Notice2022-27648
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
December 21, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 244 (Wednesday, December 21, 2022)</title>
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[Federal Register Volume 87, Number 244 (Wednesday, December 21, 2022)]
[Notices]
[Pages 78138-78141]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-27648]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-96501; File No. SR-NYSEAMER-2022-55]
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
December 15, 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 December 9, 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 and II
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 the Firm Monthly Fee Cap. The
Exchange proposes to implement the fee change effective December 9,
2022.\4\ 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.
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\4\ The Exchange previously filed to amend the Fee Schedule on
December 1, 2022 (SR-NYSEAMER-2022-54) and withdrew such filing on
December 9, 2022.
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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 to amend the Fee Schedule to modify the
Firm Monthly Fee Cap. The Exchange proposes to implement the rule
change on December 9, 2022.
The Exchange proposes to modify the Firm Monthly Fee Cap, which is
set forth in Section I.I. of the Fee Schedule.\5\ Currently, a Firm's
fees associated with Manual transactions are capped at $100,000 per
month per Firm. A Firm currently may also qualify for a decreased fee
cap by achieving tier levels in the American Customer Engagement
Program (the ``ACE Program'').\6\
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\5\ See Fee Schedule, Section I.I., Firm Monthly Fee Cap,
available at: <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>.
\6\ See id., Section I.E., American Customer Engagement
(``ACE'') Program.
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The Exchange proposes to raise the Firm Monthly Fee Cap to $150,000
per month per Firm and to eliminate the decreased fee caps for Firms
that achieve ACE Program tiers, such that all Firms would be eligible
for a $150,000 monthly fee cap. Accordingly, the Exchange proposes to
modify Section I.I. to replace references to a $100,000 cap with
references to a $150,000 cap and to delete the sentence and table
describing decreased fee caps offered to Firms that qualify for ACE
Program tiers.\7\ The Exchange does not otherwise propose any changes
to the provisions of the Firm Monthly Fee Cap. The incremental service
fee of $0.01 per contract for Firm Manual transactions other than QCC
Transactions will continue to apply once the Firm Monthly Fee Cap has
been reached, and Royalty Fees and fees or volumes associated with
Strategy Executions will continue to be excluded from the calculation
of fees towards the Firm Monthly Fee Cap. Firm Facilitation Manual
trades will also continue to be executed at the rate of $0.00 per
contract regardless of whether a Firm has reached the Firm Monthly Fee
Cap.
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\7\ The Exchange also proposes a conforming change to footnote 4
in Section I.A. (Rates for Options transactions) of the Fee
Schedule, which cross-references the Firm Monthly Fee Cap as set
forth in Section I.I. The Exchange likewise proposes to modify
footnote 4 to replace the reference to a $100,000 cap with a
reference to a $150,000 cap.
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The Exchange believes that the proposed change, despite increasing
the amount of the Firm Monthly Fee Cap, would continue to incentivize
Firms to direct order flow to the Exchange to achieve the benefits of
cap on their Manual transaction fees. The Exchange also notes that the
proposed change would provide for a uniform fee cap amount that would
be applicable to all Firms and sets the Firm Monthly Fee Cap at an
amount similar to the firm fee cap established by another options
exchange.\8\
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\8\ See, e.g., Nasdaq PHLX LLC, Options 7 Pricing Schedule,
Section 4 (providing for a ``Monthly Firm Fee Cap'' capping firm
fees at $150,000).
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\9\ in general, and furthers the
objectives of Sections 6(b)(4) and (5) of the Act,\10\ in particular,
because it provides for the equitable allocation of reasonable dues,
fees, and
[[Page 78139]]
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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\9\ 15 U.S.C. 78f(b).
\10\ 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.'' \11\
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\11\ 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.\12\ Therefore, no exchange possesses significant pricing power
in the execution of multiply-listed equity and ETF options order flow.
More specifically, in October 2022, the Exchange had less than 8%
market share of executed volume of multiply-listed equity and ETF
options trades.\13\
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\12\ 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/Monthy-Weekly-Volume-Statistics">https://www.theocc.com/Market-Data/Market-Data-Reports/Volume-and-Open-Interest/Monthy-Weekly-Volume-Statistics</a>.
\13\ 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 7.68%
for the month of October 2021 and 7.25% for the month of October
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 proposed change to the Firm Monthly Fee Cap is reasonable
because the Exchange believes the fee cap would continue to incentivize
Firms to direct order flow to the Exchange to receive the benefits of
capped fees for their Manual transactions. The Exchange also believes
the proposed change is reasonable because it would provide for a fee
cap amount that would be applicable to all Firms (regardless of their
qualification for ACE Program tiers) and establishes a cap amount
similar to that offered by another options exchange.\14\
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\14\ See note 8, supra.
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To the extent that the proposed change continues to attract volume
to the Exchange, this 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, which could promote market depth,
facilitate tighter spreads and enhance price discovery, particularly to
the extent the proposed change encourages market participants to
utilize the Exchange as a primary trading venue, and may lead to a
corresponding increase in order flow from other market 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 market participants can choose to direct their order
flow to any of the 16 options exchanges, including an exchange offering
a monthly firm fee cap of a similar amount.\15\ The Exchange believes
that proposed rule change is designed to continue to incent market
participants to direct liquidity to the Exchange, and, to the extent
they continue to be incentivized to aggregate their trading activity at
the Exchange, that increased liquidity could promote market depth,
price discovery and improvement, and enhanced order execution
opportunities for all market participants.
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\15\ See id.
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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 change is equitable
because the modified Firm Monthly Fee Cap would apply to all Firms
equally and, by eliminating the decreased caps available to Firms that
achieve ACE Program tiers, would provide for the same fee cap amount
for all Firms on their Manual transactions. The Exchange believes that
the proposed changes are designed to continue to incent Firms to
aggregate their executions at the Exchange as a primary execution
venue. To the extent that the proposed change achieves its purpose in
attracting more 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 Proposed Rule Change Is Not Unfairly Discriminatory
The Exchange believes that the modification of the Firm Monthly Fee
Cap is not unfairly discriminatory because the fee cap, as proposed,
would be available to all similarly situated Firms, any of which could
continue to be incentivized to direct order flow to the Exchange to
qualify for the fee cap. Moreover, the proposed change to the Firm
Monthly Fee Cap is not unfairly discriminatory because it would apply
the same fee cap amount to all Firms, regardless of whether they
achieve ACE Program tiers.
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.
Finally, the Exchange believes that it is subject to significant
competitive forces, as described below in the
[[Page 78140]]
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.'' \16\
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\16\ See Reg NMS Adopting Release, supra note 11, at 37499.
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Intramarket Competition. The proposed change is designed to
continue to attract order flow to the Exchange, which could increase
the volumes of contracts traded on the Exchange. Greater liquidity
benefits all market participants on the Exchange, and the Exchange
believes that the proposed modification of the Firm Monthly Fee Cap
(even though it would raise the amount of the fee cap) would continue
to incentivize Firms to direct order flow to the Exchange to be
eligible for the benefits of capped fees on Manual transactions,
thereby promoting liquidity on the Exchange to the benefit of all
market participants.
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.\17\ Therefore, no
exchange possesses significant pricing power in the execution of
multiply-listed equity and ETF options order flow. More specifically,
in October 2022, the Exchange had less than 8% market share of executed
volume of multiply-listed equity and ETF options trades.\18\
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\17\ See note 12, supra.
\18\ See note 13, 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 continue to incent market participants to direct
trading interest to the Exchange, to provide liquidity and to attract
order flow. To the extent that Firms 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
also notes that the proposed change increases the Firm Monthly Fee Cap
to an amount similar to the fee cap offered by another options
exchange. 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.
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) \19\ of the Act and subparagraph (f)(2) of Rule
19b-4 \20\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\19\ 15 U.S.C. 78s(b)(3)(A).
\20\ 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) \21\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\21\ 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#c9bbbca5ace4aaa6a4a4aca7bdba89baacaae7aea6bf"><span class="__cf_email__" data-cfemail="ff8d8a939ad29c9092929a918b8cbf8c9a9cd1989089">[email protected]</span></a>. Please include
File Number SR-NYSEAMER-2022-55 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-2022-55. 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-2022-55, and should be
submitted on or before January 11, 2023.
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For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
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\22\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022-27648 Filed 12-20-22; 8:45 am]
BILLING CODE 8011-01-P
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