[Federal Register Volume 85, Number 204 (Wednesday, October 21, 2020)]
[Notices]
[Pages 67032-67034]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-23253]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-90191; File No. SR-NYSEArca-2020-90]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Modify the NYSE
Arca Options Fee
October 15, 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 October 8, 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 extend the waiver of certain Floor-based fixed
fees. The Exchange proposes to implement the fee change effective
October 8, 2020.\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\ The Exchange originally filed to amend the Fee Schedule on
September 24, 2020. (SR-NYSEArca-2020-86) and withdrew such filing
on October 8, 2020.
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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 modify the Fee Schedule to extend
the waiver of certain Floor-based fixed fees for market participants
that have been unable to resume their Floor operations to a certain
capacity level, as discussed below. The Exchange proposes to implement
the fee change effective October 8, 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.
Following the temporary closure of the Trading Floor, the Exchange
waived certain Floor-based fixed fees for April and May 2020.\5\
Although the Trading Floor partially reopened on May 4, 2020 and Floor-
based open outcry activity is supported, certain participants have been
unable to resume pre-Floor closure levels of operations. As a result,
the Exchange extended the fee waiver through June, July, August and
September 2020, but only for Floor Broker firms that were unable to
operate at more than 50% of their March 2020 on-Floor staffing levels
and for Market Maker firms that have vacant or ``unmanned'' Podia for
the entire month due to COVID-19 related considerations (the
``Qualifying Firms'').\6\ Because the Trading Floor will continue to
operate with reduced capacity, the Exchange proposes to extend the fee
waiver for Qualifying Firms through the earlier of the first full month
of a full reopening of the Trading Floor facilities to Floor personnel
or December 2020.\7\ The Exchange also proposes to clarify that
Qualifying Firms would include firms that began Floor operations after
March 2020 that are unable to operate at more than 50% of their
Exchange-approved on-Floor staffing levels.\8\
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\5\ See Securities Exchange Act Release Nos. 88596 (April 8,
2020), 85 FR 20796 (April 14, 2020) (SR-NYSEArca-2020-29); 88812
(May 5, 2020), 85 FR 27787 (May 11, 2020) (SR-NYSEArca-2020-38).
\6\ See Securities Exchange Act Release Nos. 89038 (June 10,
2020), 85 FR 36447 (June 16, 2020) (SR-NYSEArca-2020-52); 89242
(June 7, 2020), 85 FR 42037 (July 13, 2020) (SR-NYSEArca-2020-60);
89480 (August 5, 2020), 85 FR 48591 (August 11, 2020) (SR-NYSEArca-
2020-69); 89694 (August 27, 2020), 85 FR 54608 (September 2, 2020)
(SR-NYSEArca-2020-76). See also Fee Schedule, NYSE Arca OPTIONS:
FLOOR and EQUIPMENT and CO-LOCATION FEES.
\7\ See proposed Fee Schedule, NYSE Arca OPTIONS: FLOOR and
EQUIPMENT and CO-LOCATION FEES.
\8\ See id. The Exchange originally filed in September 2020 (see
supra note 4) to make explicit the treatment of firms that began
Floor operations after March 2020 and this change applies to firms
that joined the Exchange on September 1st or thereafter.
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Specifically, as with the prior fee waivers, the proposed fee
waiver covers the following fixed fees for Qualifying Firms, which
relate directly to Floor operations, are charged only to Floor
participants and do not apply to participants that conduct business
off-Floor:
Floor Booths;
Market Maker Podia;
Options Floor Access;
Wire Services; and
ISP Connection.\9\
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\9\ See id. Given the proposed changes to the preamble of this
section to update the potential duration of the fee waiver, which
includes a delineation of each fee waived, the Exchange proposes to
delete (the now repetitive) references that appear (again) next to
each fee waived for Qualifying Firms as well as to delete references
to prior months (now concluded) regarding when the fee waivers were
in place. See id.
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[[Page 67033]]
The proposed fee change is designed to reduce monthly costs for all
Qualifying Firms whose operations continue to be disrupted even though
the Trading Floor has partially reopened. In reducing this monthly
financial burden, the proposed change would allow Qualifying Firms that
had Floor operations in March 2020 to reallocate funds to assist with
the cost of shifting and maintaining their prior fully-staffed on-Floor
operations to off-Floor and recoup losses as a result of the partial
reopening. Absent this change, all Qualifying Firms may experience an
unexpected increase in the cost of doing business on the Exchange.\10\
The Exchange believes that all Qualifying Firms would benefit from this
proposed fee change.
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\10\ The Exchange will refund participants of the Floor Broker
Prepayment Program for any prepaid 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 Qualifying Firms as defined, and set forth in, NYSE Arca
OPTIONS: FLOOR and EQUIPMENT and CO-LOCATION FEES'').
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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.
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\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(4) and (5).
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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.'' \13\
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\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'').
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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.\14\ Therefore, currently no exchange possesses significant
pricing power in the execution of multiply-listed equity & ETF options
order flow. More specifically, in August 2020, the Exchange had
slightly over 10% market share of executed volume of multiply-listed
equity & ETF options trades.\15\
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\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/volume/default.jsp.
\15\ Based on OCC data, see id., the Exchange's market share in
equity-based options increased from 9.59% for the month of August
2019 to 10.20% for the month of August 2020.
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This proposed fee change is reasonable, equitable, and not unfairly
discriminatory because it would reduce monthly costs for all Qualifying
Firms whose operations have been disrupted despite the fact that the
Trading Floor has partially reopened because of the social distancing
requirements and/or other health concerns related to resuming operation
on the Floor. In reducing this monthly financial burden, the proposed
change would allow Qualifying Firms that had Floor operations in March
2020 to reallocate funds to assist with the cost of shifting and
maintaining their prior fully-staffed on-Floor operations to off-Floor
and recoup losses as a result of the partial reopening of the Floor.
Absent this change, all Qualifying Firms may experience an unexpected
increase in the cost of doing business on the Exchange. The Exchange
believes that all Qualifying Firms would benefit from this proposed fee
change.
The Exchange believes the proposed rule change is an equitable
allocation of its fees and credits as it merely continues the previous
fee waiver for Qualifying Firms, which affects fees charged only to
Floor participants and does not apply to participants that conduct
business off-Floor. The Exchange believes it is an equitable allocation
of fees and credits to extend the fee waiver for Qualifying Firms
because such firms have either no more than half of their Floor staff
(as measured by either the March 2020 or Exchange-approved) levels or
have vacant podia--and this reduction in staffing levels on the Floor
impacts the speed, volume and efficiency with which these firms can
operate, which is to their financial detriment.
The Exchange believes that the proposal is not unfairly
discriminatory because the proposed continuation of the fee waiver
would affect all similarly-situated market participants on an equal and
non-discriminatory basis.
The Exchange believes that it is reasonable to clarify that firms
that began Floor operations on the Exchange after March 2020 would be
included as ``Qualifying Firms'' if such firms are unable to operate at
more than 50% of their Exchange-approved on-Floor staffing levels as
such treatment places all firms on a level playing field and avoids
placing ``newer'' Qualifying Firms at a financial disadvantage. The
Exchange believes that this proposed change would add clarity and
transparency and reduce the potential for confusion in the Fee Schedule
as relates to the treatment new Floor 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. The Exchange believes that the proposed changes
would encourage the continued participation of Qualifying Firms,
thereby promoting market depth, price discovery and transparency and
would enhance 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\
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\16\ See Reg NMS Adopting Release, supra note 13, at 37499.
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Intramarket Competition. The proposed change, which continues the
fee waiver for all Qualifying Firms, is designed to reduce monthly
costs for those Floor participants whose operations continue to be
impacted even though the Trading Floor has partially reopened. In
reducing this monthly financial burden, the proposed change would allow
Qualifying Firms that had Floor operations in March 2020 to reallocate
funds to assist with the cost of shifting and maintaining their
previously on-Floor operations to off-Floor. Absent this change, all
Qualifying Firms may experience an unintended increase in the cost of
doing business on
[[Page 67034]]
the Exchange, given that the Floor has only reopened in a limited
capacity. The Exchange believes that the proposed waiver of fees for
Qualifying Firms 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. In
addition, Floor-based firms that are not subject to the extent of
staffing shortfalls as are Qualifying Firms, i.e., such firms have more
than 50% of their March 2020--or Exchange-approved--staffing levels on
the Floor and/or have no vacant Podia during the month, do not face the
same operational disruption and potential financial impact during the
partial reopening of the Floor.
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 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.\17\ Therefore, currently
no exchange possesses significant pricing power in the execution of
multiply-listed equity & ETF options order flow. More specifically, in
August 2020, the Exchange had slightly over 10% market share of
executed volume of multiply-listed equity & ETF options trades.\18\
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\17\ See supra note 14.
\18\ Based on OCC data, supra note 15, the Exchange's market
share in equity-based options was the Exchange's market share in
equity-based options increased from 9.59% for the month of August
2019 to 10.20% for the month of August 2020.
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The Exchange believes that the proposed rule change reflects this
competitive environment because it waives fees for Qualifying Firms and
is designed to reduce monthly costs for Floor participants whose
operations continue to be disrupted even though the Trading Floor has
partially reopened. In reducing this monthly financial burden, the
proposed change would allow affected participants to reallocate funds
to assist with the cost of shifting and maintaining their prior fully
staffed on-Floor operations to off-Floor. Absent this change,
Qualifying Firms 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) \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 (http://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-NYSEArca-2020-90 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-2020-90. 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-2020-90, and should be
submitted on or before November 12, 2020.
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\22\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-23253 Filed 10-20-20; 8:45 am]
BILLING CODE 8011-01-P