[Federal Register Volume 85, Number 141 (Wednesday, July 22, 2020)]
[Notices]
[Pages 44349-44352]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-15793]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89335; File No. SR-NYSEAMER-2020-54]


Self-Regulatory Organizations; NYSE American LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Change To Amend the NYSE 
American Options Fee Schedule

July 16, 2020.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on July 10, 2020, 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, 
II, and III 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 amend the NYSE American Options Fee 
Schedule (``Fee Schedule'') to offer a new rebate for initiating a 
Complex Customer Best Execution Auction. The Exchange proposes to 
implement the fee change effective July 10, 2020.\4\ The proposed 
change is available on the Exchange's website at www.nyse.com, 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 
July 1, 2020 (SR-NYSEAMER-2020-51) and withdrew such filing on July 
10, 2020.
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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 modify the Fee Schedule to offer a 
new rebate for initiating a Complex Customer Best Execution (``CUBE'') 
auction, provided the ATP Holder meets the minimum volume requirements 
as discussed below.
    The Exchange proposes to implement the rule changes on July 10, 
2020.

Background

    The Exchange has established various pricing incentives designed to 
encourage increased Electronic volume executed on the Exchange, 
including (but not limited to) the American Customer Engagement 
(``ACE'') Program and the Professional Step-Up Incentive Program. The 
Exchange also offers an ACE Initiating Participant Rebate to 
participants in the ACE Program that initiate Single-Leg or Complex 
CUBE Auctions as well as an alternative to the ACE Initiating 
Participant Rebate--the Alternative Initiating Participant Rebate--that 
enables non-ACE Program participants to qualify for a rebate on

[[Page 44350]]

certain initiating Single-Leg CUBE Orders provided they meet certain 
Professional volume requirements and increase their initiating CUBE 
volume. The Exchange is proposing to similarly offer an Alternative 
Initiating Rebate for certain initiating Complex CUBE transactions to 
encourage ATP Holders to submit initiating Complex CUBE Orders and to 
increase their initiating Single-Leg CUBE Orders and Electronic volume 
in the ``Professional'' range.\5\ To the extent that this incentive 
succeeds, the increased liquidity on the Exchange would result in 
enhanced market quality for all participants.
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    \5\ For purposes of this filing, ``Professional'' Electronic 
volume includes: Professional Customer, Broker Dealer, Non-NYSE 
American Options Market Maker, and Firm (the ``Professional 
volume'').
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Proposed Rule Change
CUBE Auction Fees & Credits: Alternative Initiating Participant Rebate
    Section I.G. of the Fee Schedule sets forth the rates for per 
contract fees and credits for executions associated with Single-Leg and 
Complex CUBE Auctions.\6\ To encourage participants to utilize CUBE 
Auctions, the Exchange offers rebates on certain initiating CUBE 
volume, including an Alternative Initiating Participant Rebate, which 
applies to the each of the first 5,000 contracts per Singe-Leg CUBE 
Order for those participants that do not qualify for the ACE Initiating 
Participant Rebate.\7\
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    \6\ See Section I.G. of the Fee Schedule, CUBE Auction Fees & 
Credits.
    \7\ See id., Singe-Leg CUBE Auction, note 2 (providing that an 
ATP Holder may qualify for the ($0.10) per contract Alternative 
Initiating Participant Rebate provided an ATP Holder executes a 
minimum of 10,000 contracts ADV in the Professional range and 
increase their Initiating CUBE Orders by the greater of 20% over 
their August 2019 volume or 10,000 contracts ADV).
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    The Exchange proposes to similarly offer an Alternative Initiating 
Participant Rebate to Complex CUBE transactions. As proposed, a ($0.10) 
per contract Alternative Initiating Participant Rebate may be applied 
to each of the first 1,000 contracts per leg of a Complex CUBE Order 
executed in a Complex CUBE Auction, provided an ATP Holder executes a 
minimum of 10,000 contracts ADV in the Professional range and increases 
their Initiating CUBE Orders by the greater of 20% over their August 
2019 volume or 10,000 contracts ADV.\8\ An ATP Holder that qualifies 
for both the ACE Initiating Participant Rebate and the Alternative 
Initiating Participant Rebate is entitled only to the greater of the 
two rebates,\9\ however both of these Initiating Participant Rebates 
are available in addition to other CUBE Auction-related credits set 
forth in the Fee Schedule.\10\
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    \8\ See proposed Section I.G. of the Fee Schedule, CUBE Auction 
Fees & Credits, Complex CUBE Auction, note 2. For additional 
clarity, the Exchange proposes to specify that the qualifying 
Initiating CUBE Order volume applies to Single-Leg CUBE Auctions 
(see id.), but notes that, by definition, a ``CUBE Order'' is ``an 
agency order that is guaranteed an execution in the Single-Leg CUBE 
Auction by a Contra Order.'' See Fee Schedule, KEY TERMS and 
DEFINITIONS.
    \9\ See id. The Exchange acknowledges that the two rebates are 
currently the same amount--i.e., ($0.10) per contract, but the ATP 
Holder would nonetheless only be entitled to one of the rebates.
    \10\ See proposed Section I.G. of the Fee Schedule, CUBE Auction 
Fees & Credits, Complex CUBE Auction, note 2.
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    This proposed change is designed to encourage ATP Holders to submit 
initiating Complex CUBE Orders and to increase their initiating Single-
Leg CUBE Orders and Electronic volume in the Professional range. The 
proposed Alternative Initiating Participant Rebate would provide ATP 
Holders that initiate Complex CUBE Auctions another means of achieving 
a rebate based on Single-Leg CUBE and Professional volume, which should 
provide additional incentive to direct such order flow to the 
Exchange.\11\ The Exchange cannot predict with certainty whether any 
ATP Holders would attempt to qualify for the proposed Complex CUBE 
Alternative Initiating Participant Rebate.
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    \11\ See, e.g., Fee Schedule, Section I. H, Professional Step-up 
Incentive (offering discounted rates on monthly Professional volume 
for ATP Holders that achieve Tier A, B or C as a result of 
increasing their Professional volume by specified percentages of 
TCADV over their August 2019 volume--or, for new ATP Holders that 
increase such volume by a specified percentages of TCADV above 
10,000 contracts ADV).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\12\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\13\ 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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    \12\ 15 U.S.C. 78f(b).
    \13\ 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.'' \14\
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    \14\ 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.\15\ Therefore, currently no exchange possesses significant 
pricing power in the execution of multiply-listed equity & ETF options 
order flow. More specifically, in June 2020, the Exchange had less than 
10% market share of executed volume of multiply-listed equity & ETF 
options trades.\16\
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    \15\ The OCC publishes options and futures volume in a variety 
of formats, including daily and monthly volume by exchange, 
available here: https://www.theocc.com/market-data/volume/default.jsp.
    \16\ Based on OCC data, see id., the Exchange's market share in 
equity-based options increased slightly from 8.20% for the month of 
June 2019 to 8.32% for the month of June 2020.
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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--particularly to other exchanges offering similar 
incentives, or discontinue or reduce use of certain categories of 
products, in response to fee changes. Accordingly, competitive forces 
constrain options exchange transaction fees.\17\ Stated otherwise, 
changes to exchange transaction fees and rebates can have a direct 
effect on the ability of an exchange to compete for order flow.
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    \17\ See e.g., Cboe Exchange Inc. (``Cboe''), Fee Schedule, 
Volume Incentive Program (VIP), available here, https://cdn.cboe.com/resources/membership/Cboe_FeeSchedule.pdf (providing 
per contract credits for volume executed in Cboe's complex price 
improvement auction). See also MIAX Options fee schedule, Section 
1.a.iv, Professional Rebate Program, available here, https://www.miaxoptions.com/sites/default/files/fee_schedule-files/MIAX_Options_Fee_Schedule_04012019.pdf (setting forth per contract 
credits on volume submitted for the account of Public Customers that 
are not Priority Customers, Non-MIAX Market Makers, Non-Member 
Broker Dealers, and Firms (collectively, Professional for purposes 
of MIAX program), provided the Member achieves certain Professional 
volume increase percentage thresholds (set forth in the schedule) in 
the month relative to the fourth quarter of 2015).
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    The Exchange believes that the proposed Alternative Initiating 
Participant Rebate for initiating Complex CUBE volume is reasonable 
because it may encourage ATP Holders

[[Page 44351]]

that choose to participate in the CUBE to direct order flow, including 
initiating Complex CUBE volume and Professional volume, to the 
Exchange. The proposed Rebate may encourage greater use of Single-Leg 
and Complex CUBE Auctions, which may lead to greater opportunities to 
trade--and for price improvement--for all participants. In addition, 
the proposed Rebate, which is based on Professional order flow would 
provide ATP Holders an additional incentive (to the Professional Step-
Up Incentive Program) to direct such order flow to the Exchange.\18\
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    \18\ See supra note 11 (regarding discounted rates offered via 
the Professional Step-up Incentive).
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    The Exchange notes that all market participants stand to benefit 
from increased transaction volume, as such increase promotes market 
depth, facilitates tighter spreads and enhances price discovery, and 
may lead to a corresponding increase in order flow from other market 
participants that do not participate in (or qualify for) the 
Professional Step-Up Incentive Program. As with the Single-Leg 
Alternative Initiating Participant Rebate, the Exchange believes that 
the baseline of 10,000 ADV Professional volumes for ATP Holders is 
reasonable because these volumes are comparable to trading volumes in 
August 2019 for those firms that were active on the Exchange and 
eligible to increase their Single-Leg CUBE initiating volume by 20% to 
qualify for the proposed Alternative Initiating Participant Rebate. 
Moreover, the proposed Rebate provides another avenue (outside of the 
ACE Program) for participants to avail themselves of a rebate for 
initiating CUBE Auctions. The Exchange cannot predict with certainty 
whether any ATP Holders would attempt to qualify for the Complex CUBE 
Alternative Initiating Participant Rebate.
    Finally, to the extent the proposal attracts greater volume and 
liquidity, the Exchange believes this would, in turn, 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 changes 
are a reasonable attempt by the Exchange to increase the depth of its 
market and improve its market share relative to its competitors. The 
proposed rule changes are designed to incent ATP Holders to direct 
liquidity to the Exchange in Electronic executions, similar to other 
exchange programs with competitive pricing programs, thereby promoting 
market depth, price discovery and improvement and enhancing order 
execution opportunities for market participants.\19\
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    \19\ See, e.g., supra note 17 (regarding Cboe rebate on VIP and 
MIAX Professional Rebate Program).
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The Proposed Rule Change Is an Equitable Allocation of Fees and Rebates
    The Exchange believes the proposed rule change is an equitable 
allocation of its fees and rebates. The proposal is based on the amount 
and type of business transacted on the Exchange and ATP Holders can opt 
to avail themselves of these incentives or not. Moreover, the proposals 
are designed to encourage ATP Holders to aggregate their executions at 
the Exchange as a primary execution venue. To the extent that the 
proposed changes attract more initiating CUBE Auction (and 
Professional) volume 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 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.
The Proposed Rule Change Is not Unfairly Discriminatory
    The Exchange believes that the proposal is not unfairly 
discriminatory because the proposed modifications would be available to 
all similarly-situated market participants on an equal and non-
discriminatory basis. ATP Holders would have increased opportunity to 
qualify for rebates based on their Professional volume with the 
Alternative Initiating Participant Rebate. The Alternative Initiating 
Participant Rebate also offers participants that choose to participate 
in the Complex CUBE, but do not qualify for the ACE Initiating 
Participant Rebate to be eligible to receive a rebate on initiating 
Complex CUBE volume. The Exchange believes that this proposal should 
incent ATP Holders to direct Electronic volume to the Exchange, which 
would increase liquidity on the Exchange to the benefit of all market 
participants, which may lead to greater opportunities to trade.
    This proposal is based on the amount and type of business 
transacted on the Exchange and ATP Holders are not obligated to try to 
achieve the incentive pricing option. Rather, the proposal is designed 
to encourage participants to utilize the Exchange as a primary trading 
venue (if they have not done so previously) or increase volume sent to 
the Exchange. To the extent that the proposed changes attract more 
executions 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, to 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.'' \20\
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    \20\ See Reg NMS Adopting Release, supra note 14, at 37499.
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    Intramarket Competition. The proposed change is designed to 
continue to attract order flow to the Exchange by offering competitive 
rates and rebates (via the Complex CUBE Alternative Initiating Rebate) 
based on increased volumes on the Exchange, which would enhance the 
quality of quoting and may increase the volumes of contracts traded on 
the Exchange. To the extent that this purpose is achieved, all of the 
Exchange's market participants should benefit from the improved

[[Page 44352]]

market liquidity. Enhanced market quality and increased transaction 
volume that results from the anticipated increase in order flow 
directed to the Exchange will benefit all market participants and 
improve competition on the Exchange.
    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 currently has more than 16% of the market share of executed 
volume of multiply-listed equity and ETF options trades.\21\ Therefore, 
no exchange currently possesses significant pricing power in the 
execution of multiply-listed equity & ETF options order flow. More 
specifically, in June 2020, the Exchange had less than 10% market share 
of executed volume of multiply-listed equity & ETF options trades.\22\
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    \21\ See supra note 15.
    \22\ Based on OCC data, supra note 16, the Exchange's market 
share in equity-based options was 8.20% for the month of June 2019 
and 8.32% for the month of June 2020.
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    The Exchange believes that the proposed rule change reflects this 
competitive environment because it modifies the Exchange's fees and 
rebates in a manner designed to encourage ATP Holders to direct trading 
interest to the Exchange, to provide liquidity and to attract order 
flow. To the extent that this purpose is achieved, all the Exchange's 
market participants should benefit from the improved market quality and 
increased opportunities for price improvement.
    The Exchange believes that the proposed change could promote 
competition between the Exchange and other execution venues, including 
those that currently offer similar pricing incentives, by encouraging 
additional orders to be sent to the Exchange for execution.

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) \23\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \24\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \23\ 15 U.S.C. 78s(b)(3)(A).
    \24\ 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) \25\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \25\ 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

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSEAMER-2020-54 on the subject line.

Paper Comments

     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-2020-54. 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 (http://www.sec.gov/rules/sro.shtml). 
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-2020-54, and should be 
submitted on or before August 12, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
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    \26\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-15793 Filed 7-21-20; 8:45 am]
BILLING CODE 8011-01-P


