Notice2023-27065
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 11, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 236 (Monday, December 11, 2023)</title>
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[Federal Register Volume 88, Number 236 (Monday, December 11, 2023)]
[Notices]
[Pages 85938-85941]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-27065]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99087; File No. SR-NYSEAMER-2023-63]
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 5, 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 November 27, 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 November 27,
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 originally filed to amend the Fee Schedule on
October 31, 2023 (SR-NYSEAMER-2023-55), then withdrew such filing
and amended the Fee Schedule on November 15, 2023 (SR-NYSEAMER-2023-
60), which latter filing the Exchange withdrew on November 27, 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 November 15, 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 $200,000 per month per Firm.\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\ The Exchange also proposes two clarifying changes to the
description of the Firm Monthly Fee Cap. First, the Exchange
proposes to add text to specify that fees for QCC transactions are
included in the Manual transaction fees eligible to be capped. This
proposed change is not intended to modify the applicability of the
Firm Monthly Fee Cap, but rather to ensure that the Fee Schedule
clearly reflects the fees that are eligible for the Firm Monthly Fee
Cap. Second, the Exchange proposes to delete the last sentence of
the description of the Firm Monthly Fee Cap as extraneous. This
proposed change similarly does not impact the applicability of the
Firm Monthly Fee Cap and is instead intended to promote clarity in
the Fee Schedule.
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[[Page 85939]]
The Exchange proposes to raise the Firm Monthly Fee Cap to $250,000
per month per Firm. To effect this change, the Exchange proposes to
modify Section I.I. to replace references to a $200,000 cap with
references to a $250,000 cap.\7\ Once a Firm has reached the Firm
Monthly Fee Cap, an incremental service fee of $0.02 per contract for
Firm Manual transactions will apply, including for the execution of a
QCC order. 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 $200,000 cap with a
reference to a $250,000 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 incent Firms
to direct order flow to the Exchange to receive the benefits of a fee
cap on Manual transaction fees (including fees for QCC transactions).
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with section 6(b) of the Act,\8\ in general, and furthers the
objectives of sections 6(b)(4) and (5) of the Act,\9\ in particular,
because it provides for the equitable allocation of reasonable dues,
fees, and other charges among its members, issuers and other persons
using its facilities and does not unfairly discriminate between
customers, issuers, brokers or dealers.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(4) and (5).
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The Proposed Rule Change Is Reasonable
The Exchange operates in a highly competitive market. The
Commission has repeatedly expressed its preference for competition over
regulatory intervention in determining prices, products, and services
in the securities markets. In Regulation NMS, the Commission
highlighted the importance of market forces in determining prices and
SRO revenues and, also, recognized that current regulation of the
market system ``has been remarkably successful in promoting market
competition in its broader forms that are most important to investors
and listed companies.'' \10\
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\10\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005) (S7-10-04) (``Reg NMS
Adopting Release'').
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There are currently 17 registered options exchanges competing for
order flow. Based on publicly-available information, and excluding
index-based options, no single exchange has more than 16% of the market
share of executed volume of multiply-listed equity and ETF options
trades.\11\ Therefore, no exchange possesses significant pricing power
in the execution of multiply-listed equity and ETF options order flow.
More specifically, in September 2023, the Exchange had less than 8%
market share of executed volume of multiply-listed equity and ETF
options trades.\12\
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\11\ The OCC publishes options and futures volume in a variety
of formats, including daily and monthly volume by exchange,
available here: <a href="https://www.theocc.com/Market-Data/Market-Data-Reports/Volume-and-Open-Interest/Monthly-Weekly-Volume-Statistics">https://www.theocc.com/Market-Data/Market-Data-Reports/Volume-and-Open-Interest/Monthly-Weekly-Volume-Statistics</a>.
\12\ Based on a compilation of OCC data for monthly volume of
equity-based options and monthly volume of ETF-based options, see
id., the Exchange's market share in equity-based options decreased
from 8.66% for the month of September 2022 to 7.31% for the month of
September 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 proposed increase to the Firm Monthly Fee Cap is reasonable
because the Exchange believes the fee cap, although higher, would
continue to incent Firms to direct order flow to the Exchange to
receive the benefits of capped fees for their Manual transactions
(including QCC transactions). The Exchange also believes the proposed
change is reasonable because the proposed fee cap amount would be
applicable to all Firms. In addition, although the proposed change
would raise the amount of the Firm Monthly Fee Cap, it would continue
to offer Firms the opportunity to qualify for capped fees on Manual
transactions (including QCC transactions), which the Exchange believes
provides Firms with a benefit not offered by at least one other options
exchange.\13\ The Exchange also believes that the proposed clarifying
changes are reasonable, as they are intended only to improve the
clarity of the Fee Schedule (and are not intended to effect any
substantive changes).
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\13\ 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 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 17 options exchanges. The Exchange believes that
proposed rule change is designed to continue to incent market
participants to direct liquidity and, in particular, Manual (including
QCC) transactions, 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 proposal is based on the amount and type of business
transacted on the Exchange. The Exchange also believes that the
proposed modification of the Firm Monthly Fee Cap is equitable because
it would be available to all Firms equally and would continue to
provide the same fee cap amount for all Firms. 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 and because Market Makers are offered
other incentives to reduce
[[Page 85940]]
transaction fees.\14\ The Exchange believes that the proposed change,
although it increases the fee cap amount, 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 does not discourage Firms from continuing to direct order flow to
the Exchange to achieve the benefits of capped fees, this increased
order flow would continue to make the Exchange a more competitive venue
for, among other things, order execution, and all market participants
would benefit from enhanced opportunities for price improvement and
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.
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\14\ For example, Customers are not subject to a fee for Manual
transactions, and the Exchange offers various incentives to Market
Makers, including the Market Maker Sliding Scale and Prepayment
Program. See Fee Schedule at Sections I.A., 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 amount, 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. Moreover, the proposed
change to the Firm Monthly Fee Cap is not unfairly discriminatory
because it would continue to apply the same fee cap amount to all
Firms. 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 and because Market Makers are offered other
incentives to reduce transaction fees.\15\
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\15\ See id.
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To the extent the proposed change continues to attract Manual
(including QCC) transactions 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, 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 change 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 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) 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 (including QCC 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 17 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 September 2023, 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 10, supra.
\18\ 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
further believes that the proposed change could promote competition
between the Exchange and other execution venues, including those that
do not offer a cap on Firm fees,\19\ by encouraging additional orders
to be sent to the Exchange for execution. 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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\19\ 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) \20\ of the Act and
[[Page 85941]]
subparagraph (f)(2) of Rule 19b-4 \21\ thereunder, because it
establishes a due, fee, or other charge imposed by the Exchange.
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\20\ 15 U.S.C. 78s(b)(3)(A).
\21\ 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) \22\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\22\ 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#8ffdfae3eaa2ece0e2e2eae1fbfccffceaeca1e8e0f9"><span class="__cf_email__" data-cfemail="b2c0c7ded79fd1dddfdfd7dcc6c1f2c1d7d19cd5ddc4">[email protected]</span></a>. Please include
file number SR-NYSEAMER-2023-63 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-2023-63. 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 subject to copyright protection. All
submissions should refer to file number SR-NYSEAMER-2023-63 and should
be submitted on or before January 2, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
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\23\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-27065 Filed 12-8-23; 8:45 am]
BILLING CODE 8011-01-P
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