Notice2023-01745
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
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
January 30, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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[Federal Register Volume 88, Number 19 (Monday, January 30, 2023)]
[Notices]
[Pages 5942-5947]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-01745]
[[Page 5942]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-96743; File No. SR-NYSEAMER-2023-08]
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
January 24, 2023.
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 January 13, 2023, 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 (1) fees and credits for
Qualified Contingent Cross (``QCC'') transactions and (2) the Floor
Broker Fixed Cost Prepayment Incentive Program (the ``FB Prepay
Program''). The Exchange proposes to implement the fee change effective
January 13, 2023.\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 30, 2022 (SR-NYSEAMER-2022-58) and withdrew such filing on
January 13, 2023.
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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 (1) modify
the fees and credits for QCC transactions \5\ and (2) modify the FB
Prepay Program. The Exchange proposes to implement the rule change on
January 13, 2023.
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\5\ A QCC is defined as 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 that
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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Modifications to QCC Fees and Credits
The table in Section I.F. of the Fee Schedule sets forth the per
contract fees and credits applicable to volume executed as part of a
QCC trade.\6\ Currently, Customers and Professional Customers do not
incur a fee or earn a credit; Non-Customers, excluding Specialists and
e-Specialists, are subject to a $0.20 per contract fee; and Specialists
and e-Specialists are subject to a $0.13 per contract fee. Floor
Brokers earn a credit for executed QCC orders of ($0.11) per contract
for the first 500,000 contracts or ($0.14) per contract in excess of
500,000.\7\
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\6\ See Fee Schedule, Section I.F., QCC Fees & Credits.
\7\ 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. The current Floor Broker credit is paid only on
volume within the applicable tier and is not retroactive to the
first contract traded. See Fee Schedule, Section I.F., QCC Fees &
Credits at Footnote 1.
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The Exchange proposes to modify the table in Section I.F. to
replace the term ``Non-Customer'' with ``Market Maker, Firm, or Broker
Dealer'' and eliminate the exception of Specialists and e-Specialists,
which would add clarity to the Fee Schedule regarding which market
participants are considered ``Non-Customers'' for purposes of QCC fees
and credits. The table would thus provide for a $0.20 fee on QCC
transactions by a Market Maker, Firm, or Broker-Dealer (as such terms
are defined in the KEY TERMS and DEFINITIONS section of the Fee
Schedule). Consistent with this change, the Exchange also proposes to
eliminate the $0.13 fee currently applicable to QCC transactions by
Specialists and e-Specialists; as Specialists and e-Specialists are
registered with the Exchange as Market Makers, they would, as proposed,
be charged as such for QCC transactions.
The Exchange further proposes to modify the table in Section I.F.
regarding credits applicable to Floor Brokers' QCC transactions and
proposes to provide Floor Brokers with credits based on the account
type of the parties to the trade.\8\ Specifically, the Exchange
proposes that Floor Brokers may earn a credit of ($0.12) per contract
for QCC transactions of a Customer or Professional Customer vs. a
Market Maker, Firm, or Broker Dealer, and a credit of ($0.18) per
contract for QCC transactions of a Market Maker, Firm, or Broker Dealer
vs. a Market Maker, Firm, or Broker Dealer.
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\8\ The Exchange also proposes to delete the sentence in
Footnote 1 to Section I.F. providing that the Floor Broker credit is
paid only on volume within the applicable tier and is not
retroactive to the first contract traded, as such concept would not
apply to the proposed Floor Broker credits.
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Finally, the Exchange proposes to modify the last sentence of
Footnote 1 to Section I.F., which currently provides that the maximum
Floor Broker credit paid for QCC transactions is $525,000 per month per
Floor Broker firm. The Exchange proposes to amend Footnote 1 to instead
provide that Floor Broker credits paid for QCC trades and rebates paid
through the Manual Billable Rebate Program (as proposed below) shall
not combine to exceed $2,000,000 per month per Floor Broker firm.
Although the Exchange cannot predict with certainty whether the
proposed change would encourage Floor Brokers to increase their QCC
volume, the Exchange believes that the proposed change would continue
to incent additional QCC executions by Floor Brokers by offering
increased credits on QCC transactions and raising the maximum monthly
amount that a Floor Broker firm could earn from Floor Broker QCC
credits (or rebates via the proposed Manual Billable Rebate Program),
and all Floor Brokers are eligible for the proposed credits, including
the proposed higher credit on QCC transactions with a Market Maker,
Firm or Broker on both sides of the trade, without any minimum volume
requirement. The Exchange also believes that the proposed change with
respect to the fee for QCC transactions by a Market Maker (including a
Specialist or e-Specialist), Firm, or Broker-Dealer would improve the
clarity of the Fee Schedule and, although the proposed change would
increase the fee for QCC transactions by Specialists and e-Specialists,
is reasonable and equitable because it would provide for the same fee
on QCC transactions for all Market Makers, Firms, and Broker-Dealers.
[[Page 5943]]
FB Prepay Program
The Exchange also proposes to modify the FB Prepay Program, a
prepayment incentive program that allows Floor Brokers to prepay
certain of their annual Eligible Fixed Costs in exchange for volume
rebates.\9\
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\9\ See Fee Schedule, Section III.E.1., Floor Broker Fixed Cost
Prepayment Incentive Program (the ``FB Prepay Program''). ``Eligible
Fixed Costs'' include monthly ATP Fees, the Floor Access Fee, and
certain monthly Floor communication, connectivity, equipment and
booth or podia fees, as set forth in the table in Section III.E.1.
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Currently, the FB Prepay Program offers participating Floor Brokers
an opportunity to qualify for rebates by achieving growth in billable
manual volume by a certain percentage as measured against one of two
benchmarks (the ``Percentage Growth Incentive''). Specifically, the
Percentage Growth Incentive is designed to encourage Floor Brokers to
increase their average daily volume (``ADV'') in billable manual
contract sides to qualify for a Tier; each Tier of the FB Prepay
Program corresponds to an annual rebate equal to the greater of the
``Total Percentage Reduction of pre-paid annual Eligible Fixed Costs''
or the annualization of the monthly ``Alternative Rebate.'' \10\ In
either case, participating Floor Brokers receive their annual rebate
amount in the following January.\11\ Floor Brokers that wish to
participate in the FB Prepay Program for the following calendar year
must notify the Exchange no later than the last business day of
December in the current year.\12\
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\10\ See id. The Percentage Growth Incentive excludes Customer
volume, Firm Facilitation trades, and QCCs. Any volume calculated to
achieve the Firm Monthly Fee Cap and the Strategy Execution Fee Cap,
regardless of whether either of these caps is achieved, will
likewise be excluded from the Percentage Growth Incentive because
fees on such volume are already capped and therefore do not increase
billable manual volume. See id.
\11\ See Fee Schedule, Section III.E.1.
\12\ See id.
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The Exchange now proposes to modify the FB Prepay Program to
eliminate the Percentage Growth Incentive and accompanying annual
rebates \13\ and instead provide Floor Brokers participating in the
program with monthly rebates based on manual billable transaction
volume (the ``Manual Billable Rebate Program''). The calculation of
volume on which rebates earned through the Manual Billable Rebate
Program would be paid is based on transactions including at least one
side for which manual transaction fees are applicable and excludes
volume from QCC transactions.\14\ The Exchange proposes to continue to
exclude any volume calculated to achieve the Strategy Execution Fee
Cap, regardless of whether the cap is achieved, from the Manual
Billable Rebate Program because fees on such volume are already capped
and therefore such volume does not increase billable manual volume.\15\
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\13\ To effect the proposed change to eliminate the Percentage
Growth Incentive and related rebates, the Exchange also proposes to
delete the last sentence in Section III.E.1., which currently
provides that Floor Brokers in the FB Prepay Program will receive
their rebate in the following January, as no longer applicable.
\14\ The Exchange proposes to continue to exclude volume from
QCC transactions from the calculation of eligible volume for rebates
paid through the Manual Billable Rebate Program, as proposed,
because Floor Brokers would be eligible for separate credits and
rebates for QCC transactions.
\15\ The Exchange proposes to remove references to the exclusion
of Customer volume and Firm Facilitation trades as redundant because
such volume is not billable. The Exchange also proposes that it
would no longer exclude volume calculated to achieve the Firm
Monthly Fee Cap from the Manual Billable Rebate Program and proposes
conforming changes to reflect the deletion of the reference to the
Firm Monthly Fee Cap in Section III.E.1. The Exchange proposes to
include volume calculated to achieve the Firm Monthly Fee Cap in
calculations for the Manual Billable Rebate Program in light of the
recent change to increase the amount of the Firm Monthly Fee Cap and
eliminate lower fee caps for firms that qualify for American
Customer Engagement Program tiers, which results in more non-
facilitation Firm volume being subject to regular transaction fees.
See Securities Exchange Act Release No. 96501 (December 15, 2022)
(SR-NYSEAMER-2022-55) (Notice of Filing and Immediate Effectiveness
of a Proposed Rule Change to Modify the NYSE American Options Fee
Schedule).
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Participants in the FB Prepay Program that achieve the following
monthly qualifications will be eligible for rebates through the Manual
Billable Rebate Program, payable on a monthly basis:
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Rebate per
Manual billable rebate qualification billable side
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Execute 1 million combined manual billable and QCC ($0.05)
billable contracts..................................
Execute 3 million combined manual billable and QCC (0.08)
billable contracts..................................
Execute 5 million combined manual billable and QCC (0.10)
billable contracts..................................
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The FB Prepay Program also currently offers participating Floor
Brokers that increase their QCC credit eligible contracts in a month by
at least 20% over the greater of their second half of 2021 average
monthly QCC credit eligible volume or 1,500,000 contracts an additional
credit of $0.04 per contract on the first 300,000 QCC credit eligible
QCC trades and an additional credit of $0.01 per contract on all QCC
credit eligible QCC trades above 300,000, subject to the monthly
maximum credit per Floor Broker firm. The Exchange now proposes to
eliminate these QCC credits currently offered through the FB Prepay
Program, and provide that program participants would instead be
eligible to qualify for monthly rebates on QCC transactions in addition
to the credits set forth in Section I.F. (as modified in this filing)
(the ``QCC Billable Bonus Rebate''), as described in the table below,
provided that they execute the required number of billable QCC
transactions in a month. The Exchange proposes that the QCC Billable
Bonus Rebate (including the Additional Bonus) would be payable back to
the first billable side.
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Additional rebate
QCC billable bonus rebate on single Additional rebate
qualification billable side QCC on two billable
contract side QCC contract
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Prepay Bonus Level--achieved with ($0.02) ($0.04)
2 million QCC billable contracts.
Additional Bonus Level--achieved (0.04) (0.06)
with 100% above Prepay Bonus
Level............................
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The Exchange further proposes to provide in Section III.E.1.,
consistent with Section I.F., that the maximum Floor Broker credits
paid for QCC trades and rebates paid through the Manual Billable Rebate
Program shall not combine to exceed $2,000,000 per month per Floor
Broker firm.
Finally, the Exchange proposes to modify the date it will use for
the calculation of a Floor Broker's Eligible Fixed Costs for the
following calendar
[[Page 5944]]
year. The FB Prepay Program currently specifies that a Floor Broker
that commits to the program will be invoiced in January for Eligible
Fixed Costs, based on annualizing their Eligible Fixed Costs incurred
in November 2020. The Exchange proposes to modify the Fee Schedule to
specify that the annualization of Eligible Fixed Costs would be based
on costs incurred in November 2022, which the Exchange believes would
more accurately reflect Eligible Fixed Costs for the coming calendar
year.
Although the Exchange cannot predict with certainty whether the
proposed changes to the FB Prepay Program would encourage Floor Brokers
to participate in the program or to increase either their manual
billable volume or QCC volume, the Exchange believes that the proposed
changes would continue to incentivize Floor Brokers to participate in
the FB Prepay Program by simplifying the structure of the program,
modifying the qualifying criteria and rebates offered through the
program to be on a monthly (rather than annual) basis, and offering
rebates on manual billable volume and QCC transactions, thereby
encouraging additional manual billable volume and QCC executions by
Floor Brokers. All Floor Brokers are eligible to participate in the FB
Prepay Program and qualify for the proposed rebates, and the rebates
are achievable in any given month without regard to volumes from any
other month.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with section 6(b) of the Act,\16\ in general, and furthers the
objectives of sections 6(b)(4) and (5) of the Act,\17\ 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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\16\ 15 U.S.C. 78f(b).
\17\ 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.'' \18\
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\18\ 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.\19\ Therefore, no exchange possesses significant pricing power
in the execution of multiply-listed equity and ETF options order flow.
More specifically, in November 2022, the Exchange had less than 7%
market share of executed volume of multiply-listed equity and ETF
options trades.\20\
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\19\ 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>.
\20\ 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 7.06%
for the month of November 2021 and 6.98% for the month of November
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 believes that the proposed credits offered to Floor
Brokers on QCC transactions, as well as the additional rebates on QCC
transactions and manual billable volume offered through the FB Prepay
Program, as proposed, are reasonable because they are designed to
continue to incent Floor Brokers to increase the number of QCC
transactions and manual billable orders executed on the Exchange. The
Exchange also believes that the proposed increase in the maximum
monthly amount that a Floor Broker firm could earn from Floor Broker
QCC credits or from rebates via the proposed Manual Billable Rebate
Program is reasonable because it is likewise intended to encourage
Floor Brokers to direct QCC transactions and manual billable volume to
the Exchange.
The Exchange believes that the proposed changes to QCC transaction
fees and credits, as set forth in Section I.F., are reasonable because
they are designed to improve the clarity of the Fee Schedule regarding
the fee applicable to ``Non-Customer'' QCC transactions and to apply a
consistent fee to QCC transactions by Market Makers (including
Specialists and e-Specialists), Firms, and Broker-Dealers. The Exchange
also believes it is reasonable to provide an increased credit to Floor
Brokers on QCC transactions with a Market Maker, Firm, or Broker-Dealer
on both sides because such transactions are billable on both sides. To
the extent that the proposed change attracts more volume to the
Exchange and does not disincentivize Specialists and e-Specialists from
directing orders 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.
With respect to the FB Prepay Program, the Exchange also believes
that the proposed changes are reasonable because participation in the
program is optional, and Floor Brokers can elect to participate in the
program to be eligible to earn the proposed rebates on manual billable
transactions and QCC transactions or not. The Exchange also believes
that the proposed modification of the FB Prepay Program is reasonable
because it is designed to simplify the program, to continue to
encourage Floor Brokers to participate in the FB Prepay Program, and to
provide liquidity on the Exchange. Specifically, the Exchange believes
that the proposed qualifying thresholds for the Manual Billable Rebate
Program and QCC Bonus Rebate are achievable by Floor Broker firms based
on recent Floor Broker activity and in consideration of the proposed
changes in this filing (including the proposed modification to Floor
Broker QCC credits). The Exchange further believes that the proposed
change to focus the FB Prepay Program on manual billable volume and QCC
transactions is reasonable because it is intended to encourage Floor
Brokers to increase manual billable volume and QCC transactions to the
Exchange, and any increase in such volume would benefit all market
participants. The Exchange also believes that the proposed rebate
amounts are reasonable and comparable to rebate amounts offered by
another options exchange to Floor Brokers on
[[Page 5945]]
manual transactions.\21\ Finally, the Exchange believes that the
proposed modification of the qualifying criteria for and rebates
offered through the FB Prepay Program to be on a monthly basis is
reasonable and could increase opportunities for participating Floor
Brokers to qualify for and receive the benefit of the incentives
offered. To the extent that the proposed changes attract 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
addition, any increased liquidity on the Exchange would result in
enhanced market quality for all participants.
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\21\ See, e.g., BOX Options Exchange Fee Schedule, Section V.C.
(offering rebates to Floor Brokers on orders presented on the
Trading Floor, including a $0.075 rebate for Broker Dealer and
Market Maker orders).
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The Exchange also believes that the proposed change to update the
date used for the calculation of Eligible Fixed Costs from November
2020 to November 2022 is reasonable because it expects Floor Broker
organizations' more recent November 2022 costs to provide a more
accurate basis for annualizing Eligible Fixed Costs for the coming
calendar year based on anticipated fixed costs in 2023.
Finally, to the extent the proposed changes continue to attract
greater volume and liquidity, the Exchange believes the proposed
changes 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
\22\ and Floor Broker rebates on manual billable orders.\23\ Thus,
Floor Brokers have a choice of where they direct their order flow,
including their QCC transactions and manual billable orders. The
proposed rule changes are designed to continue to incent Floor Brokers
to direct liquidity (and, in particular, QCC orders and manual billable
orders) to the Exchange; to the extent Floor Brokers are 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 market participants.
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\22\ See, e.g., EDGX Options Exchange Fee Schedule, QCC
Initiator/Solicitation Rebate Tiers (applying ($0.14) per contract
rebate up to 999,999 contracts for QCC transactions when only one
side of the transaction is a non-customer or ($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 ($0.14) per contract rebate up
to 1,499,999 contracts for QCC transactions when only one side of
the QCC transaction is a broker-dealer or market maker or ($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.B. (QCC Rebate) (offering rebates on QCC
transactions of ($0.14) per contract when only one side of the QCC
transaction is a non-customer or ($0.22) per contract when both
sides of the QCC transaction are non-customers).
\23\ See note 21, supra.
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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 proposal is based on the amount
and type of business transacted on the Exchange; Floor Brokers are not
obligated to participate in the FB Prepay Program and can choose to
execute QCC transactions or manual billable transactions to earn the
various proposed credits and rebates or not. In addition, the proposed
credits and rebates are available to all Floor Brokers equally, and the
proposed monthly limit on the amount that Floor Brokers could earn from
credits and rebates on QCC transactions and manual billable
transactions would apply to all Floor Brokers equally. The Exchange
also believes that the proposed modification of the qualifying criteria
for and rebates offered through the FB Prepay Program to be on a
monthly basis is equitable because it could provide participating Floor
Brokers opportunities each month to qualify for and receive the benefit
of the incentives offered through the program.
The Exchange also believes that the proposed increased credit for
QCC transactions with a Market Maker, Firm, or Broker-Dealer on both
sides is equitable because such transactions are billable on both sides
(whereas a QCC transaction with a Customer or Professional Customer on
one side is only billable on one side). In addition, the Exchange
believes that the proposed changes with respect to the fees for QCC
transactions executed by Market Makers (including Specialists and e-
Specialists), Firms, and Broker-Dealers modify the Fee Schedule to
provide clarity regarding QCC transaction fees for ``Non-Customers''
and are equitable because they provide that these similarly-situated
market participants would be equally subject to a $0.20 fee on their
QCC transactions.
The Exchange also notes that the proposed changes are designed to
encourage Floor Brokers that have previously enrolled in the FB Prepay
Program to reenroll for the upcoming year, as well as to attract Floor
Brokers that have not yet participated in the program. Moreover, the
Exchange believes that the proposed modifications to the FB Prepay
Program are an equitable allocation of fees and credits because they
would apply to participating Floor Brokers equally and are intended to
encourage the role performed by Floor Brokers in facilitating the
execution of orders via open outcry, a function which the Exchange
wishes to support for the benefit of all market participants. The
Exchange further believes that the proposed change with respect to the
calculation of Eligible Fixed Costs is equitable because it would
continue to be based on each Floor Broker organization's annualized
costs and because the November 2022 basis for annualizing costs would
provide a more accurate reflection of Eligible Fixed Costs for the
coming calendar year based on anticipated fixed costs in 2023.
Moreover, the proposed changes are designed to continue to incent
Floor Brokers to encourage ATP Holders to aggregate their executions--
including QCC transactions and manual orders--at the Exchange as a
primary execution venue. To the extent that the proposed change
achieves its purpose in attracting more Floor Broker 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 changes 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.
[[Page 5946]]
The Proposed Rule Change Is Not Unfairly Discriminatory
The Exchange believes the proposed fees, credits, and rebates
applicable to Floor Brokers on QCC transactions and manual billable
transactions are not unfairly discriminatory because they are based on
the amount and type of business transacted on the Exchange, and Floor
Brokers are not obligated to execute QCC or manual billable volume, or
to participate in the FB Prepay Program. Rather, the proposal is
designed to streamline the structure of the FB Prepay Program and 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 and manual billable volume sent to the Exchange. In
addition, the proposed changes, including the modification of the
monthly maximum Floor Broker credits paid for QCC trades and rebates
paid through the Manual Billable Rebate Program, would apply to all
similarly-situated Floor Brokers on an equal and non-discriminatory
basis. The proposed credits and rebates 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, which the Exchange wishes to encourage and support to promote
price improvement opportunities for all market participants.
The Exchange also believes that the proposed change relating to
``Non-Customer'' QCC transactions is not unfairly discriminatory
because it is intended to clarify that the existing $0.20 fee is
applicable to QCC transactions by Market Makers, Firms, and Broker-
Dealers and further believes that the proposed change with respect to
Specialists and e-Specialists is not unfairly discriminatory because it
would modify the Fee Schedule to charge the same fee on any QCC
transactions executed by Market Makers (including Specialists and e-
Specialists), Firms, and Broker-Dealers.
The Exchange further believes that the proposed change with respect
to the calculation of Eligible Fixed Costs is not unfairly
discriminatory because it would continue to be based on each Floor
Broker organization's annualized costs and because the Exchange expects
that using November 2022 as the basis for annualizing costs would
provide a more accurate reflection of Eligible Fixed Costs for the
coming calendar year.
To the extent that the proposed changes attract more QCC orders and
manual 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.
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,\24\ 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.'' \25\
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\24\ See 15 U.S.C. 78f(b)(8).
\25\ See Reg NMS Adopting Release, supra note 18, at 37499.
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Intramarket Competition. The proposed modification of the FB Prepay
Program and the proposed credits and rebates offered to Floor Brokers
on QCC transactions and manual billable orders are designed to incent
participation in the FB Prepay Program and to attract additional 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 increased QCC and manual billable
transactions could increase opportunities for execution of other
trading interest. The proposed QCC credits would be available to all
similarly-situated Floor Brokers that execute QCC trades and the
rebates available through the Manual Billable Rebate Program and QCC
Billable Bonus Rebate would be available to all Floor Brokers that
choose to participate in the FB Prepay Program and meet the qualifying
criteria for such rebates. The modification of the monthly maximum
Floor Broker credits paid for QCC trades and rebates paid through the
Manual Billable Rebate Program, would likewise apply equally to all
similarly-situated Floor Brokers. 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 and price discovery for all market participants. Finally, the
Exchange believes the elimination of a lower QCC fee for Specialists
and e-Specialists could also promote intramarket competition by
establishing the same fee for all Market Makers, Firms, and Broker
Dealers on QCC transactions.
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.\26\ Therefore, no
exchange possesses significant pricing power in the execution of
multiply-listed equity and ETF options order flow. More specifically,
in November 2022, the Exchange had less than 7% market share of
executed volume of multiply-listed equity and ETF options trades.\27\
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\26\ See note 19, supra.
\27\ See note 20, supra.
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The Exchange believes that the proposed changes reflect this
competitive environment because they modify the Exchange's fees and
credits in a manner designed to continue to incent Floor Brokers to
direct trading interest (particularly QCC transactions and manual
orders) to the Exchange, to provide liquidity and to attract order
flow. To the extent that Floor Brokers are encouraged to participate in
the FB Prepay Program and/or incentivized to
[[Page 5947]]
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 and
Floor Broker rebates on manual billable volume,\28\ by encouraging
additional orders to be sent to the Exchange for execution.
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\28\ See notes 21 & 22, supra.
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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) \29\ of the Act and subparagraph (f)(2) of Rule
19b-4 \30\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\29\ 15 U.S.C. 78s(b)(3)(A).
\30\ 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) \31\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\31\ 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#087a7d646d256b6765656d667c7b487b6d6b266f677e"><span class="__cf_email__" data-cfemail="5a282f363f77393537373f342e291a293f39743d352c">[email protected]</span></a>. Please include
File Number SR-NYSEAMER-2023-08 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-2023-08. 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-2023-08, and should be
submitted on or before February 21, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\32\
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\32\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-01745 Filed 1-27-23; 8:45 am]
BILLING CODE 8011-01-P
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