Notice2022-12403
Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the NYSE American Options Fee Schedule
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Published
June 10, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 112 (Friday, June 10, 2022)</title>
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[Federal Register Volume 87, Number 112 (Friday, June 10, 2022)]
[Notices]
[Pages 35587-35590]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-12403]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-95041; File No. SR-NYSEAMER-2022-22]
Self-Regulatory Organizations; NYSE American LLC; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
the NYSE American Options Fee Schedule
June 3, 2022.
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 May 31, 2022, NYSE American LLC (``NYSE American'' 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 amend the NYSE American Options Fee
Schedule (``Fee Schedule'') regarding credits relating to the BOLD
Mechanism. The Exchange proposes to implement the fee change effective
June 1, 2022. The proposed rule change is available on the Exchange's
website at <a href="http://www.nyse.com">www.nyse.com</a>, 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of this filing is to modify credits associated with the
BOLD Mechanism, a trading mechanism for automated order handling for
eligible orders in designated classes pursuant to NYSE American Rule
994NY.
Currently, BOLD Initiating Orders receive the better of a $0.12 per
contract credit or a higher credit earned by qualifying for the
American Customer Engagement (``ACE'') Program.\4\ As set forth in
Section I.E. of the Fee Schedule, the ACE Program provides qualifying
participants with per contract credits applicable to Electronic options
transactions, including those executed via the BOLD Mechanism.
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\4\ See Fee Schedule, Section I.M. BOLD Mechanism Fees &
Credits.
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The Exchange now proposes to modify Section I.M. of the Fee
Schedule to provide that the credit available to BOLD Initiating Orders
would be the better of $0.12 or, to the extent an ATP Holder would
qualify for a higher credit via the ACE Program, $0.13.\5\
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\5\ The Exchange notes that this proposed change would only
impact the credit relating to BOLD Initiating Orders, and the ACE
Program credits outlined in Section I.E. remain unchanged.
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The Exchange notes that the fees and credits relating to the BOLD
Mechanism, as originally established,\6\
[[Page 35588]]
were intended to encourage the use of the new mechanism, which purpose
was achieved. The Exchange believes that, although the proposed change
would set an upper limit on the credit for BOLD Initiating Orders
offered to ATP Holders that qualify via the ACE Program, the proposed
change would not discourage ATP Holders from continuing to use the BOLD
Mechanism and would continue to provide an incentive to ATP Holders to
submit orders to the Exchange for execution via the BOLD Mechanism.
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\6\ See Securities Exchange Act Release No. 80964 (June 19,
2017), 82 FR 28726 (June 23, 2017) (SR-NYSEMKT-2017-37) (Notice of
Filing and Immediate Effectiveness of Proposed Change to Modify the
NYSE Amex Options Fee Schedule).
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The Exchange proposes to implement the fee change effective June 1,
2022.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\7\ in general, and furthers the
objectives of Sections 6(b)(4) and (5) of the Act,\8\ 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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\7\ 15 U.S.C. 78f(b).
\8\ 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.'' \9\
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\9\ 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.\10\ Therefore, currently no exchange possesses significant
pricing power in the execution of multiply-listed equity and ETF
options order flow. More specifically, in April 2022, the Exchange had
less than 9% market share of executed volume of multiply-listed equity
and ETF options trades.\11\
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\10\ The OCC publishes options and futures volume in a variety
of formats, including daily and monthly volume by exchange,
available here: <a href="https://www.theocc.com/Market-Data/Market-Data-Reports/Volume-and-Open-Interest/Monthly-Weekly-Volume-Statistics">https://www.theocc.com/Market-Data/Market-Data-Reports/Volume-and-Open-Interest/Monthly-Weekly-Volume-Statistics</a>.
\11\ Based on a compilation of OCC data for monthly volume of
equity-based options and monthly volume of ETF-based options, see
id., the Exchange's market share in equity-based options decreased
from 8.57% for the month of April 2021 to 8.14% for the month of
April 2022.
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The Exchange believes that the ever-shifting market share among the
exchanges from month to month demonstrates that market participants can
shift order flow or discontinue or reduce use of certain categories of
products, in response to fee changes. Accordingly, competitive forces
constrain options exchange transaction fees. Stated otherwise, changes
to exchange transaction fees can have a direct effect on the ability of
an exchange to compete for order flow.
The Exchange's fees are constrained by intermarket competition, as
OTP Holders may direct their order flow to any of the 16 options
exchanges. The Exchange regularly reviews the effectiveness of various
fees and incentives, including to determine whether moderations of such
fees and incentives would be appropriate. As noted above, the existing
fees and credits for use of the BOLD Mechanism were designed to incent
ATP Holders to become familiar with the execution quality of the
mechanism, and ATP Holders have now had the opportunity to do so.
Having reviewed the effectiveness of the credit offered on BOLD
Initiating Orders, the Exchange believes that its proposed modification
of the incentives for use of the BOLD Mechanism is reasonably designed
to continue to encourage ATP Holders to submit orders to the Exchange
for execution via the BOLD Mechanism and would not discourage ATP
Holders from continuing to use the BOLD Mechanism even though the
credit available to ATP Holders that earn a higher credit through the
ACE Program would be capped at $0.13, as proposed.
The Exchange cannot predict with certainty whether or the extent to
which ATP Holders would continue to use the BOLD Mechanism, but
believes that the $0.12 credit on BOLD Initiating Orders (which remains
unchanged) as well as the proposed credit of $0.13 for qualifying ACE
Program participants would continue to encourage ATP Holders to utilize
the mechanism. The Exchange further believes that the benefits
associated with the use of the BOLD Mechanism would continue to provide
an incentive for ATP Holders to direct Customer options order flow to
the Exchange, which brings increased liquidity and order flow for the
benefit of all market participants.
Finally, to the extent the proposed change continues to attract
volume and liquidity, while encouraging use of the BOLD Mechanism, the
Exchange believes the proposed change would improve the Exchange's
overall competitiveness and strengthen its market quality for all
market participants by offering various mechanisms for execution of
orders. In the backdrop of the competitive environment in which the
Exchange operates, the proposed rule change is a reasonable attempt by
the Exchange to maintain the depth of its market and maintain its
market share relative to its competitors. ATP Holders have a choice of
where they direct their order flow (including their Customer marketable
orders), and the proposed rule change is designed to continue to incent
ATP Holders to direct liquidity to the Exchange, thereby promoting
market depth, price discovery and improvement and enhancing order
execution opportunities for market participants.
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 is based on the amount
and type of business transacted on the Exchange and ATP Holders can opt
to use the BOLD Mechanism or not. Although the proposed change would
limit the credit available on BOLD Initiating Orders for certain ATP
Holders that also participate in the ACE Program, such limit would
apply equally to all ACE Program participants that may be eligible for
a higher credit and would thus provide for a more equitable allocation
of credits associated with the use of the BOLD Mechanism. Moreover, the
proposal is designed to continue to incent ATP Holders to aggregate all
Customer interest at the Exchange as a primary execution venue and to
attract more marketable orders to be executed through the BOLD
Mechanism. To the extent that the proposed change does not discourage
ATP Holders from directing Customer marketable orders to the Exchange,
the Exchange believes that order flow sent to the Exchange for
execution via the BOLD Mechanism would continue to make the Exchange a
more competitive venue for, among other things, order execution of all
order types. Thus, the Exchange believes the proposed rule change would
improve market quality for all market participants on the Exchange and,
as a
[[Page 35589]]
consequence, attract more order flow to the Exchange thereby improving
market-wide quality and price discovery.
The Proposed Rule Change Is Not Unfairly Discriminatory
The Exchange does not believe that the proposed change to the
credit for BOLD Initiating Orders is unfairly discriminatory because
all ATP Holders that submit orders through the BOLD Mechanism would
continue to be eligible for the $0.12 credit, and the proposed
modification to cap the credit available to ATP Holders that may be
eligible for a higher credit via the ACE Program at $0.13 would apply
equally to all such ATP Holders.
The proposal is based on the amount and type of business transacted
on the Exchange, and ATP Holders are not obligated to use the BOLD
Mechanism. Rather, the proposal is designed to encourage ATP Holders to
utilize the Exchange as a primary trading venue for Customer marketable
orders (if they have not done so previously). To the extent that the
proposed change would continue to encourage ATP Holders to maintain
their current level of Customer interest, including marketable
interest, on the Exchange, this order flow would continue to make the
Exchange a competitive venue for, among other things, order execution.
Thus, the Exchange believes the proposed rule change would support
market quality for all market participants on the Exchange and, as a
consequence, attract order flow to the Exchange thereby improving
market-wide quality and price discovery. The resulting continued volume
and liquidity would provide more trading opportunities and tighter
spreads to all market participants and thus would promote just and
equitable principles of trade, remove impediments to and perfect the
mechanism of a free and open market and a national market system and,
in general, to protect investors and the public interest.
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.
For the foregoing reasons, the Exchange believes that the proposal
is consistent with the Act.
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. Instead, as discussed above, the Exchange believes
that the proposed changes would continue to encourage the submission of
additional liquidity to a public exchange, 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.'' \12\
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\12\ See Reg NMS Adopting Release, supra note 9, at 37499.
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Intramarket Competition. The proposed change is designed to
maintain order flow (particularly Customer marketable orders) to the
Exchange. The Exchange believes that the proposed modification to the
credit on BOLD Initiating Orders would not discourage ATP Holders from
using the BOLD Mechanism or maintaining their current level of Customer
marketable order flow to the Exchange and, to the extent such purpose
is achieved, the Exchange would maintain its Customer order flow, which
benefits all market participants on the Exchange. In addition, because
the credits available on BOLD Initiating Orders, as modified, would be
available to all similarly-situated market participants that execute
Customer marketable interest through the BOLD Mechanism, the Exchange
does not believe that the proposed change would impose a disparate
burden on competition among market participants on the Exchange.
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 has more than 16% of the market share of executed volume of
multiply-listed equity and ETF options trades.\13\ Therefore, currently
no exchange possesses significant pricing power in the execution of
multiply-listed equity & ETF options order flow. More specifically, in
April 2022, the Exchange had less than 9% market share of executed
volume of multiply-listed equity & ETF options trades.\14\
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\13\ See note 10, supra.
\14\ Based on a compilation of OCC data for monthly volume of
equity-based options and monthly volume of ETF-based options, see
id., the Exchange's market share in equity-based options decreased
from 8.57% for the month of April 2021 to 8.14% for the month of
April 2022.
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The Exchange believes that the proposed rule change reflects this
competitive environment because, although it may reduce the credit that
some ATP Holders would earn on BOLD Initiating Orders, it modifies the
Exchange's fees in a manner designed to continue to incent ATP Holders
to direct trading interest (particularly Customer marketable interest)
to the Exchange, to provide liquidity and to attract order flow. To the
extent that this purpose is achieved, all the Exchange's market
participants should benefit from the improved market quality and
increased opportunities for price improvement.
The Exchange believes that the proposed change could maintain
competition between the Exchange and other execution venues, including
those that currently offer similar Customer execution mechanisms, by
encouraging additional orders to be sent to the Exchange for execution.
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) \15\ of the Act and subparagraph (f)(2) of Rule
19b-4 \16\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\15\ 15 U.S.C. 78s(b)(3)(A).
\16\ 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) \17\ of the Act to determine whether the proposed
rule
[[Page 35590]]
change should be approved or disapproved.
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\17\ 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
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#b4c6c1d8d199d7dbd9d9d1dac0c7f4c7d1d79ad3dbc2"><span class="__cf_email__" data-cfemail="6c1e190009410f0301010902181f2c1f090f420b031a">[email protected]</span></a>. Please include
File Number SR-NYSEAMER-2022-22 on the subject line.
Paper Comments
<bullet> 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-NYSEAMER-2022-22. 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 (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
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-NYSEAMER-2022-22, and should be
submitted on or before July 1, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-12403 Filed 6-9-22; 8:45 am]
BILLING CODE 8011-01-P
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