FR 2024-29471

Summary of the Document

The document details a proposal by NYSE Arca, Inc. to temporarily waive the Options Regulatory Fee (ORF) for December 2024. This fee is typically charged for options transactions and is meant to cover part of the regulatory costs for overseeing such transactions. The waiver aims to prevent the Exchange from collecting more than its regulatory expenses, a situation prompted by unusually high trading volumes. After December, the ORF is scheduled to resume at its previous rate, with the Exchange committing to monitoring the situation to prevent over-collection in the future. Additionally, the Exchange plans to update its fee schedule by removing outdated references to past fees and waivers.

Issues and Concerns

A significant issue with the document is the repeated use of the phrase "does not exceed ORF Costs" with the notation "[sic]," which suggests potential typographical errors. This might confuse readers about whether the fees collected are actually exceeding the costs or vice versa. Moreover, the explanation regarding the financial impact of these changes lacks specificity, providing only broad statements about avoiding excess revenue without indicating exact figures.

The language used, rich in legal and financial jargon, may present accessibility challenges to readers without specialized knowledge in securities regulation. While the waiver is expected to prevent excess fee collection, the exact amount by which collections could have exceeded costs remains unspecified, leaving readers without a full understanding of the potential fiscal impact.

Impact on the Public

For the general public, especially those participating in options trading, this waiver suggests a reduced financial burden for the month of December 2024. This temporary financial relief, though possibly minor for individuals, could signal a commitment from NYSE Arca to fair pricing and regulation that ultimately reflects their service costs more accurately. The effort to remove outdated language from the fee schedule is a step toward greater transparency, which can help build trust among traders.

However, the public must also consider the inherent uncertainty expressed in the document about future trading volumes and related costs. Such unpredictability may affect fees beyond January 2025, potentially altering the costs for trading participants if the ORF rate is adjusted again according to new cost projections.

Impact on Stakeholders

Specific stakeholders, such as brokers and options traders (particularly those classified under OTP Holders in the document), will directly benefit from the waiver. Reduced costs for a month alleviate some financial pressure, albeit temporary. The advance notice given for these changes also allows these stakeholders to adjust their processes accordingly, minimizing disruption.

On the other hand, stakeholders involved with NYSE Arca’s financial and regulatory planning might face challenges. The document highlights the difficulty in predicting trading volumes and associated costs, which complicates long-term financial planning. This uncertainty might require ongoing adjustments and communications to both regulatory bodies and trading participants.

In conclusion, while the document represents an effort to prevent excess fee collection and provide transparency, it leaves several questions unanswered about the broader financial implications and future adjustments. Both general participants and specific stakeholders should remain informed and vigilant to navigate the potential impacts of these regulatory fee changes.

The document discusses the proposed changes to the Options Regulatory Fee (ORF) by the NYSE Arca, Inc. and includes several references to financial allocations. These references pertain to changes in the fee rate and how these changes aim to manage regulatory costs associated with options trading.

Summary of Financial Allocations

The document outlines a temporary waiver of the ORF for the period from December 1, 2024, to December 31, 2024. During this time, the Exchange will not collect this fee from market participants, which is intended to prevent the ORF collections from exceeding the Exchange’s regulatory costs. The ORF is defined as a charge that usually helps offset a significant portion, but not the entirety, of the Exchange's expenses related to regulation, including technology, personnel, and administrative expenses.

The ORF is set to resume at a rate of $0.0038 per contract starting on January 1, 2025. Previously, the ORF was higher at $0.0058 per contract, but was reduced as of January 1, 2024. The reduction and current temporary waiver reflect attempts to align the fee collections accurately with the Exchange’s regulatory cost projections.

Relation to Identified Issues

The document frequently mentions ensuring that total collections do not "exceed ORF Costs," but it contains typographical errors marked with "[sic]" which could lead to confusion about whether the fees do exceed these costs or not. The intended purpose seems clear: to avoid over-collection, but the errors could mislead readers.

Furthermore, the rationale for setting the rate at $0.0038 per contract from the beginning of 2025 is based on "estimated projections" and thus is preliminary, which may raise concerns about the stability and reliability of these projections in properly aligning with actual regulatory costs. The document mentions high volatility and variability in the options market, which implies there are financial risks in retaining a static fee without broader transparency into potential fluctuations.

In removing outdated language from the Fee Schedule, the document indicates an improvement in clarity, yet there is no detailed evaluation of past confusion caused by this language. This lack of quantification of clarity improvement might affect stakeholders' understanding of how these changes benefit regulatory oversight efficiency.

The document also does not specify the precise percentage or amount by which the regulatory expenses might have been exceeded without this waiver. This omission could raise questions among stakeholders regarding the nature of the decision-making process and the financial effects of maintaining or altering the fee rate based on historical and projected options trading volumes.

Overall, the financial references in the document aim to ensure proper alignment between collected fees and actual regulatory expenses, acknowledging market dynamics and operational costs. However, the document could benefit from more explicit details and concrete data to bolster transparency and stakeholder confidence.