[Federal Register Volume 85, Number 72 (Tuesday, April 14, 2020)]
[Notices]
[Pages 20796-20798]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-07775]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88596; File No. SR-NYSEArca-2020-29]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Modify the NYSE
Arca Options Fee Schedule
April 8, 2020.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on April 1, 2020, NYSE Arca, Inc. (``NYSE Arca'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C.78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to modify the NYSE Arca Options Fee Schedule
(``Fee Schedule'') to waive certain Floor-based fixed fees for the
month of April 2020. The Exchange proposes to implement the fee change
effective April 1, 2020. 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.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of this filing is to modify the Fee Schedule to waive
certain Floor-based fixed fees for the month of April 2020. The
Exchange proposes to implement the fee change effective April 1, 2020.
On March 18, 2020, the Exchange announced that it would temporarily
close the Trading Floor, effective Monday, March 23, 2020, as a
precautionary measure to prevent the potential spread of COVID-19.
Because the Trading Floor is temporarily unavailable, the Exchange
proposes to waive for April 2020 certain Floor-based fixed fees.
Specifically, for the month of April 2020, the Exchange proposes to
waive fees associated with:
Floor Booths;
Market Maker Podia;
Options Floor Access;
Wire Services; and
ISP Connection.\4\
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\4\ See proposed Fee Schedule, NYSE Arca OPTIONS: FLOOR and
EQUIPMENT and CO-LOCATION FEES. The Exchange will re-evaluate the
time limitations on this change (i.e., whether it will need to apply
to May) depending upon how long the Trading Floor remains
temporarily closed and would file a separate proposed rule change if
an extension is warranted.
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The Exchange notes that these fixed fees, which relate directly to
Floor operations, are charged only to Floor participants and do not
apply to participants that conduct business off-Floor. These fees are
unrelated to trading volume and are charged for use of services made
available to Floor participants on the Trading Floor. This proposed
change is designed to reduce monthly costs for Floor participants while
the Trading Floor is temporarily closed and Floor participants are
unable to use the services associated with these fixed fees. The
Exchange believes that this fee waiver would ease the financial burden
and allow affected participants to reallocate funds to assist with the
cost of shifting operations from on-Floor to off-Floor. Absent this
change, such participants may experience an unintended increase in the
cost of doing business on the Exchange.\5\
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\5\ The Exchange will refund participants of the Floor Broker
Prepayment Program for any prepaid April 2020 fees that are waived.
See proposed Fee Schedule, FLOOR BROKER FIXED COST PREPAYMENT
INCENTIVE PROGRAM (the ``FB Prepay Program'') (providing that ``the
Exchange will refund certain of the prepaid Eligible Fixed costs
that were waived for April 2020, per Sections NYSE Arca OPTIONS:
FLOOR and EQUIPMENT and CO-LOCATION FEES'').
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The Exchange believes that all OTP Holders that conduct business on
the Trading Floor would benefit from this proposed fee change.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\6\ in general, and furthers the
objectives of Sections 6(b)(4) and (5) of the Act,\7\ in particular,
because it provides for the equitable allocation of reasonable dues,
fees, and other charges among its members, issuers and other persons
using its facilities and does not unfairly discriminate between
customers, issuers, brokers or dealers.
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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(4) and (5).
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The Proposed Rule Change Is Reasonable
The Exchange operates in a highly competitive market. The
Commission has repeatedly expressed its preference for competition over
regulatory intervention in determining prices, products, and services
in the securities markets. In Regulation NMS, the Commission
highlighted the importance of market forces in determining prices and
SRO revenues and, also, recognized that current regulation of the
market system ``has been remarkably successful in promoting market
competition in its broader forms that are most important to investors
and listed companies.'' \8\
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\8\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005) (S7-10-04) (``Reg NMS
Adopting Release'').
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There are currently 16 registered options exchanges competing for
order flow. Based on publicly-available information, and excluding
index-based options, no single exchange has more than 16% of the market
share of executed volume of multiply-listed equity and ETF options
trades.\9\ Therefore, currently no exchange possesses significant
pricing power in the execution of multiply-listed equity & ETF options
order flow. More specifically, in January 2020, the Exchange had less
than 10% market share of executed volume of multiply-listed equity &
ETF options trades.\10\
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\9\ 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/volume/default.jsp.
\10\ Based on OCC data, see id., in 2019, the Exchange's market
share in equity-based options was 9.57% for the month of January
2019 and 9.59% for the month of January 2020.
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This proposed change is designed to reduce monthly costs for Floor
[[Page 20797]]
participants that are unable to conduct Floor operations, including any
open outcry trading, while the Trading Floor is temporarily closed. The
Exchange believes that this fee waiver would ease the financial burden
and allow affected participants to reallocate funds to assist with the
cost of shifting operations from on-Floor to off-Floor. Absent this
change, such participants may experience an unintended increase in the
cost of doing business on the Exchange.
The Exchange believes that all OTP Holders that conduct business on
the Trading Floor would benefit from this proposed fee change.
The Proposed Rule Change Is an Equitable Allocation of Credits and Fees
The Exchange believes the proposed rule change is an equitable
allocation of its fees and credits. The proposal waives certain Floor-
based fixed fees for the month of April 2020, during the period that
the Trading Floor is temporarily closed. The fees being waived are
charged only to Floor participants and do not apply to participants
that conduct business off-Floor. These fees are unrelated to trading
volume and are charged for use of services made available to Floor
participants on the Trading Floor. This proposed change is equitable as
it is designed to reduce monthly costs for Floor participants that are
unable to conduct Floor operations. The Exchange believes that this fee
waiver would allow affected participants to reallocate funds to assist
with the cost of shifting operations from on-Floor to off-Floor. Absent
this change, such participants may experience an unintended increase in
the cost of doing business on the Exchange.
The Proposed Rule Change Is Not Unfairly Discriminatory
The Exchange believes that the proposal is not unfairly
discriminatory because the proposed modifications would affect all
similarly-situated market participants on an equal and non-
discriminatory basis. The Exchange is not proposing to waive the Floor-
related fixed fees indefinitely, but rather only during the period that
the Trading Floor is temporarily closed. The proposed fee change is
designed to ease the financial burden and allow affected participants
to reallocate funds to assist with the cost of shifting operations from
on-Floor to off-Floor. Absent this change, such participants may
experience an unintended increase in the cost of doing business on the
Exchange.
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. The Exchange believes that the proposed changes
would encourage the continued participation of affected OTP Holders,
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.'' \11\
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\11\ See Reg NMS Adopting Release, supra note 8, at 37499.
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Intramarket Competition. The proposed fee change is designed to
ease the financial burden and allow affected participants to reallocate
funds to assist with the cost of shifting operations from on-Floor to
off-Floor. Absent this change, such participants may experience an
unintended increase in the cost of doing business on the Exchange. The
Exchange believes that the proposed waiver of fees would not impose a
disparate burden on competition among market participants on the
Exchange because off-Floor market participants are not subject to these
Floor-based fixed fees.
Intermarket Competition. The Exchange operates in a highly
competitive market in which market participants can readily favor one
of the 16 competing option exchanges if they deem fee levels at a
particular venue to be excessive. In such an environment, the Exchange
must continually adjust its fees to remain competitive with other
exchanges and to attract order flow to the Exchange. Based on publicly-
available information, and excluding index-based options, no single
exchange currently has more than 16% of the market share of executed
volume of multiply-listed equity and ETF options trades.\12\ Therefore,
currently no exchange possesses significant pricing power in the
execution of multiply-listed equity & ETF options order flow. More
specifically, in January 2020, the Exchange had less than 10% market
share of executed volume of multiply-listed equity & ETF options
trades.\13\
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\12\ See supra note 9.
\13\ Based on OCC data, supra note 10, the Exchange's market
share in equity-based options was 9.57% for the month of January
2019 and 9.59% for the month of January, 2020.
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The Exchange believes that the proposed rule change reflects this
competitive environment because it modifies the Exchange's fees in a
manner designed to ease the financial burden and allow affected
participants to reallocate funds to assist with the cost of shifting
operations from on-Floor to off-Floor. Absent this change, such
participants may experience an unintended increase in the cost of doing
business on the Exchange, which would make the Exchange a less
competitive venue on which to trade as compared to other options
exchanges.
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) \14\ of the Act and subparagraph (f)(2) of Rule
19b-4 \15\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\14\ 15 U.S.C. 78s(b)(3)(A).
\15\ 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) \16\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\16\ 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:
[[Page 20798]]
Electronic Comments
Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-NYSEArca-2020-29 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-2020-29. 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 (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NYSEArca-2020-29 and should be submitted
on or before May 5, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-07775 Filed 4-13-20; 8:45 am]
BILLING CODE 8011-01-P