NYSE Arca Proposes Targeted Options Fee Changes to Boost Liquidity and Simplify Pricing

2025-11-27 · Regulation · QuoteReporter

NYSE Arca has filed a series of proposed changes to its Options Fee Schedule, seeking immediate effectiveness under SEC rules. The adjustments affect Firms, Broker-Dealers, and Floor Brokers and aim to stimulate liquidity, enhance transparency, and maintain competitiveness in the highly fragmented U.S. options market.

These changes arrive in an environment where exchanges constantly recalibrate fees and incentives to attract tighter spreads, deeper liquidity, and more consistent participation.

Stronger Credits for Liquidity Providers

A key part of the proposal is NYSE Arca’s plan to increase per-contract credits for Firms and Broker-Dealers that add liquidity electronically in Penny Issues.
The new credit rises from ($0.10) to ($0.28) per contract.

At the same time, the exchange proposes eliminating the $0.50 fee for liquidity-adding executions in non-Penny Issues, reducing it to $0.00.

For market participants, these changes improve the economics of posting liquidity—one of the core drivers of tighter markets and better displayed quotes.

Simplifying the Penny Posting Credit Tiers

The exchange also intends to simplify its tier structure by removing the lowest tier, which has become obsolete after the increase in the base credit.
The former Tier 2 becomes the new Tier 1.

This restructuring aims to make the schedule easier to interpret, reducing unnecessary layers and improving predictability for firms monitoring their activity thresholds.

Elimination of the Incentive Program

NYSE Arca proposes discontinuing the Firm and Broker Dealer Incentive Program, which previously offered supplementary credits to high-activity participants.

With the revised liquidity credits already providing stronger baseline incentives, the program has become redundant. Removing it reduces complexity and streamlines the fee landscape, aligning with industry-wide efforts to make fee schedules less cumbersome.

Fee Relief for Floor Brokers

To support traditional open-outcry trading, NYSE Arca proposes granting Floor Brokers an exemption from Routing Fees.

Floor Brokers must occasionally route orders to other venues to meet best-execution requirements. Under current rules, they incur routing fees for such executions.
Removing these charges reduces cost burdens and encourages continued activity on the trading floor—an important venue for complex or high-touch orders.

Competitive Dynamics: A Market Driven by Choice

The U.S. options market is intensely competitive, with 18 exchanges sharing order flow. No single exchange holds more than a mid-teens percentage of market share.

In August 2025, NYSE Arca’s share of equity and ETF options volume stood at 9.87%, down from 14.62% a year earlier.
This decline underscores why exchanges frequently adjust fee schedules: pricing is one of the few direct levers they can use to attract order flow and remain competitive.

The proposal stresses that the changes are intended to balance incentives, encourage liquidity provision, and strengthen Arca’s position without disadvantaging other market participants.

No Expected Harm to Competition

NYSE Arca asserts that the revisions will not impose an undue burden on competition.
To the contrary, increased credits and reduced fees are expected to enhance liquidity and may improve market quality.

The adjustments support both electronic liquidity providers and floor intermediaries, facilitating a diverse ecosystem of trading styles.

Regulatory Process and Public Comments

The filing became effective upon submission under Section 19(b)(3)(A), as is standard for fee-related proposals.
However, the SEC retains authority to temporarily suspend the change within 60 days if needed for investor protection.

Members of the public may submit comments electronically or by mail, consistent with usual SEC procedures.

A Streamlined and More Competitive Fee Structure

In summary, NYSE Arca’s proposal focuses on:

Increasing credits for liquidity-adding orders

Eliminating outdated fee tiers

Removing redundant incentive programs

Reducing routing costs for Floor Brokers

Realigning incentives to attract and retain market participants

These changes reflect ongoing efforts by exchanges to fine-tune the microstructure of the options markets.
By simplifying the schedule and enhancing incentives, NYSE Arca aims to strengthen its competitive stance while supporting both electronic traders and floor-based participants.

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