[Federal Register Volume 88, Number 115 (Thursday, June 15, 2023)]
[Notices]
[Pages 39311-39314]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-12764]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97694; File No. SR-NYSEAMER-2023-31]


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

June 9, 2023.
    Pursuant to section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that, on June 1, 2023, NYSE American LLC (``NYSE American'' or the 
``Exchange'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to modify the NYSE American Options Fee 
Schedule (``Fee Schedule'') regarding a rebate for Qualified Contingent 
Cross (``QCC'') transactions. The Exchange proposes to implement the 
fee change effective June 1, 2023. 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.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this filing is to amend the Fee Schedule to offer 
Floor Brokers an additional incentive for executing QCC 
transactions.\4\ The Exchange proposes to implement the rule change on 
June 1, 2023.
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    \4\ A QCC is defined as an originating order to buy or sell at 
least 1,000 contracts, or 10,000 mini-options contracts, that is 
identified as being part of a qualified contingent trade (as that 
term is defined in Commentary .01 to Rule 900.3NY), coupled with a 
contra side order or orders totaling an equal number of contracts. 
See Rule 900.3NY(y).
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    Section I.F. of the Fee Schedule sets forth fees and credits 
applicable to QCC transactions.\5\ Currently, Floor Brokers may earn a 
credit of ($0.12) per contract for QCC transactions of a Customer or 
Professional Customer vs. a Market Maker, Firm, or Broker Dealer, and a 
credit of ($0.18) per contract for QCC transactions of a Market Maker, 
Firm, or Broker Dealer vs. a Market Maker, Firm, or Broker Dealer.
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    \5\ See Fee Schedule, Section I.F. (QCC Fees & Credits).
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    The Exchange proposes to modify Section I.F. to add a QCC Billable 
Bonus Rebate (the ``Rebate'') for Floor Brokers' QCC transactions. 
Specifically, the Exchange proposes that the Rebate would provide Floor 
Brokers that achieve (1) 1 million manual billable sides in a month and 
(2) 3 million QCC billable contracts in a month with a rebate of 
($0.02) per two billable side QCC contract, payable on a monthly basis.
    Although the Exchange cannot predict with certainty whether the 
proposed change would encourage Floor Brokers to increase their manual 
billable volume or QCC billable volume on the Exchange, the proposed 
change is designed to continue to incentivize Floor Brokers to do so in 
order to earn an additional rebate on QCC two billable side volume. All 
Floor Brokers would be eligible to qualify for the Rebate, as proposed.
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,

[[Page 39312]]

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 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.'' \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 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.\9\ Therefore, no exchange possesses significant pricing power 
in the execution of multiply-listed equity and ETF options order flow. 
More specifically, in April 2023, the Exchange had less than 8% market 
share of executed volume of multiply-listed equity and ETF options 
trades.\10\
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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: https:/www.theocc.com/Market-Data/Market-Data-Reports/Volume-and-Open-Interest/Monthly-Weekly-Volume-Statistics.
    \10\ Based on a compilation of OCC data for monthly volume of 
equity-based options and monthly volume of ETF-based options, see 
id., the Exchange's market share in equity-based options was 8.14% 
for the month of April 2022 and 7.87% for the month of April 2023.
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    The Exchange believes that the ever-shifting market share among the 
exchanges from month to month demonstrates that market participants can 
shift order flow, or discontinue or reduce use of certain categories of 
products, in response to fee changes. Accordingly, competitive forces 
constrain options exchange transaction fees. Stated otherwise, changes 
to exchange transaction fees can have a direct effect on the ability of 
an exchange to compete for order flow.
    The Exchange believes that the proposed Rebate is reasonable 
because it is designed to continue to incent Floor Brokers to increase 
their manual billable volume and QCC billable contracts executed on the 
Exchange. The Exchange notes that all market participants stand to 
benefit from any increase in volume, which could promote market depth, 
facilitate tighter spreads and enhance price discovery, particularly to 
the extent the proposed change encourages market participants to 
utilize the Exchange as a primary trading venue, and may lead to a 
corresponding increase in order flow from other market participants.
    Finally, to the extent the proposed change continues to attract 
greater volume and liquidity, the Exchange believes the proposed change 
would improve the Exchange's overall competitiveness and strengthen its 
market quality for all market participants. In the backdrop of the 
competitive environment in which the Exchange operates, the proposed 
rule change is a reasonable attempt by the Exchange to increase the 
depth of its market and improve its market share relative to its 
competitors. The Exchange's fees are constrained by intermarket 
competition, as market participants can choose to direct their order 
flow to any of the 16 options exchanges, including those offering 
rebates on QCC transactions.\11\ The Exchange believes that proposed 
rule change is designed to continue to incent Floor Brokers to direct 
liquidity to the Exchange, and, to the extent they continue to be 
incentivized to aggregate their trading activity at the Exchange, that 
increased liquidity could promote market depth, price discovery and 
improvement, and enhanced order execution opportunities for all market 
participants.
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    \11\ See, e.g., EDGX Options Exchange Fee Schedule, QCC 
Initiator/Solicitation Rebate Tiers (applying ($0.14) per contract 
rebate up to 999,999 contracts for QCC transactions when only one 
side of the transaction is a non-customer or ($0.22) per contract 
rebate up to 999,999 contracts for QCC transactions with non-
customers on both sides); BOX Options Fee Schedule at Section 
IV.D.1. (QCC Rebate) (providing for ($0.14) per contract rebate up 
to 1,499,999 contracts for QCC transactions when only one side of 
the QCC transaction is a broker-dealer or market maker or ($0.22) 
per contract rebate up to 1,499,999 contracts for QCC transactions 
when both parties are a broker-dealer or market maker); Nasdaq ISE, 
Options 7, Section 6.B. (QCC Rebate) (offering rebates on QCC 
transactions of ($0.14) per contract when only one side of the QCC 
transaction is a non-customer or ($0.22) per contract when both 
sides of the QCC transaction are non-customers).
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The Proposed Rule Change Is an Equitable Allocation of Fees and Credits
    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 Floor Brokers can 
choose to execute manual billable transactions and QCC billable 
transactions to earn the proposed Rebate or not. The Exchange also 
believes that the proposed Rebate is an equitable allocation of fees 
and credits because it would be available to all Floor Brokers equally, 
and all Floor Brokers would be eligible to qualify for the Rebate based 
on achieving the same volume requirements. The Exchange further 
believes that the proposed change is equitable because it 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.
    To the extent that the proposed changes continue to incent ATP 
Holders to utilize the Exchange as a primary execution venue and 
attract more volume on 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 
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 the proposed change is not unfairly 
discriminatory because the proposed Rebate is based on the amount and 
type of business transacted on the Exchange, and Floor Brokers are not 
obligated to execute billable manual or QCC volume. The Exchange also 
believes that the proposed change is not unfairly discriminatory to 
non-Floor Brokers because Floor Brokers serve an important function in 
facilitating the execution of orders on the Exchange, which the 
Exchange wishes to encourage and support to promote price improvement 
opportunities for all market participants.
    Thus, the Exchange believes that, to the extent the proposed rule 
change would continue to improve market quality for all market 
participants on the Exchange by attracting 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

[[Page 39313]]

principles of trade, remove impediments to and perfect the mechanism of 
a free and open market and a national market system and, in general, 
protect investors and the public interest.
    Finally, the Exchange believes that it is subject to significant 
competitive forces, as described below in the Exchange's statement 
regarding the burden on competition.

B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with section 6(b)(8) of the Act, the Exchange does 
not believe that the proposed rule change would impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. Instead, as discussed above, the Exchange believes 
that the proposed 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.'' \12\
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    \12\ See Reg NMS Adopting Release, supra note 8, at 37499.
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    Intramarket Competition. The proposed change is designed to attract 
order flow to the Exchange. Specifically, the proposed change is 
intended to continue to incent Floor Brokers to direct manual billable 
volume and QCC billable volume to the Exchange by offering them a 
rebate on QCC billable volume, which could increase the volumes of 
contracts traded on the Exchange. Greater liquidity benefits all market 
participants on the Exchange, and increased manual billable and QCC 
billable transactions could increase opportunities for execution of 
other trading interest.
    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.\13\ Therefore, no 
exchange possesses significant pricing power in the execution of 
multiply-listed equity and ETF options order flow. More specifically, 
in April 2023, the Exchange had less than 8% market share of executed 
volume of multiply-listed equity and ETF options trades.\14\
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    \13\ See note 9, supra.
    \14\ See note 10, supra.
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    The Exchange believes that the proposed rule 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 manual billable volume and QCC 
billable volume) to the Exchange, to provide liquidity, and to attract 
order flow. To the extent that Floor Brokers are encouraged 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, including those 
that offer rebates on QCC transactions.\15\ In such an environment, the 
Exchange must continually review, and consider adjusting, its fees and 
credits to remain competitive with other exchanges.
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    \15\ See note 11, supra.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change is effective upon filing pursuant to 
section 19(b)(3)(A) \16\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \17\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 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) \18\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \18\ 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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number
    SR-NYSEAMER-2023-31 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-2023-31. 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 (https://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 
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

[[Page 39314]]

subject to copyright protection. All submissions should refer to file 
number SR-NYSEAMER-2023-31 and should be submitted on or before July 6, 
2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-12764 Filed 6-14-23; 8:45 am]
BILLING CODE 8011-01-P


