[Federal Register Volume 88, Number 162 (Wednesday, August 23, 2023)]
[Notices]
[Pages 57481-57485]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-18105]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98159; File No. SR-NYSEAMER-2023-40]


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

August 17, 2023.
    Pursuant to section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that, on August 8, 2023, NYSE American LLC (``NYSE American'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``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 modify the NYSE American Options Fee 
Schedule (``Fee Schedule'') regarding Floor Broker incentives and the 
Strategy Execution Fee Cap. The Exchange proposes to implement the fee 
changes effective August 8, 2023.\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 previously filed to amend the Fee Schedule on 
July 31, 2023 (SR-NYSEAMER-2023-38) and withdrew such filing on 
August 8, 2023.
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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 to amend the Fee Schedule to (1) delete 
text relating to the expired Floor Broker Grow With Me Program and add 
a new Floor Broker incentive, and (2) add dividend strategies to the 
list of strategy executions eligible for the Strategy Execution Fee Cap 
(the ``Strategy Cap''). The Exchange proposes to implement the rule 
changes on August 8, 2023.

[[Page 57482]]

Floor Broker Incentives
    The Exchange proposes to modify Section III.E.2. of the Fee 
Schedule to delete text providing for the Floor Broker Grow With Me 
Program (the ``Grow With Me Program''), which expired on July 31, 2023, 
and to introduce the Floor Broker Manual Billable Incentive Program 
(the ``Manual Billable Incentive Program''). The Exchange proposes that 
Floor Brokers would be eligible for rebates on manual billable volume 
through the Manual Billable Incentive Program by achieving certain 
qualifying levels of average daily manual billable contracts. 
Specifically, a Floor Broker would earn a rebate of ($0.05) per manual 
billable side by executing an average daily volume of 40,000 manual 
billable contracts; a rebate of ($0.07) per manual billable side by 
executing an average daily volume of 100,000 manual billable contracts; 
or a rebate of ($0.09) per manual billable side by executing an average 
daily volume of 150,000 manual billable contracts. Rebates available 
through the Manual Billable Incentive Program would be payable back to 
the first contract, and Floor Brokers would earn the highest rebate for 
which they qualify.\5\ The Exchange believes that the proposed 
qualifications for rebates available through the Manual Billable 
Incentive Program are reasonable and attainable by Floor Brokers based 
on their recent manual billable volume.
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    \5\ For example, a Floor Broker that executes an average daily 
volume of 100,000 manual billable contracts would be eligible for 
the ($0.07) rebate but would not also earn the ($0.05) rebate.
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    Although the Exchange cannot predict with certainty whether the 
proposed change would encourage Floor Brokers to increase their manual 
billable volume, the proposed change is designed to continue to 
incentivize Floor Brokers to do so by offering rebates on manual 
billable volume. All Floor Brokers would be eligible to earn a rebate 
through the Manual Billable Incentive Program, as proposed.
Strategy Cap
    Currently, the Strategy Cap provides for a $1,000 cap on 
transaction fees for strategy executions involving (a) reversals and 
conversions, (b) box spreads, (c) short stock interest spreads, (d) 
merger spreads, and (e) jelly rolls.\6\ The Strategy Cap applies to 
each strategy execution executed in standard option contracts on the 
same trading day. In addition, the cap is reduced to $200 on 
transactions fees for qualifying strategies traded on the same trading 
day for those ATP Holders that trade at least 25,000 monthly billable 
contract sides in qualifying strategy executions.
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    \6\ See Fee Schedule, Section I.J., Strategy Execution Fee Cap.
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    The Exchange now proposes to modify Section I.J. of the Fee 
Schedule to add dividend strategies as item (f) in the list of strategy 
executions eligible for the Strategy Cap (and to make non-substantive 
conforming changes to include an item (f) in such list). The Exchange 
also proposes that dividend strategies would be included among the 
strategies that contribute to an ATP Holder's qualification for the 
lower cap of $200. Finally, the Exchange proposes to add new 
subparagraph (f) to Section I.J. of the Fee Schedule to define a 
dividend strategy as transactions done to achieve a dividend arbitrage 
involving the purchase, sale, and exercise of in-the-money options of 
the same class, executed the first business day prior to the date on 
which the underlying stock goes ex-dividend.
    The Exchange notes that other options exchanges currently offer 
caps on fees for dividend strategy executions.\7\ Although the Exchange 
cannot predict with certainty whether the proposed change would 
encourage ATP Holders to increase their dividend strategy executions, 
the proposed change is intended to encourage additional dividend 
strategy executions on the Exchange by including them in the strategies 
eligible for the Strategy Cap (including the lower cap for qualifying 
ATP Holders).
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    \7\ See, e.g., BOX Options Fee Schedule, Section V.D. (Strategy 
QOO Order Fee Cap and Rebate), available at: https://boxexchange.com/assets/BOX-Fee-Schedule-as-of-July-3-2023.pdf 
(providing for daily cap on manual transaction fees for dividend 
strategies); Nasdaq PHLX LLC Options 7, Section 4, available at: 
https://listingcenter.nasdaq.com/rulebook/phlx/rules/Phlx%20Options%207 (providing for daily cap on fees for dividend 
strategies).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with section 6(b) of the Act,\8\ in general, and furthers the 
objectives of sections 6(b)(4) and (5) of the Act,\9\ 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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    \8\ 15 U.S.C. 78f(b).
    \9\ 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.'' \10\
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    \10\ 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.\11\ Therefore, no exchange possesses significant pricing power 
in the execution of multiply-listed equity and ETF options order flow. 
More specifically, in June 2023, the Exchange had less than 7% market 
share of executed volume of multiply-listed equity and ETF options 
trades.\12\
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    \11\ The OCC publishes options and futures volume in a variety 
of formats, including daily and monthly volume by exchange, 
available here: https://www.theocc.com/Market-Data/Market-Data-Reports/Volume-and-Open-Interest/Monthly-Weekly-Volume-Statistics.
    \12\ Based on a compilation of OCC data for monthly volume of 
equity-based options and monthly volume of ETF-based options, see 
id., the Exchange's market share in equity-based options decreased 
from 7.43% for the month of June 2022 to 6.57% for the month of June 
2023.
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    The Exchange believes that the ever-shifting market share among the 
exchanges from month to month demonstrates that market participants can 
shift order flow, or discontinue or reduce use of certain categories of 
products, in response to fee changes. Accordingly, competitive forces 
constrain options exchange transaction fees. Stated otherwise, changes 
to exchange transaction fees can have a direct effect on the ability of 
an exchange to compete for order flow.
    The Exchange believes the proposed deletion of the language 
describing the Grow With Me Program is reasonable because the program 
has expired, and the deletion would thus improve the clarity of the Fee 
Schedule and reduce confusion as to the fees and credits that are 
currently in effect. The Exchange also believes that the removal of 
obsolete text from the Fee Schedule would further the protection of 
investors and the public interest by promoting clarity and transparency 
in the Fee Schedule and making the Fee

[[Page 57483]]

Schedule easier to navigate and understand.
    The Exchange believes that the proposed Manual Billable Incentive 
Program is reasonable because it is designed to continue to incent 
Floor Brokers to increase their manual billable volume executed on the 
Exchange. The Exchange also believes that the proposed change is 
reasonable because the proposed volume thresholds to qualify for the 
rebates are attainable based on recent manual billable volume executed 
by Floor Brokers, and the proposed rebates would be available to all 
Floor Brokers.
    The Exchange believes the proposed modification of the Strategy Cap 
is reasonable because it is designed to encourage ATP Holders to 
increase their dividend strategies executed on the Exchange by 
including dividend strategies among the strategy executions eligible 
for the Strategy Cap. The Exchange also believes the proposed change 
could incent ATP Holders to execute and aggregate dividend strategy 
orders as well as other types of strategy orders at NYSE American as a 
primary execution venue.
    To the extent that the proposed changes attract greater volume and 
liquidity, the Exchange believes they would improve the Exchange's 
overall competitiveness, strengthen its market quality for all market 
participants, and continue to make the Exchange a more competitive 
venue for 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. The 
Exchange notes that all market participants stand to benefit from any 
increase in volume, which could promote market depth, facilitate 
tighter spreads, and enhance price discovery, particularly to the 
extent the proposed change encourages market participants to utilize 
the Exchange as a primary trading venue, and may lead to a 
corresponding increase in order flow from other market participants.
    In addition, 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 ATP Holders may direct their 
order flow to any of the 16 options exchanges, including those that 
also offer caps on dividend strategies.\13\ Thus, ATP Holders have a 
choice of where they direct their order flow, including their strategy 
executions. The proposed rule change is designed to incent ATP Holders 
to direct liquidity to the Exchange, thereby promoting market depth and 
enhancing order execution opportunities for market participants.
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    \13\ See note 7, supra.
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The Proposed Rule Change Is an Equitable Allocation of Fees and Credits
    The Exchange believes the proposed rule change is an equitable 
allocation of its fees and credits. The proposed deletion of language 
relating to the expired Grow With Me Program would eliminate text from 
the Fee Schedule no longer applicable to any Floor Brokers, thus 
impacting all similarly situated Floor Brokers on an equal basis and 
improving the clarity of the Fee Schedule to the benefit of all market 
participants. The proposed Manual Billable Incentive Program is 
equitable because it is based on the amount and type of business 
transacted on the Exchange; Floor Brokers can choose to execute manual 
billable volume to earn rebates through the program or not. In 
addition, the rebates offered through the Manual Billable Incentive 
Program would be available to all qualifying Floor Brokers equally. The 
Exchange further believes that the proposed change is equitable because 
it is intended to encourage the role performed by Floor Brokers in 
facilitating the execution of orders via open outcry, a function which 
the Exchange wishes to support for the benefit of all market 
participants. To the extent the proposed change continues to encourage 
increased liquidity on the Exchange, all market participants would 
benefit from enhanced opportunities for price improvement and order 
execution.
    The Exchange also believes that the proposed change to the Strategy 
Cap is an equitable allocation of fees and credits because it is based 
on the amount and type of business transacted on the Exchange, and ATP 
Holders can opt to avail themselves of the Strategy Cap or not. The 
modified Strategy Cap, as proposed, would continue to be available to 
all ATP Holders that direct strategy executions, including dividend 
strategies, to the Exchange. Moreover, the proposal is designed to 
continue to encourage ATP Holders to aggregate strategy executions at 
the Exchange as a primary execution venue. To the extent that the 
proposed change attracts more dividend strategies to the Exchange, this 
increased 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 marked-wide quality and price 
discovery.
The Proposed Rule Change Is Not Unfairly Discriminatory
    The Exchange believes the proposed rule change is not unfairly 
discriminatory. The proposed elimination of text describing the expired 
Grow With Me Program would affect all Floor Brokers on an equal and 
non-discriminatory basis, as the program would no longer be available 
to any Floor Brokers. The Exchange believes that the proposed Manual 
Billable Incentive Program is not unfairly discriminatory because all 
Floor Brokers are eligible to qualify for the rebates offered through 
the program. Moreover, the proposed change is not unfairly 
discriminatory to non-Floor Brokers because Floor Brokers serve an 
important function in facilitating the execution of orders on the 
Exchange, which the Exchange wishes to encourage and support to promote 
price improvement opportunities for all market participants.
    The Exchange also believes the proposed change is not unfairly 
discriminatory because the proposed modification of the Strategy Cap 
would apply 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 are not 
obligated to try to achieve the Strategy Cap, nor are they obligated to 
execute any dividend strategies. Rather, the proposal is designed to 
encourage ATP Holders to increase their dividend strategy executions 
and to utilize the Exchange as a primary trading venue for all strategy 
executions (if they have not done so previously).
    Thus, the Exchange believes that, to the extent the proposed rule 
change would continue to improve market quality for all market 
participants on the Exchange by attracting more order flow to the 
Exchange, thereby improving market-wide quality and price discovery, 
the resulting increased volume and liquidity would provide more trading 
opportunities and tighter spreads to all market participants and thus 
would promote just and equitable principles of trade, remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system and, in general, protect investors and the 
public interest.

[[Page 57484]]

    Finally, the Exchange believes that it is subject to significant 
competitive forces, as described below in the Exchange's statement 
regarding the burden on competition.

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

    In accordance with section 6(b)(8) of the Act, the Exchange does 
not believe that the proposed rule change would impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. Instead, as discussed above, the Exchange believes 
that the proposed changes would encourage the submission of additional 
liquidity to a public exchange, thereby promoting market depth, price 
discovery and transparency and enhancing order execution opportunities 
for all market participants. As a result, the Exchange believes that 
the proposed change furthers the Commission's goal in adopting 
Regulation NMS of fostering integrated competition among orders, which 
promotes ``more efficient pricing of individual stocks for all types of 
orders, large and small.'' \14\
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    \14\ See Reg NMS Adopting Release, supra note 10, at 37499.
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    Intramarket Competition. The Exchange does not believe that the 
proposed changes would impose any burden on intramarket competition 
that is not necessary or appropriate. The proposed changes are designed 
to attract order flow to the Exchange. The proposed Manual Billable 
Incentive Program is intended to attract additional order flow to the 
Exchange by offering Floor Brokers rebates on manual billable volume, 
which could increase the volume of contracts traded on the Exchange. 
The proposed modification of the Strategy Cap to include dividend 
strategies is intended to attract additional dividend strategies to the 
Exchange and could also encourage ATP Holders to aggregate all strategy 
executions on the Exchange to qualify for the Strategy Cap. Greater 
liquidity benefits all market participants on the Exchange, and 
increased manual billable transactions and strategy executions could 
increase opportunities for execution of other trading interest. 
Finally, the proposed deletion of language relating to the Grow With Me 
Program would remove language from the Fee Schedule no longer 
applicable to any Floor Brokers and, accordingly, would not have any 
impact on intramarket competition.
    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.\15\ Therefore, no 
exchange possesses significant pricing power in the execution of 
multiply-listed equity and ETF options order flow. More specifically, 
in June 2023, the Exchange had less than 8% market share of executed 
volume of multiply-listed equity and ETF options trades.\16\
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    \15\ See note 11, supra.
    \16\ See note 12, supra.
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    The Exchange believes that the proposed rule change reflects this 
competitive environment because it modifies the Exchange's fees and 
credits in a manner designed to continue to incent additional manual 
billable volume and dividend strategy volume to the Exchange, to 
provide liquidity, and to attract order flow. To the extent the 
proposed changes encourage Floor Brokers and other market participants 
to utilize the Exchange as a primary trading venue for all 
transactions, all of the Exchange's market participants should benefit 
from the improved market quality and increased opportunities for price 
improvement. The Exchange also believes that the proposed change could 
promote competition between the Exchange and other execution venues, as 
other competing options exchanges currently offer fee caps for dividend 
strategies.\17\ Finally, the Exchange believes that deleting text 
describing the Grow With Me Program would add clarity to the Fee 
Schedule by removing expired pricing and, accordingly, would not have 
any impact on intermarket competition.
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    \17\ See note 7, supra.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

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

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

    The foregoing rule change has become effective upon filing pursuant 
to section 19(b)(3)(A) \18\ of the Act and paragraph (f) thereunder. At 
any time within 60 days of the filing of the 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.
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    \18\ 15 U.S.C. 78s(b)(3)(A).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-NYSEAMER-2023-40 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to file number SR-NYSEAMER-2023-40. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for website viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE, 
Washington, DC 20549 on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available

[[Page 57485]]

publicly. We may redact in part or withhold entirely from publication 
submitted material that is obscene or subject to copyright protection. 
All submissions should refer to file number SR-NYSEAMER-2023-40 and 
should be submitted on or before September 13, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-18105 Filed 8-22-23; 8:45 am]
BILLING CODE 8011-01-P