[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 [email protected]. 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