Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify the NYSE Arca Options Fee Schedule, 7420-7424 [2024-02062]

Download as PDF 7420 Federal Register / Vol. 89, No. 23 / Friday, February 2, 2024 / Notices that the Postal Service states concern Competitive product(s), applicable statutory and regulatory requirements include 39 U.S.C. 3632, 39 U.S.C. 3633, 39 U.S.C. 3642, 39 CFR part 3035, and 39 CFR part 3040, subpart B. Comment deadline(s) for each request appear in section II. Program (the ‘‘FB Prepay Program’’). The Exchange proposes to implement the fee change effective January 25, 2024.4 The proposed rule change is available on the Exchange’s website at www.nyse.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Docketed Proceeding(s) 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. Docket No(s).: MC2024–169 and CP2024–175; Filing Title: USPS Request to Add Priority Mail & USPS Ground Advantage Contract 176 to Competitive Product List and Notice of Filing Materials Under Seal; Filing Acceptance Date: January 29, 2024; Filing Authority: 39 U.S.C. 3642, 39 CFR 3040.130 through 3040.135, and 39 CFR 3035.105; Public Representative: Samuel Robinson; Comments Due: February 6, 2024. This Notice will be published in the Federal Register. Jennie L. Jbara, Alternate Certifying Officer. A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change [FR Doc. 2024–02105 Filed 2–1–24; 8:45 am] BILLING CODE 7710–FW–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–99440; File No. SR– NYSEARCA–2024–10] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify the NYSE Arca Options Fee Schedule January 29, 2024. 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 January 25, 2024, 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. khammond on DSKJM1Z7X2PROD with NOTICES 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 the Floor Broker Fixed Cost Prepayment Incentive 1 15 U.S.C. 78s(b)(1). U.S.C. 78a. 3 17 CFR 240.19b–4. 2 15 VerDate Sep<11>2014 17:08 Feb 01, 2024 Jkt 262001 1. Purpose The purpose of this filing is to amend the Fee Schedule to modify the FB Prepay Program. The Exchange proposes to implement the rule change on January 25, 2024. The FB Prepay Program is a prepayment incentive program that allows Floor Brokers to prepay certain of their annual Eligible Fixed Costs in exchange for volume rebates. Participating Floor Brokers receive their monthly rebate amount on a monthly basis.5 All Floor Brokers that participate in the FB Prepay Program are eligible for a rebate on manual billable volume of ($0.08) per billable side, payable on a monthly basis. In addition, FB Prepay Program participants that achieve more than 500,000 billable sides in a month are eligible for an additional rebate of ($0.02) per billable side. The additional ($0.02) is retroactive to the first billable side. Manual billable volume includes transactions for which at least one side is subject to manual transaction fees and excludes QCCs. Any volume calculated to achieve the Limit of Fees on Options 4 The Exchange originally filed to amend the Fee Schedule on January 2, 2024 (NYSEArca–2023–90) [sic] and withdrew such filing on January 12, 2024 (SR–NYSEArca–2024–07) [sic], which latter filing the Exchange withdrew on January 25, 2024. 5 See Fee Schedule, Floor Broker Fixed Cost Prepayment Incentive Program (the ‘‘FB Prepay Program’’). The Exchange notes that the FB Prepay Program is currently structured similarly to the Floor Broker prepayment program offered by its affiliated exchange, NYSE American LLC (‘‘NYSE American’’). PO 00000 Frm 00068 Fmt 4703 Sfmt 4703 Strategy Executions (‘‘Strategy Cap’’), regardless of whether this cap is achieved, is likewise excluded from the Manual Billable Rebate Program because fees on such volume are already capped and therefore such volume does not increase billable manual volume. The Exchange notes that it places a $2,000,000 per firm, monthly maximum limit on the rebates earned through the Manual Billable Rebate Program when combined with ‘‘Submitting Broker QCC Credits.’’ 6 Floor Brokers that wish to participate in the FB Prepay Program for the following calendar year must notify the Exchange no later than the last business day of December in the current year.7 The Exchange does not issue any refunds in the event that a Floor Broker organization’s prepaid Eligible Fixed Costs exceeds actual costs. The Exchange proposes to modify the FB Prepay Program as follows. First, the Exchange proposes to increase the maximum allowable combined Submitting Broker QCC credits and Floor Broker rebates earned through the Manual Billable Rebate Program (the ‘‘Maximum Combined Rebate/Credit’’) to $2,500,000 per month per firm, an increase from the current maximum of $2,000,000. The proposed increase is designed to encourage Floor Broker firms to continue to direct transactions to the Exchange, despite increasing industry volumes making it less difficult to attain the maximum rebate. Next, the Exchange proposes to modify the FB Prepay Program to 6 See Fee Schedule, FB Prepay Program, endnote 17 (providing in relevant part that ‘‘Submitting Broker QCC credits and Floor Broker rebates earned through the Manual Billable Rebate Program shall not combine to exceed $2,500,000 per month per firm’’). A ‘‘Submitting Broker QCC credit’’ is available to any broker submitting a QCC transaction to the Exchange (a ‘‘Submitting Broker’’), whether the broker is a Floor Broker on the Trading Floor or a broker that enters orders electronically through an interface with the Exchange. The Exchange provides a ($0.22) per contract credits to Submitting Brokers for NonCustomer vs. Non-Customer QCC transactions and a ($0.16) per contract credit to Submitting Brokers for Customer vs. Non-Customer QCC transactions. See Fee Schedule, NYSE Arca OPTIONS: TRADERELATED CHARGES FOR STANDARD OPTIONS, QUALIFIED CONTINGENT CROSS (‘‘QCC’’) TRANSACTION FEES AND CREDITS. 7 See Fee Schedule, FB Prepay Program (providing, in relevant part, that the notification ‘‘email to enroll in the Program must originate from an officer of the Floor Broker organization and, except as provided for below, represents a binding commitment through the end of the following calendar year.’’). The Exchange proposes to modify Section III.E. [sic] of the Fee Schedule to remove the now obsolete phrase ‘‘except as provided for below,’’ as there is no exception to the notification requirement, which modification will add clarity, transparency, and internal consistency to the Fee Schedule. See proposed Fee Schedule, FB Prepay Program. E:\FR\FM\02FEN1.SGM 02FEN1 Federal Register / Vol. 89, No. 23 / Friday, February 2, 2024 / Notices khammond on DSKJM1Z7X2PROD with NOTICES remove reference to a specific year (i.e., November 2022) and to instead reference ‘‘November of the current year’’ as the date that the Exchange will use for the calculation of a Floor Broker’s Eligible Fixed Costs for the following calendar year. The FB Prepay Program currently specifies that a Floor Broker that commits to the program will be invoiced in January for Eligible Fixed Costs, based on annualizing their Eligible Fixed Costs incurred in November 2022. The Exchange believes that this proposed change would prevent the Exchange from relying on a stale date and would add flexibility to the program (insofar as it would not need to be revised each year). Finally, the Exchange proposes to allow a Floor Broker to join the Program after the first of the year To do so, similar to the protocol required of existing Program participants, such Floor Broker organizations would notify the Exchange in writing by emailing optionsbilling@nyse.com and indicating their commitment to submit prepayment for the balance of the calendar year; the email notification would have to originate from an officer of the Floor Broker organization and would represent a binding commitment through the balance of the calendar year.8 As further proposed, the Floor Broker organization would be enrolled in the Program beginning on the first day of the next full month and would be invoiced for that first full month for Eligible Fixed Costs and the balance of the year, based on annualizing for the remainder of the calendar year their Eligible Fixed Costs incurred in its first full month in the Program.9 The Exchange notes that both the current and proposed methodology rely on recently incurred Eligible Fixed Costs to predict anticipated Eligible Fixed Costs. For current program Participants the Exchange relies on November costs; whereas, for later-joining Program participants, the Exchange would rely on costs incurred in the Floor Broker’s first full month in the Program. The Exchange believes that this approach allows the Exchange the flexibility to offer the FB Prepay Program to Floor Brokers that did not enroll before the 8 See proposed Fee Schedule, FB Prepay Program (providing, in relevant part, that ‘‘[t]o participate in the FB Prepay Program after the first of the year, Floor Broker organizations must notify the Exchange in writing by emailing optionsbilling@ nyse.com, indicating a commitment to submit prepayment for the balance of the calendar year’’ and that the notification ‘‘email to enroll in the Program must originate from an officer of the Floor Broker organization and represents a binding commitment through the balance of the calendar year.’’). 9 See proposed Fee Schedule, FB Prepay Program. VerDate Sep<11>2014 17:08 Feb 01, 2024 Jkt 262001 end of the prior calendar year, including/especially Floor Brokers new to the Exchange, without putting these Floor Brokers at a competitive disadvantage. Although the Exchange cannot predict with certainty whether the proposed changes to the FB Prepay Program would encourage Floor Brokers to participate in the program or to increase their manual billable volume, the Exchange believes that the proposed changes would continue to incent Floor Brokers to participate in the FB Prepay Program by adding flexibility to the structure of the Program, including by allowing Floor Brokers to join the Program after the first of the year and increasing the Maximum Combined Rebate/Credit. All Floor Brokers are eligible to participate in the FB Prepay Program and qualify for the proposed rebates. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with section 6(b) of the Act,10 in general, and furthers the objectives of sections 6(b)(4) and (5) of the Act,11 in particular, because it provides for the equitable allocation of reasonable dues, fees, and other charges among its members, issuers and other persons using its facilities and does not unfairly discriminate between customers, issuers, brokers or dealers. The Proposed Rule Change Is Reasonable The Exchange operates in a highly competitive market. The Commission has repeatedly expressed its preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. In Regulation NMS, the Commission highlighted the importance of market forces in determining prices and SRO revenues and, also, recognized that current regulation of the market system ‘‘has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.’’ 12 There are currently 17 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 10 15 U.S.C. 78f(b). U.S.C. 78f(b)(4) and (5). 12 See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005) (S7–10–04) (‘‘Reg NMS Adopting Release’’). 11 15 PO 00000 Frm 00069 Fmt 4703 Sfmt 4703 7421 equity and ETF options trades.13 Therefore, no exchange possesses significant pricing power in the execution of multiply-listed equity and ETF options order flow. More specifically, in November 2023, the Exchange had less than 12% market share of executed volume of multiplylisted equity and ETF options trades.14 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 changes are reasonable because they are designed to continue to incent Floor Brokers to increase the number of manual transactions sent to the Exchange by offering them rebates on manual transactions with at least one billable side. The Exchange also believes that the proposed higher maximum monthly amount that a firm could earn from Submitting Broker QCC credits and Floor Broker rebates on manual billable volume (i.e., the Maximum Combined Rebate/Credit) is reasonable because it is set at an amount that is designed to encourage Floor Brokers to direct QCC transactions and manual billable volume to the Exchange to receive the existing credits and proposed rebates. With respect to the FB Prepay Program, the Exchange also believes that the proposed changes are reasonable because participation in the program is optional, and Floor Brokers can elect to participate in the program to be eligible for the rebates offered through the Manual Billable Rebate Program or not. The Exchange also believes that the proposed modification of the FB Prepay Program is reasonable because it is designed to continue to encourage Floor Brokers to participate in the FB Prepay Program, and to provide liquidity on the Exchange. Specifically, the Exchange 13 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. 14 Based on a compilation of OCC data for monthly volume of equity-based options and monthly volume of equity-based ETF options, see id., the Exchange’s market share in equity-based options decreased from 12.31% for the month of November 2022 to 11.67% for the month of November 2023. E:\FR\FM\02FEN1.SGM 02FEN1 khammond on DSKJM1Z7X2PROD with NOTICES 7422 Federal Register / Vol. 89, No. 23 / Friday, February 2, 2024 / Notices believes that the proposed continuation of the FB Prepay Program to offer participating Floor Brokers rebates on manual billable volume is reasonable because it would maintain both the incentives offered to Floor Brokers and the qualification basis for such incentives; all Floor Brokers participating in the FB Prepay Program would be eligible for the same rebate on manual billable volume and would qualify for the same additional rebate on manual billable volume by meeting a set volume threshold (which the Exchange believes is reasonable and is attainable based on manual billable volume rebates earned by Floor Brokers). To the extent that the continued aspects of the program continue to attract 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 Floor Brokers, which could promote market depth, facilitate tighter spreads, and enhance price discovery, to the extent the proposed change encourages Floor Brokers to utilize the Exchange as a primary trading venue, and may lead to a corresponding increase in order flow from other market participants. In addition, any increased liquidity on the Exchange would result in enhanced market quality for all participants. The Exchange also believes that the proposed change to modify the Program to remove reference to a specific year is reasonable because it would prevent the Exchange from using a benchmark based on a stale date and would add flexibility to the Program (insofar as it would not need to be revised each year). In addition, the proposed change to allow Floor Brokers to join the Program after the first of the year—by prepaying an amount (to cover the balance of the year) based on their Eligible Fixed Costs incurred in their first month in the Program—is reasonable for several reasons. First, the proposed method used to determine the prepayment amount for any later-joining Floor Brokers is analogous to the Exchange’s current method of determining the prepayment amount for Program participants (i.e., prepayment amount is based on the Eligible Fixed Costs recently-incurred). Second, the Exchange believes that the proposed method of determining a (later-joining) Floor Broker’s prepayment amount VerDate Sep<11>2014 17:08 Feb 01, 2024 Jkt 262001 would provide the most accurate basis for anticipating that Floor Broker’s future Eligible Fixed Costs. Moreover, the Exchange believes that this approach would allow the Exchange the flexibility to offer the FB Prepay Program to later-joining Floor Brokers, including/especially Floor Brokers new to the Exchange, without putting these Floor Brokers at a competitive disadvantage. To the extent the continuation of the program would continue to attract greater volume and liquidity, the Exchange believes the proposed change would improve the Exchange’s overall competitiveness and strengthen its market quality for all market participants. In the backdrop of the competitive environment in which the Exchange operates, the proposed rule change is a reasonable attempt by the Exchange to increase the depth of its market and improve its market share relative to its competitors. The Exchange’s fees are constrained by intermarket competition, as Floor Brokers may direct their order flow to any of the 17 options exchanges, including an exchange offering Floor Broker rebates on manual transactions.15 Thus, Floor Brokers have a choice of where they direct their order flow, including their manual transactions. The proposed rule changes are designed to continue to incent Floor Brokers to direct liquidity and, in particular, manual transactions to the Exchange. In addition, to the extent Floor Brokers are incented to continue 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. Finally, the proposed changes to remove superfluous or obsolete text from the FB Prepay Program, are reasonable because they would add clarity, transparency, and internal consistency to the Fee Schedule to the benefit of all 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 because the proposal is based on the amount and type of business transacted on the Exchange. Floor Brokers are not obligated to participate in the FB Prepay Program, and those who do can choose to execute manual billable volume to earn rebates through the Manual Billable Rebate Program or not. In addition, the Manual 15 See PO 00000 id. Frm 00070 Fmt 4703 Sfmt 4703 Billable Rebate Program continues to be equally available to all Floor Brokers that participate in the FB Prepay Program and the proposed monthly limit on the amount that firms could earn from Floor Broker manual billable rebates and Submitting Broker QCC credits combined would apply to all firms equally (i.e., the Maximum Combined Rebate/Credit). The Exchange also notes that the proposed changes are designed to encourage Floor Brokers that have previously enrolled in the FB Prepay Program to reenroll for the upcoming year, as well as to attract Floor Brokers that have not yet participated in the program. Moreover, the Exchange believes that the proposed modifications to the FB Prepay Program are an equitable allocation of fees and credits because they would apply to participating Floor Brokers equally and are intended to encourage the role performed by Floor Brokers in facilitating the execution of orders via open outcry, a function which the Exchange wishes to support for the benefit of all market participants. The Exchange also believes that the proposed change to modify the Program to remove reference to a specific year is equitable because it would prevent the Exchange from using a benchmark based on a stale date. In addition, the proposed change to allow Floor Brokers to join the Program after the first of the year—by prepaying an amount (to cover the balance of the year) based on their Eligible Fixed Costs incurred in their first month in the Program—is equitable for several reasons. First, the proposed method used to determine the prepayment amount for any later-joining Floor Brokers is analogous to the Exchange’s current method of determining the prepayment amount for Program participants (i.e., prepayment amount is based on the Eligible Fixed Costs recently-incurred). Second, the Exchange believes that the proposed method of determining a (later-joining) Floor Broker’s prepayment amount would provide the most accurate basis for anticipating that Floor Broker’s future Eligible Fixed Costs. Moreover, the Exchange believes that this approach would allow the Exchange the flexibility to offer the FB Prepay Program to later-joining Floor Brokers, including/especially Floor Brokers new to the Exchange, without putting these Floor Brokers at a competitive disadvantage. Moreover, the proposed changes are designed to continue to incent Floor Brokers to encourage OTP Holders to aggregate their executions at the Exchange as a primary execution venue. E:\FR\FM\02FEN1.SGM 02FEN1 Federal Register / Vol. 89, No. 23 / Friday, February 2, 2024 / Notices khammond on DSKJM1Z7X2PROD with NOTICES 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 Proposed Rule Change Is Not Unfairly Discriminatory The Exchange believes the proposed change is not unfairly discriminatory because it is based on the amount and type of business transacted on the Exchange. Floor Brokers are not obligated to execute manual billable transactions or participate in the FB Prepay Program, and the proposed rebates offered through the Manual Billable Rebate Program are available to all Floor Brokers that participate in the FB Prepay Program on a nondiscriminatory basis. The proposed changes are designed to add flexibility to the FB Prepay Program by offering all participating Floor Brokers the same increased Maximum Combined Rebate/ Credit and to encourage Floor Brokers to utilize the Exchange as a primary trading venue for all transactions (if they have not done so previously) and increase manual billable volume sent to the Exchange. The Exchange also believes that the proposed change to modify the Program to remove reference to a specific year is not unfairly discriminatory because it would apply equally to all Program participants and would prevent the Exchange from using a benchmark based on a stale date. In addition, the proposed change to allow Floor Brokers to join the Program after the first of the year—by prepaying an amount (to cover the balance of the year) based on their Eligible Fixed Costs incurred in their first month in the Program—is not unfairly discriminatory for several reasons. First, the proposed method used to determine the prepayment amount for any later-joining Floor Brokers is analogous to the Exchange’s current method of determining the prepayment amount for Program participants (i.e., prepayment amount is based on the Eligible Fixed Costs recently-incurred). Second, the Exchange believes that the proposed method of determining a (later-joining) Floor Broker’s prepayment amount would provide the most accurate basis for anticipating that Floor Broker’s VerDate Sep<11>2014 17:08 Feb 01, 2024 Jkt 262001 future Eligible Fixed Costs. Moreover, the Exchange believes that this approach would allow the Exchange the flexibility to offer the FB Prepay Program to later-joining Floor Brokers, including/especially Floor Brokers new to the Exchange, without putting these Floor Brokers at a competitive disadvantage. To the extent that the proposed continuation of (and modifications to) the Program attracts more manual 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. 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.’’ 16 Intramarket Competition. The continuation of the rebates on manual billable volume is designed to attract 16 See Reg NMS Adopting Release, supra note 12, at 37499. PO 00000 Frm 00071 Fmt 4703 Sfmt 4703 7423 additional order flow to the Exchange (particularly in manual billable transactions), which could increase the volumes of contracts traded on the Exchange. The proposed modification of the FB Prepay Program is likewise intended to incent Floor Brokers specifically to direct manual billable transactions to the Exchange, as well as encourage Floor Brokers to participate in the Program. The continued rebates would be available to all similarly situated Floor Brokers that participate in the FB Prepay Program. Greater liquidity benefits all market participants on the Exchange, and increased manual transactions could increase opportunities for execution of other trading interest. The proposed Maximum Combined Rebate/Credit would likewise apply equally to all similarly situated Floor Brokers. To the extent that the proposed continuation of the program imposes an additional competitive burden on nonFloor Brokers, the Exchange believes that any such burden would be appropriate because all market participants stand to benefit from any increase in volume entered by Floor Brokers because an increase in trading volume could promote market depth, facilitate tighter spreads, and enhance price discovery. In addition, any increased liquidity on the Exchange would result in enhanced market quality for all participants. Intermarket Competition. The Exchange operates in a highly competitive market in which market participants can readily favor one of the 17 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.17 Therefore, currently no exchange possesses significant pricing power in the execution of multiply-listed equity and ETF options order flow. More specifically, in November 2023, the Exchange had less than 12% market 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. E:\FR\FM\02FEN1.SGM 02FEN1 7424 Federal Register / Vol. 89, No. 23 / Friday, February 2, 2024 / Notices share of executed volume of multiplylisted equity and ETF options trades.18 The Exchange believes that the proposed changes reflect this competitive environment because they modify the Exchange’s fees and rebates in a manner designed to continue to incent OTP Holders to direct trading interest (particularly manual transactions) to the Exchange, to provide liquidity and to attract order flow. To the extent that Floor Brokers are encouraged to participate in the FB Prepay Program and/or incented 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 further believes that the proposed change could promote competition between the Exchange and other execution venues, including those that currently offer rebates on manual transactions by encouraging additional orders to be sent to the Exchange for execution. Finally, the proposed changes to remove superfluous or obsolete text from the FB Prepay Program are not designed to address any competitive issue but are instead designed to add clarity, transparency, and internal consistency to the Fee Schedule. 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 khammond on DSKJM1Z7X2PROD with NOTICES The foregoing rule change is effective upon filing pursuant to section 19(b)(3)(A) 19 of the Act and subparagraph (f)(2) of Rule 19b–4 20 thereunder, because it establishes a due, fee, or other charge imposed by the Exchange. At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the 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 12.31% for the month of November 2022 to 11.67% for the month of November 2023. 19 15 U.S.C. 78s(b)(3)(A). 20 17 CFR 240.19b–4(f)(2). VerDate Sep<11>2014 17:08 Feb 01, 2024 Jkt 262001 public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings under section 19(b)(2)(B) 21 of the Act to determine whether the proposed rule change should be approved or disapproved. 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–2024–10 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–2024–10. 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 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. Do not include personal identifiable information in submissions; you should submit only information that you wish to make available publicly. We may redact in part or 21 15 PO 00000 U.S.C. 78s(b)(2)(B). Frm 00072 Fmt 4703 Sfmt 4703 withhold entirely from publication submitted material that is obscene or subject to copyright protection. All submissions should refer to file number SR–NYSEARCA–2024–10 and should be submitted on or before February 23, 2024. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.22 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2024–02062 Filed 2–1–24; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–99444; File No. SR–MSRB– 2023–06] Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Suspension of and Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change To Establish the 2024 Rate Card Fees for Dealers and Municipal Advisors Pursuant to MSRB Rules A–11 and A–13 January 29, 2024. I. Introduction On November 30, 2023, the Municipal Securities Rulemaking Board (‘‘MSRB’’ or ‘‘Board’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’ or ‘‘Exchange Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change (File No. SR–MSRB–2023–06) to establish the 2024 Rate Card Fees for Dealers and Municipal Advisors.3 The proposed rule change was immediately effective upon filing with the Commission pursuant to Section 19(b)(3)(A) of the Act.4 The proposed rule change was published for comment in the Federal Register on December 12, 2023.5 Pursuant to Section 19(b)(3)(C) of the Act,6 the Commission is hereby temporarily suspending File No. SR– MSRB–2023–06 and instituting 22 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 Securities Exchange Act Release No. 34–99096 (December 6, 2023), 88 FR 86188 (December 12, 2023) (‘‘Notice’’). 4 15 U.S.C. 78s(b)(3)(A). A proposed rule change may take effect upon filing with the Commission if it is designated by the SRO as ‘‘establishing or changing a due, fee, or other charge imposed by the self-regulatory organization on any person, whether or not the person is a member of the self-regulatory organization.’’ 15 U.S.C. 78s(b)(3)(A)(ii). 5 See Notice 88 FR at 86188. 6 15 U.S.C. 78s(b)(3)(C). 1 15 E:\FR\FM\02FEN1.SGM 02FEN1

Agencies

[Federal Register Volume 89, Number 23 (Friday, February 2, 2024)]
[Notices]
[Pages 7420-7424]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-02062]


=======================================================================
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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99440; File No. SR-NYSEARCA-2024-10]


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

January 29, 2024.
    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 January 25, 2024, 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 the Floor Broker Fixed Cost Prepayment 
Incentive Program (the ``FB Prepay Program''). The Exchange proposes to 
implement the fee change effective January 25, 2024.\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 
January 2, 2024 (NYSEArca-2023-90) [sic] and withdrew such filing on 
January 12, 2024 (SR-NYSEArca-2024-07) [sic], which latter filing 
the Exchange withdrew on January 25, 2024.
---------------------------------------------------------------------------

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 modify 
the FB Prepay Program. The Exchange proposes to implement the rule 
change on January 25, 2024.
    The FB Prepay Program is a prepayment incentive program that allows 
Floor Brokers to prepay certain of their annual Eligible Fixed Costs in 
exchange for volume rebates. Participating Floor Brokers receive their 
monthly rebate amount on a monthly basis.\5\ All Floor Brokers that 
participate in the FB Prepay Program are eligible for a rebate on 
manual billable volume of ($0.08) per billable side, payable on a 
monthly basis. In addition, FB Prepay Program participants that achieve 
more than 500,000 billable sides in a month are eligible for an 
additional rebate of ($0.02) per billable side. The additional ($0.02) 
is retroactive to the first billable side. Manual billable volume 
includes transactions for which at least one side is subject to manual 
transaction fees and excludes QCCs. Any volume calculated to achieve 
the Limit of Fees on Options Strategy Executions (``Strategy Cap''), 
regardless of whether this cap is achieved, is likewise excluded from 
the Manual Billable Rebate Program because fees on such volume are 
already capped and therefore such volume does not increase billable 
manual volume. The Exchange notes that it places a $2,000,000 per firm, 
monthly maximum limit on the rebates earned through the Manual Billable 
Rebate Program when combined with ``Submitting Broker QCC Credits.'' 
\6\
---------------------------------------------------------------------------

    \5\ See Fee Schedule, Floor Broker Fixed Cost Prepayment 
Incentive Program (the ``FB Prepay Program''). The Exchange notes 
that the FB Prepay Program is currently structured similarly to the 
Floor Broker prepayment program offered by its affiliated exchange, 
NYSE American LLC (``NYSE American'').
    \6\ See Fee Schedule, FB Prepay Program, endnote 17 (providing 
in relevant part that ``Submitting Broker QCC credits and Floor 
Broker rebates earned through the Manual Billable Rebate Program 
shall not combine to exceed $2,500,000 per month per firm''). A 
``Submitting Broker QCC credit'' is available to any broker 
submitting a QCC transaction to the Exchange (a ``Submitting 
Broker''), whether the broker is a Floor Broker on the Trading Floor 
or a broker that enters orders electronically through an interface 
with the Exchange. The Exchange provides a ($0.22) per contract 
credits to Submitting Brokers for Non-Customer vs. Non-Customer QCC 
transactions and a ($0.16) per contract credit to Submitting Brokers 
for Customer vs. Non-Customer QCC transactions. See Fee Schedule, 
NYSE Arca OPTIONS: TRADE-RELATED CHARGES FOR STANDARD OPTIONS, 
QUALIFIED CONTINGENT CROSS (``QCC'') TRANSACTION FEES AND CREDITS.
---------------------------------------------------------------------------

    Floor Brokers that wish to participate in the FB Prepay Program for 
the following calendar year must notify the Exchange no later than the 
last business day of December in the current year.\7\ The Exchange does 
not issue any refunds in the event that a Floor Broker organization's 
prepaid Eligible Fixed Costs exceeds actual costs.
---------------------------------------------------------------------------

    \7\ See Fee Schedule, FB Prepay Program (providing, in relevant 
part, that the notification ``email to enroll in the Program must 
originate from an officer of the Floor Broker organization and, 
except as provided for below, represents a binding commitment 
through the end of the following calendar year.''). The Exchange 
proposes to modify Section III.E. [sic] of the Fee Schedule to 
remove the now obsolete phrase ``except as provided for below,'' as 
there is no exception to the notification requirement, which 
modification will add clarity, transparency, and internal 
consistency to the Fee Schedule. See proposed Fee Schedule, FB 
Prepay Program.
---------------------------------------------------------------------------

    The Exchange proposes to modify the FB Prepay Program as follows. 
First, the Exchange proposes to increase the maximum allowable combined 
Submitting Broker QCC credits and Floor Broker rebates earned through 
the Manual Billable Rebate Program (the ``Maximum Combined Rebate/
Credit'') to $2,500,000 per month per firm, an increase from the 
current maximum of $2,000,000. The proposed increase is designed to 
encourage Floor Broker firms to continue to direct transactions to the 
Exchange, despite increasing industry volumes making it less difficult 
to attain the maximum rebate.
    Next, the Exchange proposes to modify the FB Prepay Program to

[[Page 7421]]

remove reference to a specific year (i.e., November 2022) and to 
instead reference ``November of the current year'' as the date that the 
Exchange will use for the calculation of a Floor Broker's Eligible 
Fixed Costs for the following calendar year. The FB Prepay Program 
currently specifies that a Floor Broker that commits to the program 
will be invoiced in January for Eligible Fixed Costs, based on 
annualizing their Eligible Fixed Costs incurred in November 2022. The 
Exchange believes that this proposed change would prevent the Exchange 
from relying on a stale date and would add flexibility to the program 
(insofar as it would not need to be revised each year).
    Finally, the Exchange proposes to allow a Floor Broker to join the 
Program after the first of the year To do so, similar to the protocol 
required of existing Program participants, such Floor Broker 
organizations would notify the Exchange in writing by emailing 
[email protected] and indicating their commitment to submit 
prepayment for the balance of the calendar year; the email notification 
would have to originate from an officer of the Floor Broker 
organization and would represent a binding commitment through the 
balance of the calendar year.\8\ As further proposed, the Floor Broker 
organization would be enrolled in the Program beginning on the first 
day of the next full month and would be invoiced for that first full 
month for Eligible Fixed Costs and the balance of the year, based on 
annualizing for the remainder of the calendar year their Eligible Fixed 
Costs incurred in its first full month in the Program.\9\ The Exchange 
notes that both the current and proposed methodology rely on recently 
incurred Eligible Fixed Costs to predict anticipated Eligible Fixed 
Costs. For current program Participants the Exchange relies on November 
costs; whereas, for later-joining Program participants, the Exchange 
would rely on costs incurred in the Floor Broker's first full month in 
the Program. The Exchange believes that this approach allows the 
Exchange the flexibility to offer the FB Prepay Program to Floor 
Brokers that did not enroll before the end of the prior calendar year, 
including/especially Floor Brokers new to the Exchange, without putting 
these Floor Brokers at a competitive disadvantage.
---------------------------------------------------------------------------

    \8\ See proposed Fee Schedule, FB Prepay Program (providing, in 
relevant part, that ``[t]o participate in the FB Prepay Program 
after the first of the year, Floor Broker organizations must notify 
the Exchange in writing by emailing [email protected], 
indicating a commitment to submit prepayment for the balance of the 
calendar year'' and that the notification ``email to enroll in the 
Program must originate from an officer of the Floor Broker 
organization and represents a binding commitment through the balance 
of the calendar year.'').
    \9\ See proposed Fee Schedule, FB Prepay Program.
---------------------------------------------------------------------------

    Although the Exchange cannot predict with certainty whether the 
proposed changes to the FB Prepay Program would encourage Floor Brokers 
to participate in the program or to increase their manual billable 
volume, the Exchange believes that the proposed changes would continue 
to incent Floor Brokers to participate in the FB Prepay Program by 
adding flexibility to the structure of the Program, including by 
allowing Floor Brokers to join the Program after the first of the year 
and increasing the Maximum Combined Rebate/Credit. All Floor Brokers 
are eligible to participate in the FB Prepay Program and qualify for 
the proposed rebates.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with section 6(b) of the Act,\10\ in general, and furthers the 
objectives of sections 6(b)(4) and (5) of the Act,\11\ 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.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78f(b).
    \11\ 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 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.'' \12\
---------------------------------------------------------------------------

    \12\ 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 17 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.\13\ Therefore, no exchange possesses significant pricing power 
in the execution of multiply-listed equity and ETF options order flow. 
More specifically, in November 2023, the Exchange had less than 12% 
market share of executed volume of multiply-listed equity and ETF 
options trades.\14\
---------------------------------------------------------------------------

    \13\ 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.
    \14\ Based on a compilation of OCC data for monthly volume of 
equity-based options and monthly volume of equity-based ETF options, 
see id., the Exchange's market share in equity-based options 
decreased from 12.31% for the month of November 2022 to 11.67% for 
the month of November 2023.
---------------------------------------------------------------------------

    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 changes are reasonable 
because they are designed to continue to incent Floor Brokers to 
increase the number of manual transactions sent to the Exchange by 
offering them rebates on manual transactions with at least one billable 
side. The Exchange also believes that the proposed higher maximum 
monthly amount that a firm could earn from Submitting Broker QCC 
credits and Floor Broker rebates on manual billable volume (i.e., the 
Maximum Combined Rebate/Credit) is reasonable because it is set at an 
amount that is designed to encourage Floor Brokers to direct QCC 
transactions and manual billable volume to the Exchange to receive the 
existing credits and proposed rebates.
    With respect to the FB Prepay Program, the Exchange also believes 
that the proposed changes are reasonable because participation in the 
program is optional, and Floor Brokers can elect to participate in the 
program to be eligible for the rebates offered through the Manual 
Billable Rebate Program or not. The Exchange also believes that the 
proposed modification of the FB Prepay Program is reasonable because it 
is designed to continue to encourage Floor Brokers to participate in 
the FB Prepay Program, and to provide liquidity on the Exchange. 
Specifically, the Exchange

[[Page 7422]]

believes that the proposed continuation of the FB Prepay Program to 
offer participating Floor Brokers rebates on manual billable volume is 
reasonable because it would maintain both the incentives offered to 
Floor Brokers and the qualification basis for such incentives; all 
Floor Brokers participating in the FB Prepay Program would be eligible 
for the same rebate on manual billable volume and would qualify for the 
same additional rebate on manual billable volume by meeting a set 
volume threshold (which the Exchange believes is reasonable and is 
attainable based on manual billable volume rebates earned by Floor 
Brokers).
    To the extent that the continued aspects of the program continue to 
attract 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 Floor Brokers, which could promote market depth, facilitate 
tighter spreads, and enhance price discovery, to the extent the 
proposed change encourages Floor Brokers to utilize the Exchange as a 
primary trading venue, and may lead to a corresponding increase in 
order flow from other market participants. In addition, any increased 
liquidity on the Exchange would result in enhanced market quality for 
all participants.
    The Exchange also believes that the proposed change to modify the 
Program to remove reference to a specific year is reasonable because it 
would prevent the Exchange from using a benchmark based on a stale date 
and would add flexibility to the Program (insofar as it would not need 
to be revised each year). In addition, the proposed change to allow 
Floor Brokers to join the Program after the first of the year--by 
prepaying an amount (to cover the balance of the year) based on their 
Eligible Fixed Costs incurred in their first month in the Program--is 
reasonable for several reasons. First, the proposed method used to 
determine the prepayment amount for any later-joining Floor Brokers is 
analogous to the Exchange's current method of determining the 
prepayment amount for Program participants (i.e., prepayment amount is 
based on the Eligible Fixed Costs recently-incurred). Second, the 
Exchange believes that the proposed method of determining a (later-
joining) Floor Broker's prepayment amount would provide the most 
accurate basis for anticipating that Floor Broker's future Eligible 
Fixed Costs. Moreover, the Exchange believes that this approach would 
allow the Exchange the flexibility to offer the FB Prepay Program to 
later-joining Floor Brokers, including/especially Floor Brokers new to 
the Exchange, without putting these Floor Brokers at a competitive 
disadvantage.
    To the extent the continuation of the program would continue to 
attract greater volume and liquidity, the Exchange believes the 
proposed change would improve the Exchange's overall competitiveness 
and strengthen its market quality for all market participants. In the 
backdrop of the competitive environment in which the Exchange operates, 
the proposed rule change is a reasonable attempt by the Exchange to 
increase the depth of its market and improve its market share relative 
to its competitors. The Exchange's fees are constrained by intermarket 
competition, as Floor Brokers may direct their order flow to any of the 
17 options exchanges, including an exchange offering Floor Broker 
rebates on manual transactions.\15\ Thus, Floor Brokers have a choice 
of where they direct their order flow, including their manual 
transactions. The proposed rule changes are designed to continue to 
incent Floor Brokers to direct liquidity and, in particular, manual 
transactions to the Exchange. In addition, to the extent Floor Brokers 
are incented to continue 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.
---------------------------------------------------------------------------

    \15\ See id.
---------------------------------------------------------------------------

    Finally, the proposed changes to remove superfluous or obsolete 
text from the FB Prepay Program, are reasonable because they would add 
clarity, transparency, and internal consistency to the Fee Schedule to 
the benefit of all 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 because the proposal is based on the 
amount and type of business transacted on the Exchange. Floor Brokers 
are not obligated to participate in the FB Prepay Program, and those 
who do can choose to execute manual billable volume to earn rebates 
through the Manual Billable Rebate Program or not. In addition, the 
Manual Billable Rebate Program continues to be equally available to all 
Floor Brokers that participate in the FB Prepay Program and the 
proposed monthly limit on the amount that firms could earn from Floor 
Broker manual billable rebates and Submitting Broker QCC credits 
combined would apply to all firms equally (i.e., the Maximum Combined 
Rebate/Credit).
    The Exchange also notes that the proposed changes are designed to 
encourage Floor Brokers that have previously enrolled in the FB Prepay 
Program to reenroll for the upcoming year, as well as to attract Floor 
Brokers that have not yet participated in the program. Moreover, the 
Exchange believes that the proposed modifications to the FB Prepay 
Program are an equitable allocation of fees and credits because they 
would apply to participating Floor Brokers equally and are intended to 
encourage the role performed by Floor Brokers in facilitating the 
execution of orders via open outcry, a function which the Exchange 
wishes to support for the benefit of all market participants.
    The Exchange also believes that the proposed change to modify the 
Program to remove reference to a specific year is equitable because it 
would prevent the Exchange from using a benchmark based on a stale 
date. In addition, the proposed change to allow Floor Brokers to join 
the Program after the first of the year--by prepaying an amount (to 
cover the balance of the year) based on their Eligible Fixed Costs 
incurred in their first month in the Program--is equitable for several 
reasons. First, the proposed method used to determine the prepayment 
amount for any later-joining Floor Brokers is analogous to the 
Exchange's current method of determining the prepayment amount for 
Program participants (i.e., prepayment amount is based on the Eligible 
Fixed Costs recently-incurred). Second, the Exchange believes that the 
proposed method of determining a (later-joining) Floor Broker's 
prepayment amount would provide the most accurate basis for 
anticipating that Floor Broker's future Eligible Fixed Costs. Moreover, 
the Exchange believes that this approach would allow the Exchange the 
flexibility to offer the FB Prepay Program to later-joining Floor 
Brokers, including/especially Floor Brokers new to the Exchange, 
without putting these Floor Brokers at a competitive disadvantage.
    Moreover, the proposed changes are designed to continue to incent 
Floor Brokers to encourage OTP Holders to aggregate their executions at 
the Exchange as a primary execution venue.

[[Page 7423]]

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 Proposed Rule Change Is Not Unfairly Discriminatory
    The Exchange believes the proposed change is not unfairly 
discriminatory because it is based on the amount and type of business 
transacted on the Exchange. Floor Brokers are not obligated to execute 
manual billable transactions or participate in the FB Prepay Program, 
and the proposed rebates offered through the Manual Billable Rebate 
Program are available to all Floor Brokers that participate in the FB 
Prepay Program on a non-discriminatory basis. The proposed changes are 
designed to add flexibility to the FB Prepay Program by offering all 
participating Floor Brokers the same increased Maximum Combined Rebate/
Credit and to encourage Floor Brokers to utilize the Exchange as a 
primary trading venue for all transactions (if they have not done so 
previously) and increase manual billable volume sent to the Exchange.
    The Exchange also believes that the proposed change to modify the 
Program to remove reference to a specific year is not unfairly 
discriminatory because it would apply equally to all Program 
participants and would prevent the Exchange from using a benchmark 
based on a stale date. In addition, the proposed change to allow Floor 
Brokers to join the Program after the first of the year--by prepaying 
an amount (to cover the balance of the year) based on their Eligible 
Fixed Costs incurred in their first month in the Program--is not 
unfairly discriminatory for several reasons. First, the proposed method 
used to determine the prepayment amount for any later-joining Floor 
Brokers is analogous to the Exchange's current method of determining 
the prepayment amount for Program participants (i.e., prepayment amount 
is based on the Eligible Fixed Costs recently-incurred). Second, the 
Exchange believes that the proposed method of determining a (later-
joining) Floor Broker's prepayment amount would provide the most 
accurate basis for anticipating that Floor Broker's future Eligible 
Fixed Costs. Moreover, the Exchange believes that this approach would 
allow the Exchange the flexibility to offer the FB Prepay Program to 
later-joining Floor Brokers, including/especially Floor Brokers new to 
the Exchange, without putting these Floor Brokers at a competitive 
disadvantage.
    To the extent that the proposed continuation of (and modifications 
to) the Program attracts more manual 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.
    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.'' \16\
---------------------------------------------------------------------------

    \16\ See Reg NMS Adopting Release, supra note 12, at 37499.
---------------------------------------------------------------------------

    Intramarket Competition. The continuation of the rebates on manual 
billable volume is designed to attract additional order flow to the 
Exchange (particularly in manual billable transactions), which could 
increase the volumes of contracts traded on the Exchange. The proposed 
modification of the FB Prepay Program is likewise intended to incent 
Floor Brokers specifically to direct manual billable transactions to 
the Exchange, as well as encourage Floor Brokers to participate in the 
Program. The continued rebates would be available to all similarly 
situated Floor Brokers that participate in the FB Prepay Program. 
Greater liquidity benefits all market participants on the Exchange, and 
increased manual transactions could increase opportunities for 
execution of other trading interest. The proposed Maximum Combined 
Rebate/Credit would likewise apply equally to all similarly situated 
Floor Brokers.
    To the extent that the proposed continuation of the program imposes 
an additional competitive burden on non-Floor Brokers, the Exchange 
believes that any such burden would be appropriate because all market 
participants stand to benefit from any increase in volume entered by 
Floor Brokers because an increase in trading volume could promote 
market depth, facilitate tighter spreads, and enhance price discovery. 
In addition, any increased liquidity on the Exchange would result in 
enhanced market quality for all participants.
    Intermarket Competition. The Exchange operates in a highly 
competitive market in which market participants can readily favor one 
of the 17 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.\17\ Therefore, currently 
no exchange possesses significant pricing power in the execution of 
multiply-listed equity and ETF options order flow. More specifically, 
in November 2023, the Exchange had less than 12% market

[[Page 7424]]

share of executed volume of multiply-listed equity and ETF options 
trades.\18\
---------------------------------------------------------------------------

    \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 12.31% for the month of November 2022 to 11.67% for 
the month of November 2023.
---------------------------------------------------------------------------

    The Exchange believes that the proposed changes reflect this 
competitive environment because they modify the Exchange's fees and 
rebates in a manner designed to continue to incent OTP Holders to 
direct trading interest (particularly manual transactions) to the 
Exchange, to provide liquidity and to attract order flow. To the extent 
that Floor Brokers are encouraged to participate in the FB Prepay 
Program and/or incented 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 further believes that the proposed change could 
promote competition between the Exchange and other execution venues, 
including those that currently offer rebates on manual transactions by 
encouraging additional orders to be sent to the Exchange for execution.
    Finally, the proposed changes to remove superfluous or obsolete 
text from the FB Prepay Program are not designed to address any 
competitive issue but are instead designed to add clarity, 
transparency, and internal consistency to the Fee Schedule.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change is effective upon filing pursuant to 
section 19(b)(3)(A) \19\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \20\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \19\ 15 U.S.C. 78s(b)(3)(A).
    \20\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings under 
section 19(b)(2)(B) \21\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \21\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-NYSEARCA-2024-10 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-2024-10. 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 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-NYSEARCA-2024-10 and should 
be submitted on or before February 23, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-02062 Filed 2-1-24; 8:45 am]
BILLING CODE 8011-01-P
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