[Federal Register Volume 84, Number 212 (Friday, November 1, 2019)]
[Notices]
[Pages 58772-58778]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-23857]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87404; File No. SR-NYSEAMER-2019-43]


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

October 28, 2019.
    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 October 15, 2019, NYSE American LLC (``NYSE

[[Page 58773]]

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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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''). The Exchange proposes to implement the fee 
change effective October 15, 2019. 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 modify the Fee Schedule to introduce 
two incentive programs that are designed to encourage increased Manual 
and Electronic order flow to the Exchange to the benefit of all market 
participants.
    In brief, and as described further below, the first proposed change 
is designed to encourage Manual transactions by NYSE American Options 
Market Makers and Specialists/e-Specialists by offering these 
participants discounted rates on any portion of their monthly Manual 
volume (excluding Strategy Executions and QCC Transactions) that 
exceeds, by a specified percentage of Total Industry Customer equity 
and ETF option average daily volume (``TCADV''),\4\ either the 
participants' August 2019 volume or, in the case of a new NYSE American 
Options Market Makers or and Specialists/e-Specialists, a base level of 
15,000 ADV. The second proposed change is designed to encourage ATP 
Holders to increase their Electronic volume in the ``Professional'' 
range.\5\ Specifically, the Exchange proposes to offer discounted rates 
on monthly Professional volume as well as certain credits on Customer 
Electronic volume, including for initiating CUBE volume, to ATP Holders 
that increase their Professional volume (excluding Strategy Executions, 
CUBE Auctions, and QCC Transactions) by specified percentages of TCADV 
over their August 2019 volume, or in the case of new ATP Holders, above 
a base level of 10,000 ADV. The Exchange believes that the baselines of 
15,000 ADV Manual volumes for new NYSE American Options Market Makers 
and/or Specialists/e-Specialists and 10,000 ADV Professional volumes 
for new ATP Holders are appropriate because these volumes are 
comparable to trading volumes in August 2019 of active firms on the 
Exchange in the respective categories.
---------------------------------------------------------------------------

    \4\ The term ``TCADV'' is defined in the Key Terms and 
Definitions Section of the Preface of the Fee Schedule, see infra 
note 8 [sic]. TCADV includes Options Clearing Corporation (``OCC'') 
calculated Customer volume of all types, including Complex Order 
transactions and QCC transactions, in equity and ETF options.
    \5\ For purposes of this filing, ``Professional'' Electronic 
volume includes: Professional Customer, Broker Dealer, Non-NYSE 
American Options Market Maker, and Firm.
---------------------------------------------------------------------------

    The Exchange proposes to implement the rule changes on October 15, 
2019.
Background
    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.'' \6\
---------------------------------------------------------------------------

    \6\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005) (S7-10-04) (``Reg NMS 
Adopting Release'').
---------------------------------------------------------------------------

    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.\7\ Therefore, no exchange possesses significant pricing power 
in the execution of multiply-listed equity & ETF options order flow. 
More specifically, in the first quarter of 2019, the Exchange had less 
than 10% market share of executed volume of multiply-listed equity & 
ETF options trades.\8\
---------------------------------------------------------------------------

    \7\ 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.
    \8\ Based on OCC data, see id., the Exchange's market share in 
equity-based options declined from 9.82% for the month of January to 
8.84% for the month of April.
---------------------------------------------------------------------------

    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.
    In response to this competitive environment, the Exchange has 
established various pricing incentives designed to encourage increased 
Manual and Electronic volume executed on the Exchange, including (but 
not limited to) the American Customer Engagement (``ACE'') Program. 
While the ACE Program is limited to Electronic Customer volume, the 
Exchange proposes two new pricing incentives that focus on encouraging 
additional Manual volume and Professional Electronic volume. To the 
extent that these incentives succeed, the increased liquidity on the 
Exchange would result in enhanced market quality for all participants.
Proposed Rule Change
Manual Volume Incentive for MMs and Specialists
    The Exchange proposes to offer NYSE American Options Market Makers 
(``MMs'') and Specialists/e-Specialists (``Specialists) discounted 
rates on Manual transactions that exceed a specified volume threshold. 
Currently, Manual transactions in both Penny and Non-Penny Pilot issues 
are subject to a per contract rate of $0.25 for MMs and $0.18 for 
Specialists.\9\ As proposed, MMs or Specialists that increase their 
monthly Manual volumes by a specified percentage of TCADV over their 
August 2019 volume or, for new MMs or Specialists, that increase Manual

[[Page 58774]]

volume by a specified percentage of TCADV above a base level of 15,000 
ADV (``Increased Manual Volume'') are eligible to receive a discounted 
rate solely on the Increased Manual Volume as set forth below. The 
Exchange will exclude any volumes attributable to QCC trades or 
Strategy Execution from monthly calculations of base level or Increased 
Manual Volume, as these transactions are subject to separate pricing 
described in Fee Schedule, Sections I.F., I.G. and I.J., respectively. 
As proposed:
---------------------------------------------------------------------------

    \9\ See Fee Schedule, Section I.A. (Options Transaction Fees and 
Credits, Rates for Options transactions), available here: https://www.nyse.com/publicdocs/nyse/markets/american-options/NYSE_American_Options_Fee_Schedule.pdf.
---------------------------------------------------------------------------

     MMs with Increased Manual Volume of at least 0.15% TCADV 
will be charged $0.18 per contract for the Increased Manual Volume. 
(Specialists currently pay $0.18 per contract for all Manual 
transactions); and
     MMs and Specialists with an Increased Manual Volume of at 
least 0.30% TCADV will be charged $0.12 per contract for the Increased 
Manual Volume.\10\
---------------------------------------------------------------------------

    \10\ See proposed Fee Schedule, Section I.A. (Options 
Transaction Fees and Credits, Rates for Options transactions), note 
8 [sic].
---------------------------------------------------------------------------

    For example, assume a MM executed 18,000 ADV Manual Volume in 
August, 2019. In October, the TCADV is 17,200,000. An increase of 0.15% 
of TCADV would be equal to 25,800 contracts. An increase of 0.30% of 
TCADV would be equal to 51,600 contracts.
    Thus, if the MM executed 44,500 ADV in October, the MM would 
qualify for $0.18 per contract on the MM's volume above the 18,000 ADV 
(i.e., the Increased Volume Amount of 26,500 contracts). The MM's 
billing would reflect $0.25 per contract on the MM's base amount of 
18,000 ADV, and $0.18 per contact on the Increased Manual Volume of 
26,500 ADV.
    If the same MM executed 74,000 ADV in October, the MM would qualify 
for $0.12 per contract on the MM's volume above the 18,000 ADV (i.e., 
the Increased Volume Amount of 56,000 contracts). The MM's billing 
would reflect $0.25 per contract on the MM's base amount of 18,000 ADV, 
and $0.12 per contract on the Increased Manual Volume of 56,000 ADV.
    The Exchange believes this proposed incentive pricing is 
appropriate because Market Makers (Specialists) serve a crucial role in 
the options markets by providing liquidity to facilitate market 
efficiency and functioning. The Exchange's fees are constrained by 
intermarket competition, as Market Makers can register on any or all of 
the 16 options exchanges. Thus, ATP Holders that are also members of 
other exchanges have a choice of where they register and operate as 
Market Makers. The proposed pricing incentive for MMs and Specialists 
is therefore designed to encourage these participants to (continue to) 
conduct Manual (open outcry) trading on the Floor of the Exchange. The 
Exchange notes that all market participants stand to benefit from 
increased Manual transaction volume, which promotes market depth, 
facilitates tighter spreads and enhances price discovery, and may lead 
to a corresponding increase in (Manual or Electronic) order flow from 
other market participants.
    The Exchange cannot predict with certainty whether any ATP Holders 
would avail themselves of this proposed fee change, particularly 
because the proposed pricing incentive is new. Assuming historical 
behavior can be predictive of future behavior, however, the Exchange 
believes that at present participation rates, between two and four 
firms may be able to qualify for discounted Manual rates.
Professional Step-Up Incentive
    The Exchange also proposes to introduce an incentive for ATP 
Holders to increase (or ``step up'') their Electronic Professional \11\ 
volume by offering lower rates and credits based on volume growth 
(i.e., Tier A, Tier B, and Tier C). Specifically, an ATP Holder may 
qualify for discounted rates on its monthly Electronic Professional 
volume and receive credits on certain Electronic Customer volume, 
including initiating CUBE volume, provided the ATP Holder increases its 
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 a specified percentages of 
TCADV above a base level of 10,000 contracts ADV (the ``Qualifying 
Volume''), as set forth in the table below. The Exchange will exclude 
any volumes attributable to QCC trades, CUBE Auctions, or Strategy 
Execution from monthly calculations of base level or Qualifying Volume, 
as these transactions are subject to separate pricing described in Fee 
Schedule Sections I.F., I.G. and I.J., respectively.
---------------------------------------------------------------------------

    \11\ See supra note 5 (defining Professional volume).

                                         Professional Step-Up Incentive
----------------------------------------------------------------------------------------------------------------
                                      Qualifying     Per contract    Per contract
                                     volume as a %    penny pilot      non-penny            ACE benefits
                                       of TCADV          rate         pilot rate
----------------------------------------------------------------------------------------------------------------
Tier A............................            0.04           $0.42           $0.65  N/A.
Tier B............................            0.07            0.35            0.55  Tier 1 Customer Credits only
                                                                                     (per Section I.E.).
Tier C............................            0.09            0.25            0.50  Tier 1 Customer Credits (per
                                                                                     Section I.E.), plus ACE
                                                                                     Initiating Participant
                                                                                     Rebate--All issues (per
                                                                                     Section I.G.).
----------------------------------------------------------------------------------------------------------------


[[Page 58775]]

    As shown in the table above, the greater the increase in Qualifying 
Volume, the more benefits that 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 October, the TCADV is 
17,200,000. To qualify for the Professional Step-Up Incentive program, 
that ATP Holder would need to execute Electronic Professional volume 
above its August 2019 that is at least 6,880 (i.e., 0.04% of TCADV) for 
Tier A; 12,040 (i.e., 0.07% of TCADV) for Tier B; or 15,480 (i.e., 
0.09% of TCADV) for Tier C. 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.
    ATP Holders that qualify for Tier A--the lowest Professional volume 
growth threshold, would be charged reduced rates of $0.42 and $0.65 on 
Professional Electronic executions on Penny and Non-Penny issues, 
respectively.\12\ ATP Holders that qualify for Tier B would be charged 
even further reduced rates--of $0.35 and $0.55 on Professional 
Electronic executions on Penny and Non-Penny issues, respectively,\13\ 
and would also receive credits on Professional Electronic Customer 
executions that are the same as those available to ATP Holders that 
achieve Tier 1 of the ACE Program (the ``ACE Tier 1 Customer 
Credits'').\14\ However, participants that qualify for Tier B of the 
Professional Step-Up Incentive do not receive any other benefits that 
inure to ATP Holders that qualify for ACE Tier 1. Finally, ATP Holders 
that qualify for Tier C would be charged the most reduced rates--$0.25 
and $0.50 on Electronic Professional executions on Penny and Non-Penny 
issues, respectively; \15\ would receive the ACE Tier 1 Customer 
Credits; and would receive the ``ACE Initiating Participant Rebate--All 
Issues'' (or ``ACE Rebate''), which applies rebates to certain volume 
that initiates a Customer Best Execution Auction or ``CUBE.\16\
---------------------------------------------------------------------------

    \12\ See Fee Schedule, Section I. A., supra note 9 (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).
    \13\ See proposed Fee Schedule, Section I.A. (Options 
Transaction Fees and Credits, Rates for Options transactions), note 
8 [sic].
    \14\ See id.; see also Fee Schedule, Section I.E. (describing 
ACE Program).
    \15\ See id.
    \16\ See Fee Schedule, Section I.G. (describing CUBE Auctions 
Fees & Credits, for Single-Leg and Complex CUBE Auctions). In the 
case of a Single-Leg CUBE Auction, the pricing table (at note 2), 
states that the ACE Rebate ``is applied to each of the first 5,000 
Customer contracts of a CUBE Order executed in a [Single-Leg] CUBE 
Auction,'' and is available to participants that qualify for ACE 
Tier 1. See id. In the case of a Complex CUBE Auction, the pricing 
table (at note 2), ACE ``is applied to each of the first 1,000 
Customer contracts per leg of a Complex CUBE Order executed in a 
Complex CUBE Auction,'' and is available to participants that 
qualify for ACE Tier 1. See id.
---------------------------------------------------------------------------

    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.\17\ Thus, 
ATP Holders have a choice of where they direct their order flow. This 
proposed Professional Step-Up Incentive program is designed 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.
---------------------------------------------------------------------------

    \17\ 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).
---------------------------------------------------------------------------

    The Exchange cannot predict with certainty whether any ATP Holders 
would avail themselves of this proposed fee change, particularly 
because the proposed Professional Step-Up Incentive program is new. 
Assuming historical behavior can be predictive of future behavior, 
however, the Exchange believes that at present participation rates, 
between two and four firms may be able to qualify for Professional 
Step-Up Incentive program.

2. Statutory Basis

    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\18\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\19\ 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.
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78f(b).
    \19\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

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.'' \20\
---------------------------------------------------------------------------

    \20\ See Reg NMS Adopting Release, supra note 6, at 37499.
---------------------------------------------------------------------------

    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.\21\ Therefore, no exchange possesses significant pricing power 
in the execution of multiply-listed equity & ETF options order flow. 
More specifically, in the first quarter of 2019, the Exchange had less 
than 10% market share of executed volume of multiply-listed equity & 
ETF options trades.\22\
---------------------------------------------------------------------------

    \21\ See supra note 7.
    \22\ Based on OCC data, see supra note 8, in 2019, the 
Exchange's market share in equity-based options declined from 9.82% 
for the month of January to 7.86% for the month of September.
---------------------------------------------------------------------------

    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.
Manual Volume Incentive for MMs and Specialists
    The Exchange believes that the proposal to offer reduced rates for 
MMs and Specialists on Increased Manual Volume is reasonable because it 
is designed to incent these participants to increase the number and 
type of Manual executions sent to the Floor of the Exchange. Market 
Makers (and Specialists) serve a crucial role in the options markets by 
providing liquidity to facilitate market efficiency and functioning. 
The Exchange's fees are

[[Page 58776]]

constrained by intermarket competition, as Market Makers can register 
on any or all of the 16 options exchanges. ATP Holders that are also 
members of other exchanges have a choice of where they register as 
Market Makers. Thus, the Exchange believes that this proposed rule 
change will provide an incentive for MMs and Specialists to (continue 
to) conduct (open outcry) Manual trading on the Exchange with increased 
volume. The Exchange notes that all market participants stand to 
benefit from increased Manual transaction 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.
Professional Step-Up Incentive
    The Exchange believes that the proposed Professional Step-Up 
Incentive is reasonable because it is designed to incent ATP Holders to 
increase the amount of Electronic Professional order flow directed to 
the Exchange. In addition, because the top two tiers (B and C) of this 
program allow qualifying ATP Holders to also receive credits on 
Electronic Customer volume (per Tier 1 of the ACE program) and, for 
Tier C only, to achieve rebates on certain initiating CUBE Auction 
order flow, the proposed program may encourage ATP Holders to direct 
both Professional and Customer Electronic order flow, including 
initiating CUBE volume to the Exchange. The Exchange notes that all 
market participants stand to benefit from increased Electronic 
transaction volume--whether Professional or Customer, 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 participant in (or qualify for) 
the Professional Step-Up Incentive program.
    The Exchange believes that the baselines of 15,000 ADV Manual 
volumes for new NYSE American Options Market Makers and/or Specialists/
e-Specialists and 10,000 ADV Professional volumes for new ATP Holders 
are reasonable because these volumes are comparable to trading volumes 
in August 2019 of active firms on the Exchange in the respective 
categories.
    Regarding both proposed pricing changes, the Exchange cannot 
predict with certainty whether any participants would avail themselves 
of the proposed fee changes, particularly because both of the proposed 
incentives are new. Assuming historical behavior can be predictive of 
future behavior, however, the Exchange believes that at present 
participation rates, between two and four firms may be able to qualify 
for the discounted Manual rates and between two and four firms may be 
able to qualify for the Professional Step-Up Inventive.\23\
---------------------------------------------------------------------------

    \23\ The Exchange notes that the ``two and four'' firms that may 
qualify for the different incentives proposed herein are not the 
same ``two and four'' firms.
---------------------------------------------------------------------------

    Finally, to the extent the proposed pricing incentives attract 
greater volume and liquidity (to the Floor or otherwise), the Exchange 
believes the proposed changes 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 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 both Manual and Electronic executions, similar to other exchange 
programs with competitive pricing programs,\24\ thereby promoting 
market depth, price discovery and improvement and enhancing order 
execution opportunities for market participants.
---------------------------------------------------------------------------

    \24\ See, e.g., supra note 17 (regarding MIAX Professional 
Rebate Program).
---------------------------------------------------------------------------

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 proposals--both for discounted 
rates on Increased Manual Volume for MMs and Specialists and the 
Professional Step-Up Incentive program--are based on the amount and 
type of business transacted on the Exchange and ATP Holders can opt to 
avail themselves of these incentive or not. Moreover, the proposals are 
designed to encourage MMs, Specialists, and ATP Holders to aggregate 
their executions--particularly Manual and Electronic Professional--at 
the Exchange as a primary execution venue. To the extent that the 
proposed changes attract more Manual and (Professional) Electronic 
volume to the Exchange, this increased order flow would continue to 
make the Exchange a more competitive venue for, among other things, 
order execution. Thus, the Exchange believes the proposed rule changes 
would improve market quality for all market participants on the 
Exchange and, as a consequence, attract more order flow to the Exchange 
thereby improving market-wide quality and price discovery.
    The Exchange believes that the baselines of 15,000 ADV Manual 
volumes for new NYSE American Options Market Makers and/or Specialists/
e-Specialists and 10,000 ADV Professional volumes for new ATP Holders 
are appropriate because these volumes are comparable to trading volumes 
in August 2019 of active firms on the Exchange in the respective 
categories.
The Proposed Rule Change is not Unfairly Discriminatory
    The Exchange believes that the proposals--both for discounted rates 
on Increased Manual Volume for MMs and Specialists and the Professional 
Step-Up Incentive program--are not unfairly discriminatory because the 
proposed modifications would be available to all similarly-situated 
market participants on an equal and non-discriminatory basis.
    The Exchange believes that the baselines of 15,000 ADV Manual 
volumes for new NYSE American Options Market Makers and/or Specialists/
e-Specialists and 10,000 ADV Professional volumes for new ATP Holders 
are not unfairly discriminatory because these volumes are comparable to 
trading volumes in August 2019 of active firms on the Exchange in the 
respective categories.
    The proposals are based on the amount and type of business 
transacted on the Exchange and MMs, Specialists, and ATP Holders are 
not obligated to try to achieve either of the incentive pricing 
options. Rather, the proposals are designed to encourage these 
participants to utilize the Exchange as a primary trading venue (if 
they have not done so previously) or increase (both Manual and 
Electronic) 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. 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

[[Page 58777]]

system and, in general, to protect investors and the public interest.
    With regard to the proposed discount rates on certain increases in 
Manual volume by MMs and Specialists, the Exchange notes that the 
Manual rates charged to these participants are already lower than the 
rates charged to other participants.\25\ MMs (and Specialists) serve a 
crucial role in financial markets by providing liquidity to facilitate 
market efficiency and functioning. Market Makers, unlike other market 
participants, add value through continuous quoting and the commitment 
of capital. Because Market Makers have these obligations and regulatory 
requirements that normally do not apply to other market participants, 
the Exchange believes that offering the proposed reduced Manual rates 
is equitable and not unfairly discriminatory in light of their 
obligations and the costs associated therewith.
---------------------------------------------------------------------------

    \25\ See Fee Schedule, Section I.A., supra note 9 (setting forth 
rates for Manual options transactions: MMs and Specialists are 
charged $0.18 per contract, while all other non-Customer participant 
(save for DOMMs) is charged $0.25 per contract).
---------------------------------------------------------------------------

    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 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.'' \26\
---------------------------------------------------------------------------

    \26\ See Reg NMS Adopting Release, supra note 6, at 37499.
---------------------------------------------------------------------------

    Intramarket Competition. The proposed changes are designed to 
attract additional order flow (both Manual and Electronic, particularly 
Professional volume) to the Exchange. The Exchange believes that the 
proposed pricing incentives would incent market participants to direct 
additional volume to the Exchange. Greater liquidity benefits all 
market participants on the Exchange and increased Manual and Electronic 
Professional volume would increase opportunities for execution of other 
trading interest. The proposed pricing incentives would be available to 
all similarly-situated market participants that incur transaction fees 
on Manual and Electronic executions, and, as such, the proposed change 
would not impose a disparate burden on competition among market 
participants on the Exchange.
    Market Makers, unlike other market participants, add value through 
continuous quoting and the commitment of capital. Because Market Makers 
have these obligations and regulatory requirements that normally do not 
apply to other market participants, the Exchange believes that offering 
the proposed reduced rates, in light of their obligations and the costs 
associated therewith, does not create an undue burden on non-Market 
Makers.
    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.\27\ Therefore, no 
exchange possesses significant pricing power in the execution of 
multiply-listed equity & ETF options order flow. More specifically, in 
the first quarter of 2019, the Exchange had less than 10% market share 
of executed volume of multiply-listed equity & ETF options trades.\28\
---------------------------------------------------------------------------

    \27\ See supra note 7.
    \28\ Based on OCC data, supra note 8, the Exchange's market 
share in equity-based options declined from 9.82% for the month of 
January to 8.84% for the month of April.
---------------------------------------------------------------------------

    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 
(both Manual and Electronic) 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. The 
Exchange also believes that the proposed change is designed to provide 
the public and investors with a Fee Schedule that is clear and 
consistent, thereby reducing burdens on the marketplace and 
facilitating investor protection.

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) \29\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \30\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
---------------------------------------------------------------------------

    \29\ 15 U.S.C. 78s(b)(3)(A).
    \30\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    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) \31\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \31\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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

[[Page 58778]]

     Send an email to [email protected]. Please include 
File No. SR-NYSEAMER-2019-43 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 No. SR-NYSEAMER-2019-43. 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 No. SR-NYSEAMER-2019-43, and should be submitted 
on or before November 22, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\32\
---------------------------------------------------------------------------

    \32\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-23857 Filed 10-31-19; 8:45 am]
 BILLING CODE 8011-01-P