[Federal Register Volume 85, Number 156 (Wednesday, August 12, 2020)]
[Notices]
[Pages 48749-48753]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-17556]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89490; File No. SR-NYSEAMER-2020-61]


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

August 6, 2020.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\

[[Page 48750]]

notice is hereby given that, on August 3, 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'') regarding the Professional Step-Up 
Incentive program. The Exchange proposes to implement the fee change 
effective August 3, 2020. 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.

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 regarding 
the Professional Step-Up Incentive program.
    The Exchange proposes to implement the rule change on August 3, 
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, which provides credit on certain Customer 
executions, and the Professional Step-Up Incentive program (the ``Step-
Up Incentive'').\4\
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    \4\ See Sections I.H and I.E. of the Fee Schedule (describing 
Professional Step-Up Incentive and ACE Program, respectively), 
available here: https://www.nyse.com/publicdocs/nyse/markets/american-options/NYSE_American_Options_Fee_Schedule.pdf.
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    The Step-Up Incentive is a four-tier program--Tiers A-D--that 
offers discounted rates on monthly Professional volume as well as 
certain credits on Customer Electronic volume to ATP Holders that 
increase their Professional volume (excluding Strategy Executions, CUBE 
Auctions, and QCC Transactions) by specified percentages of Total 
Industry Customer equity and ETF option average daily volume 
(``TCADV''),\5\ over their August 2019 volume, or in the case of new 
ATP Holders, above a base level of 10,000 ADV (the ``Qualifying 
Volume'').\6\ ATP Holders that qualify for current Tiers C and D are 
also entitled to credits on their monthly Customer Electronic volume at 
the same rate as participants that achieve Tier 1 in the ACE 
Program.\7\
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    \5\ The term ``TCADV'' is defined in the Key Terms and 
Definitions Section of the Preface of the Fee Schedule, see supra 
note 4. TCADV includes Options Clearing Corporation (``OCC'') 
calculated Customer volume of all types, including Complex Order 
transactions and QCC transactions, in equity and ETF options.
    \6\ For purposes of this filing, ``Professional'' Electronic 
volume includes: Professional Customer, Broker Dealer, Non-NYSE 
American Options Market Maker, and Firm.
    \7\ See Fee Schedule, supra note 4.
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    The Exchange proposes to simplify the Step-Up Incentive, which is 
voluntary, by removing two of the four tiers. In doing so, the Exchange 
has determined that it no longer seeks to provide a financial incentive 
for minimal increases to an ATP Holder's base volume levels and 
therefore proposes to increase the qualifying volume that would be 
required for the Step-Up Incentive's lower tier. The Exchange believes 
that the modified incentive program would still encourage ATP Holders 
to direct order flow to the Exchange, particularly given the high level 
of options trading in 2020, which additional liquidity benefits all 
markets participants on the Exchange.
Proposed Rule Change
Professional Step-Up Incentive
    The Exchange is proposing to reduce the number of Step-Up Incentive 
Tiers from four to two by eliminating current Tiers A and C and 
renaming the remaining Tiers B and D as proposed Tiers A and B, 
respectively.\8\ The Exchange also proposes to raise the qualification 
for the new Tier A (existing Tier B) from 0.08% of TCADV to 0.12% of 
TCADV. The proposed rule change is shown in the table below, with to-
be-deleted text in brackets and proposed (new) text underscored.\9\
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    \8\ Proposed (and simply renamed) Tier B is substantively the 
same as existing Tier D and therefore ``ATP Holders that increase 
Qualifying Volume by 0.20% of TCADV and execute posted Professional 
volume (i.e., that adds liquidity) of at least 0.10% of TCADV will 
receive a $0.03 per contract discount off the Tier B rates.'' See 
proposed Fee Schedule, Section I.H., note 1.
    \9\ See proposed Fee Schedule, Section I.H.

                                         Professional Step-Up Incentive
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                                          Qualifying
                                         volume as a %   Per contract    Per contract         ACE benefits
                                           of TCADV       penny rate    non penny rate
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[Tier A]..............................          [0.06]         [$0.45]         [$0.70]  [N/A].
Tier [B]A.............................      [0.08]0.12            0.35            0.60  [N/A]Tier 1.
[Tier C]..............................          [0.10]          [0.25]          [0.55]  [Tier 1].
Tier [D]B\1\..........................            0.15            0.20            0.50  Tier 1.
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[[Page 48751]]

    As shown in the table above, by achieving an increase in Qualifying 
Volume, benefits accrue to the ATP Holder. To put in context, assume an 
ATP Holder executed Electronic Professional volume in August 2019 
totaling 9,000 ADV and, in July, the TCADV is 17,200,000. To qualify 
for the Step-Up Incentive program, that ATP Holder would need to 
execute Electronic Professional volume above its August 2019 volume 
that is at least 20,640 ADV (i.e., 0.12% of TCADV) for new Tier A; 
25,800 ADV (i.e., 0.15% of TCADV) for new Tier B. If that same ATP 
Holder did not have August 2019 volume, it would have to execute at 
least this much volume above the 10,000 ADV base level.
    The net result of the incentive program as modified is that 
proposed Tier A has a slightly higher minimum monthly volume 
requirement than the Tiers being deleted and a slightly higher (but 
still discounted) rate than existing Tier C. However, as further 
proposed, ATP Holders that qualify for new Tiers A and B would be 
eligible for ACE Tier 1 credits on certain Customer executions,\10\ 
which should also encourage an increase in Customer volume to the 
benefit of all market participants.
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    \10\ See Fee Schedule, Section I. A., supra note 4 (setting 
forth options transactions rates for Electronic Professional volume 
of $0.50 and $0.75 for Penny and Non-Penny issues respectively; 
except that Firm execution in Penny issues are charged $0.47 per 
contract).
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    The Exchange's fees are constrained by intermarket competition, as 
ATP Holders may direct their order flow to any of the 16 options 
exchanges, including those with similar incentive programs.\11\ To 
address this competitive environment, the Exchange offers incentives, 
such as the voluntary Step-Up Incentive to encourage ATP Holders to 
consistently direct order flow (in particular Professional flow) to the 
Exchange. The Exchange believes that the proposal to streamline the 
Step-Up Incentive would simplify the incentive program while still 
offering discounted rates and credits. Although proposed Tier A of the 
modified Step-Up Incentive would require a higher minimum volume 
threshold for a lower discount (than existing, to-be-deleted, Tier C), 
the Exchange believes the incentive program would continue to incent 
ATP Holders to direct volume to the Exchange. In particular, proposed 
Tier A together with the existing requirements of new Tier B (current 
Tier D) continue to offer discounted rates coupled with ACE Tier 1 
credits on certain Customer executions at a time where the Exchange has 
experience a significant increase in options trading. The Exchange 
believes the Step-Up Incentive, as modified, should continue to incent 
the consistent and concerted redirection of order flow to the Exchange 
by ATP Holders in exchange for better economics as provided by the 
incentive program (i.e., enhanced discounts and credits), making it a 
more attractive venue for trading.
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    \11\ See e.g., 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 notes that all market participants stand to benefit 
from increased Electronic Professional volume, which promotes market 
depth, facilitates tighter spreads and enhances price discovery, and 
may lead to a corresponding increase in order flow from other market 
participants, including those that do not participant in (or qualify 
for) the Step-Up Incentive (or the ACE) program.
    The Exchange cannot predict with certainty whether any ATP Holders 
would avail themselves of the proposed rule change.
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, 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, 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, 
modifications to exchange transaction fees can have a direct effect on 
the ability of an exchange to compete for order flow.
    The proposal to simplify the Step-Up Incentive by removing two of 
the four tiers is reasonable because participation in the incentive 
program is voluntary and the Exchange continues to offer discounted 
rates and credits. Although proposed Tier A of the modified Step-Up 
Incentive would require a higher minimum volume threshold for a lower 
discount (than existing, to-be-deleted, Tier C), the Exchange believes 
the incentive program would continue to incent ATP Holders to direct 
volume to the Exchange. In particular, proposed Tier A (which has a 
slightly higher minimum monthly volume requirement than the Tiers being 
deleted) together with the existing requirements of new Tier B (current 
Tier D) continue to offer discounted rates coupled with ACE Tier 1 
credits on certain Customer executions at a time where the Exchange has 
experience a significant increase in options trading. The Exchange 
believes the Step-Up Incentive, as modified, should continue to incent 
the consistent and concerted redirection of order flow to the Exchange 
by ATP Holders in

[[Page 48752]]

exchange for better economics as provided by the incentive program 
(i.e., enhanced discounts and credits), making it a more attractive 
venue for trading.
    The Exchange believes that the Step-Up Incentive, as modified, is 
still designed to encourage ATP Holders to increase the amount of 
Electronic Professional (and, given the ACE Tier 1 benefits, even 
Customer) volume directed to and executed on the Exchange. The Exchange 
notes that all market participants stand to benefit from increased 
Electronic Professional (and Customer) volume, which promotes market 
depth, facilitates tighter spreads and enhances price discovery, and 
may lead to a corresponding increase in order flow from other market 
participants, including those that do not participant in (or qualify 
for) the Step-Up Incentive (or the ACE) program.
    The Exchange cannot predict with certainty whether any ATP Holders 
would avail themselves of the proposed rule change.
    Finally, to the extent the proposed change attract greater volume 
and liquidity, the Exchange believes this 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 proposed rule change 
is 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.\17\
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    \17\ See, e.g., supra note 11 (regarding MIAX Professional 
Rebate Program).
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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 proposal is based on the amount 
and type of business transacted on the Exchange and ATP Holders can opt 
to avail themselves of the Step-Up Incentive or not. Moreover, the 
proposal is designed to encourage ATP Holders to aggregate their 
executions--particularly Electronic Professional (and Customer)--at the 
Exchange as a primary execution venue. To the extent that the proposed 
change attracts more Professional (and Customer) Electronic 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 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 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.
    Regarding the eliminated of Incentive Step-Up Tiers A and C, ATP 
Holders would continue to have the option of availing themselves of the 
still-reduced rates for Professional volume, as well as the ACE Tier 1 
credits on certain Customer executions, that are available under 
proposed new Tier A and renamed Tier B.
    The proposal is based on the amount and type of business transacted 
on the Exchange and ATP Holders are not obligated to try to achieve 
either of the incentive pricing options. Rather, the proposal is 
designed to continue to encourage these participants to utilize the 
Exchange as a primary trading venue (if they have not done so 
previously) or increase Electronic volume sent to the Exchange. To the 
extent that the proposed change attracts 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 change--which continues to offer discounted rates and 
credits--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.'' \18\
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    \18\ See Reg NMS Adopting Release, supra note 14, at 37499.
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    Intramarket Competition. The proposed change is designed to attract 
additional order flow (particularly Professional, and Customer, volume) 
to the Exchange. The Exchange believes that the proposed modification 
to the Step-Up Incentive would continue to incent market participants 
to direct additional volume to the Exchange. Greater liquidity benefits 
all market participants on the Exchange. The proposed qualification 
Tiers would be available to all similarly-situated market participants 
that incur transaction fees on Electronic executions, and, as such, the 
proposed change would not impose a disparate burden on competition 
among market participants 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 has more than 16% of the market share of executed volume of 
multiply-listed equity and ETF options trades.\19\ Therefore, no 
exchange possesses significant pricing power in the execution of 
multiply-listed equity & ETF options order flow. More

[[Page 48753]]

specifically, in June 2020, the Exchange had less than 10% market share 
of executed volume of multiply-listed equity & ETF options trades.\20\
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    \19\ See supra note 15.
    \20\ 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 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) \21\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \22\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \21\ 15 U.S.C. 78s(b)(3)(A).
    \22\ 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) \23\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \23\ 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-2020-61 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-2020-61. 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-2020-61 and should be submitted 
on or before September 2, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-17556 Filed 8-11-20; 8:45 am]
BILLING CODE 8011-01-P


