[Federal Register Volume 86, Number 70 (Wednesday, April 14, 2021)]
[Notices]
[Pages 19653-19656]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-07596]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91510; File No. SR-NYSEAMER-2021-20]


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

    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 April 8, 2021, 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 April 8, 2021.\4\ The proposed rule 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 
April 1, 2021 (SR-NYSEAmer-2021-18) and withdrew such filing on 
April 8, 2021 to make a clarifying change to the proposed Fee 
Schedule, set forth in the instant filing.
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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 regarding 
the Professional Step-Up Incentive program (the ``Step-Up Incentive'') 
\5\ and correct a typographical error.\6\
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    \5\ See Fee Schedule, Section I.H.
    \6\ The Exchange proposes a non-substantive change to delete an 
extraneous word in Section I.H., which would improve the clarity of 
the Fee Schedule. See proposed Fee Schedule, Section I.H.
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    The Exchange proposes to implement the rule change on April 8, 
2021.
    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 \7\ and the Step-Up Incentive. While the ACE Program 
is limited to Electronic Customer volume, the Step-Up Incentive is 
limited to Electronic Professional \8\ volume. The Exchange proposes to 
modify certain volume exclusions and qualifying criteria for the Step-
Up Incentive to continue to encourage greater Electronic Professional 
volume and, specifically, to continue to incentivize increased 
Electronic Professional volume. To the extent that the modifications 
succeed, the increased liquidity on the Exchange would result in 
enhanced market quality for all participants.
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    \7\ See Fee Schedule, Section I.E.
    \8\ For purposes of this filing, Electronic ``Professional'' 
volume includes Electronic volume in the Professional Customer, 
Broker Dealer, Non-NYSE American Options Market Maker, and Firm 
ranges.
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    Currently, the Step-Up Incentive program provides that ATP Holders 
who increase their monthly Electronic Professional volume by specified 
percentages of TCADV over their August 2019 volume or, for new ATP 
Holders, that increase Electronic Professional volume by the specified 
percentages of TCADV above a base level of 10,000 contracts ADV (the 
``Qualifying Volume''), will qualify for certain reduced transaction 
rates on Electronic Professional volume, as well as credits on 
Electronic Customer volume at Tier 1 of the ACE program.
    The Exchange proposes to modify the Step-Up Incentive program to 
(1) exclude an additional category of volume from the calculations of 
base volume amounts and Qualifying Volume, and (2) revise the 
Qualifying Volume percentages for Tiers A and B.
    Currently, volumes from Strategy Executions, CUBE Auctions, and QCC 
Transactions are excluded from the calculation of base volume amounts 
and Qualifying Volume. The Exchange proposes to further specify that 
volume from interest that takes liquidity from posted Customer interest 
would also be excluded for purposes of calculating base volume amounts 
and Qualifying Volume for the Step-Up Incentive, as such Customer 
interest is eligible for discounted rates and credits under other 
programs set forth in the Exchange's Fee Schedule.\9\
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    \9\ See, e.g., Fee Schedule, Section I.E.
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    The Step-Up Incentive program includes two tiers that ATP Holders 
can qualify for based on Qualifying Volume as a percentage of TCADV. 
The Exchange proposes to increase the qualification for Tier A from 
0.12% of TCADV to 0.20% of TCADV and for Tier B from 0.15% of TCADV to 
0.25% of TCADV. This proposed change is shown in the table below, with 
to-be-deleted

[[Page 19654]]

text in brackets and proposed (new) text underscored.\10\
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    \10\ See also proposed Fee Schedule, Section I.H.

                                         Professional Step-Up Incentive
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                                    Qualifying volume as    Per contract     Per contract
                                        a % of TCADV         penny rate     non-penny rate      ACE benefits
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Tier A............................  [0.12%] 0.20%.......            $0.35            $0.60  Tier 1
Tier B............................  [0.15%] 0.25%.......             0.20             0.50  Tier 1
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    As shown in the table above, by achieving an increase in Qualifying 
Volume, benefits accrue to the ATP Holder. For example, assume an ATP 
Holder executed Electronic Professional volume in August 2019 totaling 
9,000 ADV and, in April 2021, the ATP Holder executed Electronic 
Professional volume of 100,000 ADV and the TCADV is 37,200,000. To 
qualify for the Step-Up Incentive, that ATP Holder would need to 
execute Electronic Professional volume that is at least 74,400 
contracts (i.e., 0.20% of TCADV) above its August 2019 Electronic 
Professional Volume for Tier A, as modified, or at least 93,000 
contracts (i.e., 0.25% of TCADV) above its August 2019 Electronic 
Professional Volume for Tier B, as modified. In other words, that ATP 
Holder would need to attain Electronic Professional volume of 83,400 
contracts to qualify for Tier A and 102,000 contracts to qualify for 
Tier B, and, in this example, would qualify for Tier A but not for Tier 
B. If an ATP Holder did not have August 2019 volume, it would have to 
execute the outlined volumes above the 10,000 ADV base level to qualify 
for Tiers A and B. Such an ATP Holder would need to attain Electronic 
Professional volume of 84,400 contracts to qualify for Tier A and 
103,000 contracts to qualify for Tier B, and, in this example, would 
likewise qualify for Tier A but not for Tier B.
    ATP Holders that qualify for Tier A, as modified, would continue to 
be charged reduced rates of $0.35 and $0.60 on Electronic Professional 
executions on Penny and Non-Penny issues, respectively, and would also 
receive ACE Tier 1 Customer Credits on Customer executions.
    ATP Holders that qualify for Tier B, as modified, would continue to 
be eligible for even further reduced rates of $0.20 and $0.50 on 
Electronic Professional executions on Penny and Non-Penny issues, 
respectively, and would also receive ACE Tier 1 Customer Credits on 
Customer executions. The Exchange also proposes to modify the Fee 
Schedule to specify that ATP Holders that qualify for Tier B as 
modified (i.e., ATP Holders that increase Qualifying Volume by 0.25% of 
TCADV) and also execute posted Professional volume (i.e., that adds 
liquidity) of at least 0.10% of TCADV would continue to receive a $0.03 
per contract discount off the Tier B rates.
    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 an exchange with a similar incentive program.\11\ 
Thus, ATP Holders have a choice of where they direct their order flow. 
These proposed modifications to the Step-Up Incentive program are 
designed to continue to encourage ATP Holders to increase the amount of 
Electronic Professional volume directed to and executed on the 
Exchange. 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.
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    \11\ See, e.g., MIAX Options (``MIAX'') Fee Schedule, Section 
1.a.iv, Professional Rebate Program, available at: https://www.miaxoptions.com/sites/default/files/fee_schedule-files/MIAX_Options_Fee_Schedule_01_13_21.pdf (setting forth incentive 
program that, like the Step-Up Incentive, provides a discounted net 
rate on Professional (as defined by the MIAX program) electronic 
volume, provided the Member achieves certain Professional volume 
increase percentage thresholds in the month relative to the fourth 
quarter of 2015).
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    The Exchange believes that the Step-Up Incentive, as modified, 
would continue to incent ATP Holders to direct volume to the Exchange 
even with the exclusion of interest that takes liquidity from posted 
Customer interest from the calculations of base volume amounts and 
Qualifying Volume, and even though ATP Holders would have to meet 
higher volume thresholds to qualify for Tiers A and B. Because both 
Tiers A and B, as proposed, will continue to offer discounted rates 
coupled with ACE program Tier 1 credits on certain Customer executions, 
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.
    The Exchange cannot predict with certainty whether any ATP Holders 
would be incented to qualify for the Step-Up Incentive, as modified; 
however, the Exchange believes that ATP Holders would continue to be 
encouraged to direct Electronic Professional volume to the Exchange to 
qualify for the Step-Up Incentive.
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

[[Page 19655]]

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 and ETF options order flow. 
More specifically, in February 2021, the Exchange had less than 10% 
market share of executed volume of multiply-listed equity and 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 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 multiply-listed equity and ETF 
options increased slightly from 8.42% for the month of February 2020 
to 8.86% for the month of February 2021.
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    The Exchange believes that the ever-shifting market share among the 
exchanges from month to month demonstrates that market participants can 
shift order flow, or discontinue or reduce use of certain categories of 
products, in response to fee changes. Accordingly, competitive forces 
constrain options exchange transaction fees. Stated otherwise, changes 
to exchange transaction fees can have a direct effect on the ability of 
an exchange to compete for order flow.
    The Exchange believes that the proposed modifications to the Step-
Up Incentive are reasonable because they are designed to continue to 
incent ATP Holders to increase the amount of Electronic Professional 
order flow directed to the Exchange. The Exchange believes that, even 
though the proposed changes to the Step-Up Incentive program would 
exclude an additional category of volume from the calculation of base 
volume and Qualifying Volume, as well as increase the threshold volume 
to qualify for Tiers A and B, ATP Holders will still be incentivized to 
direct order flow to the Exchange in exchange for better economics as 
provided by the incentive program (i.e., enhanced discounts and 
credits). The Exchange also notes that all market participants stand to 
benefit from increased Electronic Professional 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 Step-Up Incentive program.
    Finally, to the extent the proposed modifications attract greater 
volume and liquidity, the Exchange believes the proposed changes would 
improve the Exchange's overall competitiveness and strengthen its 
market quality for all market participants, and continue to attract 
Electronic Professional volume to the Exchange even though the proposed 
changes would raise the qualification thresholds for the Step-Up 
Incentive. In the backdrop of the competitive environment in which the 
Exchange operates, the proposed 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 changes are designed to 
incent ATP Holders to direct liquidity to the Exchange in Electronic 
Professional executions, similar to another exchange program offering 
incentives on professional volume,\17\ thereby promoting market depth, 
price discovery and improvement and enhancing order execution 
opportunities for market participants.
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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 proposed change 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 program or not. 
Moreover, even though the proposed changes would exclude additional 
volume from the calculation of base volume and Qualifying Volume, as 
well as increase the threshold volume to qualify for the Step-Up 
Incentive, the Exchange believes they are designed to encourage ATP 
Holders to aggregate their executions--particularly Electronic 
Professional--at the Exchange as a primary execution venue. To the 
extent that the proposed changes attract more Electronic Professional 
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 continue to improve market quality for all market participants on 
the Exchange and, as a consequence, continue to 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.
    The proposed changes are based on the amount and type of business 
transacted on the Exchange and ATP Holders are not obligated to 
participate in the Step-Up Incentive program. Rather, the proposed 
changes are designed to continue to encourage ATP Holders to utilize 
the Exchange as a primary trading venue (if they have not done so 
previously) or increase Electronic Professional 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, 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, as a consequence, attract more order flow to the Exchange 
thereby improving market-wide quality and price discovery, even though 
they exclude an additional category of volume from the calculation of 
base volume and Qualifying Volume and increase the threshold volume to 
qualify for the Step-Up Incentive. 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.
    For the foregoing reasons, the Exchange believes that the proposal 
is consistent with the Act.

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

[[Page 19656]]

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 changes are designed to 
attract additional order flow (particularly Electronic Professional 
volume) to the Exchange. The Exchange believes that the proposed 
modifications 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 and 
increased Electronic Professional volume would increase opportunities 
for execution of other trading interest. The proposed modifications to 
the calculation of base volume amounts and Qualifying Volume and to the 
qualification bases for Tiers A and B of the Step-Up Incentive would 
apply to all ATP Holders that execute Electronic Professional volume, 
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, currently 
no exchange possesses significant pricing power in the execution of 
multiply-listed equity and ETF options order flow. More specifically, 
in February 2021, the Exchange had less than 10% market share of 
executed volume of multiply-listed equity and ETF options trades.\20\
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    \19\ See supra note 15.
    \20\ 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 multiply-listed equity and ETF 
options increased slightly from 8.42% for the month of February 2020 
to 8.86% for the month of February 2021.
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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 encourage ATP Holders to direct trading 
interest (and, in particular, Electronic Professional volume) 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-2021-20 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-2021-20. 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-2021-20, and should be 
submitted on or before May 5, 2021.

    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. 2021-07596 Filed 4-13-21; 8:45 am]
BILLING CODE 8011-01-P


