Notice2023-12764
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
June 15, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 115 (Thursday, June 15, 2023)</title>
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[Federal Register Volume 88, Number 115 (Thursday, June 15, 2023)]
[Notices]
[Pages 39311-39314]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-12764]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97694; File No. SR-NYSEAMER-2023-31]
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
June 9, 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 June 1, 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 a rebate for Qualified Contingent
Cross (``QCC'') transactions. The Exchange proposes to implement the
fee change effective June 1, 2023. The proposed rule change is
available on the Exchange's website at <a href="http://www.nyse.com">www.nyse.com</a>, at the principal
office of the Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of this filing is to amend the Fee Schedule to offer
Floor Brokers an additional incentive for executing QCC
transactions.\4\ The Exchange proposes to implement the rule change on
June 1, 2023.
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\4\ 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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Section I.F. of the Fee Schedule sets forth fees and credits
applicable to QCC transactions.\5\ Currently, 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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\5\ See Fee Schedule, Section I.F. (QCC Fees & Credits).
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The Exchange proposes to modify Section I.F. to add a QCC Billable
Bonus Rebate (the ``Rebate'') for Floor Brokers' QCC transactions.
Specifically, the Exchange proposes that the Rebate would provide Floor
Brokers that achieve (1) 1 million manual billable sides in a month and
(2) 3 million QCC billable contracts in a month with a rebate of
($0.02) per two billable side QCC contract, payable on a monthly basis.
Although the Exchange cannot predict with certainty whether the
proposed change would encourage Floor Brokers to increase their manual
billable volume or QCC billable volume on the Exchange, the proposed
change is designed to continue to incentivize Floor Brokers to do so in
order to earn an additional rebate on QCC two billable side volume. All
Floor Brokers would be eligible to qualify for the Rebate, as proposed.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with section 6(b) of the Act,\6\ in general, and furthers the
objectives of sections 6(b)(4) and (5) of the Act,\7\ in particular,
[[Page 39312]]
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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\6\ 15 U.S.C. 78f(b).
\7\ 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.'' \8\
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\8\ 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.\9\ Therefore, no exchange possesses significant pricing power
in the execution of multiply-listed equity and ETF options order flow.
More specifically, in April 2023, the Exchange had less than 8% market
share of executed volume of multiply-listed equity and ETF options
trades.\10\
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\9\ The OCC publishes options and futures volume in a variety of
formats, including daily and monthly volume by exchange, available
here: https:/<a href="http://www.theocc.com/Market-Data/Market-Data-Reports/Volume-and-Open-Interest/Monthly-Weekly-Volume-Statistics">www.theocc.com/Market-Data/Market-Data-Reports/Volume-and-Open-Interest/Monthly-Weekly-Volume-Statistics</a>.
\10\ 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 8.14%
for the month of April 2022 and 7.87% for the month of April 2023.
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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 Rebate is reasonable
because it is designed to continue to incent Floor Brokers to increase
their manual billable volume and QCC billable contracts executed on the
Exchange. 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 those offering
rebates on QCC transactions.\11\ The Exchange believes that proposed
rule change is designed to continue to incent Floor Brokers 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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\11\ 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).
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The Proposed Rule Change Is an Equitable Allocation of Fees and Credits
The Exchange believes the proposed rule change is an equitable
allocation of its fees and credits. The proposal is based on the amount
and type of business transacted on the Exchange, and Floor Brokers can
choose to execute manual billable transactions and QCC billable
transactions to earn the proposed Rebate or not. The Exchange also
believes that the proposed Rebate is an equitable allocation of fees
and credits because it would be available to all Floor Brokers equally,
and all Floor Brokers would be eligible to qualify for the Rebate based
on achieving the same volume requirements. The Exchange further
believes that the proposed change is equitable because it is 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.
To the extent that the proposed changes continue to incent ATP
Holders to utilize the Exchange as a primary execution venue and
attract more volume on 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 the proposed change is not unfairly
discriminatory because the proposed Rebate is based on the amount and
type of business transacted on the Exchange, and Floor Brokers are not
obligated to execute billable manual or QCC volume. The Exchange also
believes that the proposed change is 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.
Thus, the Exchange believes that, to the extent the proposed rule
change would continue to improve market quality for all market
participants on the Exchange by attracting 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
[[Page 39313]]
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.'' \12\
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\12\ See Reg NMS Adopting Release, supra note 8, at 37499.
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Intramarket Competition. The proposed change is designed to attract
order flow to the Exchange. Specifically, the proposed change is
intended to continue to incent Floor Brokers to direct manual billable
volume and QCC billable volume to the Exchange by offering them a
rebate on QCC billable volume, which could increase the volumes of
contracts traded on the Exchange. Greater liquidity benefits all market
participants on the Exchange, and increased manual billable and QCC
billable transactions could increase opportunities for execution of
other trading interest.
Intermarket Competition. The Exchange operates in a highly
competitive market in which market participants can readily favor one
of the 16 competing option exchanges if they deem fee levels at a
particular venue to be excessive. In such an environment, the Exchange
must continually adjust its fees to remain competitive with other
exchanges and to attract order flow to the Exchange. Based on publicly-
available information, and excluding index-based options, no single
exchange has more than 16% of the market share of executed volume of
multiply-listed equity and ETF options trades.\13\ Therefore, no
exchange possesses significant pricing power in the execution of
multiply-listed equity and ETF options order flow. More specifically,
in April 2023, the Exchange had less than 8% market share of executed
volume of multiply-listed equity and ETF options trades.\14\
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\13\ See note 9, supra.
\14\ See note 10, supra.
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The Exchange believes that the proposed rule change reflects this
competitive environment because it modifies the Exchange's fees and
credits in a manner designed to continue to incent Floor Brokers to
direct trading interest (particularly manual billable volume and QCC
billable volume) to the Exchange, to provide liquidity, and to attract
order flow. To the extent that Floor Brokers are encouraged 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 offer rebates on QCC transactions.\15\ 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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\15\ See note 11, 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) \16\ of the Act and subparagraph (f)(2) of Rule
19b-4 \17\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\16\ 15 U.S.C. 78s(b)(3)(A).
\17\ 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) \18\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\18\ 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="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#0f7d7a636a226c6062626a617b7c4f7c6a6c21686079"><span class="__cf_email__" data-cfemail="5a282f363f77393537373f342e291a293f39743d352c">[email protected]</span></a>. Please include
file number
SR-NYSEAMER-2023-31 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-2023-31. 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="https://www.sec.gov/rules/sro.shtml">https://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
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or
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subject to copyright protection. All submissions should refer to file
number SR-NYSEAMER-2023-31 and should be submitted on or before July 6,
2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-12764 Filed 6-14-23; 8:45 am]
BILLING CODE 8011-01-P
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