Notice2024-26752
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
November 18, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 222 (Monday, November 18, 2024)</title>
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[Federal Register Volume 89, Number 222 (Monday, November 18, 2024)]
[Notices]
[Pages 90798-90800]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-26752]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-101586; File No. SR-NYSEAMER-2024-66]
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
November 12, 2024.
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 1, 2024, 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. 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 [sic] to amend the Fee Schedule to
increase the maximum combined credits and rebates available to Floor
Brokers for qualifying Qualified Contingent Cross Trades (``QCCs'').
The Exchange proposes to implement the rule change on November 1, 2024.
The Exchange proposes to modify Section I.F. and Section III.E.1.
to increase the maximum combined Floor Broker credits and rebates paid
through the Manual Billable Rebate Program, respectively, for
qualifying QCCs to $2,750,000 per month per Floor Broker firm, an
increase from the current monthly amount of 2,500,000 (the ``Maximum
Combined Rebate/Credit'' or ``QCC Cap'').\4\ The proposed increase is
designed to encourage Floor Broker firms to continue to direct
transactions to the Exchange, despite increasing industry volumes
making it less difficult to attain the maximum rebate. By increasing
the QCC Cap, Floor Brokers are eligible to achieve more QCC credits and
rebates, thus making the Exchange a more attractive venue for QCC
transactions.\5\
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\4\ See proposed Fee Schedule, Sections III.E.1 and I.F.
(providing, in relevant, part that Floor Broker credits paid for QCC
trades and rebates paid through the Manual Billable Rebate Program
shall not combine to exceed $2,500,000 per month per Floor Broker
firm). The Exchange notes that the Manual Billable Rebate Program is
available only to Floor Brokers that participate in the FB Prepay
Program. See Fee Schedule, Section III.E.1. As such, the proposed
increase to the QCC Cap would likewise encourage more Floor Brokers
to participate in this Program.
\5\ The Exchange notes that the Manual Billable Rebate Program
is available only to Floor Brokers that participate in the FB Prepay
Program. See Fee Schedule, Section III.E.1. As such, the proposed
increase to the QCC Cap would likewise encourage more Floor Brokers
to participate in this Program.
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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,
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 change [sic] to the Fee Schedule are reasonable,
equitable, and not unfairly discriminatory. As a threshold matter, the
Exchange is subject to significant competitive forces in the market for
options securities transaction services that constrain its pricing
determinations in that 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 17 [sic] 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, currently no exchange possesses significant
pricing power in the execution of multiply-listed equity & ETF options
order flow. More specifically, in September of 2024, the Exchange had
7.64% market share of executed volume of multiply-listed equity & ETF
options trades.\10\ In such
[[Page 90799]]
a low-concentrated and highly competitive market, no single options
exchange possesses significant pricing power in the execution of option
order flow. Within this environment, market participants can freely and
often do shift their order flow among the Exchange and competing venues
in response to changes in their respective pricing schedules. As such,
the proposal represents a reasonable attempt by the Exchange to remain
competitive and to continue to attract QCC transactions to the
Exchange.
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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: <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>.
\10\ Based on a compilation of OCC data for monthly volume of
equity-based options and monthly volume of equity-based ETF options,
see id., the Exchanges market share in equity-based options
increased from 7.31% for the month of September 2023 to 7.64% for
the month of September 2024.
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The Exchange believes that the proposed increase of the QCC Cap is
reasonable, equitable, and not unfairly discriminatory because it is
intended to encourage Floor Brokers to direct QCC transactions to the
Exchange. The Exchange believes the proposed increase to the QCC Cap is
reasonable given that increasing industry volumes make it less
difficult to attain the QCC Cap. Floor Brokers that exceed the monthly
QCC Cap may be incentivized to direct additional QCC volume (in that
same month) away from the Exchange to another venue that offers more
favorable pricing.
The proposed change 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. Floor Brokers have the option to execute QCC
transactions on the Exchange to earn the various proposed credits and
rebates or not. The credits and rebates for QCC transactions (and
whether a Floor Broker exceeds the increased QCC Cap) are based on the
amount and type of business a Floor Broker transacts on the Exchange
and are available--and apply equally to all similarly situated Floor
Brokers. As such, the proposed increase to the QCC Cap is an equitable
allocation of its fees and credits that is not unfairly discriminatory.
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.
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.'' \11\
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\11\ See Reg NMS Adopting Release, supra note 8, at 37499.
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Intramarket Competition. The proposed increase of the QCC Cap would
apply equally to all similarly-situated Floor Brokers and is design
[sic] to continue to incent Floor Brokers to execute QCC transactions
on the Exchange. 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, therefore,
attract more order flow to the Exchange, thereby improving market-wide
quality and price discovery. 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.
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.\12\ Therefore, no
exchange possesses significant pricing power in the execution of
multiply-listed equity and ETF options order flow. More specifically,
in September 2024 the Exchange had less than 8% market share of
executed volume of multiply-listed equity and ETF options trades.\13\
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\12\ See note 9, supra.
\13\ See note 10, supra.
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The Exchange believes that the proposed 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 QCC transactions) to the
Exchange, to provide liquidity and to attract order flow. To the extent
that Floor Brokers are encouraged to try to meet the QCC Cap and/or
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. 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.
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.
[[Page 90800]]
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) \14\ of the Act and subparagraph (f)(2) of Rule
19b-4 \15\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\14\ 15 U.S.C. 78s(b)(3)(A).
\15\ 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) \16\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\16\ 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#4331362f266e202c2e2e262d3730033026206d242c35"><span class="__cf_email__" data-cfemail="a8daddc4cd85cbc7c5c5cdc6dcdbe8dbcdcb86cfc7de">[email protected]</span></a>. Please include
file number SR-NYSEAMER-2024-66 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-2024-66. 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-2024-66 and should
be submitted on or before December 9, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-26752 Filed 11-15-24; 8:45 am]
BILLING CODE 8011-01-P
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