Notice2023-03250
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
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Published
February 16, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 32 (Thursday, February 16, 2023)</title>
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[Federal Register Volume 88, Number 32 (Thursday, February 16, 2023)]
[Notices]
[Pages 10153-10156]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-03250]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-96879; File No. SR-NYSEAMER-2023-13]
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
February 10, 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 February 9, 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 the Firm Monthly Fee Cap. The
Exchange proposes to implement the fee change effective February 9,
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
January 31, 2023 (SR-NYSEAMER-2023-10) and withdrew such filing on
February 9, 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 is to amend the Fee Schedule to modify
the Firm Monthly Fee Cap. The Exchange proposes to implement the rule
change on February 9, 2023.
The Firm Monthly Fee Cap is set forth in Section I.I. of the Fee
Schedule.\5\ Currently, a Firm's fees associated with Manual
transactions are capped at $150,000 per month per Firm.
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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>.
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The Exchange proposes to raise the Firm Monthly Fee Cap to $200,000
per month per Firm. To effect this change, the Exchange proposes to
modify Section I.I. to replace references to a $150,000 cap with
references to a $200,000 cap.\6\ The Exchange also proposes to increase
the incremental service fee--which is charged for Manual transactions
once the Firm Monthly Fee Cap has been reached--from $0.01 to $0.02 and
to extend the proposed incremental service fee of $0.02 per contract to
also apply to QCC transactions entered by Floor Brokers from the
Trading Floor (i.e., manual QCC transactions). 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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\6\ 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 $150,000 cap with a
reference to a $200,000 cap.
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The Exchange believes that the proposed change, despite increasing
the amount of the Firm Monthly Fee Cap and the incremental service fee
for Manual transactions and QCC transactions, would continue to
incentivize Firms to direct order flow to the Exchange to receive the
benefits of a cap on their Manual transaction fees.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\7\ in general, and furthers the
objectives of Sections
[[Page 10154]]
6(b)(4) and (5) of the Act,\8\ in particular, because it provides for
the equitable allocation of reasonable dues, fees, and other charges
among its members, issuers and other persons using its facilities and
does not unfairly discriminate between customers, issuers, brokers or
dealers.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(4) and (5).
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The Proposed Rule Change Is Reasonable
The Exchange operates in a highly competitive market. The
Commission has repeatedly expressed its preference for competition over
regulatory intervention in determining prices, products, and services
in the securities markets. In Regulation NMS, the Commission
highlighted the importance of market forces in determining prices and
SRO revenues and, also, recognized that current regulation of the
market system ``has been remarkably successful in promoting market
competition in its broader forms that are most important to investors
and listed companies.'' \9\
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\9\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005) (S7-10-04) (``Reg NMS
Adopting Release'').
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There are currently 16 registered options exchanges competing for
order flow. Based on publicly-available information, and excluding
index-based options, no single exchange has more than 16% of the market
share of executed volume of multiply-listed equity and ETF options
trades.\10\ Therefore, no exchange possesses significant pricing power
in the execution of multiply-listed equity and ETF options order flow.
More specifically, in December 2022, the Exchange had less than 8%
market share of executed volume of multiply-listed equity and ETF
options trades.\11\
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\10\ The OCC publishes options and futures volume in a variety
of formats, including daily and monthly volume by exchange,
available here: <a href="https://www.theocc.com/Market-Data/Market-Data-Reports/Volume-and-Open-Interest/Monthly-Weekly-Volume-Statistics">https://www.theocc.com/Market-Data/Market-Data-Reports/Volume-and-Open-Interest/Monthly-Weekly-Volume-Statistics</a>.
\11\ Based on a compilation of OCC data for monthly volume of
equity-based options and monthly volume of ETF-based options, see
id., the Exchange's market share in equity-based options was 6.77%
for the month of December 2021 and 7.11% for the month of December
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 (including manual QCC
transactions), even though the proposed change would increase the
amount of the fee cap and the incremental service charge applicable to
Manual transactions (including manual QCC transactions) after a Firm
has reached the fee cap. The Exchange also believes the proposed change
is reasonable because the proposed fee cap amount would be applicable
to all Firms and the proposed incremental service charge would be
applicable to all Manual transactions (including manual QCC
transactions) executed by a Firm once it reaches the fee cap. In
addition, although the proposed change would establish a higher fee cap
amount, it would continue to offer Firms the ability to qualify for
capped fees on Manual transactions (including manual QCC transactions),
which the Exchange believes provides Firms with a benefit not offered
by at least one other options exchange.\12\
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\12\ See, e.g., BOX Options Fee Schedule, available at: <a href="https://boxoptions.com/fee-schedule/">https://boxoptions.com/fee-schedule/</a> (no cap on Firm manual transaction
fees).
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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 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.
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 increased Firm Monthly Fee Cap would be available to all
Firms equally. The proposed change is also equitable because the
increased incremental service charge would apply equally to all Firms
that achieve the fee cap and would now also apply to manual QCC
transactions executed by Firms once they have reached the fee cap. The
Exchange also believes that the proposed rule change is equitable with
respect to non-Firm market participants because the Firm Monthly Fee
Cap would not be as meaningful for Customers or Professional Customers
and because Market Makers are offered other incentives to reduce
transaction fees.\13\ The Exchange believes that the proposed changes,
although they increase the fee cap and incremental service charge
amounts, would not discourage Firms from directing order flow to the
Exchange. To the extent that the proposed change achieves its purpose
in continuing to incent Firms to aggregate their executions at the
Exchange as a primary execution venue and 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,
[[Page 10155]]
thereby improving market-wide quality and price discovery.
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\13\ Customers are not subject to a fee for Manual transactions,
and neither Customers nor Professional Customers pay transaction
fees for QCC transactions. See Fee Schedule at Sections I.A. and
I.F. The Exchange offers various incentives to Market Makers,
including the Market Maker Sliding Scale and Prepayment Program. See
id. at Sections I.C. and I.D.
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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 and incremental
service charge amounts, as proposed, would continue to be applicable 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. The Exchange notes that offering the Firm Monthly Fee Cap, as
proposed, to Firms but not to other market participants is not unfairly
discriminatory because the Firm Monthly Fee Cap would not be as
meaningful for Customers or Professional Customers and because Market
Makers are offered other incentives to reduce transaction fees.\14\
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\14\ See note 13, supra.
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Thus, to the extent the proposed change continues to attract Manual
transactions (including manual QCC transactions) to the Exchange, 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, 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.'' \15\
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\15\ See Reg NMS Adopting Release, supra note 9, 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 and incremental
service charge) would not impose any burden on competition that is not
necessary or appropriate because it is intended to 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.\16\ Therefore, no
exchange possesses significant pricing power in the execution of
multiply-listed equity and ETF options order flow. More specifically,
in December 2022, the Exchange had less than 8% market share of
executed volume of multiply-listed equity and ETF options trades.\17\
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\16\ See note 10, supra.
\17\ See note 11, 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
notes that it operates in a highly competitive market in which market
participants can readily favor competing venues, including those that
do not offer a cap on Firm fees.\18\ In such an environment, the
Exchange must continually review, and consider adjusting, its fees and
credits to remain competitive with other exchanges.
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\18\ See note 12, 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) \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#e99b9c858cc48a8684848c879d9aa99a8c8ac78e869f"><span class="__cf_email__" data-cfemail="582a2d343d753b3735353d362c2b182b3d3b763f372e">[email protected]</span></a>. Please include
File Number SR-NYSEAMER-2023-13 on the subject line.
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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-2023-13. 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-2023-13, and should be
submitted on or before March 9, 2023.
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. 2023-03250 Filed 2-15-23; 8:45 am]
BILLING CODE 8011-01-P
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