[Federal Register Volume 85, Number 56 (Monday, March 23, 2020)]
[Notices]
[Pages 16402-16406]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-06007]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88405; File No. SR-NYSEAMER-2020-16]


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

March 17, 2020.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on March 10, 2020, NYSE American LLC (``NYSE American'' or 
the ``Exchange'') filed with the Securities and Exchange Commission 
(the ``Commission'') the proposed rule change as described in Items I, 
II, and III below, which Items have been prepared by the self-
regulatory organization. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C.78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.

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[[Page 16403]]

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the NYSE American Options Fee 
Schedule (``Fee Schedule'') to raise the existing cap on the available 
credit for certain Qualified Contingent Cross (``QCC'') transactions. 
The Exchange proposes to implement the fee change effective March 10, 
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 existing cap on the 
available credit to Floor Brokers that execute a specified number of 
Qualified Contingent Cross (``QCC'') transactions.
    Currently, Floor Brokers earn a credit for executed QCC orders of 
$0.07 per contact up to 300,000 contracts or $0.10 per contract above 
300,000.\4\ QCC executions in which a Customer or Professional Customer 
is on both sides of the QCC trade are not eligible for the Floor Broker 
credit.\5\ The Exchange currently limits the maximum Floor Broker 
credit to $375,000 per month per Floor Broker firm.\6\ The Exchange 
proposes to increase this limit to $425,000. The Exchange believes the 
proposed increase would continue to incent ATP Holders acting as Floor 
Brokers to achieve the highest credit possible.
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    \4\ See Fee Schedule, Section I.F., QCC Fees & Credits, n. 1, 
available here, https://www.nyse.com/publicdocs/nyse/markets/american-options/NYSE_American_Options_Fee_Schedule.pdf.
    \5\ See id., note 1.
    \6\ See id. (providing that ``[t]he maximum Floor Broker credit 
paid shall not exceed $375,000 per month per Floor Broker firm'').
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    The Exchange proposes to implement the fee change effective March 
10, 2020.
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.'' \7\
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    \7\ 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.\8\ Therefore, no exchange possesses significant pricing power 
in the execution of multiply-listed equity & ETF options order flow. 
More specifically, in the fourth quarter of 2019, the Exchange had less 
than 10% market share of executed volume of multiply-listed equity & 
ETF options trades.\9\
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    \8\ 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.
    \9\ Based on OCC data, see id., the Exchange's market share in 
equity-based options was 9.82% for the month of January 2019 and 
8.08% for the month of January 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.
    In response to this competitive environment, the Exchange has 
established incentives, including the credits for QCC transactions 
provided to ATP Holders acting as Floor Brokers, to encourage such ATP 
Holders to execute QCCs on the Exchange.
    As noted above, the Exchange currently limits the maximum Floor 
Broker rebate for QCCs to $375,000 per month per Floor Broker firm. The 
Exchange proposes to increase this amount to $425,000.\10\ The Exchange 
believes the proposed increase would continue to incent ATP Holders 
acting as Floor Brokers to achieve the highest rebate possible.
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    \10\ See Fee Schedule, Section I.F., QCC Fees & Credits, n. 1,
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Proposed Rule Change
    Floor Brokers currently earn a rebate for executed QCC orders of 
$0.07 per contact up to 300,000 contracts or $0.10 per contract above 
300,000, provided that a Customer or Professional Customer 
(collectively, ``Customer'') is not on both sides of the QCC trade.\11\ 
The Exchange currently limits the maximum Floor Broker rebate to 
$375,000 per month per Floor Broker firm.\12\ The Exchange proposes to 
increase this to $425,000.
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    \11\ See id.
    \12\ See id.
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    The Exchange's fees are constrained by intermarket competition, as 
ATP Holders acting as Floor Brokers may direct their order flow to any 
of the 16 options exchanges, including those with similar QCC rebate 
programs and associated caps on same.\13\ Thus, ATP Holders have a 
choice of where they direct their order flow. This proposed change--
which increases the maximum available credit--is designed to incent ATP 
Holders acting as Floor Brokers to increase their QCC volumes on the 
Exchange. The Exchange notes that all market participants stand to 
benefit from increased 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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    \13\ See, e.g., NASDAQ PHLX, Options 7 Pricing Schedule, Section 
4. Multiply Listed Options Fees, QCC Rebate Schedule, available 
here, http://nasdaqphlx.cchwallstreet.com/NASDAQPHLXTools/PlatformViewer.asp?selectednode=chp%5F1%5F1%5F3%5F1&manual=%2Fnasdaqomxphlx%2Fphlx%2Fphlx%2Dllcrules%2F (providing that ``[t]he maximum 
QCC Rebate to be paid in a given month will not exceed $550,000'').
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    The Exchange cannot predict with certainty whether any ATP Holders 
acting as Floor Brokers would avail themselves of this proposed fee 
change. Assuming historical behavior can be predictive of future 
behavior, the Exchange estimates that at least three firms may benefit 
from this fee change.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\14\ in general, and furthers the 
objectives of Sections

[[Page 16404]]

6(b)(4) and (5) of the Act,\15\ 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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    \14\ 15 U.S.C. 78f(b).
    \15\ 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.'' \16\
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    \16\ See Reg NMS Adopting Release, supra note 7, at 37499.
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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.\17\ Therefore, no exchange possesses significant pricing power 
in the execution of multiply-listed equity & ETF options order flow. 
More specifically, in the fourth quarter of 2019, the Exchange had less 
than 10% market share of executed volume of multiply-listed equity & 
ETF options trades.\18\
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    \17\ See supra note 8.
    \18\ Based on OCC data, see supra note 9, the Exchange's market 
share in equity-based options was 9.82% for the month of January 
2019 and 8.08% for the month of January 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, changes 
to exchange transaction fees and credits can have a direct effect on 
the ability of an exchange to compete for order flow.
    The Exchange believes that the proposed modification to increase 
the allowable cap on the Floor Broker credit for QCC transactions is 
designed to incent ATP Holders acting as Floor Brokers to increase the 
number QCC transactions executed on the Exchange. The proposal caps 
fees on all similar (QCC) transactions, regardless of size and 
similarly-situated ATP Holders can opt to try to achieve the modified 
(and increased) credit. The proposal is designed to encourage ATP 
Holders acting as Floor Brokers to execute all QCC transactions on 
Exchange. To the extent that the proposed change attracts more QCC 
trades to the Exchange Trading Floor, this increased order flow would 
continue to make the Exchange a more competitive venue for, among other 
things, order execution, which, in turn, promotes just and equitable 
principles of trade and removes impediments to and perfects the 
mechanism of a free and open market and a national market system.
    Finally, to the extent the proposed change continues to attract 
greater volume and liquidity (to the Floor or otherwise), 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 OTP Holders may direct their 
order flow to any of the 16 options exchanges, including those with 
similar QCC credit programs and associated caps on same.\19\ Thus, ATP 
Holders have a choice of where they direct their order flow--including 
their QCC transactions. The proposed rule change is designed to incent 
OTP Holders to direct liquidity to the Exchange--in particular QCC 
transactions, thereby promoting market depth, price discovery and 
improvement and enhancing order execution opportunities for market 
participants.
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    \19\ See supra note 13 (regarding NASDAQ PHLX's $550,000 monthly 
cap on QCC rebate).
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    The Exchange cannot predict with certainty whether any ATP Holders 
acting as Floor Brokers would avail themselves of this proposed fee 
change. Assuming historical behavior can be predictive of future 
behavior, the Exchange estimates that at least three firms may benefit 
from this fee change.
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 acting 
as Floor Brokers can opt to avail themselves of the modified cap on QCC 
transaction credits (i.e., by executing more QCC transactions) or not. 
As the proposal is designed to encourage Floor Brokers to execute QCC 
transactions on the Exchange, any resulting increase in 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 it is not unfairly discriminatory to modify 
the maximum allowable credit on QCC transactions to Floor Brokers 
because the proposed modification would be available to all similarly-
situated market participants on an equal and non-discriminatory basis.
    The proposal is based on the amount and type of business transacted 
on the Exchange and ATP Holders acting as Floor Brokers are not 
obligated to try to achieve the modified cap. Rather, the proposal is 
designed encourage ATP Holders acting as Floor Brokers to utilize the 
Exchange as a primary trading venue for QCC transactions (if they have 
not done so previously) or increase volume sent to the Exchange. To the 
extent that the proposed change attracts more QCC transactions 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 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

[[Page 16405]]

Exchange's statement regarding the burden on competition.

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

    In accordance with Section 6(b)(8) of the Act, the Exchange does 
not believe that the proposed rule change would impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. Instead, as discussed above, the Exchange believes 
that the proposed changes would encourage the submission of additional 
liquidity to a public exchange, thereby promoting market depth, price 
discovery and transparency and enhancing order execution opportunities 
for all market participants. As a result, the Exchange believes that 
the proposed change furthers the Commission's goal in adopting 
Regulation NMS of fostering integrated competition among orders, which 
promotes ``more efficient pricing of individual stocks for all types of 
orders, large and small.'' \20\
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    \20\ See Reg NMS Adopting Release, supra note 7, at 37499.
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    Intramarket Competition. The proposed change is designed to attract 
additional order flow (particularly QCC trades) to the Exchange. The 
Exchange believes that the proposed increased QCC Floor Broker credit 
would incent market participants to direct their QCC volume to the 
Exchange. Greater liquidity benefits all market participants on the 
Exchange and increased Strategy Executions would increase opportunities 
for execution of other trading interest. The proposed increased cap 
would be available to all similarly-situated market participants that 
execute QCC transactions, 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.\21\ Therefore, no 
exchange possesses significant pricing power in the execution of 
multiply-listed equity & ETF options order flow. More specifically, in 
the fourth quarter of 2019, the Exchange had less than 10% market share 
of executed volume of multiply-listed equity & ETF options trades.\22\
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    \21\ See supra note 8.
    \22\ Based on OCC data, supra note 9, the Exchange's market 
share in equity-based options was 9.82% for the month of January 
2019 and 8.08% for the month of January, 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 
(particularly QCC transactions) 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 QCC credits and caps thereon, by 
encouraging additional orders to be sent to the Exchange for 
execution.\23\ 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.
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    \23\ See supra note 13.
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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) \24\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \25\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \24\ 15 U.S.C. 78s(b)(3)(A).
    \25\ 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) \26\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \26\ 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 [email protected]. Please include 
File No. SR-NYSEAMER-2020-16 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-2020-16. 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

[[Page 16406]]

to make available publicly. All submissions should refer to File No. 
SR-NYSEAMER-2020-16, and should be submitted on or before April 13, 
2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\27\
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    \27\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-06007 Filed 3-20-20; 8:45 am]
BILLING CODE 8011-01-P