what's going on everyone charlie here another filing to talk about out of the nyse arca and
they are a primarily an options exchange and this is a filing immediate effectiveness of proposed
rule change to modify the nyse arca options fee schedule now if you're new to the channel
i want you to realize that every time you see a filing come out with the word fee schedule in it
it's going to relate to market share liquidity payment for order flow and the lack thereof
so the purpose of this filing is to modify the mysc arc options fee schedule regarding
incentive programs offered by the exchange now this was originally supposed to take effect july
1st however since it just showed up on the fed register it will not be in effect until tomorrow
7 13 21 says the purpose of this filing is to amend the fee schedule to make modifications
to one of the customer posting credit tiers and non-penny issues and to introduce an additional
discount and take liquidity fees for professional customers and non-customer liquidity removing
interest as described below the exchange proposes to implement the fee change effective july 1st
in other words 13th because we just saw it come on the register today and if anyone else is new
here no matter what a filing says until it shows up on the fed register for publication
it will not be approved that's just how the process works
now the changes this is going to do basically the non-penny tiers provide the otp holders now otp
holder is just an options trading permit holder can qualify for for per contract credits applied
to electronic options transactions based on meeting certain minimum volume thresholds
from customer posting interest in non-penny issues the exchange proposes to modify the non-penny
tiers by providing an alternative qualification method to achieve non-penny tier f and the
different qualification method that they're doing is they're basically doubling the total amount of
percentage of uh liquidity or volume they have to meet that threshold in order to get that incentive
now in otp trading rights are granted through options trading permits and it entitles you to
trade options on the nyse arca options facilities including the electronic platform and the physical
trading floor the nyc arca platform is available to five types of market participants that would be
lead market makers market makers market maker authorized traders agency floor brokers and order
flow providers so everything we hate right so the proposed alternative qualification to achieve
non-penny tier f is designed to continue to attract customer order flow for all issues to the
exchange and also to reward posted liquidity which provides benefits to all market participants by
providing more trading opportunities which in turn attracts customers market makers and non-customer
interest an increase in the activity of these market participants in turn facilitates tighter
spreads which may cause additional corresponding increase in order flow from other participants
changes continued so this is the change i was talking about it has to be two percent of total
industry customer equity and and the cool thing is they're adding specifically etf option average
daily volume so if you want to be able to get this incentive rebate not only do you have to
provide the two percent but it's including options as well now tcad v what that means is just the uh
occ calculated customer volume of all types including complex order transactions
qcc transactions in equity and etf options now remember qcc is a i believe that is a blackrock
etf if i'm not mistaken now if you see the language pertaining in this file to non-customer
that means specifically firms broker dealers and market makers again people we all hate
so basically reasoning for these changes again not enough liquidity in the market as we see through
the sibo market share graph dark pools have a complete monopoly and it's finra and nasdaq
basically the exchange believes that this proposed change would incentivize or incent the otp holders
to increase the amount of customer posted volume executed on the exchange while maintaining the
same level of liquidity removing volume required under one of the existing take feed discounts
which activity may result in tighter spreads and more trading making the exchange a more
attractive trading venue to the benefit of all participants sounds great there are currently 16
registered option exchanges competing for order flow based on public available information and
excluding index based options no single exchange has more than 16 percent of the market share
of executed volume that is a huge problem and that and they they say of multiply listed
equity and etf options trades therefore currently no exchange possesses significant pricing power
in the execution of multiply listed equity and etf options order flow more specifically
and we all saw this in may 2021 the exchange had less than 10 percent market share that's awful
and that's uh for multiple listed equity and etf options so basically in essence nyc arca and
options exchange wants to increase the amount of customer interest sent to the exchange and
to compete for more order flow repeated language about market share and no option exchange owning
more than 16 percent is stated reduced bid and s spread for options uh therefore implying
better price discovery and it also is going to incentivize broker dealers and market makers
to provide more liquidity by providing more incentives ape speak nysc arca no market due
to li to a dark pool taking all of the order flow and once the arc is says hey i give you
bigger rebate if you provide more liquidity here nyc arc also says hey we have no order
flow we want order flow effective tomorrow due to the showing up on the register today 7 13.
hope you found this helpful and talk to you all later when i get the next one out