[Federal Register Volume 89, Number 98 (Monday, May 20, 2024)]
[Notices]
[Pages 43926-43929]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-10943]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100126; File No. SR-NYSEAMER-2024-29]


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

May 14, 2024.
    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 May 1, 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.
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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 Initiating Participant Rebates 
for Single-Leg Customer Best Execution Auctions. The Exchange proposes 
to implement the fee change effective May 1, 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.

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 certain Initiating 
Participant Rebates offered for initiating Single-Leg Customer Best 
Execution Auctions (each a ``CUBE Auction'').\4\
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    \4\ See generally Rule 971.1NYP (describing the CUBE Auction, 
which is an electronic crossing mechanism for single-leg orders with 
a price improvement auction on the Exchange).
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Background
    The Exchange first notes that it operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or incentives to be insufficient.
    There are currently 17 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.\5\ Therefore, currently no exchange possesses significant 
pricing power in the execution of multiply-listed equity & ETF options 
order flow. More specifically, in March of 2024, the Exchange had less 
than 9% market share of executed volume of multiply-listed equity & ETF 
options trades.\6\ Thus, in such a low-concentrated and highly 
competitive market, no single options exchange possesses significant 
pricing power in the execution of option order flow.
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    \5\ 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.
    \6\ Based on a compilation of OCC data for monthly volume of 
equity-based options and monthly volume of equity-based ETF options, 
see id., the Exchanges market share in equity-based options 
increased from 7.55% for the month of March 2023 to 8.36% for the 
month of March 2024.
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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 use of certain categories of products, 
in response to fee changes. Accordingly, competitive forces constrain 
the Exchange's transaction fees (and credits), and market participants 
can readily trade on competing venues if they deem pricing levels at 
those other venues to be more favorable. In response to the competitive 
environment, the Exchange offers specific rates and credits in its Fees 
Schedule, as do other competing options exchanges, which the Exchange 
believes provide incentive to ATP Holders to increase order flow of 
certain qualifying orders.
Proposal
    In response to these competitive forces, 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 and the 
Professional Volume Incentive program.\7\ To encourage participation in 
the ACE Program and CUBE Auctions, the Exchange offers an ACE 
Initiating Participant Rebate to ACE Program participants that initiate 
CUBE Auctions.\8\ The Exchange also offers an alternative to the ACE 
Initiating Participant Rebate--the Alternative Initiating Participant 
Rebate--that enables non-ACE Program participants to qualify for this 
Rebate on certain initiating CUBE Orders provided they meet certain 
Professional volume requirements and increase their initiating CUBE 
volume.\9\
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    \7\ See Fee Schedule Sections I.E. (American Customer Engagement 
(``ACE'') Program); and I.H. (Professional Volume Incentive).
    \8\ See Fee Schedule Section I.G (CUBE Auction Fees & Credits, 
Single-Leg CUBE Auction).
    \9\ Id., note 2. The Alternative Initiating Participant Rebate 
is available to ATP Holders that execute a minimum of 5,000 
contracts ADV in the ``Professional'' range and increase their 
Initiating CUBE Orders by the greater of 40% over their August 2019 
volume or 15,000 contracts ADV. Id. Section I.H. of the Fee Schedule 
defines volume in the Professional range as Electronic volume of 
Professional Customers, Broker Dealers, Non-NYSE American Options 
Market Makers, and Firms.
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    The ACE Initiating Participant Rebate (the ``ACE Rebate'') and the 
Alternative Initiating Participant Rebate are applied to each of the 
first 5,000 contracts per leg of a CUBE Order executed in a CUBE 
Auction (each a ``qualifying contract'').\10\ Currently, the ACE Rebate 
is ($0.12) per qualifying contract for ATP Holders that qualify for any 
of the five ACE Program Tiers. The Alternative Initiating Participant 
Rebate is ($0.10) per qualifying contract. These rebates are in 
addition to any additional credits offered for participation in CUBE 
Auctions and an ATP Holder that

[[Page 43927]]

qualifies for both rebates would be entitled only to the greater of the 
two rebates.\11\
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    \10\ Id.
    \11\ Id.
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    The Exchange proposes to modify the ACE Initiating Participant 
Credit such that ATP Holders who qualify for the ACE Program are 
eligible to receive a different ACE Rebate amount depending on which 
ACE Tier that ATP Holder achieves. Specifically, ACE Program 
participants that qualify for ACE Tiers 1, 2, or 3 would be eligible 
for a ($0.05) per contract rebate for qualify contracts.\12\ The ACE 
Program participants that qualify for ACE Tiers 4 or 5 (the highest ACE 
Tiers) would continue to be eligible for the ($0.12) per contract 
rebate for qualifying contracts.\13\ The proposed change is design 
[sic] to incent ATP Holders that currently qualify for the ACE Rebates 
to increase their Electronic volume on the Exchange (i.e., and to 
qualify for ACE Tier 4 or 5. For ACE Program participants that do not 
achieve ACE Tiers 4 or 5, the Exchange believes that the ($0.05) per 
contract ACE Rebate would continue to incent ACE Program participants 
to submit initiating CUBE Orders. The Exchange notes that the ACE 
Program Tiers are competitively achievable for all ATP Holders that 
submit significant Customer order flow, in that all firms that submit 
the requisite significant Customer order flow could compete to meet the 
tiers.
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    \12\ See proposed Fee Schedule Section I.G (CUBE Auction Fees & 
Credits, Single-Leg CUBE Auction), including updates to note 2.
    \13\ See proposed Fee Schedule Section I.G (CUBE Auction Fees & 
Credits, Single-Leg CUBE Auction), including updates to note 2 
(specifying that the ACE Rebate amount is tied to the ACE Program 
Tier achieved).
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    The Exchange also proposes to eliminate the Alternative Initiating 
Participant Rebate as it did not sufficiently encourage non-ACE Program 
participants to submit initiating CUBE Orders.\14\ Moreover, the 
Exchange believes that the removal of stale and outdated volume 
benchmarks (i.e., August 2019) would allow the Exchange to streamline 
the Fee Schedule.
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    \14\ See proposed Fee Schedule Section I.G (CUBE Auction Fees & 
Credits, Single-Leg CUBE Auction), including updates to note 2 
(removing reference to the Alternative Initiating Participant Rebate 
and associated volume requirements).
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    To the extent that the proposed modification encourages the 
submission of CUBE Orders, all market participants stand to benefit 
from increased liquidity and opportunities for price improvement. 
Further, because the ACE Rebate is tied to Customer order flow--in 
addition to initiating CUBE volume, the Exchange believes all market 
participants stand to benefit from increased order flow, which promotes 
market depth, facilitates tighter spreads and enhances price discovery. 
The increased liquidity on the Exchange would result in enhanced market 
quality for all participants.
    The Exchange notes the fee changes proposed herein are consistent 
with similar fees/credits offered on other options exchanges.\15\
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    \15\ See, e.g., Miami Options Exchange LLC (``MIAX'') Fee 
Schedule, 1.a.iii. (Transaction Fees, Multiply-Listed Options 
Exchange Fees, Priority Customer Rebate Program) (providing a 
($0.10) per contract credit for PRIME Agency Orders--the MIAX 
equivalent to initiating CUBE Orders and an additional ($0.02) per 
contract credit for Priority Customer Agency Orders submitted to 
PRIME), which amounts are tied to meeting certain Priority Customer 
volume thresholds; and Cboe Exchange Inc. (``Cboe'') Fee Schedule, 
Volume Incentive Program (providing Trading Permit Holders 
(``TPH'')--their ATP Holder equivalent per contract credits for 
Public Customer orders transmitted by TPHs and executed 
electronically on the Exchange, provided the TPH meets certain 
volume thresholds in a month).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\16\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\17\ 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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    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed change to the ACE Rebate is 
reasonable, equitable, and not unfairly discriminatory. As noted above, 
the Exchange operates in highly competitive market. The Exchange is 
only one of several options venues to which market participants may 
direct their order flow, and it represents a small percentage of the 
overall market. As such, market participants can readily direct order 
flow to competing venues if they deem fee levels at a particular venue 
to be excessive or incentives to be insufficient. The Exchange believes 
that the proposed fee change is reasonable, equitable, and not unfairly 
discriminatory in that the Exchange and competing options exchanges 
currently offer reduced fees or credits in connection with Customer 
volume and auction volume. The proposed change to the ACE Rebate is 
reasonable because it continues to encourage ATP Holders to take the 
opportunity to receive credits on initiating CUBE Orders by reaching 
the Customer volume thresholds (set forth in the ACE Program). The 
Exchange notes that the volume thresholds for each Tier of the ACE 
Program are not being modified in this proposal--only the amount of ACE 
Rebate associated with each Tier. The Exchange also believes that the 
changes to the ACE Rebate, as amended, are in a reasonable increment to 
encourage overall order flow to the Exchange without change the 
criteria for reaching each ACE Program Tier.
    The Exchange believes that the proposal represents an equitable 
allocation of rebates and is not unfairly discriminatory because all 
ATP Holders have the opportunity to meet the ACE Program Tier 
thresholds and, in turn, qualify for the higher ACE Rebate. The 
Exchange also notes that the proposed changes will not adversely impact 
any ATP Holder's ability to qualify for other credit tiers. Rather, 
should an ATP Holder not achieve ACE Program Tier 4 or 5, the ATP 
Holder will still receive the ACE Rebate (albeit a reduced one). 
Further, the proposal is based on the amount and type of business 
transacted on the Exchange and ATP Holders are not obligated to 
participate in CUBE Auctions. Rather, the proposal is designed to 
encourage participants to utilize the Exchange as a primary trading 
venue (if they have not done so previously) or increase Electronic 
Customer volume sent to the Exchange to be eligible to receive an ACE 
Rebate.
    The Exchange believes that the proposed elimination of the 
Alternative Initiating Participant Rebate is reasonable, equitable, and 
not unfairly discriminatory as this Rebate was not functioning as 
intended. Moreover, the proposed removal of this Rebate is reasonable 
because it eliminates a stale and outdated volume benchmarks (i.e., 
August 2019) and would therefore streamline the Fee Schedule.
    As noted herein, relative volume-based incentives and discounts 
have been widely adopted by exchanges \18\ and are reasonable, 
equitable and non-discriminatory because they are open to all ATP 
Holders on an equal basis and provide additional benefits or discounts 
that are reasonably related to (i) the value to an exchange's market 
quality and (ii) associated higher levels of market activity, such as 
higher levels of liquidity provision and/or growth patterns. 
Additionally, as noted above, the Exchange operates in a highly 
competitive market. The Exchange is only one of several options venues 
to which market participants may direct their order flow. Competing 
options exchanges offer similar tiered pricing

[[Page 43928]]

structures to that of the Exchange, including schedules of rebates/
credits and fees that apply based upon members achieving certain volume 
and/or growth thresholds. These competing pricing schedules, moreover, 
are presently comparable to those that the Exchange provides, including 
the rebates and credits available based on Customer and auction 
volume.\19\
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    \18\ See supra note 15.
    \19\ Id.
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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 continue to 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 changes further 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 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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Intramarket Competition
    The Exchange believes that the proposed change to the ACE Rebate 
does not impose any burden on intramarket competition that is not 
necessary or appropriate in furtherance of the purposes of the Act. All 
ATP Holders have the opportunity to meet the ACE Program Tier 
thresholds and, in turn, qualify for the higher ACE Rebate. The 
Exchange does not believe that the proposed changes to the ACE Rebate 
will adversely impact any ATP Holder's ability to qualify for other 
credit tiers. Rather, should an ATP Holder not achieve ACE Program Tier 
4 or 5, the ATP Holder will still receive the ACE Rebate (albeit a 
reduced one). Further, the proposal is based on the amount and type of 
business transacted on the Exchange and ATP Holders are not obligated 
to participate in CUBE Auctions. Rather, the proposal is designed to 
encourage participants to utilize the Exchange as a primary trading 
venue (if they have not done so previously) or increase Electronic 
Customer volume sent to the Exchange to be eligible to receive an ACE 
Rebate.
    The Exchange believes this proposed change will help promote 
competition by providing incentives for market participants to continue 
to submit Customer order flow to the Exchange and thus, create a 
greater opportunity for Customers to receive additional price 
improvement and access greater liquidity. As such, the Exchange does 
not believe the proposed changes to ACE Initiating Participant rebate 
will impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act.
    The Exchange believes that the proposed elimination of the 
Alternative Initiating Participant Rebate does not impose any burden on 
intramarket competition that is not necessary or appropriate in 
furtherance of the purposes of the Act because it would apply equally 
to all similarly-situated ATP Holders.
Intermarket Competition
    The Exchange operates in a highly competitive market in which 
market participants can readily favor one of the 17 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 currently has 
more than 16% of the market share of executed volume of multiply-listed 
equity and ETF options trades.\21\ Therefore, no exchange currently 
possesses significant pricing power in the execution of multiply-listed 
equity & ETF options order flow. More specifically, in March of 2024, 
the Exchange had less than 9% market share of executed volume of 
multiply-listed equity & ETF options trades.\22\
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    \21\ See supra note 5.
    \22\ Based on OCC data, supra note 6, the Exchange's market 
share in equity-based options increased from 7.55% for the month of 
March 2023 to 8.36% for the month of March 2024.
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    The Exchange believes that the proposed rule change reflects this 
competitive environment as it designed to encourage ATP Holders to 
direct trading interest 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 changes could promote 
competition between the Exchange and other execution venues, including 
those that currently offer similar pricing structures, by encouraging 
additional orders to be sent to the Exchange for execution.\23\
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    \23\ See supra note 15.
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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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-NYSEAMER-2024-29 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-2024-29. This

[[Page 43929]]

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-2024-29 and should 
be submitted on or before June 10, 2024.

    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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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-10943 Filed 5-17-24; 8:45 am]
BILLING CODE 8011-01-P