Notice2022-19683
Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Modify the NYSE American Options Fee Schedule
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Published
September 13, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 176 (Tuesday, September 13, 2022)</title>
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[Federal Register Volume 87, Number 176 (Tuesday, September 13, 2022)]
[Notices]
[Pages 56103-56107]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-19683]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-95694; File No. SR-NYSEAMER-2022-39]
Self-Regulatory Organizations; NYSE American LLC; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Modify
the NYSE American Options Fee Schedule
September 7, 2022.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on August 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 modify the NYSE American Options Fee
Schedule (``Fee Schedule'') regarding credits for certain Qualified
Contingent Cross (``QCC'') transactions and to make an administrative
change. The Exchange proposes to implement the fee change effective
September 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.
[[Page 56104]]
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 to amend the Fee Schedule to (1) modify
Floor Broker credits for QCC transactions,\4\ and (2) make an
administrative change to the table setting forth fees for Premium
Products to reflect a ticker symbol change. The Exchange proposes to
implement the rule change on September 1, 2022.
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\4\ A QCC is comprised of an originating order to buy or sell at
least 1,000 contracts, or 10,000 mini-options contracts, that is
identified as being part of a qualified contingent trade (as such
term is defined in Commentary .01 to Rule 900.3NY), coupled with a
contra side order or orders totaling an equal number of contracts.
See Rule 900.3NY(y).
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Floor Broker QCC Credits
The Exchange proposes to modify the credits available to Floor
Brokers on QCC orders. Currently, Floor Brokers earn a credit for
executed QCC orders of ($0.07) per contract for the first 300,000
contracts or ($0.10) per contract in excess of 300,000.\5\ The Exchange
currently limits the maximum Floor Broker credit to $525,000 per month
per Floor Broker firm.\6\ QCC executions in which a Customer or
Professional Customer, or both, is on both sides of the QCC trade are
not eligible for the Floor Broker credit, and the Floor Broker credit
is paid only on volume within the applicable tier and is not
retroactive to the first contract traded.\7\
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\5\ See Fee Schedule, Section I.F., QCC Fees & Credits,
available here, <a href="https://www.nyse.com/publicdocs/nyse/markets/american-options/NYSE_American_Options_Fee_Schedule.pdf">https://www.nyse.com/publicdocs/nyse/markets/american-options/NYSE_American_Options_Fee_Schedule.pdf</a>. See id.,
Section I.F., Footnote 1.
\6\ See id., Section I.F. Footnote 1.
\7\ See id.
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The Exchange now proposes to increase the amount of the credits
available to Floor Brokers for executed QCC orders. Specifically, the
Exchange proposes that Floor Brokers may earn a credit of ($0.08) per
contract for the first 300,000 contracts and a credit of ($0.11) per
contract on all contracts above 300,000 in a month.
Although the Exchange cannot predict with certainty whether the
proposed change would encourage Floor Brokers to increase their QCC
volume, the proposed change is intended to continue to incent
additional QCC executions by Floor Brokers by increasing the credits
available on such orders, and all Floor Brokers are eligible to qualify
for the proposed credits.
Ticker Symbol Change
The Exchange proposes to make an administrative change to Section
III.D. of the Fee Schedule to reflect a ticker symbol change. Section
III.D., NYSE American Options Market Maker Monthly Premium Product Fee,
sets forth the monthly fee assessed to NYSE American Options Market
Makers that transact in certain Premium Products set forth in a table
(the ``Premium Products Table'') in this section of the Fee Schedule.
One such product, Meta Platforms, Inc., changed its trading symbol from
FB to META effective June 9, 2022. Accordingly, the Exchange proposes
to update the Premium Products Table to replace ``FB'' with ``META.''
The Exchange believes this proposed change would improve the clarity
and accuracy of the Fee Schedule by ensuring that the Premium Products
Table reflects the current ticker symbol for all Premium Products.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\8\ in general, and furthers the
objectives of Sections 6(b)(4) and (5) of the Act,\9\ 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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\8\ 15 U.S.C. 78f(b).
\9\ 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.'' \10\
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\10\ 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.\11\ Therefore, no exchange possesses significant pricing power
in the execution of multiply-listed equity and ETF options order flow.
More specifically, in July 2022, the Exchange had less than 8% market
share of executed volume of multiply-listed equity and ETF options
trades.\12\
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\11\ 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>.
\12\ 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 was 7.53%
for the month of July 2021 and 7.26% for the month of July 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.
To respond to this competitive marketplace, the Exchange has
established incentives to assist Floor Brokers in attracting more
business to the Exchange--including credits on QCC transactions--as
such participants serve an important function in facilitating the
execution of orders on the Exchange (including via open outcry),
thereby promoting price discovery on the public markets.
The Exchange believes that the proposed modification of the credits
offered to Floor Brokers on QCC transactions is reasonable because it
is designed to continue to incent Floor Brokers to increase the number
of QCC transactions sent to the Exchange. To the extent that the
proposed change attracts more volume to the Exchange, this increased
order flow would continue to make the Exchange a more competitive venue
for order execution, which, in turn, promotes just and equitable
principles of trade and removes impediments to and perfects the
mechanism of a free and open market and a national market system. The
Exchange notes that all market participants stand to benefit from any
increase in volume by Floor Brokers, which could promote market depth,
facilitate tighter spreads and enhance price discovery to the extent
the proposed change encourages Floor Brokers to utilize the Exchange as
a primary trading venue, and may lead to a corresponding increase in
order flow from other market participants. In
[[Page 56105]]
addition, any increased liquidity on the Exchange would result in
enhanced market quality for all participants.
Finally, to the extent the proposed change continues to attract
greater volume and liquidity, the Exchange believes the proposed change
would improve the Exchange's overall competitiveness and strengthen its
market quality for all market participants. In the backdrop of the
competitive environment in which the Exchange operates, the proposed
rule change is a reasonable attempt by the Exchange to increase the
depth of its market and improve its market share relative to its
competitors. The Exchange's fees are constrained by intermarket
competition, as Floor Brokers may direct their order flow to any of the
16 options exchanges, including those offering rebates on QCC
orders.\13\ Thus, Floor Brokers have a choice of where they direct
their order flow, including their QCC transactions. The proposed rule
change is designed to continue to incent Floor Brokers to direct
liquidity to the Exchange and, in particular, QCC orders, thereby
promoting market depth, price discovery and improvement, and enhanced
order execution opportunities for market participants, particularly to
the extent Floor Brokers are incentivized to aggregate their trading
activity at the Exchange.
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\13\ See, e.g., EDGX Options Exchange Fee Schedule, QCC
Initiator/Solicitation Rebate Tiers (applying ($0.22) per contract
rebate up to 999,999 contracts for QCC transactions with non-
customers on both sides); BOX Options Fee Schedule at Section
IV.D.1. (QCC Rebate) (providing for ($0.22) per contract rebate up
to 1,499,999 contracts for QCC transactions when both parties are a
broker-dealer or market maker); Nasdaq ISE, Options 7, Section 6.A.
(QCC and Solicitation Rebate) (offering rebates on QCC transactions
of up to ($0.11) on 1,000,000 or more contract sides in a month).
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The Exchange believes that the proposed administrative change with
respect to the Premium Products Table is reasonable because it would
update the table to reflect the current ticker symbols for all Premium
Products, thereby ensuring that the Fee Schedule clearly and accurately
sets forth the products subject to the fees in Section III.D.
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 proposed modification of QCC
credits is based on the amount and type of business transacted on the
Exchange, and Floor Brokers can attempt to trade QCC orders to earn the
increased credits or not. In addition, the proposed credits are
available to all Floor Brokers equally. The Exchange also believes that
the proposed credits are an equitable allocation of fees and credits
because they would encourage and support Floor Brokers' role in
facilitating the execution of orders on the Exchange, and to the extent
the proposed credits incent Floor Brokers to direct increased liquidity
to the Exchange, all market participants would benefit from enhanced
opportunities for price improvement and order execution.
Moreover, the proposed credits are designed to incent Floor Brokers
to encourage OTP Holders to aggregate their executions--particularly
QCC transactions--at the Exchange as a primary execution venue. To the
extent that the proposed changes attract more QCC volume to the
Exchange, this increased order flow would continue to make the Exchange
a more competitive venue for, among other things, order execution.
Thus, the Exchange believes the proposed rule change would improve
market quality for all market participants on the Exchange and, as a
consequence, attract more order flow to the Exchange, thereby improving
market-wide quality and price discovery.
The Exchange also believes that the proposed change relating to the
Premium Products Table is equitable because it would ensure that the
table accurately reflects the ticker symbol for all Premium Products,
to the benefit of all OTP Holders.
The Proposed Rule Change Is Not Unfairly Discriminatory
The Exchange believes it is not unfairly discriminatory to modify
the credits offered to Floor Brokers on QCC orders because the proposed
credits would be available to all similarly-situated Floor Brokers on
an equal and non-discriminatory basis. The proposed credits are also
not unfairly discriminatory to non-Floor Brokers because Floor Brokers
serve an important function in facilitating the execution of orders on
the Exchange (including via open outcry), which the Exchange wishes to
encourage and support to promote price improvement opportunities for
all market participants.
The proposal is based on the amount and type of business transacted
on the Exchange, and Floor Brokers are not obligated to execute QCC
orders. Rather, the proposal is designed to encourage Floor Brokers to
utilize the Exchange as a primary trading venue for all transactions
(if they have not done so previously) and increase QCC volume sent to
the Exchange. To the extent that the proposed change attracts more QCC
orders to the Exchange, this increased order flow would continue to
make the Exchange a more competitive venue for order execution. Thus,
the Exchange believes the proposed rule change would improve market
quality for all market participants on the Exchange and, as a
consequence, attract more order flow to the Exchange, thereby improving
market-wide quality and price discovery. The resulting increased 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, protect investors and the public interest.
The Exchange also believes that the proposed change to modify the
Premium Products Table is not unfairly discriminatory because it is
designed to update the table to include the current ticker symbol for
all Premium Products, to the benefit of all OTP Holders.
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. Instead, as discussed above, the Exchange believes
that the proposed changes would 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.'' \14\
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\14\ See Reg NMS Adopting Release, supra note 10, at 37499.
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Intramarket Competition. The proposed increased credits are
designed to attract additional order flow to the Exchange (particularly
in Floor Brokers' QCC transactions), which could increase the volumes
of contracts traded on the Exchange. Greater liquidity benefits all
[[Page 56106]]
market participants on the Exchange, and increased QCC transactions
would increase opportunities for execution of other trading interest.
The proposed credits would be available to all similarly-situated Floor
Brokers that execute QCC trades, and to the extent that there is an
additional competitive burden on non-Floor Brokers, the Exchange
believes that any such burden would be appropriate because Floor
Brokers serve an important function in facilitating the execution of
orders (including via open outcry) and price discovery for all market
participants.
The Exchange does not believe that the proposed change relating to
the Premium Products Table would impose any burden on intramarket
competition, as it is merely intended to improve the clarity of the Fee
Schedule by ensuring that the table reflects all Premium Products'
current ticker symbols.
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.\15\ Therefore, no
exchange possesses significant pricing power in the execution of
multiply-listed equity and ETF options order flow. More specifically,
in July 2022, the Exchange had less than 8% market share of executed
volume of multiply-listed equity and ETF options trades.\16\
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\15\ See note 11, supra.
\16\ See note 12, supra.
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The Exchange believes that the proposed rule change reflects this
competitive environment because it modifies the Exchange's fees in a
manner designed to incent Floor Brokers to direct trading interest
(particularly QCC transactions) to the Exchange, to provide liquidity
and to attract order flow. To the extent that Floor Brokers are
incentivized to utilize the Exchange as a primary trading venue for all
transactions, all of the Exchange's market participants should benefit
from the improved market quality and increased opportunities for price
improvement.
The Exchange notes that it operates in a highly competitive market
in which market participants can readily favor competing venues. In
such an environment, the Exchange must continually review, and consider
adjusting, its fees and credits to remain competitive with other
exchanges. For the reasons described above, the Exchange believes that
the proposed rule change reflects this competitive environment. The
Exchange further believes that the proposed change could promote
competition between the Exchange and other execution venues, including
those that currently offer rebates on QCC transactions, by encouraging
additional orders (and, in particular, QCC orders) to be sent to the
Exchange for execution.\17\
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\17\ See note 13, supra.
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The Exchange does not believe that the proposed change to update
the Premium Products Table would impact intermarket competition because
the proposed modification of the table is intended only to ensure that
it reflects the accurate ticker symbol for all Premium Products,
thereby improving the clarity and accuracy of the Fee Schedule,
reducing burdens on the marketplace, and facilitating investor
protection.
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) \18\ of the Act and subparagraph (f)(2) of Rule
19b-4 \19\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\18\ 15 U.S.C. 78s(b)(3)(A).
\19\ 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) \20\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\20\ 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#f280879e97df919d9f9f979c8681b2819791dc959d84"><span class="__cf_email__" data-cfemail="8bf9fee7eea6e8e4e6e6eee5fff8cbf8eee8a5ece4fd">[email protected]</span></a>. Please include
File Number SR-NYSEAMER-2022-39 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-2022-39. 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-2022-39, and should be
submitted on or before October 4, 2022.
[[Page 56107]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-19683 Filed 9-12-22; 8:45 am]
BILLING CODE 8011-01-P
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