Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify the NYSE Arca Options Fee Schedule, 95867-95870 [2024-28253]

Download as PDF Federal Register / Vol. 89, No. 232 / Tuesday, December 3, 2024 / Notices Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include file number SR– Phlx–2024–63 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. lotter on DSK11XQN23PROD with NOTICES1 All submissions should refer to file number SR–Phlx–2024–63. 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–Phlx–2024–63 and should be submitted on or before December 24, 2024. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.12 Stephanie J. Fouse, Assistant Secretary. [FR Doc. 2024–28344 Filed 12–2–24; 8:45 am] BILLING CODE 8011–01–P 12 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 17:09 Dec 02, 2024 Jkt 265001 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–101758; File No. SR– NYSEARCA–2024–102] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify the NYSE Arca Options Fee Schedule November 26, 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 November 21, 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. 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 incentives available to Market Makers. The Exchange proposes to implement the fee change effective November 21, 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. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. 1 15 U.S.C. 78s(b)(1). U.S.C. 78a. 3 17 CFR 240.19b–4. 4 On November 1, 2024, the Exchange filed to amend the Fee Schedule (NYSEARCA–2024–93) and withdrew such filing on November 15, 2024 (NYSEARCA–2024–99), which latter filing the Exchange withdrew on November 21, 2024. 2 15 PO 00000 Frm 00136 Fmt 4703 Sfmt 4703 95867 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 certain incentives intended to encourage Market Maker posted volume. The Exchange proposes to implement the fee change on November 21, 2024. Currently, the Fee Schedule provides a variety of incentives to encourage greater participation by Market Makers and Market Maker affiliates, including more favorable rates for higher volumes from posted interest (e.g., the Market Maker Incentive For Non-Penny Interval Issues and the Market Maker Incentives for SPY). The Exchange also offers incentives that reward higher volume from posted interest in conjunction with activity in the NYSE Arca Equity Market (for purposes of this filing, activity in the NYSE Arca Equity Market is referred to as ‘‘cross asset activity’’). The Exchange proposes to modify the Market Maker Penny and SPY Posting Credit Tiers (the ‘‘Market Maker Penny Tiers’’) 5 by creating two new tiers (described below) that would replace the current ‘‘Additional Credit’’ per contract credit of ($0.03) on Market Maker posted interest that is available to OTP Holder or OTP Firm (collectively, ‘‘OTP Holders’’) that qualify for either Super Tier. Pursuant to the Fee Schedule, to qualify for the Additional Credit, eligible OTP Holders must achieve (i) at least 0.55% of total combined IWM, QQQ, and SPY industry ADV from Market Maker posted interest in IWM, QQQ, and SPY,6 and (ii) ETP Holder and Market Maker posted volume in Tape B Adding ADV that is equal to at least 1.50% of US Tape B CADV executed on NYSE Arca Equity Market for the billing month.7 As a result, OTP Holders that qualify for the Super Tier and the Additional Credit will receive a per contract credit of ($0.40) on all Penny Issues other than SPY and a per contract credit of ($0.42) per contract for executions in SPY.8 Similarly, OTP 5 See Fee Schedule, MARKET MAKER PENNY AND SPY POSTING CREDIT TIERS. 6 IWM is the iShares Russell 2000 ETF. QQQ is the Invesco QQQ Trust. SPY is the SPDR S&P 500 ETF Trust. 7 See Fee Schedule, MARKET MAKER PENNY AND SPY POSTING CREDIT TIERS. The Additional Credit does not apply to executions of issues in a Lead Market Maker’s appointment. See id. 8 Id. The total potential Super Tier credits combines the ($0.37) standard per contract credit (for Penny Issues other than SPY) with the ($0.03) Additional Credit to equal a per contract credit of E:\FR\FM\03DEN1.SGM Continued 03DEN1 95868 Federal Register / Vol. 89, No. 232 / Tuesday, December 3, 2024 / Notices lotter on DSK11XQN23PROD with NOTICES1 Holders that qualify for Super Tier II and the Additional Credit will receive a per contract credit of ($0.45) on all Penny Issues, including SPY.9 The Exchange proposes to eliminate completely the ‘‘Additional Credit’’ and to instead add two tiers—named the Super Select Tier and Super Select Tier II (collectively, the ‘‘proposed Tiers’’).10 As with the existing Market Maker Penny Tiers, the proposed Tiers will apply to electronic executions of Market Maker posted interest in Penny Issues and will include a cross-asset component. To qualify for the proposed Super Select Tier and associated ($0.40) per contract on all Penny Issues (including SPY), an OTP Holder must achieve: (i) at least 0.25% of total combined IWM, QQQ, and SPY industry ADV from Market Maker posted interest in IWM, QQQ, and SPY; plus (ii) ETP Holder and Market Maker posted volume in Tape B Adding ADV equal to at least 1.55% of US Tape B CADV for the billing month executed on NYSE Arca Equity Market. In addition, to qualify for the proposed Super Select Tier II and associated ($0.41) per contract credit, an OTP Holder must achieve: (i) at least 0.35% of total combined IWM, QQQ, and SPY industry ADV from Market Maker posted interest in IWM, QQQ, and SPY; plus (ii) ETP Holder and Market Maker posted volume in Tape B Adding ADV equal to at least 1.65% of US Tape B CADV for the billing month executed on NYSE Arca Equity Market. The proposed Tiers, like the Additional Credit, require that an OTP Holder execute a minimum of posted volume in IWM/QQQ/SPY, plus satisfy the cross-asset component. The Exchange notes that each of the proposed Tiers, as compared to the Additional Credit, have a lower IWM/ QQQ/SPY volume requirement (i.e., 0.25% or 0.35% as compared to 0.55%), which is offset by a slightly higher volume requirement for the cross-asset component (i.e., 1.55% or 1.65% as ($0.40); or combines the ($0.39) standard per contract credit for SPY with ($0.03) Additional Credit to equal a per contract credit of ($0.42). 9 Id. The total Super Tier II credit combines the ($0.42) standard per contract credit for all Penny Issues (including SPY) with the ($0.03) Additional Credit to equal a per contract credit of ($0.45). 10 See proposed Fee Schedule, MARKET MAKER PENNY AND SPY POSTING CREDIT TIERS (adding the proposed Tiers and removing the language regarding the Additional Credit as well as the asterisks signaling this credit that appears in the title of Super Tier and Super Tier II). While the Additional Credit is being eliminated, the Exchange is not proposing to modify the qualification bases or associated credits for the Super Tier or Super Tier II. VerDate Sep<11>2014 17:09 Dec 02, 2024 Jkt 265001 compared to 1.50%). The Exchange believes that the proposed (lower) posted volume requirements for IWM/ QQQ/SPY on balance should make the proposed Tiers more achievable. As such, the Exchange believes the proposed Tiers will (continue to) encourage more Market Maker posted interest in certain very high-volume products, in combination with cross asset activity. Increased posted volume order flow, particularly by liquidity providers, contributes to a deeper, more liquid market, which, in turn, provides for increased execution opportunities and thus overall enhanced price discovery and price improvement opportunities on the Exchange. While the Exchange cannot predict with certainty whether any OTP Holders would seek to qualify for the proposed Tiers, the Exchange believes the proposed modifications, which are designed to encourage increased posted interest from Market Makers in certain high-volume issues as well as cross market activity, would continue to incentivize OTP Holders to submit these types of orders to the Exchange, which brings increased liquidity and order flow for the benefit of all market participants. broader forms that are most important to investors and listed companies.’’ 13 There are currently 18 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.14 Therefore, currently no exchange possesses significant pricing power in the execution of multiply-listed equity & ETF options order flow. More specifically, in September of 2024, the Exchange had 14.05% market share of executed volume of multiply-listed equity & ETF options trades.15 In such a low-concentrated and highly competitive market, no single options exchange possesses significant pricing power in the execution of option order flow. Within this environment, market participants can freely and often do shift their order flow among the Exchange and competing venues in response to changes in their respective pricing schedules. The Exchange believes that the proposed modifications to add the proposed Tiers are reasonably designed to incent OTP Holders to increase the number and variety of orders sent to the 2. Statutory Basis Exchange for execution. Specifically, to The Exchange believes that the the extent that the proposed change proposed rule change is consistent with attracts more Market Maker posted Section 6(b) of the Act,11 in general, and interest in certain high-volume issues furthers the objectives of Sections and cross asset activity, this increased 6(b)(4) and (5) of the Act,12 in particular, order flow would continue to make the because it provides for the equitable Exchange a more competitive venue for allocation of reasonable dues, fees, and order execution, which, in turn, other charges among its members, promotes just and equitable principles issuers and other persons using its of trade and removes impediments to facilities and does not unfairly and perfects the mechanism of a free and open market and a national market discriminate between customers, system. Although the Exchange issuers, brokers or dealers. The proposed change to the Fee proposes to eliminate the Additional Schedule are reasonable, equitable, and Credit, the Exchange believes that the not unfairly discriminatory. As a proposed Tiers will continue to threshold matter, the Exchange is incentivize participation in greater subject to significant competitive forces volume from posted interest, as well as in the market for options securities cross asset activity. The Exchange believes the proposed transaction services that constrain its rule change is an equitable allocation of pricing determinations in that market. its fees and credits and is not unfairly The Commission has repeatedly expressed its preference for competition 13 See Securities Exchange Act Release No. 51808 over regulatory intervention in (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005) determining prices, products, and (S7–10–04) (‘‘Reg NMS Adopting Release’’). services in the securities markets. In 14 The OCC publishes options and futures volume Regulation NMS, the Commission in a variety of formats, including daily and monthly volume by exchange, available here: https:// highlighted the importance of market www.theocc.com/Market-Data/Market-Dataforces in determining prices and SRO Reports/Volume-and-Open-Interest/Monthlyrevenues and, also, recognized that Weekly-Volume-Statistics. 15 Based on a compilation of OCC data for current regulation of the market system monthly volume of equity-based options and ‘‘has been remarkably successful in monthly volume of equity-based ETF options, see promoting market competition in its 11 15 12 15 PO 00000 U.S.C. 78f(b). U.S.C. 78f(b)(4) and (5). Frm 00137 Fmt 4703 Sfmt 4703 id., the Exchanges market share in equity-based options increased from 11.48% for the month of September 2023 to 14.05% for the month of September 2024. E:\FR\FM\03DEN1.SGM 03DEN1 Federal Register / Vol. 89, No. 232 / Tuesday, December 3, 2024 / Notices lotter on DSK11XQN23PROD with NOTICES1 discriminatory as it available equally to all similarly-situated market participants on an equal and nondiscriminatory basis. The proposal is based on the amount and type of business transacted on the Exchange, and OTP Holders are not obligated to try to achieve the qualifications for any of the tiers or execute either Market Maker posted interest or cross asset activity. Rather, the proposal is designed to continue to encourage OTP Holders to utilize the Exchange as a primary trading venue for Market Maker posted interest (if they have not done so previously) and to increase volume sent to the Exchange. 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 17 competing options exchanges, including those that also offer incentives based on Market Maker posted volume in IWM, QQQ, and SPY.16 Thus, OTP Holders have a choice of where they direct their order flow, including their Market Maker posted interest and cross asset activity. The proposed rule change is designed to incent OTP Holders to direct liquidity to the Exchange, and in particular, Market Maker posted interest in highly liquid issues and cross asset activity, thereby promoting market depth, price discovery and improvement, and enhanced order execution opportunities for market participants. At present, whether an OTP Holder qualifies for the various monthly incentives set forth in the Market Maker Penny Tiers is dependent on market activity and an OTP Holder’s mix of order flow. Thus, while the Exchange cannot predict with certainty whether any OTP Holders will seek to qualify for the proposed Tiers, which apply to Market Maker posted interest in certain 16 See MIAX Pearl Options Exchange Fee Schedule, available at MIAX_Pearl_Options_Fee_ Schedule_100721.pdf (miaxglobal.com) (offering tiered incentives based on Market Maker volume in IWM, QQQ, and SPY); Cboe BZX Options Fee Schedule, available at https://www.cboe.com/us/ options/membership/fee_schedule/bzx/a (offering favorable credits as an alternative for Market Maker posting volume in IWM, QQQ, and SPY). VerDate Sep<11>2014 17:09 Dec 02, 2024 Jkt 265001 high-volume issues and cross asset activity, would provide an incentive for OTP Holders to continue to submit these types of orders to the Exchange, which brings increased liquidity and order flow for the benefit of all market participants. Finally, the Exchange believes that it is subject to significant competitive forces, as described below in the Exchange’s statement regarding the burden on competition. B. Self-Regulatory Organization’s Statement on Burden on Competition In accordance with Section 6(b)(8) of the Act, the Exchange does not believe that the proposed rule change would impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. Instead, as discussed above, the Exchange believes that the proposed changes would encourage the submission of additional liquidity to a public exchange, thereby promoting market depth, price discovery and transparency and enhancing order execution opportunities for all market participants. As a result, the Exchange believes that the proposed change furthers the Commission’s goal in adopting Regulation NMS of fostering integrated competition among orders, which promotes ‘‘more efficient pricing of individual stocks for all types of orders, large and small.’’ 17 Intramarket Competition. The proposed change is designed to attract additional order flow (particularly Market Maker posted interest in certain high-volume issues) to the Exchange. The Exchange believes that the proposed Tiers would continue to encourage market participants to direct their Market Maker posted interest volume to the Exchange, particularly in certain high-volume issues, as well as encourage cross asset activity. Greater liquidity benefits all market participants on the Exchange, and increased Market Maker posted interest would increase opportunities for execution of other trading interest. The proposed modifications would apply and be available equally to all similarlysituated market participants that handle Market Maker posted interest and cross asset activity, and, accordingly, the proposed change would not impose a disparate burden on competition among market participants on the Exchange. Intermarket Competition. The Exchange operates in a highly competitive market in which market participants can readily favor one of the 17 See Reg NMS Adopting Release, supra note 13, at 37499. PO 00000 Frm 00138 Fmt 4703 Sfmt 4703 95869 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.18 Therefore, currently no exchange possesses significant pricing power in the execution of multiply-listed equity & ETF options order flow. More specifically, in September 2024, the Exchange had just over 14% market share of executed volume of multiplylisted equity & ETF options trades.19 The Exchange believes that the proposed rule change reflects this competitive environment because it modifies the Exchange’s fees in a manner designed to encourage OTP Holders to direct trading interest (particularly Market Maker posted interest and cross asset activity) to the Exchange, to provide liquidity and to attract order flow. To the extent that this purpose is achieved, all the Exchange’s market participants should benefit from the improved market quality and increased opportunities for price improvement. The Exchange believes that the proposed change could promote competition between the Exchange and other execution venues, including those that also currently offer incentives based on Market Maker posted volume in IWM, QQQ, and SPY,20 by encouraging additional orders to be sent to the Exchange for execution. 18 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. 19 Based on OCC data for monthly volume of equity-based options and monthly volume of ETFbased options, see id., the Exchanges market share in equity-based options increased from 11.48% for the month of September 2023 to 14.05% for the month of September 2024. 20 See MIAX Pearl Options Exchange Fee Schedule, available at MIAX_Pearl_Options_Fee_ Schedule_100721.pdf (miaxglobal.com) (offering tiered incentives based on Market Maker volume in IWM, QQQ, and SPY); Cboe BZX Options Fee Schedule, available at https://www.cboe.com/us/ options/membership/fee_schedule/bzx/a (offering favorable credits as an alternative for Market Maker posting volume in IWM, QQQ, and SPY). E:\FR\FM\03DEN1.SGM 03DEN1 95870 Federal Register / Vol. 89, No. 232 / Tuesday, December 3, 2024 / Notices 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) 21 of the Act and subparagraph (f)(2) of Rule 19b–4 22 thereunder, because it establishes a due, fee, or other charge imposed by the Exchange. At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings under Section 19(b)(2)(B) 23 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: lotter on DSK11XQN23PROD with NOTICES1 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–2024–102 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–2024–102. 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 21 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(2). 23 15 U.S.C. 78s(b)(2)(B). 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–2024–102 and should be submitted on or before December 24, 2024. [FR Doc. 2024–28253 Filed 12–2–24; 8:45 am] companies to issue multiple classes of shares and to impose asset-based distribution and/or service fees and early withdrawal charges. Applicants: Privacore PCAAM Alternative Income Fund, Privacore PCAAM Alternative Growth Fund, Privacore Capital Advisors, LLC, and Janus Henderson Distributors US LLC. Filing Dates: The application was filed on August 30, 2024. Hearing or Notification of Hearing: An order granting the requested relief will be issued unless the Commission orders a hearing. Interested persons may request a hearing on any application by emailing the SEC’s Secretary at Secretarys-Office@sec.gov and serving the Applicants 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 Commission by 5:30 p.m. on December 23, 2024, and should be accompanied by proof of service on the 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 emailing the Commission’s Secretary. BILLING CODE 8011–01–P ADDRESSES: For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.24 Sherry R. Haywood, Assistant Secretary. SECURITIES AND EXCHANGE COMMISSION [Investment Company Act Release No. 35403; 812–15624] Privacore PCAAM Alternative Income Fund, et al. November 27, 2024. Securities and Exchange Commission (‘‘Commission’’ or ‘‘SEC’’). ACTION: Notice. AGENCY: Notice of an application under section 6(c) of the Investment Company Act of 1940 (the ‘‘Act’’) for an exemption from sections 18(a)(2), 18(c) and 18(i) of the Act, under sections 6(c) and 23(c) of the Act for an exemption from rule 23c–3 under the Act, and for an order pursuant to section 17(d) of the Act and rule 17d– 1 under the Act. Summary of Application: Applicants request an order to permit certain registered closed-end investment 22 17 VerDate Sep<11>2014 17:09 Dec 02, 2024 24 17 Jkt 265001 PO 00000 CFR 200.30–3(a)(12). Frm 00139 Fmt 4703 Sfmt 4703 The Commission: Secretarys-Office@sec.gov. Applicants: Joshua B. Deringer, Esq., Faegre Drinker Biddle & Reath LLP, joshua.deringer@ faegredrinker.com, with a copy to Sandhya Ganapathy, Privacore Capital Advisors, LLC, Sandhya.Ganapathy@ privacorecap.com. FOR FURTHER INFORMATION CONTACT: Steven I. Amchan, Senior Counsel, or Lisa Reid Ragen, Branch Chief, at (202) 551–6825 (Division of Investment Management, Chief Counsel’s Office). For Applicants’ representations, legal analysis, and conditions, please refer to Applicants’ application, dated August 30, 2024, which may be obtained via the Commission’s website by searching for the file number at the top of this document, 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. SUPPLEMENTARY INFORMATION: E:\FR\FM\03DEN1.SGM 03DEN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 89, Number 232 (Tuesday, December 3, 2024)]
[Notices]
[Pages 95867-95870]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-28253]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-101758; File No. SR-NYSEARCA-2024-102]


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

November 26, 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 November 21, 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to modify the NYSE Arca Options Fee Schedule 
(``Fee Schedule'') regarding incentives available to Market Makers. The 
Exchange proposes to implement the fee change effective November 21, 
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.
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    \4\ On November 1, 2024, the Exchange filed to amend the Fee 
Schedule (NYSEARCA-2024-93) and withdrew such filing on November 15, 
2024 (NYSEARCA-2024-99), which latter filing the Exchange withdrew 
on November 21, 2024.
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II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

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 
certain incentives intended to encourage Market Maker posted volume. 
The Exchange proposes to implement the fee change on November 21, 2024.
    Currently, the Fee Schedule provides a variety of incentives to 
encourage greater participation by Market Makers and Market Maker 
affiliates, including more favorable rates for higher volumes from 
posted interest (e.g., the Market Maker Incentive For Non-Penny 
Interval Issues and the Market Maker Incentives for SPY). The Exchange 
also offers incentives that reward higher volume from posted interest 
in conjunction with activity in the NYSE Arca Equity Market (for 
purposes of this filing, activity in the NYSE Arca Equity Market is 
referred to as ``cross asset activity'').
    The Exchange proposes to modify the Market Maker Penny and SPY 
Posting Credit Tiers (the ``Market Maker Penny Tiers'') \5\ by creating 
two new tiers (described below) that would replace the current 
``Additional Credit'' per contract credit of ($0.03) on Market Maker 
posted interest that is available to OTP Holder or OTP Firm 
(collectively, ``OTP Holders'') that qualify for either Super Tier.
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    \5\ See Fee Schedule, MARKET MAKER PENNY AND SPY POSTING CREDIT 
TIERS.
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    Pursuant to the Fee Schedule, to qualify for the Additional Credit, 
eligible OTP Holders must achieve (i) at least 0.55% of total combined 
IWM, QQQ, and SPY industry ADV from Market Maker posted interest in 
IWM, QQQ, and SPY,\6\ and (ii) ETP Holder and Market Maker posted 
volume in Tape B Adding ADV that is equal to at least 1.50% of US Tape 
B CADV executed on NYSE Arca Equity Market for the billing month.\7\ As 
a result, OTP Holders that qualify for the Super Tier and the 
Additional Credit will receive a per contract credit of ($0.40) on all 
Penny Issues other than SPY and a per contract credit of ($0.42) per 
contract for executions in SPY.\8\ Similarly, OTP

[[Page 95868]]

Holders that qualify for Super Tier II and the Additional Credit will 
receive a per contract credit of ($0.45) on all Penny Issues, including 
SPY.\9\
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    \6\ IWM is the iShares Russell 2000 ETF. QQQ is the Invesco QQQ 
Trust. SPY is the SPDR S&P 500 ETF Trust.
    \7\ See Fee Schedule, MARKET MAKER PENNY AND SPY POSTING CREDIT 
TIERS. The Additional Credit does not apply to executions of issues 
in a Lead Market Maker's appointment. See id.
    \8\ Id. The total potential Super Tier credits combines the 
($0.37) standard per contract credit (for Penny Issues other than 
SPY) with the ($0.03) Additional Credit to equal a per contract 
credit of ($0.40); or combines the ($0.39) standard per contract 
credit for SPY with ($0.03) Additional Credit to equal a per 
contract credit of ($0.42).
    \9\ Id. The total Super Tier II credit combines the ($0.42) 
standard per contract credit for all Penny Issues (including SPY) 
with the ($0.03) Additional Credit to equal a per contract credit of 
($0.45).
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    The Exchange proposes to eliminate completely the ``Additional 
Credit'' and to instead add two tiers--named the Super Select Tier and 
Super Select Tier II (collectively, the ``proposed Tiers'').\10\ As 
with the existing Market Maker Penny Tiers, the proposed Tiers will 
apply to electronic executions of Market Maker posted interest in Penny 
Issues and will include a cross-asset component.
---------------------------------------------------------------------------

    \10\ See proposed Fee Schedule, MARKET MAKER PENNY AND SPY 
POSTING CREDIT TIERS (adding the proposed Tiers and removing the 
language regarding the Additional Credit as well as the asterisks 
signaling this credit that appears in the title of Super Tier and 
Super Tier II). While the Additional Credit is being eliminated, the 
Exchange is not proposing to modify the qualification bases or 
associated credits for the Super Tier or Super Tier II.
---------------------------------------------------------------------------

    To qualify for the proposed Super Select Tier and associated 
($0.40) per contract on all Penny Issues (including SPY), an OTP Holder 
must achieve:
    (i) at least 0.25% of total combined IWM, QQQ, and SPY industry ADV 
from Market Maker posted interest in IWM, QQQ, and SPY; plus
    (ii) ETP Holder and Market Maker posted volume in Tape B Adding ADV 
equal to at least 1.55% of US Tape B CADV for the billing month 
executed on NYSE Arca Equity Market.
    In addition, to qualify for the proposed Super Select Tier II and 
associated ($0.41) per contract credit, an OTP Holder must achieve:
    (i) at least 0.35% of total combined IWM, QQQ, and SPY industry ADV 
from Market Maker posted interest in IWM, QQQ, and SPY; plus
    (ii) ETP Holder and Market Maker posted volume in Tape B Adding ADV 
equal to at least 1.65% of US Tape B CADV for the billing month 
executed on NYSE Arca Equity Market.
    The proposed Tiers, like the Additional Credit, require that an OTP 
Holder execute a minimum of posted volume in IWM/QQQ/SPY, plus satisfy 
the cross-asset component. The Exchange notes that each of the proposed 
Tiers, as compared to the Additional Credit, have a lower IWM/QQQ/SPY 
volume requirement (i.e., 0.25% or 0.35% as compared to 0.55%), which 
is offset by a slightly higher volume requirement for the cross-asset 
component (i.e., 1.55% or 1.65% as compared to 1.50%). The Exchange 
believes that the proposed (lower) posted volume requirements for IWM/
QQQ/SPY on balance should make the proposed Tiers more achievable. As 
such, the Exchange believes the proposed Tiers will (continue to) 
encourage more Market Maker posted interest in certain very high-volume 
products, in combination with cross asset activity. Increased posted 
volume order flow, particularly by liquidity providers, contributes to 
a deeper, more liquid market, which, in turn, provides for increased 
execution opportunities and thus overall enhanced price discovery and 
price improvement opportunities on the Exchange.
    While the Exchange cannot predict with certainty whether any OTP 
Holders would seek to qualify for the proposed Tiers, the Exchange 
believes the proposed modifications, which are designed to encourage 
increased posted interest from Market Makers in certain high-volume 
issues as well as cross market activity, would continue to incentivize 
OTP Holders to submit these types of orders to the Exchange, which 
brings increased liquidity and order flow for the benefit of all market 
participants.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\11\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\12\ 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.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    The proposed change to the Fee Schedule are reasonable, equitable, 
and not unfairly discriminatory. As a threshold matter, the Exchange is 
subject to significant competitive forces in the market for options 
securities transaction services that constrain its pricing 
determinations in that 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.'' \13\
---------------------------------------------------------------------------

    \13\ 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 18 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.\14\ Therefore, currently no exchange possesses significant 
pricing power in the execution of multiply-listed equity & ETF options 
order flow. More specifically, in September of 2024, the Exchange had 
14.05% market share of executed volume of multiply-listed equity & ETF 
options trades.\15\ In such a low-concentrated and highly competitive 
market, no single options exchange possesses significant pricing power 
in the execution of option order flow. Within this environment, market 
participants can freely and often do shift their order flow among the 
Exchange and competing venues in response to changes in their 
respective pricing schedules.
---------------------------------------------------------------------------

    \14\ 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.
    \15\ 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 Exchanges market share in equity-based options 
increased from 11.48% for the month of September 2023 to 14.05% for 
the month of September 2024.
---------------------------------------------------------------------------

    The Exchange believes that the proposed modifications to add the 
proposed Tiers are reasonably designed to incent OTP Holders to 
increase the number and variety of orders sent to the Exchange for 
execution. Specifically, to the extent that the proposed change 
attracts more Market Maker posted interest in certain high-volume 
issues and cross asset activity, 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. Although the Exchange 
proposes to eliminate the Additional Credit, the Exchange believes that 
the proposed Tiers will continue to incentivize participation in 
greater volume from posted interest, as well as cross asset activity.
    The Exchange believes the proposed rule change is an equitable 
allocation of its fees and credits and is not unfairly

[[Page 95869]]

discriminatory as it available equally to all similarly-situated market 
participants on an equal and non-discriminatory basis.
    The proposal is based on the amount and type of business transacted 
on the Exchange, and OTP Holders are not obligated to try to achieve 
the qualifications for any of the tiers or execute either Market Maker 
posted interest or cross asset activity. Rather, the proposal is 
designed to continue to encourage OTP Holders to utilize the Exchange 
as a primary trading venue for Market Maker posted interest (if they 
have not done so previously) and to increase volume sent to the 
Exchange.
    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 
17 competing options exchanges, including those that also offer 
incentives based on Market Maker posted volume in IWM, QQQ, and 
SPY.\16\ Thus, OTP Holders have a choice of where they direct their 
order flow, including their Market Maker posted interest and cross 
asset activity. The proposed rule change is designed to incent OTP 
Holders to direct liquidity to the Exchange, and in particular, Market 
Maker posted interest in highly liquid issues and cross asset activity, 
thereby promoting market depth, price discovery and improvement, and 
enhanced order execution opportunities for market participants.
---------------------------------------------------------------------------

    \16\ See MIAX Pearl Options Exchange Fee Schedule, available at 
MIAX_Pearl_Options_Fee_Schedule_100721.pdf (miaxglobal.com) 
(offering tiered incentives based on Market Maker volume in IWM, 
QQQ, and SPY); Cboe BZX Options Fee Schedule, available at https://www.cboe.com/us/options/membership/fee_schedule/bzx/a (offering 
favorable credits as an alternative for Market Maker posting volume 
in IWM, QQQ, and SPY).
---------------------------------------------------------------------------

    At present, whether an OTP Holder qualifies for the various monthly 
incentives set forth in the Market Maker Penny Tiers is dependent on 
market activity and an OTP Holder's mix of order flow. Thus, while the 
Exchange cannot predict with certainty whether any OTP Holders will 
seek to qualify for the proposed Tiers, which apply to Market Maker 
posted interest in certain high-volume issues and cross asset activity, 
would provide an incentive for OTP Holders to continue to submit these 
types of orders to the Exchange, which brings increased liquidity and 
order flow for the benefit of all market participants.
    Finally, the Exchange believes that it is subject to significant 
competitive forces, as described below in the Exchange's statement 
regarding the burden on competition.

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

    In accordance with Section 6(b)(8) of the Act, the Exchange does 
not believe that the proposed rule change would impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. Instead, as discussed above, the Exchange believes 
that the proposed changes would encourage the submission of additional 
liquidity to a public exchange, thereby promoting market depth, price 
discovery and transparency and enhancing order execution opportunities 
for all market participants. As a result, the Exchange believes that 
the proposed change furthers the Commission's goal in adopting 
Regulation NMS of fostering integrated competition among orders, which 
promotes ``more efficient pricing of individual stocks for all types of 
orders, large and small.'' \17\
---------------------------------------------------------------------------

    \17\ See Reg NMS Adopting Release, supra note 13, at 37499.
---------------------------------------------------------------------------

    Intramarket Competition. The proposed change is designed to attract 
additional order flow (particularly Market Maker posted interest in 
certain high-volume issues) to the Exchange. The Exchange believes that 
the proposed Tiers would continue to encourage market participants to 
direct their Market Maker posted interest volume to the Exchange, 
particularly in certain high-volume issues, as well as encourage cross 
asset activity. Greater liquidity benefits all market participants on 
the Exchange, and increased Market Maker posted interest would increase 
opportunities for execution of other trading interest. The proposed 
modifications would apply and be available equally to all similarly-
situated market participants that handle Market Maker posted interest 
and cross asset activity, and, accordingly, the proposed change would 
not impose a disparate burden on competition among market participants 
on the Exchange.
    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.\18\ Therefore, currently 
no exchange possesses significant pricing power in the execution of 
multiply-listed equity & ETF options order flow. More specifically, in 
September 2024, the Exchange had just over 14% market share of executed 
volume of multiply-listed equity & ETF options trades.\19\
---------------------------------------------------------------------------

    \18\ 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.
    \19\ Based on OCC data for monthly volume of equity-based 
options and monthly volume of ETF-based options, see id., the 
Exchanges market share in equity-based options increased from 11.48% 
for the month of September 2023 to 14.05% for the month of September 
2024.
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change reflects this 
competitive environment because it modifies the Exchange's fees in a 
manner designed to encourage OTP Holders to direct trading interest 
(particularly Market Maker posted interest and cross asset activity) to 
the Exchange, to provide liquidity and to attract order flow. To the 
extent that this purpose is achieved, all the Exchange's market 
participants should benefit from the improved market quality and 
increased opportunities for price improvement.
    The Exchange believes that the proposed change could promote 
competition between the Exchange and other execution venues, including 
those that also currently offer incentives based on Market Maker posted 
volume in IWM, QQQ, and SPY,\20\ by encouraging additional orders to be 
sent to the Exchange for execution.
---------------------------------------------------------------------------

    \20\ See MIAX Pearl Options Exchange Fee Schedule, available at 
MIAX_Pearl_Options_Fee_Schedule_100721.pdf (miaxglobal.com) 
(offering tiered incentives based on Market Maker volume in IWM, 
QQQ, and SPY); Cboe BZX Options Fee Schedule, available at https://www.cboe.com/us/options/membership/fee_schedule/bzx/a (offering 
favorable credits as an alternative for Market Maker posting volume 
in IWM, QQQ, and SPY).

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[[Page 95870]]

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) \21\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \22\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
---------------------------------------------------------------------------

    \21\ 15 U.S.C. 78s(b)(3)(A).
    \22\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \23\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \23\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

IV. Solicitation of Comments

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

Electronic Comments:

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-NYSEARCA-2024-102 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-2024-102. 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-2024-102 and should 
be submitted on or before December 24, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
---------------------------------------------------------------------------

    \24\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-28253 Filed 12-2-24; 8:45 am]
BILLING CODE 8011-01-P

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