[Federal Register Volume 89, Number 9 (Friday, January 12, 2024)]
[Notices]
[Pages 2294-2297]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-00497]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99282; File No. SR-NYSEAMER-2024-01]


Self-Regulatory Organizations; NYSE American LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Change To Amend Certain 
Transaction Fees and Credits in the NYSE American Equities Price List 
and Fee Schedule

January 8, 2024.
    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 January 2, 2024, NYSE American LLC (``NYSE American'' or 
the ``Exchange'') filed with the Securities and Exchange Commission 
(the ``Commission'') the proposed rule change as described in Items I 
and II below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \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 certain transaction fees and credits 
in the NYSE American Equities Price List and Fee Schedule (``Price 
List'') pertaining to its optional monthly credits applicable to 
Electronic Designated Market Makers (``eDMM'') in assigned securities. 
The Exchange proposes to implement the fee changes effective January 2, 
2024. The proposed rule change is available on the Exchange's website 
at www.nyse.com, at the principal office of the Exchange, and at the 
Commission's Public Reference Room.

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

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

[[Page 2295]]

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

1. Purpose
    The Exchange proposes to amend certain transaction fees and credits 
in the NYSE American Equities Price List and Fee Schedule (``Price 
List'') pertaining to its optional monthly credits applicable to 
Electronic Designated Market Makers (``eDMM'') in assigned securities.
    The proposed changes respond to the current competitive environment 
where order flow providers have a choice of where to direct liquidity-
providing orders by offering further incentives for ETP Holders to send 
additional adding and removing liquidity to the Exchange.
    The Exchange proposes to implement the fee changes effective 
January 2, 2024.
Competitive Environment
    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.'' \4\
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005) (File No. S7-10-04) (Final 
Rule) (``Regulation NMS'').
---------------------------------------------------------------------------

    While Regulation NMS has enhanced competition, it has also fostered 
a ``fragmented'' market structure where trading in a single stock can 
occur across multiple trading centers. When multiple trading centers 
compete for order flow in the same stock, the Commission has recognized 
that ``such competition can lead to the fragmentation of order flow in 
that stock.'' \5\ Indeed, cash equity trading is currently dispersed 
across 16 exchanges,\6\ numerous alternative trading systems,\7\ and 
broker-dealer internalizers and wholesalers, all competing for order 
flow. Based on publicly-available information, no single exchange 
currently has more than 17% market share.\8\ Therefore, no exchange 
possesses significant pricing power in the execution of cash equity 
order flow. More specifically, the Exchange currently has less than 1% 
market share of executed volume of cash equities trading.\9\
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 61358, 75 FR 3594, 
3597 (January 21, 2010) (File No. S7-02-10) (Concept Release on 
Equity Market Structure).
    \6\ See Cboe U.S. Equities Market Volume Summary, available at 
https://markets.cboe.com/us/equities/market_share. See generally 
https://www.sec.gov/fast-answers/divisionsmarketregmrexchangesshtml.html.
    \7\ See FINRA ATS Transparency Data, available at https://otctransparency.finra.org/otctransparency/AtsIssueData. A list of 
alternative trading systems registered with the Commission is 
available at https://www.sec.gov/foia/docs/atslist.htm.
    \8\ See Cboe Global Markets U.S. Equities Market Volume Summary, 
available at http://markets.cboe.com/us/equities/market_share/.
    \9\ See id.
---------------------------------------------------------------------------

    The Exchange believes that the ever-shifting market share among the 
exchanges from month to month demonstrates that market participants can 
move order flow, or discontinue or reduce use of certain categories of 
products. While it is not possible to know a firm's reason for shifting 
order flow, the Exchange believes that one such reason is because of 
fee changes at any of the registered exchanges or non-exchange venues 
to which the firm routes order flow. Accordingly, competitive forces 
compel the Exchange to use exchange transaction fees and credits 
because market participants can readily trade on competing venues if 
they deem pricing levels at those other venues to be more favorable.
Proposed Rule Change
    Currently, the Exchange offers eDMMs an optional monthly credit per 
security (``Credit Per Security'') up to a maximum credit of $850 per 
month per assigned security, provided that eDMMs agree to a credit of 
$0.0020 per share for orders adding displayed liquidity instead of the 
otherwise-applicable credit of $0.0045 per share. Specifically, for 
eDMMs agreeing to a $0.0020 credit per share for orders adding 
displayed liquidity, the Exchange currently offers a Credit Per 
Security of $100 for an eDMM quoting at the National Best Bid or Offer 
(``NBBO'') for a minimum average of 25% of the time; a Credit Per 
Security of $350 for an eDMM quoting at the NBBO for a minimum average 
of 40% of the time; and a Credit Per Security of $850 for an eDMM 
quoting at the NBBO for a minimum average of 50% of the time.\10\
---------------------------------------------------------------------------

    \10\ See Securities Exchange Act Release No. 95106 (June 15, 
2022), 87 FR 37364 (June 22, 2022) (SR-NYSEAMER-2022-24).
---------------------------------------------------------------------------

    The Exchange proposes to add a new Credit Per Security level, 
offering a Credit Per Security of $1,000 for an eDMM quoting at the 
NBBO for a minimum average of 70% of the time.
    The proposed change responds to the current competitive environment 
where order flow providers have a choice of where to direct liquidity-
providing orders by offering further incentives for eDMMs to increase 
quoting on, and send additional displayed liquidity to, the Exchange. 
The Exchange believes that offering Exchange eDMMs the option to 
receive a new higher monthly rebate across all eDMM securities would 
foster liquidity provision, increased quoting, and stability in the 
marketplace and lessen eDMM reliance on transaction fees, to the 
benefit of the marketplace and all market participants.
    The Exchange does not propose any other changes to its rates to 
eDMMs on transactions in assigned securities.
    The proposed changes are not otherwise intended to address any 
other issues, and the Exchange is not aware of any significant problems 
that market participants would have in complying with the proposed 
changes.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\11\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\12\ 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, is designed to prevent fraudulent and 
manipulative acts and practices and to promote just and equitable 
principles of trade, and does not unfairly discriminate between 
customers, issuers, brokers or dealers.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

The Proposed Fee Change Is Reasonable
    As discussed above, the Exchange operates in a highly fragmented 
and competitive market. The Commission has repeatedly expressed its 
preference for competition over regulatory intervention in determining 
prices, products, and services in the securities markets. Specifically, 
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.'' \13\
---------------------------------------------------------------------------

    \13\ See Regulation NMS, supra note 4, 70 FR at 37499.
---------------------------------------------------------------------------

    The Exchange believes that the ever-shifting market share among the 
exchanges from month to month

[[Page 2296]]

demonstrates that market participants can shift order flow, or 
discontinue to reduce use of certain categories of products, in 
response to fee changes. ETP Holders can choose from any one of the 16 
currently operating registered exchanges, and numerous off-exchange 
venues, to route such order flow. Accordingly, competitive forces 
constrain exchange transaction fees that relate to orders on an 
exchange. Stated otherwise, changes to exchange transaction fees can 
have a direct effect on the ability of an exchange to compete for order 
flow.
    Given this competitive environment, the proposal represents a 
reasonable attempt to attract additional order flow to the Exchange. 
Providing eDMMs with the option to receive a lower per share 
transaction credit for adding displayed liquidity in exchange for 
higher monthly rebates per assigned liquidity for higher quoting 
levels, up to a maximum credit of $1,000 per month across all eDMM 
assigned securities, is reasonable because it would foster liquidity 
provision, improved quoting, and stability in the marketplace and 
lessen eDMM reliance on transaction fees, to the benefit of the 
marketplace and all market participants. Moreover, the proposal is 
reasonable because it would balance the increased risks and heightened 
quoting and other obligations that eDMMs on the Exchange have and that 
other market participants do not. The Exchange believes that increasing 
the maximum Credit Per Security level to $1,000 (from $850) per month 
is reasonable and will provide a further incentive for eDMMs to quote 
and to quote at higher levels in a greater number of securities on the 
Exchange and will generally allow the Exchange and eDMMs to better 
compete for order flow, and thus enhance competition.
The Proposed Change Is an Equitable Allocation of Fees and Credits
    The Exchange believes its proposal equitably allocates its fees 
among its market participants by fostering liquidity provision and 
stability in the marketplace. The Exchange believes that it is 
equitable to offer eDMMs the option to receive a lower per-share 
transaction credit for adding displayed liquidity in exchange for 
monthly rebates per assigned security because it would balance the 
increased risks and heightened quoting and other obligations that eDMMs 
on the Exchange have and that other market participants do not have. As 
such, it is equitable to offer eDMMs the option to receive a flat per-
security credit based on the eDMM's quoting in that symbol, coupled 
with a lower transaction fee.
    The Exchange believes that increasing the maximum Credit Per 
Security level to $1,000 (from $850) per month is equitable because it 
would apply equally to all eDMM firms, each of whom would have the 
option to elect to participate (or not participate) on a monthly basis. 
Any eDMM wishing to receive the Credit Per Security would be required 
to meet the prescribed quoting requirements in order to qualify for the 
payments, as described above. All eDMMs would be eligible to elect to 
receive a Credit Per Security and could do so by notifying the Exchange 
and meeting the per symbol quoting requirements.
The Proposed Fee Change Is Not Unfairly Discriminatory
    The Exchange believes it is not unfairly discriminatory to offer 
eDMMs the option to receive a flat per-security credit coupled with a 
lower transaction fee for orders that provide displayed liquidity in 
assigned securities as the proposed credits would be provided on an 
equal basis to all such participants. The proposed $1,000 maximum 
Credit Per Security level would apply equally to all eDMM firms, who 
would have the option to elect to participate on a monthly basis. 
Further, the Exchange believes the new proposed maximum credit would 
incentivize eDMMs that meet the proposed quoting requirement to send 
more orders to the Exchange to qualify for a higher Credit Per 
Security.
    The proposal neither targets nor will it have a disparate impact on 
any particular category of market participant. The proposal does not 
permit unfair discrimination because the proposed thresholds would be 
applied to all similarly situated eDMMs, who would all be eligible for 
the same credit on an equal basis. Accordingly, no eDMM already 
operating on the Exchange would be disadvantaged by this allocation of 
fees.
    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,\14\ the Exchange 
believes that the proposed rule change would not 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 fee change 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 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.'' \15\
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78f(b)(8).
    \15\ See Securities Exchange Act Release No. 51808, 70 FR 37495, 
37498-99 (June 29, 2005) (S7-10-04) (Final Rule).
---------------------------------------------------------------------------

    Intramarket Competition. The Exchange believes the proposed change 
would not impose any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The proposed 
change is designed to attract additional orders to the Exchange. The 
Exchange believes that the proposed changes would incentivize market 
participants to direct their orders to the Exchange. Greater overall 
order flow, trading opportunities, and pricing transparency benefit all 
market participants on the Exchange by enhancing market quality and 
continuing to encourage ETP Holders to send orders, thereby 
contributing towards a robust and well-balanced market ecosystem.
    Intermarket Competition. The Exchange operates in a highly 
competitive market in which market participants can readily choose to 
send their orders to other exchange and off-exchange venues if they 
deem fee levels at those other venues to be more favorable. As noted 
above, the Exchange currently has less than 1% market share of executed 
volume of equities trading. In such an environment, the Exchange must 
continually adjust its fees and credits to remain competitive with 
other exchanges and with off-exchange venues. Because competitors are 
free to modify their own fees and credits in response, and because 
market participants may readily adjust their order routing practices, 
the Exchange does not believe its proposed fee change can impose any 
burden on intermarket competition.
    The Exchange believes that the proposed change could promote 
competition between the Exchange and other execution venues, including 
those that currently offer similar order types and comparable 
transaction pricing, by encouraging additional orders to be sent to the 
Exchange for execution.

[[Page 2297]]

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

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

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

    The foregoing rule change is effective upon filing pursuant to 
Section 19(b)(3)(A) \16\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \17\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    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. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \18\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \18\ 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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-NYSEAMER-2024-01 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-2024-01. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for website viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE, 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-NYSEAMER-2024-01 and should 
be submitted on or before February 2, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
---------------------------------------------------------------------------

    \19\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-00497 Filed 1-11-24; 8:45 am]
BILLING CODE 8011-01-P