it has ceased to be an
investment company. Applicant
currently has fewer than 100 beneficial
owners, is not presently making an
offering of securities and does not
propose to make any offering of
securities. Applicant will continue to
operate as a private investment fund in
reliance on Section 3(c)(1) of the Act.
Filing Dates: The application was
filed on February 24, 2023.
E:\FR\FM\06APN1.SGM
06APN1
]]>Agencies
[Federal Register Volume 88, Number 66 (Thursday, April 6, 2023)]
[Notices]
[Pages 20589-20594]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-07142]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97234; File No. SR-NYSEARCA-2023-28]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Modify the NYSE
Arca Options Fee Schedule
March 31, 2023.
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 March 24, 2023, 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 and II
below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to modify the NYSE Arca Options Fee Schedule
(``Fee Schedule'') regarding (1) credits for Qualified Contingent Cross
(``QCC'') transactions, (2) fees applicable to routed orders, and (3)
certain Market Maker incentives. The Exchange proposes to implement the
fee changes effective March 24, 2023.\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 originally filed to amend the Fee Schedule on
March 1, 2023 (SR-NYSEARCA-2023-22), then withdrew such filing and
amended the Fee Schedule on March 15, 2023 (SR-NYSEARCA-2023-25),
which latter filing the Exchange withdrew on March 24, 2023.
---------------------------------------------------------------------------
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of this filing is to amend the Fee Schedule to (1)
provide for additional credits to qualifying Submitting Brokers for QCC
transactions \5\ and clarify the cap applicable to QCC credits and
Floor Broker rebates earned through the Manual Billable Rebate Program
(``FB Rebates''), (2) modify the Routing Fees applicable to routed
orders, and (3) eliminate the Market Maker Incentive For Penny Issues
and the Market Maker Incentive For Non-Penny Issues (collectively, the
``Market Maker Incentives''). The Exchange proposes to implement the
rule change on March 24, 2023.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
QCC Transaction Credits
Currently, the Exchange offers Submitting Brokers a credit of
($0.22) per contract for Non-Customer vs. Non-Customer QCC transactions
or ($0.16) 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 eligible for a credit.\7\
---------------------------------------------------------------------------
\6\ See Fee Schedule, QUALIFIED CONTINGENT CROSS (``QCC'')
TRANSACTION FEES AND CREDITS.
\7\ See id.
---------------------------------------------------------------------------
The Exchange proposes to offer additional credits on QCC
transactions to Submitting Brokers that meet certain monthly volume
thresholds. Submitting Brokers who achieve 1.5 million QCC contracts in
a month will receive an additional ($0.01) credit on Customer vs. Non-
Customer QCC transactions, and an additional ($0.03) credit on Non-
Customer vs. Non-Customer QCC transactions. Submitting Brokers who
achieve 3 million QCC contracts in a month will receive an additional
($0.02) credit on Customer vs. Non-Customer QCC transactions, and an
additional ($0.06) credit on Non-Customer vs. Non-Customer QCC
transactions. The proposed additional credits would be applicable back
to the first QCC contract executed by a Submitting Broker in a month,
but would not be cumulative across tiers (e.g., a Submitting Broker who
transacts 3.1 million QCC contracts in a month would be eligible for an
additional ($0.02) credit on Customer vs. Non-Customer QCC transactions
or an additional ($0.06) credit on Non-Customer vs. Non-Customer QCC
transactions, but would not also earn the additional credits offered to
Submitting Brokers that achieve 1.5 million QCC contracts in a month).
Although the Exchange cannot predict with certainty whether the
proposed change would encourage Submitting Brokers to increase their
QCC volume, the proposed change is intended to continue to incentivize
additional QCC executions by Submitting Brokers by increasing the
credits available on such orders.
Endnote 13 of the Fee Schedule currently provides that QCC
executions in which a Customer is on both sides of the QCC trade will
not be eligible for the Submitting Broker credit and that there is a
$375,000 maximum monthly credit per firm on QCC transactions by a
Submitting Broker.\8\ The Exchange recently modified the Fee Schedule
to
[[Page 20590]]
provide that Submitting Broker QCC credits and Floor Broker rebates
earned through the Manual Billable Rebate Program may not combine to
exceed $2,000,000 per month per firm (the ``Monthly Credit and Rebate
Cap'').\9\ To improve the clarity of the Fee Schedule and obviate
potential confusion regarding the applicability of the Monthly Credit
and Rebate Cap, the Exchange proposes to delete the second sentence of
Endnote 13 (which describes the $375,000 maximum monthly credit on QCC
transactions by a Submitting Broker), add new Endnote 17, and modify
the table setting forth Submitting Broker QCC credits to reference
Endnote 17. Endnote 17 would contain the same text already reflected in
the Fee Schedule describing the Monthly Credit and Rebate Cap.\10\ The
Exchange believes that Endnote 17 would add clarity to the Fee Schedule
regarding the maximum amount that a firm could earn per month from
Submitting Broker QCC credits and FB Rebates combined.
---------------------------------------------------------------------------
\8\ See Fee Schedule, Endnote 13.
\9\ See Fee Schedule, FLOOR BROKER FIXED COST PREPAYMENT
INCENTIVE PROGRAM (the ``FB Prepay Program'').
\10\ The Exchange also proposes a conforming change to delete
the text describing the Monthly Credit and Rebate Cap in the section
of the Fee Schedule setting forth the Floor Broker Fixed Cost
Prepayment Incentive Program and add a reference to Endnote 17, as
proposed.
---------------------------------------------------------------------------
Routing Fees
The Exchange currently charges an $0.11 per contract fee on orders
routed and executed on another exchange, plus (i) any transaction fees
assessed by the away exchange (calculated on an order-by-order basis
since different away exchanges charge different amounts) or (ii) if the
actual transaction fees assessed by the away exchange(s) cannot be
determined prior to the execution, the highest per contract charge
assessed by the away exchange(s) for the relevant option class and type
of market participant (e.g., Customer, Firm, Broker/Dealer,
Professional Customer or Market Maker).\11\ The Exchange applies the
Routing Fees in addition to any customary execution fees applicable to
the order.
---------------------------------------------------------------------------
\11\ See Fee Schedule, ROUTING FEES.
---------------------------------------------------------------------------
The Exchange now proposes to modify the Routing Fees to be based on
whether the routed order is in a Penny or non-Penny issue and to
establish a single fee that would be applicable to all routed orders in
Penny issues, and a single fee for routed orders in non-Penny issues.
Specifically, the Exchange proposes that the fee for routed orders
would be set at a fixed amount intended to counterbalance the internal
resources required to support the handling of orders routed away from
the Exchange. The Exchange proposes to implement a flat fee structure
for routing fees, which the Exchange believes would streamline the
process of calculating fees applied to orders routed away from the
Exchange because it would, among other things, reduce the
administrative burden of recalibrating routing fees each time an away
exchange modifies its relevant transaction fees. Accordingly, the
Exchange proposes a Routing Fee of $0.61 in Penny issues, and $1.21 in
non-Penny issues. The Exchange believes that having a single published
rate for all routed orders in Penny issues and single published rate
for all routed orders in non-Penny issues would also reduce potential
confusion relating to the amount of the Routing Fee for a given order
(particularly in light of the variability in transaction fees across
other options markets) and would permit market participants to
determine execution costs at the time of order entry, thereby promoting
clarity and transparency in the Fee Schedule. The Exchange believes the
proposed routing fee structure is not novel, as at least one other
options exchange similarly applies fixed routing fees based on whether
the routed order is in a Penny or non-Penny issue, and that the
proposed amounts of the fees are within the range of fees applied by
other markets to routed orders.\12\
---------------------------------------------------------------------------
\12\ See, e.g., BOX Options Exchange Fee Schedule, available at:
https://boxexchange.com/assets/BOX-Fee-Schedule-as-of-March-6-2023.pdf (providing for fixed routing fees of $0.60 per contract fee
for customer orders in Penny classes and $0.85 per contract fee for
customer orders in non-Penny class); Cboe Exchange, Inc. Options Fee
Schedule, available at: https://cdn.cboe.com/resources/membership/Cboe_FeeSchedule.pdf (providing, for example, Customer routing fees
of $0.75 for orders in Penny issues or $1.25 for orders in non-Penny
issues routed to certain away markets and Non-Customer routing fees
of $1.17 for all orders in Penny issues or $1.45 for all orders in
non-Penny issues routed away).
---------------------------------------------------------------------------
Market Maker Incentives
The Exchange currently offers a Market Maker Incentive For Penny
Issues, which provides an enhanced posting credit of $0.41 applied to
electronic executions of Market Maker posted interest in Penny issues
to Market Makers that achieve the volume requirement of at least 0.75%
TCADV from Customer posted interest in all issues and an ADV from
Market Maker posted interest in all issues other than SPY equal to
0.40% of TCADV.
The Exchange also offers a similar Market Maker Incentive For Non-
Penny Issues. Market Makers that meet the volume requirement of either
(1) at least 0.55% of TCADV from Market Maker posted interest in all
issues, or (2) at least 1.60% of TCADV from all interest in all issues,
all account types, with at least 0.15% of TCADV from Market Maker
posted interest in all issues qualify for a $0.55 credit applied to
electronic executions of Market Maker posted interest in non-Penny
issues.
The Exchange now proposes to eliminate the Market Maker Incentives
because they have not been as effective in encouraging Market Maker
posted interest as other similar incentive programs. Market Makers are
entitled to the highest credit on posted interest they achieve, and
because the Market Maker Incentives have similar qualifying criteria
but offer lower credit amounts than other volume incentive programs
available to Market Makers (such as the Market Maker Penny and SPY
Posting Credit Tiers or the Non-Customer, Non-Penny Posting Credit
Tiers),\13\ Market Makers have availed themselves of the Market Maker
Incentives less frequently. Accordingly, the Exchange believes that
Market Markers would not be significantly impacted by the elimination
of the Market Maker Incentives, as the programs generally provided
benefits that were superseded by the incentives available through
other, more utilized volume incentive programs (which would continue to
be available to Market Makers).
---------------------------------------------------------------------------
\13\ See Fee Schedule, MARKET MAKER PENNY AND SPY POSTING CREDIT
TIERS & NON-CUSTOMER, NON-PENNY POSTING CREDIT TIERS.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\14\ in general, and furthers the
objectives of Sections 6(b)(4) and (5) of the Act,\15\ 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.
---------------------------------------------------------------------------
\14\ 15 U.S.C. 78f(b).
\15\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
The Proposed Rule Change Is Reasonable
The Exchange operates in a highly competitive market. The
Commission has repeatedly expressed its preference for competition over
regulatory intervention in determining prices, products, and services
in the securities markets. In Regulation NMS, the Commission
highlighted the importance of market forces in determining prices and
SRO revenues and, also, recognized
[[Page 20591]]
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.'' \16\
---------------------------------------------------------------------------
\16\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005) (S7-10-04) (``Reg NMS
Adopting Release'').
---------------------------------------------------------------------------
There are currently 16 registered options exchanges competing for
order flow. Based on publicly-available information, and excluding
index-based options, no single exchange has more than 16% of the market
share of executed volume of multiply-listed equity and ETF options
trades.\17\ Therefore, no exchange possesses significant pricing power
in the execution of multiply-listed equity and ETF options order flow.
More specifically, in January 2023, the Exchange had less than 13%
market share of executed volume of multiply-listed equity and ETF
options trades.\18\
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\17\ 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.
\18\ 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 13.06% for the month of January 2022 to 12.58% for
the month of January 2023.
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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.
The Exchange believes that the proposed additional QCC credits are
reasonable because they are designed to incent OTP Holders to increase
the number of QCC transactions sent to the Exchange by offering
increased credits on QCC transactions for Submitting Brokers that meet
the qualifying volume thresholds. In addition, the Exchange believes it
is reasonable to offer a higher additional credit on Non-Customer vs.
Non-Customer QCC transactions than on Customer vs. Non-Customer QCC
transactions because Non-Customer vs. Non-Customer QCC transactions are
billable on both sides, whereas Customer vs. Non-Customer QCC
transactions are billable on one side only. The Exchange also believes
that modifying the Fee Schedule regarding the Monthly Credit and Rebate
Cap is reasonable because it would add clarity to the Fee Schedule
regarding the maximum monthly amount that firms may earn from
Submitting Broker QCC credits and FB Rebates combined. 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 entered by Submitting Brokers,
which could promote market depth, facilitate tighter spreads and
enhance price discovery, to the extent the proposed change encourages
OTP Holders 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.
The Exchange believes the proposed change to Routing Fees is
reasonable because it would establish a single fee that would be
applicable to all routed orders in Penny issues and a single fee that
would be applicable to all routed orders in non-Penny issues, and such
fees would be applicable to all market participants equally. In
addition, the Exchange believes the proposed change is reasonable
because it would provide for routing fees that would counterbalance the
internal resources required to support the handling of orders routed
away from the Exchange and would streamline the process of calculating
routing fees by obviating the need to recalibrate fees based on
individual away market fees (which are variable and subject to frequent
change) and eliminating any potential confusion as to routing fees
applicable to a given order. The Exchange also notes that a fixed fee
structure for routing fees is not novel and that the amounts of the
proposed Routing Fees are within the range of routing fees currently
charged by other options exchanges.\19\
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\19\ See note 12, supra.
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The Exchange believes that eliminating the Market Maker Incentives
is reasonable because the programs have been underutilized in favor of
incentive programs offering higher credits on posted interest, and the
Exchange will continue to offer alternative incentives for Market
Makers with similar qualifying bases and credits (including the Market
Maker Penny and SPY Posting Credit Tiers or the Non-Customer, Non-Penny
Posting Credit Tiers). Accordingly, although Market Makers would no
longer be able to qualify for credits through the Market Maker
Incentives, they would still benefit from the availability of other
similar incentive programs that have, to date, more successfully
incentivized Market Maker posted interest.
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 OTP Holders may direct their order flow to any of the
16 options exchanges, including those offering rebates on QCC
transactions.\20\ Thus, OTP Holders have a choice of where they direct
their order flow, including their QCC transactions. The proposed rule
change is designed to continue to incent OTP Holders to direct
liquidity and, in particular, QCC transactions to the Exchange. In
addition, to the extent OTP Holders 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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\20\ 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 or ($0.22) per contract
rebate up to 999,999 contracts for QCC transactions with non-
customers on both sides); 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 or ($0.22)
per contract rebate up to 1,499,999 contracts for QCC transactions
when both parties are 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 or ($0.22) per contract when both
sides of the QCC transaction are non-customers).
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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 proposed QCC credits are based
on the amount and type of business transacted on the
[[Page 20592]]
Exchange, and Submitting Brokers can attempt to submit QCC transactions
to earn the credits or not. In addition, the proposed credits are
equally available to all qualifying Submitting Brokers. The Exchange
also believes the proposed changes regarding the Monthly Credit and
Rebate Cap are equitable because they would add clarity and
transparency to the Fee Schedule regarding the current maximum monthly
amount that a firm could earn from combined Submitting Broker QCC
credits and FB Rebates, thereby obviating potential confusion regarding
the applicability of the Monthly Credit and Rebate Cap. To the extent
the proposed changes continue to incent Submitting 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 credits are designed to incent
Submitting 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 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 Exchange also believes the proposed change to the Routing Fees
is equitable because the proposed single fee for all routed orders in
Penny issues and single fee for all routed orders in non-Penny issues
would apply to all market participants equally and the proposed amounts
are designed to offset internal resources necessary to support the
handling of orders routed away from the Exchange. The proposed change
would also streamline the process of calculating routing fees for all
market participants and provide increased clarity regarding execution
costs at the time of order entry.
The Exchange believes that the elimination of the Market Maker
Incentives is equitable because these incentives, which did not achieve
their intended purpose of encouraging Market Maker posted interest,
would no longer be available to any Market Makers, and, moreover, the
Exchange offers Market Makers alternative methods to achieve credits of
an equal or higher amount.
The Proposed Rule Change Is Not Unfairly Discriminatory
The Exchange believes the proposed change is not unfairly
discriminatory because the proposed credits on QCC transactions would
be available to all qualifying Submitting Brokers on an equal and non-
discriminatory basis. The proposed change is based on the amount and
type of business transacted on the Exchange, and Submitting Brokers are
not obligated to execute QCC transactions. Rather, the proposal is
designed to encourage Submitting Brokers to increase QCC volume sent to
the Exchange and to utilize the Exchange as a primary trading venue for
all transactions (if they have not done so previously). To the extent
that the proposed change attracts more QCC transactions 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.
The Exchange also believes that the proposed change to eliminate
the Market Maker Incentives is also not unfairly discriminatory because
the incentives, which were underutilized by Market Makers, would be
eliminated in their entirety and would no longer be available to any
Market Makers. In addition, Market Makers would continue to be eligible
for alternative incentives currently available to them with similar
credits and qualifying criteria. The Exchange also believes that the
proposed changes to the Routing Fees are not unfairly discriminatory
because the proposed fees are intended to assess streamlined routing
fees in amounts that would appropriately account for the internal
resources necessary to support orders routed away from the Exchange and
would apply equally to all market participants' routed orders, based on
whether such order is in a Penny or non-Penny issue. The proposed
change would simplify the calculation of routing fees for all market
participants and add clarity and transparency to the Fee Schedule
regarding the fees applicable to routed orders.
Thus, the Exchange believes that, to the extent the proposed rule
change would continue to improve market quality for all market
participants on the Exchange by promoting clarity and transparency in
the Fee Schedule and 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.'' \21\
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\21\ See Reg NMS Adopting Release, supra note 16, at 37499.
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Intramarket Competition. The proposed change with respect to QCC
credits is designed to attract additional order flow to the Exchange
(particularly in 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 Submitting
Brokers that execute
[[Page 20593]]
QCC trades and achieve the volume thresholds for the additional
credits. The Exchange does not believe that the proposed changes
regarding Routing Fees or the Monthly Credit and Rebate Cap would
impose any burden on competition that is not necessary or appropriate,
as they are intended to add clarity and transparency to the Fee
Schedule with respect to fees for orders routed away from the Exchange
and the monthly cap on combined Submitting Broker QCC credits and FB
Rebates earned by a firm. The Exchange also does not believe that the
proposed changes to the Market Maker Incentives would impose any burden
on intramarket competition that is not necessary or appropriate because
the incentives would be eliminated for all Market Makers.
Intermarket Competition. The Exchange operates in a highly
competitive market in which market participants can readily favor one
of the 16 competing option exchanges if they deem fee levels at a
particular venue to be excessive. In such an environment, the Exchange
must continually adjust its fees to remain competitive with other
exchanges and to attract order flow to the Exchange. Based on publicly-
available information, and excluding index-based options, no single
exchange has more than 16% of the market share of executed volume of
multiply-listed equity and ETF options trades.\22\ Therefore, currently
no exchange possesses significant pricing power in the execution of
multiply-listed equity and ETF options order flow. More specifically,
in January 2023, the Exchange had less than 13% market share of
executed volume of multiply-listed equity and ETF options trades.\23\
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\22\ 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.
\23\ 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 13.06% for the month of January 2022 to 12.58% for
the month of January 2023.
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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 OTP Holders to direct trading
interest (particularly QCC transactions) to the Exchange, to provide
liquidity and to attract order flow. To the extent that Submitting
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 does not believe that the proposed changes regarding
Routing Fees or the Monthly Credit and Rebate Cap would impose any
burden on competition that is not necessary or appropriate, as they are
intended to improve the clarity and transparency of the Fee Schedule
with respect to fees for orders routed away from the Exchange and the
maximum monthly amount that a firm could earn from Submitting Broker
QCC credits and FB Rebates combined. The Exchange also does not believe
that the proposed elimination of the Market Maker Incentives would
impose any burden on competition that is not necessary or appropriate
because the incentives would no longer be available to any Market
Makers, and the Exchange would continue to offer Market Makers similar,
alternative incentives.
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 changes could promote
competition between the Exchange and other execution venues, including
those that currently offer similarly structured routing charges or that
currently offer credits on QCC transactions, by encouraging additional
orders (and, in particular, QCC transactions) to be sent to the
Exchange for execution.\24\
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\24\ See notes 12 & 20, 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) \25\ of the Act and subparagraph (f)(2) of Rule
19b-4 \26\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\25\ 15 U.S.C. 78s(b)(3)(A).
\26\ 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) \27\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\27\ 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-2023-28 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-2023-28. 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
[[Page 20594]]
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-2023-28, and should
be submitted on or before April 27, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\28\
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\28\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-07142 Filed 4-5-23; 8:45 am]
BILLING CODE 8011-01-P
